In the news release, R.H. Donnelley (NYSE: RHD) Reports Third Quarter
Results today by R.H. Donnelley over PR Newswire, we are advised by the
company that the second footnote following the Safe Harbor Provision, should
read 'amount of $22 million for $7 million in September' rather than 'amount
of $22 million or $7 million in September' as originally issued inadvertently.
Complete, corrected release follows:
R.H. Donnelley Reports Third Quarter Results
- Net Revenue of $648 million
- Adjusted EBITDA of $334 million
- Net Debt Reduced by More Than $150 Million
CARY, N.C., Oct. 23 /PRNewswire-FirstCall/ -- R.H. Donnelley Corporation
(NYSE: RHD), one of the nation's leading Yellow Pages and online local
commercial search companies, today reported third quarter net revenues of $648
million. Adjusted EBITDA(1) in the quarter was $334 million. Adjusted free
cash flow was $108 million, based on cash flow from operations of $110
million, capital expenditures of $17 million and $15 million of other
adjustments. Third quarter advertising sales were $504 million, down 8.3
percent from pro forma advertising sales for the same period in the prior
year. Net income and EPS for the quarter were $26 million and $0.38 per
share, respectively. As of September 30, 2008, RHD's net debt outstanding was
$9,564 million, excluding the purchase accounting fair value adjustment of $91
million.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060731/NYM044LOGO)
'We continue to make excellent progress streamlining operating processes
and reducing costs,' said David C. Swanson, chairman and CEO of R.H.
Donnelley. 'The decline in third quarter ad sales was as expected due to weak
consumer sentiment and the impact it is having on advertisers' ability to make
new growth investments, pay existing bills, and for some, stay in business.
As a result of the continued deterioration in the economy, we are revising our
full year 2008 guidance to the low end of the previous range.'
Swanson continued, 'While we are carefully managing expenses and maintain our
focus on debt reduction, we remain committed to increasing the value we
provide to advertisers and consumers. We continue to expand advertisers'
reach by connecting them with consumers looking for local products and
services regardless of where they are searching. This month we rolled out our
exciting new voice search platform, 1-800-CALL-DEX, across the 14-state Qwest
region. This service allows consumers to use their phone to search our
accurate and comprehensive database of local business information as well as
locate businesses near landmarks or other convenient search criteria. By
year-end, we will launch DexKnows.com 2.0, our next generation local search
site. In addition, in the first half of 2009, we will be launching the Dex
Search Network and a new DexKnows.com platform for mobile, continuing to
increase consumers' ability to access our unique and up to date content over
additional convenient platforms. These initiatives are all about building the
foundation for sustainable growth as the economy recovers.'
Capital Markets Activity
During the third quarter, the Company repurchased senior notes and senior
discount notes of R.H. Donnelley Corporation having an aggregate principal
value of approximately $187 million for $92 million.(2) In addition, the
Company repaid approximately $35 million of bank debt during the same period.
On October 22, 2008, R.H. Donnelley Inc., a wholly owned subsidiary of the
Company, obtained a waiver under its senior secured credit facility to permit
voluntary prepayments of its Term Loan D-1 and Term Loan D-2 at a discount to
their principal amounts. R.H. Donnelley Inc. is not obligated to make any
such prepayments.
Outlook
The Company is clarifying its full year 2008 guidance to be at the low end
of the previously announced range that was issued on July 30 for ad sales,
adjusted EBITDA and adjusted free cash flow. Net debt at year end, excluding
the fair value adjustment, is now expected to be less than $9.5 billion.
Guidance for full year net revenue and weighted average diluted shares
outstanding are unchanged. Current 2008 guidance is summarized below (all
numbers are approximate):
-- Ad sales decline of 8%.
-- Net revenue of $2.6 billion.
-- Adjusted EBITDA(3) of $1,350 million; operating loss of $2,345 million;
and adjusted operating income(3) of $860 million.
-- Adjusted free cash flow(4) of $475 million and operating cash flow of
$505 million.
-- Net debt at year end of less than $9.5 billion, excluding the fair
value adjustment of $0.1 billion.
-- Weighted average diluted shares outstanding during 2008 of
70 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 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.
Third Quarter Conference Call
R.H. Donnelley will host a conference call to discuss its third quarter
2008 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 http://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 (domestic) or 203-369-0363 (international). There is no pass
code for the replay, which will be available through November 6, 2008. 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.
Helping Local Businesses Reach More Customers
R.H. Donnelley's interactive offerings are essential to its Triple Play
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(TM)
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.
About R.H. Donnelley
R.H. Donnelley 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 http://www.rhd.com and http://DexKnows.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,' 'would,' 'planned,' 'estimated,' 'potential,'
'goal,' 'outlook,' 'may,' 'predicts,' 'could,' or the negative of such terms,
or other comparable 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.
