Dex Media West 10Q 2008 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 333-112694

DEX MEDIA WEST LLC

(Exact name of registrant as specified in its charter)


Delaware		25-1903487

(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1001 Winstead Drive, Cary, N.C.		27513

(Address of principal executive offices)		(Zip Code)

(919) 297-1600
(Registrant’s telephone number, including area code)

N/A
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yeso Noþ *

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filero	Accelerated filero	Non-accelerated filerþ	Smaller reporting companyo
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of October 15, 2008, R.H. Donnelley Corporation indirectly owned all of the registrant’s equity.

THE REGISTRANT IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF R.H. DONNELLEY CORPORATION. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.


*		The Registrant is a voluntary filer and as such is not required to file reports by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”); however, the Registrant has voluntarily filed all Exchange Act reports for the preceding 12 months.

DEX MEDIA WEST LLC

INDEX TO FORM 10-Q


	PAGE
PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007		3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2008 and 2007		4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007		5

Notes to Condensed Consolidated Financial Statements		6

Item 2. Management’s Narrative Analysis of Results of Operations*		17

Item 3. Quantitative and Qualitative Disclosures About Market Risk**		27

Item 4. Controls and Procedures		27

PART II: OTHER INFORMATION

Item 1. Legal Proceedings		27

Item 1A. Risk Factors		27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds***		31

Item 3. Defaults Upon Senior Securities***		31

Item 4. Submission of Matters to a Vote of Security Holders***		31

Item 5. Other Information		31

Item 6. Exhibits		32

SIGNATURES		33
EX-31.1
EX-31.2
EX-32.1


*		Pursuant to General Instruction H(2)(a) of Form 10-Q: (i) the information called for by Item 2 of Part I, Management’s Discussion and Analysis of Financial Condition and Results of Operations has been omitted and (ii) the registrant is providing a Management’s Narrative Analysis of Results of Operations.

**		Omitted pursuant to General Instruction H(2)(c) of Form 10-Q.

***		Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

PART I. FINANCIAL INFORMATION

Item I. Financial Statements

Dex Media West LLC

Condensed Consolidated Balance Sheets (Unaudited)


*(in thousands)*	September 30, 2008			December 31, 2007

Assets
Current Assets
Cash and cash equivalents	$	6,269		$	7,992
Accounts receivable
Billed		112,388			82,854
Unbilled		266,236			324,079
Allowance for doubtful accounts and sales claims		(20,266	)		(13,598	)

Net accounts receivable		358,358			393,335
Deferred directory costs		59,886			68,741
Short-term deferred income taxes, net		31,527			27,456
Prepaid expenses and other current assets		30,077			30,520

Total current assets		486,117			528,044
Fixed assets and computer software, net		44,662			45,390
Other non-current assets		48,160			8,723
Intangible assets, net		4,735,523			4,858,713
Goodwill		—			1,354,053

Total Assets	$	5,314,462		$	6,794,923

Liabilities and Owner’s Equity
Current Liabilities
Accounts payable and accrued liabilities	$	26,264		$	28,860
Affiliates payable, net		238,885			243,138
Accrued interest		22,045			52,008
Deferred directory revenues		402,877			467,249
Current portion of long-term debt		11,250			136,457

Total current liabilities		701,321			927,712
Long-term debt		2,290,801			2,167,528
Deferred income taxes, net		835,594			1,284,205
Other non-current liabilities		14,934			19,911

Total liabilities		3,842,650			4,399,356

Commitments and contingencies

Owner’s Equity
Owner’s interest		2,267,936			2,428,291
Accumulated deficit		(797,132	)		(26,013	)
Accumulated other comprehensive income (loss)		1,008			(6,711	)

Total Owner’s Equity		1,471,812			2,395,567

Total Liabilities and Owner’s Equity	$	5,314,462		$	6,794,923

The accompanying notes are an integral part of the condensed consolidated financial statements.

Dex Media West LLC

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)


	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2008			2007			2008			2007

Net revenues	$	226,729		$	237,475		$	696,318		$	708,390

Expenses:
Production, publication and distribution expenses (exclusive of depreciation and amortization shown separately below)		31,988			35,545			96,156			113,215
Selling and support expenses		58,137			56,094			170,146			174,708
General and administrative expenses		11,676			7,508			27,216			29,005
Depreciation and amortization		52,471			48,880			150,657			141,934
Goodwill impairment		—			—			1,325,485			—

Total expenses		154,272			148,027			1,769,660			458,862

Operating income (loss)		72,457			89,448			(1,073,342	)		249,528

Interest expense, net		(43,590	)		(44,844	)		(142,162	)		(138,817	)


Income (loss) before income taxes		28,867			44,604			(1,215,504	)		110,711

(Provision) benefit for income taxes		(12,773	)		(16,629	)		444,385			(42,456	)


Net income (loss)	$	16,094		$	27,975		$	(771,119	)	$	68,255


Comprehensive Income (Loss)
Net income (loss)	$	16,094		$	27,975		$	(771,119	)	$	68,255
Unrealized gain (loss) on interest rate swaps, net of tax		—			(3,726	)		7,719			(2,053	)

Comprehensive income (loss)	$	16,094		$	24,249		$	(763,400	)	$	66,202

The accompanying notes are an integral part of the condensed consolidated financial statements.

Dex Media West LLC

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine months ended September 30,
(*in thousands)*	2008			2007

Cash Flows from Operating Activities
Net income (loss)	$	(771,119	)	$	68,255
Reconciliation of net income (loss) to net cash provided by operating activities:
Goodwill impairment		1,325,485			—
Loss on extinguishment of debt		2,142			—
Depreciation and amortization		150,657			141,934
Deferred income tax (benefit) provision		(444,450	)		41,246
Provision for bad debts		40,228			15,944
Stock-based compensation expense		6,967			9,680
Amortization of debt fair value adjustment		(10,443	)		(9,671	)
Amortization of deferred financing costs		3,162			1,345
Interest rate swap ineffectiveness		8,030			—
Other non-cash items, net		(5,652	)		(2,032	)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(5,251	)		1,951
Decrease in other assets		26,417			12,371
(Decrease) in accounts payable and accrued liabilities and accrued interest		(30,104	)		(25,038	)
(Decrease) in deferred directory revenues		(64,372	)		(45,262	)
(Decrease) increase in affiliates payable		(11,220	)		89,405
(Decrease) increase in other non-current liabilities		(11,095	)		1,949

Net cash provided by operating activities		209,382			302,077
Cash Flows from Investing Activities
Additions to fixed assets and computer software		(15,689	)		(16,120	)

Net cash used in investing activities		(15,689	)		(16,120	)
Cash Flows from Financing Activities
Credit facility borrowings, net of costs		1,035,491			—
Credit facility repayments		(1,053,492	)		(319,895	)
Revolver borrowings		141,300			84,700
Revolver repayments		(159,300	)		(59,700	)
Increase in checks not yet presented for payment		940			4,336
Distributions to Owner		(161,500	)		(20,000	)
Excess tax benefits from exercise of stock options		1,145			—

Net cash used in financing activities		(195,416	)		(310,559	)

(Decrease) in cash and cash equivalents		(1,723	)		(24,602	)
Cash and cash equivalents, beginning of period		7,992			28,358

Cash and cash equivalents, end of period	$	6,269		$	3,756

Supplemental Information:
Cash paid:
Interest, net	$	166,659		$	176,003
Income taxes, net	$	41		$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

Dex Media West LLC

Notes to Condensed Consolidated Financial Statements (Unaudited)

(tabular amounts in thousands)

1. Business and Basics of Presentation

Dex Media West LLC is a subsidiary of Dex Media West, Inc. and an indirect wholly-owned subsidiary of Dex Media, Inc. (“Dex Media” or “Owner”). Dex Media is a direct wholly-owned subsidiary of R.H. Donnelley Corporation (“RHD”). The interim condensed consolidated financial statements of Dex Media West LLC and its wholly-owned subsidiary, Dex Media West Finance Co. (collectively the “Company,” “Dex Media West,” “we,” “us” and “our”) have been prepared in accordance with the instructions to Quarterly Report on Form 10-Q and should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2007. The interim condensed consolidated financial statements include the accounts of Dex Media West and its wholly-owned subsidiary. All intercompany transactions and balances between Dex Media West and its subsidiary have been eliminated. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of financial position, results of operations and cash flows at the dates and for the periods presented have been included.

Dex Media is the largest directory publisher in the Dex West States (defined below). Together with its parent, RHD, Dex Media is one of the nation’s largest Yellow Pages and online local commercial search companies, based on revenues. We publish and distribute advertiser content utilizing our own Dex brand and Qwest, which is one of the most highly recognizable brands in the industry. During 2007, our print and online solutions helped more than 200,000 national and local businesses in 7 states reach consumers who were actively seeking to purchase products and services. During 2007, we published and distributed print directories in many of the country’s most attractive markets, including Phoenix.

Dex Media West is the exclusive publisher of the “official” yellow pages and white pages directories for Qwest Corporation, the local exchange carrier of Qwest Communications International Inc. (“Qwest”), in Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming (collectively, the “Dex West States”).

Significant Financing Developments

On June 6, 2008, we refinanced our credit facility. The new Dex Media West credit facility consists of a $130.0 million Term Loan A maturing in October 2013, a $950.0 million Term Loan B maturing in October 2014 and a $90.0 million revolving credit facility maturing in October 2013 (“Dex Media West Revolver”), except as otherwise noted. For additional information relating to the maturities under the new Dex Media West credit facility, see Note 4, “Credit Facility.”

As a result of the refinancing of our former credit facility on June 6, 2008, the existing interest rate swaps associated with our former credit facility having a notional amount of $650.0 million are no longer highly effective in offsetting changes in cash flows. Accordingly, cash flow hedge accounting treatment under Statement of Financial Accounting Standards (“SFAS”) No. 133,Accounting for Derivative Instruments and Hedging Activities(“SFAS No. 133”) is no longer permitted. Interest expense for the nine months ended September 30, 2008 includes a non-cash charge of $15.0 million resulting from amounts previously charged to accumulated other comprehensive income (loss) related to these interest rate swaps. Interest expense for the three and nine months ended September 30, 2008 includes a reduction to interest expense of $5.0 million and $7.0 million, respectively, resulting from the change in the fair value of these interest rate swaps.

Please see Note 2, “Summary of Significant Accounting Policies — Interest Expense and Deferred Financing Costs” and Note 4, “Credit Facility” for additional information.

Reclassifications

Expenses presented as cost of revenues in our previous filings are now presented as production, publication and distribution expenses to more appropriately reflect the nature of these costs. Certain prior period amounts included in the condensed consolidated statement of operations have been reclassified to conform to the current period’s presentation. Selling and support expenses are now presented as a separate expense category in the condensed consolidated statements of operations. In prior periods, certain selling and support expenses were included in production, publication and distribution expenses and others were included in general and administrative expenses. Additionally, beginning in the fourth quarter of 2007, we began classifying adjustments for customer claims to sales allowance, which is deducted from gross revenues to determine net revenues. In prior periods, adjustments for customer claims were included in bad debt expense under general and administrative expenses. Bad debt expense is now included under selling and support expenses. Accordingly, we have reclassified adjustments for customer claims and bad debt expense for the three and nine months ended September 30, 2007 to conform to the current period’s presentation. These reclassifications had no impact on operating income or net income for the three and nine months ended September 30, 2007. The table below summarizes these reclassifications.


	Three Months Ended September 30, 2007							Nine Months Ended September 30, 2007
	As							As
	Previously					As		Previously					As
	Reported		Reclass			Reclassified		Reported		Reclass			Reclassified

Net revenues	$	236,524	$	951		$	237,475	$	705,953	$	2,437		$	708,390
Production, publication and distribution expenses		90,833		(55,288	)		35,545		285,638		(172,423	)		113,215
Selling and support expenses		—		56,094			56,094		—		174,708			174,708
General and administrative expenses		7,363		145			7,508		28,853		152			29,005

In addition, certain prior period amounts included in the condensed consolidated balance sheet and condensed consolidated statement of cash flows have been reclassified to conform to the current period’s presentation.

2. Summary of Significant Accounting Policies

Identifiable Intangible Assets and Goodwill

As a result of the RHD Merger (as defined in Note 3, “RHD Merger”), certain intangible assets were identified in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”) and recorded at their estimated fair values. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), the fair values of the identifiable intangible assets are being amortized over their estimated useful lives in a manner that best reflects the economic benefit derived from such assets. Goodwill is not amortized but is subject to impairment testing on an annual basis or more frequently if we believe indicators of impairment exist. Amortization expense was $44.9 million and $45.1 million for the three months ended September 30, 2008 and 2007, respectively, and $134.8 million and $130.8 million for the nine months ended September 30, 2008 and 2007, respectively.

As a result of the decline in the trading value of Dex Media’s and our debt and RHD’s debt and equity securities during the first quarter of 2008 and continuing negative industry and economic trends that have directly affected RHD’s and our business, RHD performed impairment tests as of March 31, 2008 of its goodwill, definite-lived intangible assets and other long-lived assets in accordance with SFAS No. 142 and SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets(“SFAS No. 144”), respectively. RHD used estimates and assumptions in its impairment evaluations, including, but not limited to, projected future cash flows, revenue growth and customer attrition rates.

The impairment test of RHD’s definite-lived intangible assets and other long-lived assets was performed by comparing the carrying amount of its intangible assets and other long-lived assets to the sum of their undiscounted expected future cash flows. In accordance with SFAS No. 144, impairment exists if the sum of the undiscounted expected future cash flows is less than the carrying amount of the intangible asset, or its related group of assets, and other long-lived assets. RHD’s testing results of its definite-lived intangible assets and other long-lived assets indicated no impairment as of March 31, 2008.

RHD’s impairment test for goodwill involved a two step process. The first step involved comparing the fair value of RHD with the carrying amount of its assets and liabilities, including goodwill. The fair value of RHD was determined using a market based approach, which reflects the market value of its debt and equity securities as of March 31, 2008. As a result of RHD’s testing, it determined that its fair value was less than the carrying amount of its assets and liabilities, requiring it to proceed with the second step of the goodwill impairment test. In the second step of the testing process, the impairment loss is determined by comparing the implied fair value of RHD’s goodwill to the recorded amount of goodwill. The implied fair value of goodwill is derived from a discounted cash flow analysis for RHD using a discount rate that results in the present value of assets and liabilities equal to the current fair value of RHD’s debt and equity securities. Based upon this analysis, RHD recognized a non-cash impairment charge of $2.5 billion during the three months ended March 31, 2008. The Company’s share of the impairment charge, based on a discounted cash flow analysis, was $1.1 billion.

Since the trading value of RHD’s equity securities further declined in the second quarter of 2008 and as a result of continuing negative industry and economic trends, RHD performed additional impairment tests of its goodwill, definite-lived intangible assets and other long-lived assets as of June 30, 2008. RHD’s testing results of its definite-lived intangible assets and other long-lived assets indicated no impairment as of June 30, 2008. As a result of these tests, RHD recognized a non-cash goodwill impairment charge of $660.2 million during the three months ended June 30, 2008, together with the impairment charge recognized in the first quarter of 2008, a total impairment charge of $3.1 billion was recognized by RHD during the first half of 2008. The Company’s share of the impairment charge, based on a discounted cash flow analysis, was $262.5 million during the three months ended June 30, 2008, together with the impairment charge recognized in the first quarter of 2008, a total impairment charge of $1.3 billion was recognized by the Company during the first half of 2008. As a result of this impairment charge, we have no recorded goodwill at September 30, 2008.

No impairment losses were recorded related to our definite-lived intangible assets and other long-lived assets during the three and nine months ended September 30, 2008 and 2007. In addition to the non-cash goodwill impairment charge, we recognized a change in goodwill of $28.6 million associated with the RHD Merger that related to deferred income taxes during the nine months ended September 30, 2008. No impairment losses were recorded related to our goodwill during the three and nine months ended September 30, 2007.

Interest Expense and Deferred Financing Costs

Certain costs associated with the issuance of debt instruments are capitalized and included in other non-current assets on the condensed consolidated balance sheets. These costs are amortized to interest expense over the terms of the related debt agreements. The bond outstanding method is used to amortize deferred financing costs relating to debt instruments with respect to which we make accelerated principal payments. Other deferred financing costs are amortized using the effective interest method. Amortization of deferred financing costs included in interest expense was $1.9 million and $0.5 million for the three months ended September 30, 2008 and 2007, respectively, and $5.3 million and $1.3 million for the nine months ended September 30, 2008 and 2007, respectively. Apart from business combinations, it is the Company’s policy to recognize losses incurred in conjunction with debt extinguishments as a component of interest expense. Interest expense for the nine months ended September 30, 2008 includes the write-off of unamortized deferred financing costs of $2.1 million associated with the refinancing of our former credit facility, which has been accounted for as an extinguishment of debt. See Note 4, “ Credit Facility” for additional information.

As a result of the ineffective interest rate swaps associated with the refinancing of our former credit facility, interest expense for the nine months ended September 30, 2008 includes a non-cash charge of $15.0 million resulting from amounts previously charged to accumulated other comprehensive income (loss) related to these interest rate swaps. Interest expense for the three and nine months ended September 30, 2008 includes a reduction to interest expense of $5.0 million and $7.0 million, respectively, resulting from the change in the fair value of these interest rate swaps. Prospective gains or losses on the change in the fair value of these interest rate swaps will be reported in earnings as a component of interest expense.

In conjunction with the RHD Merger and as a result of purchase accounting required under generally accepted accounting principles (“GAAP”), our debt was recorded at its fair value on January 31, 2006. We recognize an offset to interest expense in each period subsequent to the RHD Merger for the amortization of the corresponding fair value adjustment over the life of the respective debt. The offset to interest expense was $3.5 million and $3.3 million for the three months ended September 30, 2008 and 2007, respectively, and $10.4 million and $9.7 million for the nine months ended September 30, 2008 and 2007, respectively.

Advertising Expense

We recognize advertising expenses as incurred. These expenses include media, public relations, promotional and sponsorship costs and on-line advertising. Total advertising expense was $3.2 million and $8.6 million for the three months ended September 30, 2008 and 2007, respectively, and $8.5 million and $15.6 million for the nine months ended September 30, 2008 and 2007, respectively. Total advertising expense for the three and nine months ended September 30, 2008 includes $1.2 million and $3.6 million, respectively, of costs associated with traffic purchased and distributed to multiple advertiser landing pages with no comparable expense for the three and nine months ended September 30, 2007.

Concentration of Credit Risk

Approximately 85% of our directory advertising revenues are derived from the sale of advertising to local small- and medium-sized businesses. Most new advertisers and advertisers desiring to expand their advertising programs are subject to a credit review. While we do not believe that extending credit to our local advertisers will have a material adverse effect on our results of operations or financial condition, no assurances can be given. We do not require collateral from our advertisers, although we do charge interest to advertisers that do not pay by specified due dates. The remaining approximately 15% of our directory advertising revenues are derived from the sale of advertising to national or large regional chains. Substantially all of the revenues derived through national accounts are serviced through certified marketing representatives (“CMRs”) from which we accept orders. We receive payment for the value of advertising placed in our directories, net of the CMR’s commission, directly from the CMR. While we are still exposed to credit risk, the amount of losses from these accounts has been historically less than the local accounts as the advertisers, and in some cases, the CMRs tend to be larger companies with greater financial resources than local advertisers. During the three and nine months ended September 30, 2008, we experienced adverse bad debt trends attributable to economic challenges in our markets. Our bad debt expense represented approximately 6.5% and 5.8% of our net revenue, respectively, for the three and nine months ended September 30, 2008. If these economic challenges in our markets continue, our bad debt experience and operating results would continue to be adversely impacted in future periods.

At September 30, 2008, we had interest rate swap agreements with major financial institutions with a notional amount of $650.0 million. None of these interest rate swaps are designated as cash flow hedges at September 30, 2008. We are exposed to credit risk in the event that one or more of the counterparties to the agreements does not, or cannot, meet their obligation. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. Any loss would be limited to the amount that would have been received over the remaining life of the swap agreement. The counterparties to the swap agreements are major financial institutions with credit ratings of AA- or higher. We do not currently foresee a material credit risk associated with these swap agreements; however, no assurances can be given.