Factors that could cause actual results to differ materially from current
expectations include risks and other factors described in RHD's publicly
available reports filed with the SEC, which contain a discussion of various
factors that may affect RHD's business or financial results. Such risks and
other factors, which in some instances are beyond RHD'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 our debt on reasonable terms and
conditions as might be necessary from time to time, particularly in light of
the recent instability in the 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. RHD 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 next 10-Q report to be filed with the SEC may contain updates to the
information included in this release.
(1) Before the following expenses: (a) restructuring, (b) FAS 123 R and
(c)restricted stock units related to the Business.com acquisition.
(2) The Company repurchased notes having an aggregate principal amount of
$22 million for $7 million in September that did not settle until
early October.
(3) Before the following expenses: (a) restructuring, (b) FAS 123 R and
(c) restricted stock units related to the Business.com acquisition.
(4) Before restructuring costs and restricted stock unit costs related to
the Business.com acquisition.
(See attached tables)
R.H. DONNELLEY CORPORATION
INDEX OF SCHEDULES
------------------
Schedule 1: Index of Schedules
Schedule 2: Unaudited Condensed Consolidated Statements of Operations
for the three months ended September 30, 2008 and 2007
Schedule 3: Unaudited Condensed Consolidated Statements of Operations
for the nine months ended September 30, 2008 and 2007
Schedule 4: Unaudited Condensed Consolidated Balance Sheets at
September 30, 2008 and December 31, 2007
Schedule 5: Unaudited Condensed Consolidated Statements of Cash Flows
for the three and nine months ended September 30, 2008 and
2007
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
Schedule 2
Amounts in millions, except earnings per share
Three Months Ended September 30,
2008 2007
Net revenue (1) $648.0 $671.2
Expenses (1) 336.7 322.1
Depreciation and amortization 125.4 111.6
Operating income 185.9 237.5
Interest expense, net (198.1) (201.1)
Gain on debt transactions, net (2) 70.2 -
Pre-tax income 58.0 36.4
Tax provision (31.9) (18.3)
Net income $26.1 $18.1
Earnings per share (EPS):
Basic $0.38 $0.25
Diluted $0.38 $0.25
Shares used in computing EPS:
Basic 68.8 71.2
Diluted 68.9 72.2
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
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
---------------------------------------------------------
Schedule 3
Amounts in millions, except (loss) earnings per share
Nine Months Ended September 30,
2008 2007
Net revenue (1) $1,986.4 $1,999.5
Expenses (1) 976.0 971.2
Depreciation and amortization 363.3 323.7
Goodwill impairment (3) 3,123.9 -
Operating (loss) income (2,476.8) 704.6
Interest expense, net (630.4) (601.7)
Gain on debt transactions, net (2) 231.5 -
Pre-tax (loss) income (2,875.7) 102.9
Tax benefit (provision) 939.8 (43.9)
Net (loss) income $(1,935.9) $59.0
(Loss) earnings per share (EPS):
Basic $(28.15) $0.83
Diluted $(28.15) $0.82
Shares used in computing EPS:
Basic 68.8 70.8
Diluted 68.8 71.9
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 4
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
-----------------------------------------------
Amounts in millions
September 30, December 31,
2008 2007
Assets
Cash and cash equivalents $60.8 $46.1
Accounts receivable, net 1,035.6 1,063.5
Deferred directory costs 175.0 183.7
Other current assets 124.8 173.9
Total current assets 1,396.2 1,467.2
Fixed assets and computer software, net 182.1 187.7
Intangible assets, net 10,859.1 11,170.5
Other non-current assets 180.0 139.4
Goodwill (3) - 3,124.3
Total Assets $12,617.4 $16,089.1
Liabilities and Shareholders' (Deficit) Equity
Accounts payable and accrued
liabilities $177.1 $230.7
Accrued interest 147.5 198.8
Deferred directory revenue 1,097.7 1,172.0
Current portion of long-term debt 121.3 177.2
Total current liabilities 1,543.6 1,778.7
Long-term debt 9,594.4 9,998.5
Deferred income taxes, net 1,356.2 2,288.4
Other non-current liabilities 192.3 200.8
Total liabilities 12,686.5 14,266.4
Shareholders' (deficit) equity (69.1) 1,822.7
Total Liabilities and Shareholders'
(Deficit) Equity $12,617.4 $16,089.1
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 Ended Nine Months Ended
September 30, September 30,
Operating activities: 2008 2007 2008 2007
Net income (loss) $26.1 $18.1 $(1,935.9) $59.0
Goodwill impairment (3) - - 3,123.9 -