Stock-Based Awards

RHD and the Company account for stock-based compensation under SFAS No. 123 (R),Share-Based Payment(“SFAS No. 123 (R)”). RHD allocates compensation expense to its subsidiaries, including the Company, consistent with the method it utilizes to allocate employee wages and benefits to its subsidiaries. The Company recorded stock-based compensation expense related to stock-based awards granted under RHD’s various employee and non-employee stock incentive plans of $2.2 million and $2.4 million for the three months ended September 30, 2008 and 2007, respectively, and $7.0 million and $9.7 million for the nine months ended September 30, 2008 and 2007, respectively.

On March 4, 2008, RHD granted 2.2 million stock appreciation rights (“SARs”) to certain employees, including executive officers, in conjunction with its annual grant of stock incentive awards. These SARs, which are settled in RHD common stock, were granted at a grant price of $7.11 per share, which was equal to the market value of RHD’s common stock on the grant date, and vest ratably over three years. In accordance with SFAS No. 123 (R), we recognized non-cash compensation expense related to these SARs of $0.1 million and $1.3 million for the three and nine months ended September 30, 2008, respectively.

In April 2008, RHD increased its estimated forfeiture rate in determining compensation expense from 5% to 8%. This adjustment was based on a review of historical forfeiture information and resulted in a reduction to compensation expense of $0.6 million during the nine months ended September 30, 2008.

In March 2008, RHD’s Board of Directors approved, subject to shareholder approval, which was obtained in May 2008, a program under which RHD’s current employees were permitted to surrender certain then outstanding stock options and stock appreciation rights (“SARs”), with exercise prices substantially above the then current market price of RHD’s common stock, in exchange for new SARs, with new vesting requirements and an exercise price equal to the market value of RHD’s common stock on the grant date (the “Exchange Program”). The exercise prices of the outstanding options and SARs eligible for the Exchange Program ranged from $10.78 to $78.01. Other outstanding stock awards, including restricted stock units, were not eligible for the Exchange Program.

The Exchange Program was designed to provide eligible employees with an opportunity to exchange deeply underwater options and SARs for new SARs covering fewer shares, but with an exercise price based on the current, dramatically lower market price.

The Exchange Program allowed for a separate exchange ratio for each outstanding group of options or SARs taking into account such factors as the Black-Scholes value of the surrendered awards and the new SARs to be granted in the Exchange Program, as well as the exercise price and remaining life of each tranche, and other considerations to ensure that the Exchange Program accomplished its intended objectives. The weighted average exchange ratio for eligible awards held by senior management members (as described below) was 1 to 3.8, whereas the weighted average exchange ratio for eligible awards held by all other eligible employees was 1 to 3.5. These senior management members are RHD’s named executive officers, three other members of RHD’s executive committee and RHD’s three general managers of sales. Non-employee directors of RHD were not eligible to participate in the Exchange Program, nor were former employees holding otherwise eligible options and SARs.

In connection with the Exchange Program, on July 14, 2008, RHD granted 1.2 million SARs to certain employees, including certain senior management members of RHD, Dex Media and the Company, in exchange for 4.6 million outstanding options and SARs for a total recapture of 3.4 million shares. These SARs, which are settled in RHD’s common stock, were granted at a grant price of $1.69 per share. The SARs granted in the Exchange Program have a seven-year term and a new three-year vesting schedule, subject to accelerated vesting upon the occurrence of certain events. Exercisability of the SARs granted to senior management members is conditioned upon the achievement of the following stock price appreciation targets, in addition to the three year service-based vesting requirements for all new SARs: (a) the first vested tranche of new SARs shall not be exercisable until RHD’s stock price equals or exceeds $20 per share; (b) the second vested tranche of new SARs shall not be exercisable until RHD’s stock price equals or exceeds $30 per share; and (c) the third and final vested tranche of new SARs shall not be exercisable until RHD’s stock price equals or exceeds $40 per share. These share price appreciation conditions will be deemed satisfied if at any time during the life of the new SARs the average closing price of RHD’s common stock during any ten consecutive trading days equals or exceeds the specified target stock price, provided, however, that otherwise vested SARs that do not become exercisable prior to their expiration date due to the failure to achieve these performance conditions shall terminate unexercised. In addition, these performance conditions for exercisability of the new SARs granted to senior management members will be deemed satisfied prior to achievement of the respective stock price appreciation targets upon the occurrence of certain events, including a change of control, voluntary or involuntary termination, death, disability or retirement. Certain events effectively accelerate the exercisability of one-third of the total new SARs granted to each senior management member if any stock appreciation target has yet to have been met at that time.

The Exchange Program has been accounted for as a modification under SFAS No. 123 (R).In calculating the incremental compensation cost of a modification, the fair value of the modified award was compared to the fair value of the original award measured immediately before its terms or conditions were modified. RHD used the Black-Scholes valuation model to determine the fair value of all original stock awards before modification and the fair value of the modified awards granted to non-senior management members. RHD utilized the Trinomial valuation model to determine the fair value of the modified awards granted to senior management members due to the stock appreciation vesting requirements noted above.

RHD will recognize an incremental non-cash charge of $0.6 million associated with the Exchange Program over its three year vesting period, of which less than $0.1 million was recognized by us during the three and nine months ended September 30, 2008.

Fair Value of Financial Instruments

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157,Fair Value Measurements(“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS No. 157 effective January 1, 2008. The adoption of SFAS No. 157 did not impact our consolidated financial position and results of operations. In accordance with SFAS No. 157, the following table represents our assets and liabilities that are measured at fair value on a recurring basis at September 30, 2008 and the level within the fair value hierarchy in which the fair value measurements are included.


	Fair Value Measurements at
	September 30, 2008
	Using Significant Other
Description	Observable Inputs (Level 2)

Derivatives — Liabilities	$	(5,768	)

In February 2008, the FASB issued Staff Position FAS 157-2,Effective Date of FASB Statement No. 157(“FSP No. 157-2”), which defers the effective date of SFAS No. 157 for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis, to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company has elected the deferral option permitted by FSP No. 157-2 for its non-financial assets and liabilities initially measured at fair value in prior business combinations including intangible assets and goodwill. We do not expect the adoption of FSP No. 157-2 to have a material impact on our consolidated financial statements.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and certain expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates and assumptions. Estimates and assumptions are used in the determination of recoverability of long-lived assets, sales allowances, allowances for doubtful accounts, depreciation and amortization, employee benefit plans expense, restructuring reserves, and certain assumptions pertaining to RHD’s stock-based awards, among others.

New Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133(“SFAS No. 161”). SFAS No. 161 amends SFAS No. 133 and requires enhanced disclosures of derivative instruments and hedging activities such as the fair value of derivative instruments and presentation of their gains or losses in tabular format, as well as disclosures regarding credit risks and strategies and objectives for using derivative instruments. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the potential impact the adoption of SFAS No. 161 will have on its consolidated financial statements.

We have reviewed other accounting pronouncements that were issued as of September 30, 2008, which the Company has not yet adopted, and do not believe that these pronouncements will have a material impact on our financial position or operating results.

3. RHD Merger

On January 31, 2006, our indirect parent, Dex Media, was acquired by RHD for an equity purchase price of $4.1 billion (“the RHD Merger”). Additionally, RHD assumed Dex Media’s outstanding indebtedness on January 31, 2006 with a fair value of $5.5 billion (together with other costs described below for a total aggregate purchase price of $9.8 billion). Pursuant to the Agreement and Plan of Merger, dated October 3, 2005 (“Merger Agreement”), each issued and outstanding share of Dex Media common stock was converted into $12.30 in cash and 0.24154 of a share of RHD common stock, resulting in an aggregate cash value of $1.9 billion and aggregate stock value of $2.2 billion, based on 36,547,381 newly issued shares of RHD common stock. The total allocable purchase price also included transaction costs of $26.7 million that were directly related to the RHD Merger, severance and related costs for certain Dex Media employees of $17.7 million and Dex Media vested equity awards outstanding as of January 31, 2006 with an estimated fair value of $77.4 million.

4. Credit Facility

On June 6, 2008, we refinanced our credit facility. The new Dex Media West credit facility consists of a $130.0 million Term Loan A maturing in October 2013, a $950.0 million Term Loan B maturing in October 2014 and the $90.0 million Dex Media West Revolver maturing in October 2013. In the event that more than $25.0 million of Dex Media West’s 9.875% Senior Subordinated Notes due 2013 (or any refinancing or replacement thereof) are outstanding, the Dex Media West Revolver, Term Loan A and Term Loan B will mature on the date that is three months prior to the final maturity of such notes. The new Dex Media West credit facility includes a $400.0 million Incremental Facility that may be incurred as additional revolving loans or additional term loans, subject to obtaining commitments for such loans. The Incremental Facility is fully available if used to refinance our Dex Media West 8.5% Senior Notes due 2010, however is limited to $200.0 million if used for any other purpose. The proceeds from the new Dex Media West credit facility were used to refinance our former credit facility and pay related fees and expenses.

As of September 30, 2008, outstanding balances under the new Dex Media West credit facility totaled $1,080.0 million, comprised of $130.0 million under Term Loan A and $950.0 million under Term Loan B and no amount was outstanding under the Dex Media West Revolver. The weighted average interest rate of outstanding debt under the new Dex Media West credit facility was 7.38% at September 30, 2008. The weighted average interest rate of outstanding debt under the former Dex Media West credit facility was 6.51% at December 31, 2007.

As of September 30, 2008, the new Dex Media West credit facility bears interest, at our option, at either:

	•		The highest of (i) the base rate determined by the Administrative Agent, JP Morgan Chase Bank, N.A., (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, and (iii) 4.0%, in each case, plus a 2.75% (or 2.50% if the leverage ratio is less than 3.00 to 1.00) margin on the Dex Media West Revolver and Term Loan A and a 3.0% margin on Term Loan B; or

	•		The higher of (i) LIBOR rate and (ii) 3.0% plus a 3.75% (or 3.50% if the leverage ratio is less than 3.00 to 1.00) margin on the Dex Media West Revolver and Term Loan A and a 4.0% margin on Term Loan B. We may elect interest periods of 1, 2, 3, or 6 months (or 9 or 12 months if, at the time of the borrowing, all lenders agree to make such term available), for LIBOR borrowings.

5. Restructuring Charges

The table below highlights the activity in our restructuring reserves for the three and nine months ended September 30, 2008.


	2006			2007			2008
Three months ended	Restructuring			Restructuring			Restructuring
September 30, 2008	Actions			Actions			Actions			Total

Balance at June 30, 2008	$	972		$	87		$	—		$	1,059
Net increase to reserve charged to earnings		—			—			3,912			3,912
Payments		(269	)		(18	)		(3,705	)		(3,992	)

Balance at September 30, 2008	$	703		$	69		$	207		$	979


	2006			2007			2008
Nine months ended	Restructuring			Restructuring			Restructuring
September 30, 2008	Actions			Actions			Actions			Total

Balance at December 31, 2007	$	1,344		$	254		$	—		$	1,598
Net increase to reserve charged to earnings		—			187			5,337			5,524
Payments		(641	)		(372	)		(5,130	)		(6,143	)

Balance at September 30, 2008	$	703		$	69		$	207		$	979

During the second quarter of 2008, RHD initiated a restructuring plan that includes planned headcount reductions, consolidation of responsibilities and vacated leased facilities (“2008 Restructuring Actions”). During the three and nine months ended September 30, 2008, we recognized a restructuring charge to earnings associated with the 2008 Restructuring Actions of $3.9 million and $5.3 million, respectively, and payments of $3.7 million and $5.1 million, respectively, which consist primarily of payments for outside consulting services, severance and vacated leased facilities. We anticipate additional charges to earnings associated with the 2008 Restructuring Actions during the remainder of 2008.

During the nine months ended September 30, 2008, we recognized a restructuring charge to earnings of $0.2 million associated with planned headcount reductions and consolidation of responsibilities to be effectuated during 2008 (“2007 Restructuring Actions”). During the three and nine months ended September 30, 2008, severance payments of less than $0.1 million and $0.4 million, respectively, were made associated with the 2007 Restructuring Actions.

As a result of the RHD Merger, approximately 120 Dex Media employees were affected by a restructuring plan, of which 110 were terminated and 10 were relocated to our corporate headquarters in Cary, North Carolina. Additionally, Dex Media vacated certain of its leased facilities in Colorado, Minnesota, Nebraska and Oregon. The costs associated with these actions are shown in the table above under the caption “2006 Restructuring Actions.” Payments made with respect to severance during the three months ended September 30, 2008 and 2007 were $0.1 million and $0.1 million, respectively, and $0.2 million and $0.9 million during the nine months ended September 30, 2008 and 2007, respectively. Payments of $0.1 million and $0.1 million were made with respect to the vacated leased facilities during the three months ended September 30, 2008 and 2007, respectively, and $0.4 million and $0.6 million during the nine months ended September 30, 2008 and 2007, respectively. The remaining lease payments for these facilities will be made through 2016.

Restructuring charges that are charged to earnings are included in general and administrative expenses on the condensed consolidated statements of operations.

6. Income Taxes

The effective tax rate on income (loss) before income taxes of 44.2% and 36.6% for the three and nine months ended September 30, 2008, respectively, compares to an effective tax rate of 37.3% and 38.3% on income before income taxes for the three and nine months ended September 30, 2007, respectively. As a result of the non-cash goodwill impairment charge of $1.3 billion recorded during the nine months ended September 30, 2008, we recognized a decrease in our deferred tax liability of $496.2 million, which directly impacted our deferred tax benefit. The change in the effective tax rate for the three and nine months ended September 30, 2008 is primarily due to changes in estimates of state tax apportionment factors that impact our effective state tax rates.

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and our effective tax rate, which has been applied to the Company’s income (loss) before income taxes.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Statutory U.S. Federal tax rate		35.0	%		35.0	%		35.0	%		35.0	%
State and local taxes, net of U.S. Federal tax benefit		10.6			2.2			1.5			3.2
Other non-deductible expenses		0.3			0.1			—			0.1
Other		(1.7	)		—			0.1			—

Effective tax rate		44.2	%		37.3	%		36.6	%		38.3	%

7. Benefit Plans

Costs associated with Dex Media’s benefit plans are allocated to the Company as discussed in Note 10, “Related Party Transactions.” In accordance with SFAS No. 132,Employers’ Disclosures About Pension and Other Postretirement Benefits (Revised 2003), the following table provides the components of net periodic benefit cost for the three and nine months ended September 30, 2008 and 2007:


	Pension Benefits
	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2008			2007			2008			2007

Service cost	$	1,154		$	1,441		$	3,776		$	4,323
Interest cost		1,650			1,736			5,115			5,209
Expected return on plan assets		(1,636	)		(1,800	)		(5,263	)		(5,401	)

Net periodic benefit cost	$	1,168		$	1,377		$	3,628		$	4,131


	Postretirement Benefits
	Three Months					Nine Months
	Ended September 30,					Ended September 30,
	2008		2007			2008		2007

Service cost	$	219	$	242		$	656	$	726
Interest cost		719		629			2,153		1,887
Amortization of prior service cost		—		(1	)		—		(3	)

Net periodic benefit cost	$	938	$	870		$	2,809	$	2,610

During the three months ended September 30, 2008 and 2007, the Company made contributions of $2.0 million and $6.2 million, respectively, to Dex Media’s pension plan. During the nine months ended September 30, 2008 and 2007, the Company made contributions of $4.2 million and $7.4 million, respectively, to Dex Media’s pension plan. During the three months ended September 30, 2008 and 2007, the Company made contributions of $0.7 million and $0.4 million, respectively, to Dex Media’s postretirement plan. During the nine months ended September 30, 2008 and 2007, the Company made contributions of $1.6 million and $1.4 million, respectively, to Dex Media’s postretirement plan. The Company expects to make total contributions of approximately $6.4 million and $3.3 million to Dex Media’s pension plan and postretirement plan, respectively, in 2008.

On October 21, 2008, the Compensation & Benefits Committee of RHD’s Board of Directors approved the following modifications to RHD’s and Dex Media’s benefit plans:

	•		A comprehensive redesign of RHD’s and Dex Media’s employee retirement savings plans;

	•		A freeze of RHD’s and Dex Media’s qualified and non-qualified pension plans as they pertain to non-union employees; and

	•		A phased in elimination of RHD’s and Dex Media’s postretirement benefit plans for certain health care and life insurance benefits to certain full-time non-union employees who reach retirement eligibility while working for RHD, Dex Media and the Company.

See Note 11, “Subsequent Events” for additional information regarding these modifications.

8. Business Segments

Management reviews and analyzes its business of providing local commercial search products and solutions, including publishing yellow pages directories, as one operating segment.

9. Legal Proceedings

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters. In many of these matters, plaintiffs allege that they have suffered damages from errors or omissions in their advertising or improper listings, in each case, contained in directories published by us.

We are also exposed to potential defamation and breach of privacy claims arising from our publication of directories and our methods of collecting, processing and using advertiser and telephone subscriber data. If such data were determined to be inaccurate or if data stored by us were improperly accessed and disseminated by us or by unauthorized persons, the subjects of our data and users of the data we collect and publish could submit claims against the Company. Although to date we have not experienced any material claims relating to defamation or breach of privacy, we may be party to such proceedings in the future that could have a material adverse effect on our business.

We periodically assess our liabilities and contingencies in connection with these matters based upon the latest information available to us. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we record a liability in our consolidated financial statements. In other instances, we are unable to make a reasonable estimate of any liability because of the uncertainties related to both the probable outcome and amount or range of loss. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

Based on our review of the latest information available, we believe our ultimate liability in connection with pending or threatened legal proceedings will not have a material adverse effect on our results of operations, cash flows or financial position. No material amounts have been accrued in our consolidated financial statements with respect to any such matters.

10. Related Party Transactions

Effective January 1, 2004, all employees were transferred to Dex Media Service LLC (“Service Co.”). As such, employee-related liabilities, including pension and other post-retirement obligations are primarily included in Service Co.’s reported liabilities with an offsetting asset recorded as an affiliate receivable from Dex Media West for the portion of the liabilities associated with the Dex Media West employees. Dex Media West is charged and carries an affiliate payable for the portion of the liabilities associated with employees providing services to Dex Media West. Under the Shared Services and Employees Agreement, dated September 9, 2003, expenses related to Dex Media West employees providing services entirely for Dex Media West are allocated 100% to Dex Media West. Shared employee expenses are allocated and charged to Dex Media West based upon Dex Media West’s proportional share of consolidated Dex Media revenues. All cash related affiliate balances are settled at least monthly. In addition, after the RHD Merger, certain transactions are managed by RHD on a centralized basis. Under this centralized cash management program, RHD and the Company advance funds and allocate certain operating expenditures to each other.

These net intercompany balances have been classified as a current liability at September 30, 2008 and December 31, 2007, as the Company intends to settle these balances with Dex Media during the next twelve months. Changes in net intercompany balances resulting from operating transactions have been presented as operating activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2008 and 2007.

In general, we and our subsidiary are restricted from paying dividends, loans or advances to Dex Media, subject to certain exceptions, under the terms of the Dex Media West credit facility and indentures governing our notes. Dividends of $161.5 million and $20.0 million were paid to Dex Media during the nine months ended September 30, 2008 and 2007, respectively.

11. Subsequent Events

Employee Retirement Savings and Pension Plans

On October 21, 2008, the Compensation & Benefits Committee of RHD’s Board of Directors approved a comprehensive redesign of RHD’s and Dex Media’s employee retirement savings and pension plans. Effective January 1, 2009, except as described below, the sole retirement benefit available to all non-union employees of RHD, Dex Media and the Company (other than those employed by Business.com) will be provided through a single defined contribution plan. This unified 401(k) plan will replace the existing R.H. Donnelley and Dex Media 401(k) savings plans. Business.com employees will continue to be eligible to participate in the Business.com 401(k) plan until such time as RHD is able to efficiently transition them to the new unified 401(k) plan. RHD will continue to maintain the R.H. Donnelley 401(k) Restoration Plan for those employees with compensation in excess of the IRS annual limits.