Gain on debt transactions, net (2) (70.2) - (231.5) -
Depreciation and amortization 125.4 111.6 363.3 323.7
Deferred income taxes 31.6 11.4 (943.0) 36.6
Changes in working capital (17.1) 0.4 (88.1) (17.0)
Other 14.6 14.5 97.9 68.0
Net cash provided by operating
activities 110.4 156.0 386.6 470.3
Investment activities:
Additions to fixed assets and computer
software (17.0) (24.5) (47.3) (61.8)
Acquisitions, net of cash received - (328.9) - (328.9)
Equity investment disposition
(investment) - - 4.3 (2.5)
Net cash used in investing activities (17.0) (353.4) (43.0) (393.2)
Financing activities:
Proceeds from the issuance of debt, net
of costs - 323.7 - 323.7
Additional borrowings under credit
facilities, net of costs - - 1,018.2 -
Credit facilities repayments (33.6) (215.2) (1,224.7) (562.3)
Revolver repayments (26.0) (175.5) (422.1) (566.1)
Borrowings under the Revolver 25.0 209.0 398.1 570.7
Note repurchases and related costs (84.7) - (84.7) -
Proceeds from the issuance of common
stock - 9.0 - 9.0
Repurchase of common stock - - (6.1) -
Debt issuance costs (1.5) - (9.6) -
Increase (decrease) in checks not yet
presented for payment 6.2 (0.5) 1.9 (2.0)
Proceeds from option exercises - 0.9 0.1 12.7
Net cash (used in) provided by
financing activities (114.6) 151.4 (328.9) (214.3)
(Decrease) increase in cash and cash
equivalents (21.2) (46.0) 14.7 (137.2)
Cash and cash equivalents, beginning
of period 82.0 65.0 46.1 156.2
Cash and cash equivalents, end of
period $60.8 $19.0 $60.8 $19.0
Supplemental Information:
Non-cash financing activities:
Reduction of debt from Debt
Exchanges $- $- $(172.8) $-
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 6a
RECONCILIATION OF NON-GAAP MEASURES
-----------------------------------
(unaudited)
Amounts in millions
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Reconciliation of net income (loss) - GAAP to EBITDA (4)
Net income (loss) - GAAP $26.1 $18.1 $(1,935.9) $59.0
Less gain on debt transactions, net (2) (70.2) - (231.5) -
Plus goodwill impairment (3) - - 3,123.9 -
Plus tax provision (benefit) 31.9 18.3 (939.8) 43.9
Plus interest expense, net 198.1 201.1 630.4 601.7
Plus depreciation and amortization 125.4 111.6 363.3 323.7
EBITDA $311.3 $349.1 $1,010.4 $1,028.3
Amortized deferred cost uplift on Dex
sales contracts as of the merger date - 3.3 - 27.9
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 7.1 8.5 23.4 30.0
Restricted stock unit expense related
to the Business.com acquisition 1.0 0.8 4.2 0.8
Restructuring costs 14.3 - 18.9 -
Adjusted EBITDA $333.7 $361.7 $1,056.9 $1,090.3
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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Reconciliation of cash flow from
operations - GAAP to adjusted free
cash flow
Cash flow from operations - GAAP $110.4 $156.0 $386.6 $470.3
Add: Restructuring costs 14.0 - 15.5 -
Add: Restricted stock unit cost
related to the Business.com
acquisition 1.0 0.8 4.5 0.8
Adjusted cash flow from operations 125.4 156.8 406.6 471.1
Less: Additions to fixed assets and
computer software - GAAP 17.0 24.5 47.3 61.8
Adjusted free cash flow $108.4 $132.3 $359.3 $409.3
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Reconciliation of interest expense -
GAAP to adjusted interest expense (5)
Interest expense - GAAP $198.1 $201.1 $630.4 $601.7
Plus: Fair value adjustment due to
purchase accounting 4.5 7.9 13.1 23.2
Less: One-time expense related to
ineffective interest rate swaps as a
result of the refinancings completed
during the second quarter of 2008 - - (42.9) -
Adjusted interest expense $202.6 $209.0 $600.6 $624.9
As of As of
September December
30, 2008 31, 2007
Reconciliation of debt - GAAP to net
debt and net debt - excluding
fair value adjustment (5) (6)
Debt - GAAP $9,715.7 $10,175.7
Less: Cash and cash equivalents (60.8) (46.1)
Net debt 9,654.9 10,129.6
Less: Fair value adjustment due to
purchase accounting (90.7) (103.8)
Net debt - excluding fair value
adjustment $9,564.2 $10,025.8
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 6c
RECONCILIATION OF NON-GAAP MEASURES (cont'd)
--------------------------------------------
(unaudited)
Current
Full Year 2008
Amounts in millions Outlook
Reconciliation of adjusted EBITDA excluding the impairment
of goodwill, SFAS No. 123 R outlook and restructuring
expense outlook, to operating income - GAAP outlook
Adjusted EBITDA excluding
restructuring, SFAS No. 123 R non-cash compensation and
restricted stock unit expense outlook $1,350
Less: Depreciation and amortization (490)
Adjusted Operating Income 860
Less: Impairment of goodwill (3,125)
Less: SFAS No.