In conjunction with establishing the new unified defined contribution plan, RHD and Dex Media will freeze the current defined benefit plans covering all non-union employees – the R.H. Donnelley Corporation Retirement Account, the Dex Media, Inc. Pension Plan, and the R.H. Donnelley Pension Benefit Equalization Plan — in each case, effective as of December 31, 2008. In connection with the freeze, all pension plan benefit accruals for non-union plan participants will cease as of December 31, 2008, however, all plan balances will remain intact and interest credits on participant account balances, as well as service credits for vesting and retirement eligibility, will continue in accordance with the terms of the respective plan. In addition, supplemental transition credits will be provided to certain plan participants nearing retirement who would otherwise lose a portion of their anticipated pension benefit at age 65 as a result of freezing the current plans. Similar supplemental transition credits will also be provided to certain plan participants who were grandfathered under a final average pay formula when the defined benefit plans were converted from traditional pension plans to cash balance plans.

Additionally, on October 21, 2008, the Compensation Committee of RHD’s Board of Directors approved for eligible non-union employees (i) the elimination of all non-subsidized access to retiree health care and life insurance benefits effective January 1, 2009, (ii) the elimination of subsidized retiree health care benefits for any Medicare-eligible retirees effective January 1, 2009 and (iii) the phase out of subsidized retiree health care benefits over a three-year period beginning January 1, 2009 (effectively converting subsidized health care benefits coverage to non-subsidized access coverage). With respect to the phase out of subsidized retiree health care benefits, if an eligible retiree becomes Medicare-eligible at any point in time during the phase out process noted above, such retiree will no longer be eligible for subsidized or non-subsidized (depending on the phase out year) retiree health care coverage.

Management is currently working with its actuaries to determine the accounting impact of these curtailments, which is anticipated to be recorded in the fourth quarter of 2008.

Item 2.Management’s Narrative Analysis of Results of Operations

Pursuant to General Instruction H(2)(a) of Form 10-Q: (i) the information called for by Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, has been omitted and (ii) we are providing the following Management’s Narrative Analysis of Results of Operations.

Forward-Looking Information

Certain statements contained in this Quarterly Report on Form 10-Q regarding our future operating results, performance, 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, words such as “believe,” “expect,” “anticipate,” “should,” “will,” “would,” “planned,” “estimated,” “potential,” “goal,” “outlook,” “could,” and similar expressions, are used to identify such forward-looking statements. All forward-looking statements reflect our current beliefs and assumptions with respect to our future results, business plans and prospects, and are based on information currently available to us. Accordingly, these statements are subject to significant risks and uncertainties and our actual results, business plans and prospects could differ significantly from those expressed in, or implied by, these statements. We caution readers not to place undue reliance on, and we undertake no obligation to update, other than as imposed by law, any forward-looking statements. Such risks, uncertainties and contingencies include, but are not limited to, statements about Dex Media West’s future financial and operating results, Dex Media West’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) our ability to generate sufficient cash to service our significant debt levels; (2) 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; (3) 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; (4) increasing LIBOR rates; (5) changes in directory advertising spend and consumer usage; (6) regulatory and judicial rulings; (7) competition and other economic conditions; (8) changes in the Company’s credit ratings; (9) changes in accounting standards; (10) adverse results from litigation, governmental investigations or tax related proceedings or audits; (11) the effect of labor strikes, lock-outs and negotiations; (12) successful integration and realization of the expected benefits of acquisitions; (13) the continued enforceability of the commercial agreements with Qwest; (14) our reliance on third-party vendors for various services; and (15) other events beyond our control that may result in unexpected adverse operating results. Additional risks and uncertainties are described in detail in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, our Quarterly Report on Form 10-Q for the three months ended March 31, 2008, our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2008 and this Quarterly Report on Form 10-Q. Unless otherwise indicated, the terms “Dex Media West,” the “Company,” “we,” “us” and “our” refer collectively to Dex Media West LLC, its direct wholly-owned subsidiary and its and their predecessors.

Corporate Overview

Dex Media, Inc. (“Dex Media”) is the largest directory publisher in the Dex West States (defined below). Together with its parent, R.H. Donnelley Corporation (“RHD”), Dex Media is one of the nation’s largest Yellow Pages and online local commercial search companies, based on revenues. We publish and distribute advertiser content utilizing our own Dex brand and Qwest, which is one of the most highly recognizable brands in the industry. Additionally, given our Dex brand is considered a leader in local search in our markets, we also co-brand our products with the Qwest brand, which further differentiates our search solutions from others.

Our Triple Play^TM integrated marketing solutions suite encompasses an increasing number of tools that consumers use to find the businesses that sell the products and services they need to manage their lives and businesses: print Yellow Pages directories, our proprietary DexKnows.com^TM online search site and the rest of the Internet via Dex Search Marketing^® tools. During 2007, our print and online solutions helped more than 200,000 national and local businesses in 7 states reach consumers who were actively seeking to purchase products and services. Dex Media’s approximately 900 local marketing consultants work on a daily basis to help bring these local businesses and consumers together to satisfy their mutual objectives utilizing our Triple Play products and services.

During 2007, we published and distributed print directories in many of the country’s most attractive markets including Phoenix. Our print directories provide comprehensive local information to consumers, facilitating their active search for products and services offered by local merchants.

Our online products and services provide merchants with additional methods to connect with consumers who are actively seeking to purchase products and services using the Internet. These powerful offerings not only distribute local advertisers’ content to our proprietary Internet Yellow Pages (“IYP”) sites, but extend to other major online search platforms, including Google^{^®}and Yahoo!^®, providing additional qualified leads for our advertisers. Our local marketing consultants help local businesses create an advertising strategy and develop a customized media plan that takes full advantage of our traditional media products, our IYP local search site DexKnows.com, and our Dex Search Network services. The Dex Search Network Internet marketing services (collectively referred to as “Internet Marketing”) include online profile creation for local businesses, broad-based distribution across the Internet through a network of Internet partners and relationships which host our local business listings and content, search engine marketing (“SEM”) and search engine optimization (“SEO”) services.

This compelling set of Triple Play^TM products and services, in turn, generates strong returns for advertisers. This strong advertiser return uniquely positions us and Dex Media as trusted advisors for marketing support and service in the local markets we serve.

Significant Financing Developments

On June 6, 2008, we refinanced our credit facility. The new Dex Media West credit facility consists of a $130.0 million Term Loan A maturing in October 2013, a $950.0 million Term Loan B maturing in October 2014 and a $90.0 million revolving credit facility maturing in October 2013 (“Dex Media West Revolver”). In the event that more than $25.0 million of Dex Media West’s 9.875% Senior Subordinated Notes due 2013 (or any refinancing or replacement thereof) are outstanding, the Dex Media West Revolver, Term Loan A and Term Loan B will mature on the date that is three months prior to the final maturity of such notes. The new Dex Media West credit facility includes a $400.0 million uncommitted incremental facility (“Incremental Facility”) that may be incurred as additional revolving loans or additional term loans, subject to obtaining commitments for such loans. The Incremental Facility is fully available if used to refinance our 8.5% Senior Notes due 2010, however is limited to $200.0 million if used for any other purpose.

Please see Item 1. Financial Statements (Unaudited) — Note 2, “Summary of Significant Accounting Policies — Interest Expense and Deferred Financing Costs” and Note 4, “Credit Facility” for additional information.

Employee Retirement Savings and Pension Plans

Management is currently working with its actuaries to determine the accounting impact of these curtailments, which is anticipated to be recorded in the fourth quarter of 2008.

Recent Trends Related to Our Business

RHD and the Company have been experiencing lower advertising sales primarily as a result of declines in recurring business (both renewal and increases to existing advertisers), mainly driven by weaker economic trends, reduced consumer confidence and more cautious advertiser spending in our markets. In addition, RHD and the Company have been experiencing adverse bad debt trends attributable to many of these same economic challenges in our markets. If these economic challenges in our markets continue, our advertising sales, bad debt experience and operating results would continue to be adversely impacted in future periods.

In response to these economic challenges facing RHD and the Company, we continue to actively manage expenses and are considering and acting upon a host of initiatives to streamline operations and contain costs. At the same time, we are committing our sales force to focus on selling the value provided to local businesses through our Triple Play offering of print yellow pages, internet yellow pages and online search. In addition, we continue to invest in our future through initiatives such as systems modernization and consolidation, new print and digital product introductions and associated employee training. As economic conditions recover in our markets, we believe these investments will drive future revenue growth, thereby enhancing RHD shareholder value.

RHD has also experienced a significant decline in its stock price during the latter part of 2007 and throughout 2008. RHD believes the decline in the stock price primarily reflects the investment community’s evolving view of (1) local media companies generally and (2) companies with significant financial leverage, particularly as the national economic outlook further deteriorates and credit markets are frozen. In that regard, RHD notes that its stock price decline has coincided with a significant drop in the stock prices of many other local media companies, as well as many companies with significant leverage, which have been adversely impacted by instability in the credit markets.

As a result of the decline in the trading value of Dex Media’s and our debt and RHD’s debt and equity securities, we recorded a non-cash goodwill impairment charge of $1.1 billion during the first quarter of 2008. Since the trading value of RHD’s equity securities further declined in the second quarter of 2008 and as a result of continuing negative industry and economic trends, we recognized a non-cash goodwill impairment charge of $262.5 million during the second quarter of 2008. As a result of these impairment charges, we have no recorded goodwill at September 30, 2008. These charges were calculated in accordance with SFAS No. 142,Goodwill and Other Intangible Assets (“SFAS No. 142”), as further described in “Results of Operations.” These charges had no impact on operating cash flow, compliance with debt covenants, or management’s outlook for the business.

As a result of the credit and liquidity crisis in the United States and throughout the global financial system, substantial volatility in world capital markets and the banking industry has occurred. Several large banking and financial institutions have received funding from the federal government, been granted government loan guarantees, been taken over by federal regulators, merged with other financial institutions, or have initiated bankruptcy proceedings. These and other events have had a significant negative impact on financial markets, as well as the overall economy. From an operational perspective, RHD and the Company have been experiencing lower advertising sales from reduced consumer confidence and reduced advertising spending in our markets, as well as increased bad debt expense. From a financing perspective, this unprecedented instability may make it difficult for RHD and the Company to access the credit market and to obtain financing or refinancing, as the case may be, on satisfactory terms or at all. In addition, as a result of the global economic instability, RHD’s and Dex Media’s pension plan’s investment portfolio has incurred significant volatility and a decline in fair value since December 31, 2007. However, because the values of RHD’s and Dex Media’s pension plan’s individual investments have and will fluctuate in response to changing market conditions, the amount of gains or losses that will be recognized in subsequent periods and the impact on the funded status of the pension plan and future minimum required contributions, if any, cannot be determined at this time.

Segment Reporting

Management reviews and analyzes its business of providing local commercial search products and solutions, including publishing yellow pages directories, as one operating segment.

New Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133(“SFAS No. 161”). SFAS No. 161 amends SFAS No. 133 and requires enhanced disclosures of derivative instruments and hedging activities such as the fair value of derivative instruments and presentation of their gains or losses in tabular format, as well as disclosures regarding credit risks and strategies and objectives for using derivative instruments. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the potential impact the adoption of SFAS No. 161 will have on its consolidated financial statements.

RESULTS OF OPERATIONS

Nine months ended September 30, 2008 and 2007

Factors Affecting Comparability

Reclassifications

Expenses presented as cost of revenues in our previous filings are now presented as production, publication and distribution expenses to more appropriately reflect the nature of these costs. Certain prior period amounts included in the condensed consolidated statement of operations have been reclassified to conform to the current period’s presentation. Selling and support expenses are now presented as a separate expense category in the condensed consolidated statements of operations. In prior periods, certain selling and support expenses were included in production, publication and distribution expenses and others were included in general and administrative expenses. Additionally, beginning in the fourth quarter of 2007, we began classifying adjustments for customer claims to sales allowance, which is deducted from gross revenues to determine net revenues. In prior periods, adjustments for customer claims were included in bad debt expense under general and administrative expenses. Bad debt expense is now included under selling and support expenses. Accordingly, we have reclassified adjustments for customer claims and bad debt expense for the nine months ended September 30, 2007 to conform to the current period’s presentation. These reclassifications had no impact on operating income or net income for the nine months ended September 30, 2007. The table below summarizes these reclassifications.


	Nine months ended September 30, 2007
	As
	Previously					As
(amounts in millions)	Reported		Reclass			Reclassified

Net revenues	$	706.0	$	2.4		$	708.4
Production, publication and distribution expenses		285.6		(172.4	)		113.2
Selling and support expenses		—		174.7			174.7
General and administrative expenses		28.9		0.1			29.0

Impact of Purchase Accounting

As a result of the merger between RHD and Dex Media (the “RHD Merger”) and associated purchase accounting required by generally accepted accounting principles (“GAAP”), we recorded deferred directory costs, such as print, paper, delivery and commissions, related to directories that were scheduled to publish subsequent to the RHD Merger at their fair value, determined as (a) the estimated billable value of the published directory less (b) the expected costs to complete the directories, plus (c) a normal profit margin. We refer to this purchase accounting entry as “cost uplift.” Cost uplift associated with print, paper and delivery costs was amortized over the terms of the applicable directories to production, publication and distribution expenses, whereas cost uplift associated with commissions was amortized over the terms of the applicable directories to selling and support expenses. Cost uplift amortized to production, publication and distribution expenses and selling and support expenses totaled $6.3 million and $9.0 million, respectively, for the nine months ended September 30, 2007, with no comparable expense for the nine months ended September 30, 2008.

Net Revenues

The components of our net revenues for the nine months ended September 30, 2008 and 2007 were as follows:


	Nine months ended September 30,
(amounts in millions)	2008			2007			$ Change			% Change

Gross directory advertising revenues	$	701.7		$	717.5		$	(15.8	)		(2.2	)%
Sales claims and allowances		(15.3	)		(19.5	)		4.2			21.5

Net directory advertising revenues		686.4			698.0			(11.6	)		(1.7	)
Other revenues		9.9			10.4			(0.5	)		(4.8	)

Total Net Revenues	$	696.3		$	708.4		$	(12.1	)		(1.7	)%

Our directory advertising revenues are earned primarily from the sale of advertising in yellow pages directories we publish, net of sales claims and allowances. Directory advertising revenues also include revenues for Internet-based advertising products including online directories, such as DexKnows.com, and Internet Marketing services. Directory advertising revenues are affected by several factors, including changes in the quantity and size of advertisements, acquisition of new customers, renewal rates of existing customers, premium advertisements sold, changes in advertisement pricing, the introduction of new products and general economic factors. Revenues with respect to print advertising and Internet-based advertising products that are sold with print advertising are recognized under the deferral and amortization method. Revenues related to our print advertising are initially deferred when a directory is published and recognized ratably over the directory’s life, which is typically 12 months. Revenues with respect to our Internet-based advertising products that are bundled 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, such as Internet Marketing services, are recognized as delivered or fulfilled.

As a result of the deferral and amortization method of revenue recognition, recognized gross directory advertising revenues reflect the amortization of advertising sales consummated in prior periods as well as advertising sales consummated in the current period. As noted further below, advertising sales have continued to deteriorate due to the overall economic instability and will result in lower recognized advertising revenues in future periods because, as noted, such revenues are recognized ratably over the directory’s life.

Gross directory advertising revenues for the nine months ended September 30, 2008 decreased $15.8 million, or 2.2%, from the nine months ended September 30, 2007. The decrease in gross directory advertising revenues for the nine months ended September 30, 2008 is due to declines in advertising sales over the past twelve months, primarily as a result of declines in recurring business, mainly driven by reduced consumer confidence and more cautious advertiser spending in our markets given our advertisers’ perception of the economic health of their respective markets.

Sales claims and allowances for the nine months ended September 30, 2008 decreased $4.2 million, or 21.5%, from the nine months ended September 30, 2007. The decrease in sales claims and allowances for the nine months ended September 30, 2008 is primarily due to improved quality and lower claims experience.

Other revenues for the nine months ended September 30, 2008 decreased $0.5 million, or 4.8%, from the nine months ended September 30, 2007. Other revenues includes late fees received on outstanding customer balances, barter revenues, commissions earned on sales contracts with respect to advertising placed into other publishers’ directories, and sales of directories and certain other advertising-related products.

Expenses

The components of total expenses for the nine months ended September 30, 2008 and 2007 were as follows:


	Nine months ended September 30,
(amounts in millions)	2008		2007		$ Change			% Change

Production, publication and distribution expenses	$	96.1	$	113.2	$	(17.1	)		(15.1	)%
Selling and support expenses		170.1		174.7		(4.6	)		(2.6	)
G&A expenses		27.2		29.0		(1.8	)		(6.2	)
D&A expenses		150.7		141.9		8.8			6.2
Goodwill impairment		1,325.5		—		1,325.5			100.0

Total	$	1,769.6	$	458.8	$	1,310.8			285.7	%

Certain costs directly related to the selling and production of directories are initially deferred and recognized ratably over the life of the directory under the deferral and amortization method of accounting, with cost recognition commencing in the month directory distribution is substantially complete. These costs are specifically identifiable to a particular directory and include sales commissions and print, paper and initial distribution costs. Sales commissions include amounts paid to employees for sales to local advertisers and to certified marketing representatives (“CMRs”), which act as our channel to national advertisers. All other expenses, such as sales person salaries, sales manager compensation, sales office occupancy, publishing and information technology services, are not specifically identifiable to a particular directory and are recognized as incurred. Our costs recognized in a reporting period consist of: (i) costs incurred in that period and fully recognized in that period; (ii) costs incurred in a prior period, a portion of which is amortized and recognized in the current period; and (iii) costs incurred in the current period, a portion of which is amortized and recognized in the current period and the balance of which is deferred until future periods. Consequently, there will be a difference between costs recognized in any given period and costs incurred in the given period, which may be significant.

Production, Publication and Distribution Expenses

Total production, publication and distribution expenses for the nine months ended September 30, 2008 and 2007 were $96.1 million and $113.2 million, respectively. The primary components of the $17.1 million, or 15.1%, decrease in production, publication and distribution expenses for the nine months ended September 30, 2008, were as follows:


	Nine months ended
(amounts in millions)	September 30, 2008
	$ Change
Decreased print, paper and distribution costs	$	(9.7	)
Decreased “cost uplift” expense		(6.3	)
Decreased information technology (“IT”) expenses		(5.0	)
Increased internet and distribution costs		3.7
All other, net		0.2

Total decrease in production, publication and distribution expenses for the nine months ended September 30, 2008	$	(17.1	)

During the nine months ended September 30, 2008, print, paper and distribution costs declined $9.7 million, compared to the nine months ended September 30, 2007. This decline is primarily due to improved efficiencies in the display of advertiser content in our print products, the refinement of our distribution scope across all of our markets and negotiated price reductions in our print expenses.

Amortization of cost uplift during the nine months ended September 30, 2007 totaled $6.3 million, with no comparable expense for the nine months ended September 30, 2008.

During the nine months ended September 30, 2008, information technology (“IT”) expenses declined $5.0 million, compared to the nine months ended September 30, 2007, primarily due to cost savings resulting from lower rates associated with an IT contract that became effective in July 2007. This decline is partially offset by additional spending associated with our IT infrastructure to support our Triple Play products and services, and enhancements and technical support of multiple production systems as we continue to integrate to a consolidated IT platform.

During the nine months ended September 30, 2008, we incurred $3.7 million of additional expenses related to internet and distribution costs due to increased operations, distribution and clicks costs associated with increased revenues from our online products and services.

Selling and Support Expenses

Total selling and support expenses for the nine months ended September 30, 2008 and 2007 was $170.1 million and $174.7 million, respectively. The primary components of the $4.6 million, or 2.6%, decrease in selling and support expenses for the nine months ended September 30, 2008, were as follows:


	Nine months ended
(amounts in millions)	September 30, 2008
	$ Change
Decreased commissions and salesperson costs	$	(10.2	)
Decreased “cost uplift” expense		(9.0	)
Decreased advertising and branding expenses		(7.1	)
Decreased marketing costs		(2.7	)
Increased bad debt expense		24.3
All other, net		0.1

Total decrease in selling and support expenses for the nine months ended September 30, 2008	$	(4.6	)

During the nine months ended September 30, 2008, commissions and salesperson costs declined $10.2 million, compared to the nine months ended September 30, 2007, primarily due to lower advertising sales as well as planned headcount reductions and consolidation of responsibilities.

Amortization of cost uplift during the nine months ended September 30, 2007 totaled $9.0 million, with no comparable expense for the nine months ended September 30, 2008.

Advertising expense for the nine months ended September 30, 2008 includes $3.6 million of costs associated with traffic purchased and distributed to multiple advertiser landing pages, with no comparable expense for the prior corresponding period. Exclusive of the costs associated with purchased traffic, during the nine months ended September 30, 2008, advertising and branding expenses declined $10.7 million as compared to the nine months ended September 30, 2007. This decrease is primarily due to additional advertising and branding costs incurred in 2007 to promote the Dex brand name for all our print and online products as well as the use of DexKnows.com as our new URL.

During the nine months ended September 30, 2008, marketing costs decreased $2.7 million compared to the nine months ended September 30, 2007, primarily due to a reduction in headcount and related expenses.

During the nine months ended September 30, 2008, bad debt expense increased $24.3 million, compared to the nine months ended September 30, 2007, primarily due to higher bad debt provision rates, deterioration in accounts receivable aging categories and increased write-offs, resulting from the adverse impact on our advertisers from the instability of the overall economy and tightening of the credit markets. If these economic challenges in our markets continue, our bad debt experience may continue to be adversely impacted in future periods.

General and Administrative Expenses

General and administrative (“G&A”) expenses for the nine months ended September 30, 2008 and 2007 were $27.2 million and $29.0 million, respectively. The primary components of the $1.8 million, or 6.2%, decrease in G&A expenses for the nine months ended September 30, 2008, were as follows:


	Nine months ended
(amounts in millions)	September 30, 2008
	$ Change
Decrease in non-cash stock-based compensation expense under SFAS No. 123 (R)	$	(2.9	)
Decrease in IT expenses		(2.5	)
Increase in restructuring expenses		5.6
All other, net		(2.0	)

Total decrease in G&A expenses for the nine months ended September 30, 2008	$	(1.8	)

During the nine months ended September 30, 2008, non-cash stock-based compensation expense under SFAS No. 123 (R) declined $2.9 million, compared to the nine months ended September 30, 2007, primarily due to additional expense related to vesting of awards granted to retirement or early retirement eligible employees during the nine months ended September 30, 2007. In addition, non-cash stock-based compensation expense declined during the nine months ended September 30, 2008 due to a credit of $0.6 million associated with an increase in RHD’s forfeiture rate estimate.

During the nine months ended September 30, 2008, IT expenses declined $2.5 million compared to the nine months ended September 30, 2007, primarily due to cost savings resulting from lower rates associated with an IT contract that became effective in July 2007. This decline is partially offset by additional spending associated with our IT infrastructure to support our Triple Play products and services.

During the nine months ended September 30, 2008, restructuring expenses unrelated to the RHD Merger increased $5.6 million primarily due to outside consulting fees, planned headcount reductions and consolidation of responsibilities.

Depreciation and Amortization Expense

Depreciation and amortization (“D&A”) expense for the nine months ended September 30, 2008 and 2007 was $150.7 million and $141.9 million, respectively. Amortization of intangible assets was $134.8 million for the nine months ended September 30, 2008, compared to $130.8 million reported for the nine months ended September 30, 2007. The increase in amortization expense for the nine months ended September 30, 2008 is primarily due to recognizing a full period of amortization expense related to the local customer relationships intangible asset established in connection with the RHD Merger of $4.5 million, as compared to eight months of amortization expense for the nine months ended September 30, 2007.

Depreciation of fixed assets and amortization of computer software was $15.9 million for the nine months ended September 30, 2008, compared to $11.1 million reported for the nine months ended September 30, 2007. The increase in depreciation expense for the nine months ended September 30, 2008 is primarily due to accelerated amortization related to software projects that are scheduled to be retired prior to their initial estimated service life as well as depreciation expense related to capital projects placed in service during 2007.

Goodwill Impairment

No impairment losses were recorded related to our definite-lived intangible assets and other long-lived assets during the nine months ended September 30, 2008 and 2007. No impairment losses were recorded related to our goodwill during the nine months ended September 30, 2007.

Operating Income (Loss)

Operating income (loss) for the nine months ended September 30, 2008 and 2007 was as follows:


	Nine months ended September 30,
(amounts in millions)	2008			2007		$ Change			% Change

Total	$	(1,073.3	)	$	249.5	$	(1,322.8	)		(530.2	)%

Operating loss for the nine months ended September 30, 2008 of $1.1 billion compares to operating income of $249.5 million for the nine months ended September 30, 2007. The change to operating loss for the nine months ended September 30, 2008 from operating income for the nine months ended September 30, 2007 is primarily due to the non-cash goodwill impairment charges noted above as well as the revenue and expense trends described above.

Interest Expense, Net

Net interest expense for the nine months ended September 30, 2008 and 2007 was $142.2 million and $138.8 million, respectively, and includes $5.3 million and $1.3 million, respectively, of amortization of deferred financing costs. As a result of the ineffective interest rate swaps associated with the refinancing of our former credit facility, interest expense for the nine months ended September 30, 2008 includes a non-cash charge of $15.0 million resulting from amounts previously charged to accumulated other comprehensive income (loss) related to these interest rate swaps. Interest expense for the nine months ended September 30, 2008 includes a reduction to interest expense of $7.0 million resulting from the change in the fair value of these interest rate swaps. Interest expense for the nine months ended September 30, 2008 also includes the write-off of unamortized deferred financing costs of $2.1 million associated with the refinancing of our former credit facility, which has been accounted for as an extinguishment of debt.

The increase in net interest expense of $3.4 million, or 2.4%, for the nine months ended September 30, 2008 is primarily due to additional interest expense associated with the ineffective interest rate swaps and extinguishment of debt noted above. This increase is partially offset by lower interest rates on our variable rate debt during the period as compared to the prior corresponding period.

In conjunction with the RHD Merger and as a result of purchase accounting required under GAAP, we recorded our debt at its fair value on January 31, 2006. We recognize an offset to interest expense each period for the amortization of the corresponding fair value adjustment over the life of the respective debt. The offset to interest expense was $10.4 million and $9.7 million for the nine months ended September 30, 2008 and 2007, respectively.

Income Taxes

The effective tax rate on loss before income taxes of 36.6% for the nine months ended September 30, 2008 compares to an effective tax rate of 38.3% on income before income taxes for the nine months ended September 30, 2007. As a result of the non-cash goodwill impairment charge of $1.3 billion recorded during the nine months ended September 30, 2008, we recognized a decrease in our deferred tax liability of $496.2 million, which directly impacted our deferred tax benefit. The change in the effective tax rate for the nine months ended September 30, 2008 is primarily due to changes in estimates of state tax apportionment factors that impact our effective state tax rates.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Omitted pursuant to General Instruction H(2)(c) of Form 10-Q.

Item 4.Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) the principal executive officer and principal financial officer of the Company have each concluded that such disclosure controls and procedures are effective and sufficient to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported appropriately and within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) Changes in Internal Control Over Financial Reporting.There have not been any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

No changes.

Item1A. Risk Factors

The four risk factors presented below replace and supersede risk factors numbered 3, 5, 9 and 10, respectively, set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (“2007 Form 10-K”). The Company has added risk factor 19, “Economic, financial and liquidity instability,” based upon the current credit and liquidity crisis in the United States and throughout the global financial system. There have been no other material changes to the Company’s risk factors as disclosed in Item 1A, “Risk Factors,” in our 2007 Form 10-K.

3) Competition

The U.S. directory advertising industry is highly competitive and we operate in our markets with significant competition. In nearly all markets, we compete with one or more yellow pages directory publishers, which are predominantly independent publishers, such as Yellow Book and the U.S. business of Yell Group Ltd. In the past, many of these independent publishers were small, undercapitalized companies that had minimal impact on our business. However, over the past five years, Yellow Book and several other regional competitors have become far more aggressive and have grown their businesses dramatically, both through acquisition and expansion into new markets. We compete with Yellow Book in the majority of our markets. In some markets, we also compete with other incumbent publishers, such as Idearc, the directory business formerly affiliated with Verizon Communications Inc., in overlapping and adjacent markets.

Virtually all independent publishers compete aggressively on price to increase market share. This may affect our pricing or revenues in the future. Due to the recent economic environment and trends in our industry, we have experienced a decline in advertising sales during the first nine months of 2008 and we expect this trend to continue throughout 2008 and 2009.

Some of the incumbent and independent publishers with which we compete are larger than we are and have greater financial resources than we have. Although we may have limited market overlap with incumbent publishers relative to the size of our overall footprint, we may not be able to compete effectively with these publishers for advertising sales in these limited markets. In addition, incumbent and independent publishers may commit more resources to certain markets than we are able to commit, thus limiting our ability to compete effectively with these publishers in these areas for advertising sales. Similarly, we may face increased competition from these companies or others (including private equity firms) for acquisitions in the future.

We also compete for advertising sales with other traditional media, including newspapers, magazines, radio, direct mail, telemarketing, billboards and television. Many of these other traditional media competitors are larger than we are and have greater financial resources than we have. We may not be able to compete effectively with these companies for advertising sales or acquisitions in the future.

The Internet has also emerged as an attractive medium for advertisers. Advances in technology have brought and likely will continue to bring new competitors, new products and new channels to the industry, including increasing use of electronic delivery of traditional directory information and electronic search engines/services. The Yellow Pages directory advertising business is subject to changes arising from developments in technology, including information distribution methods and users’ preferences. The use of the Internet and wireless devices by consumers as a means to transact commerce results in new technologies being developed and services being provided that compete with our traditional products and services. National search companies such as Googleand Yahoo! are focusing and placing a high priority on local commercial search initiatives. Our growth and future financial performance may depend on our ability to develop and market new products and services and utilize new distribution channels, while enhancing existing products, services and distribution channels, to incorporate the latest technological advances and accommodate changing user preferences, including the use of the Internet and wireless devices. We may not be able to respond successfully to any such developments.

Directory publishers, including us, have increasingly bundled online advertising with their traditional print offerings in an attempt to increase advertiser value, increase customer retention and enhance total usage. We compete through our IYP sites with the IYP directories of independent and other incumbent directory publishers, and with other Internet sites, including those available through wireless applications that provide classified directory information, such as YellowPages.com, Switchboard.com, Superpages.com and Citysearch.com, and with search engines and portals, such as Yahoo!, Google, MSN and others. We may not be able to compete effectively with these other companies, some of which may have greater resources than we do, for advertising sales or acquisitions in the future. Our Internet strategy and our business may be adversely affected if major search engines build local sales forces or otherwise begin to more effectively reach small local businesses for local commercial search services.

Our ability to provide Internet Marketing solutions to our advertisers is dependent upon relationships with major Internet search companies. Loss of key relationships or changes in the level of service provided by these search companies could impact performance of our Internet Marketing solutions. The success of our relationships with Internet search companies also depends on the compatibility of our technologies, and we have in the past, and may in the future, experience difficulties in this regard. Many of these Internet search companies are larger than we are and have greater financial resources than we have. We may not be able to compete effectively with these companies for advertising sales or acquisitions in the future, particularly should Internet based advertising sales become increasingly accessible to small- and medium- sized businesses. In addition, Internet Marketing services are provided by many other competitors within the territory we service and our advertisers could choose to work with other providers of these services or with search engines directly.

Competition from other Yellow Pages publishers, other forms of traditional media and the Internet may affect our ability to attract and retain advertisers and to increase advertising rates. In addition, the market position of telephone utilities, including those with which we have relationships, may be adversely impacted by the Telecommunications Act of 1996, referred to as the Telecommunications Act, which effectively opened local telephone markets to increased competition. In addition, Federal Communication Commission rules regarding local number portability, advances in communications technology (such as wireless devices and voice over Internet protocol) and demographic factors (such as potential shifts in younger generations away from wire line telephone communications towards wireless or other communications technologies) may further erode the market position of telephone utilities, including Qwest. As a result, it is possible that Qwest will not remain the primary local telephone service provider in their local service areas. If Qwest were no longer the primary local telephone service provider in any particular local service area, our license to be the exclusive publisher in that market and to use the incumbent local exchange carrier (“ILEC”) brand name on our directories in that market may not be as valuable as we presently anticipate, and we may not realize some of the existing benefits under our commercial arrangements with Qwest.

5) Recognition of impairment charges for our intangible assets, other long-lived assets or goodwill

At September 30, 2008, the net carrying value of our intangible assets totaled approximately $4.7 billion. As a result of the impairment charges during the first and second quarter of 2008 noted below, we had no recorded goodwill at September 30, 2008. Our intangible assets and other long-lived assets are subject to impairment testing in accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-lived Assets. We review the carrying value of our intangible assets and other long-lived assets for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable. Significant negative industry or economic trends, including the market price of RHD’s common stock or the fair value of Dex Media’s and our debt and RHD’s debt, disruptions to our business, unexpected significant changes or planned changes in the use of the intangible assets and other long-lived assets, and mergers and acquisitions could result in an impairment charge for any of our intangible assets or other long-lived assets.

As a result of the decline in the trading value of Dex Media’s and our debt and RHD’s debt and equity securities during the first quarter of 2008 and continuing negative industry and economic trends that have directly affected RHD’s and our business, RHD performed impairment tests as of March 31, 2008 of its goodwill and definite-lived intangible assets in accordance with SFAS No. 142 and SFAS No. 144, respectively. RHD used certain estimates and assumptions in its impairment evaluations, including, but not limited to, projected future cash flows, revenue growth and customer attrition levels. As a result of this testing, RHD recognized a non-cash impairment charge of $2.5 billion in the first quarter of 2008. The Company’s share of the impairment charge, based on a discounted cash flow analysis, was $1.1 billion.

No impairment losses were recorded related to our definite-lived intangible assets and other long-lived assets during the three and nine months ended September 30, 2008.

If industry and economic conditions in certain of RHD’s markets continue to deteriorate, RHD will be required to assess the recoverability of its long-lived assets and other intangible assets, which could result in additional impairment charges. Any additional impairment charge related to our intangible assets or other long-lived assets could have a significant effect on our financial position and results of operations in the periods recognized.

9) Future changes in directory publishing obligations in Qwest markets and other regulatory matters

Pursuant to our publishing agreement with Qwest, we are required to discharge Qwest’s regulatory obligation to publish White Pages directories covering each service territory in the Dex Media West states where it provided local telephone service as the incumbent service provider as of November 8, 2002. If the staff of a state public utility commission in a Dex Media West state were to impose additional or changed legal requirements in any of Qwest’s service territories with respect to this obligation, we would be obligated to comply with these requirements on behalf of Qwest, even if such compliance were to increase our publishing costs. Pursuant to the publishing agreement, Qwest will only be obligated to reimburse us for one half of any material net increase in our costs of publishing directories that satisfy Qwest’s publishing obligations (less the amount of any previous reimbursements) resulting from new governmental legal requirements, and this obligation will expire on November 7, 2009. Our competitive position relative to competing directory publishers could be adversely affected if we are not able to recover from Qwest that portion of our increased costs that Qwest has agreed to reimburse and, moreover, we cannot assure you that we would be able to increase our revenue to cover any unreimbursed compliance costs.

As the IYP directories industry develops, specific laws relating to the provision of Internet services and the use of Internet and Internet-related applications may become relevant. Regulation of the Internet and Internet-related services is itself still developing both formally by, for instance, statutory regulation, and also less formally by, for instance, industry self regulation. If our regulatory environment becomes more restrictive, including by increased Internet regulation, our profitability could decrease.

Our operations, as well as the properties owned and leased for our business, are subject to stringent laws and regulations relating to environmental protection. The failure to comply with applicable environmental laws, regulations or permit requirements, or the imposition of liability related to waste disposal or other matters arising under these laws, could result in civil or criminal fines, penalties or enforcement actions, third-party claims for property damage and personal injury or requirements to clean up property or other remedial actions. Some of these laws provide for “strict liability,” which can render a party liable for environmental or natural resource damage without regard to negligence or fault on the part of the party.

In addition, new laws and regulations (including, for example, limiting distribution of print directories), new interpretations of existing laws and regulations, increased governmental enforcement or other developments could require us to make additional unforeseen expenditures or could lead to us suffering declines in revenues. For example, “opt out” legislation has been proposed in certain states where we operate that would allow consumers to opt out of the delivery of print yellow pages. Although to date, this proposed legislation has not been signed into law in any of the states where we operate, we cannot assure you that similar legislation will not be passed in the future. If such legislation were to become effective, it could have a material adverse effect on the usage of our products and, ultimately, our revenues. Depending on the consistency of the legislation if adopted in multiple jurisdictions, it could materially increase our operating costs in order to comply. We are adopting voluntary measures to permit consumers to share with us their preferences with respect to the delivery of our various print and digital products. If a large number of consumers advise us that they do not desire delivery of our products, the usage of our products and, ultimately our revenues, could materially decline, which may have an adverse effect on our financial condition and results of operations.

Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time. To the extent that the costs associated with meeting any of these requirements are substantial and not adequately provided for, there could be a material adverse effect on our businesses, financial condition and results of operations.

10) Reliance on, and extension of credit to, small and medium-sized businesses

Approximately 85% of our directory advertising revenue is derived from selling advertising to small and medium-sized enterprises (“SMEs”). In the ordinary course of our yellow pages publishing business, we extend credit to these advertisers for advertising purchases. SMEs, however, tend to have fewer financial resources and higher failure rates than large businesses, especially during a downturn in the general economy. The proliferation of very large retail stores may continue to harm small- and medium-sized businesses. We believe these limitations are significant contributing factors to having advertisers in any given year not renew their advertising in the following year. In addition, full or partial collection of delinquent accounts can take an extended period of time. Consequently, we could be adversely affected by our dependence on and our extension of credit to small- and medium-sized businesses. For the year ended December 31, 2007, our bad debt expense represented approximately 2.6% of our net revenue. For the three and nine months ended September 30, 2008, our bad debt expense represented approximately 6.5% and 5.8% of our net revenue, respectively. Our bad debt expense could continue to increase given the current state of the credit market crisis, which may negatively impact SMEs to a greater extent than larger businesses.

19) Economic, financial and liquidity instability

As a result of the credit and liquidity crisis in the United States and throughout the global financial system, substantial volatility in world capital markets and the banking industry has occurred. This volatility and other events have had a significant negative impact on financial markets, as well as the overall economy. From an operational perspective, RHD and the Company have been experiencing lower advertising sales from reduced consumer confidence and reduced advertising spending in our markets, as well as increased bad debt expense. From a financing perspective, this unprecedented instability may make it difficult for RHD and the Company to access the credit market and to obtain financing or refinancing, as the case may be, on satisfactory terms or at all. In addition, as a result of the global economic instability, RHD’s and Dex Media’s pension plan’s investment portfolio has incurred significant volatility and a decline in fair value since December 31, 2007. However, because the values of RHD’s and Dex Media’s pension plan’s individual investments have and will fluctuate in response to changing market conditions, the amount of gains or losses that will be recognized in subsequent periods and the impact on the funded status of the pension plan and future minimum required contributions, if any, cannot be determined at this time.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

Item 3.Defaults Upon Senior Securities

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

Item 4.Submission of Matters to a Vote of Security Holders

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

Item 5.Other Information

None.

Item 6.Exhibits


Number		Document

31.1*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2008 by David C. Swanson, Chairman and Chief Executive Officer of Dex Media West LLC under Section 302 of the Sarbanes-Oxley Act.

31.2*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2008 by Steven M. Blondy, Executive Vice President and Chief Financial Officer of Dex Media West LLC under Section 302 of the Sarbanes-Oxley Act.

32.1*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2008 under Section 906 of the Sarbanes-Oxley Act David C. Swanson, Chairman and Chief Executive Officer, and Steven M. Blondy, Executive Vice President and Chief Financial Officer of Dex Media West LLC.


*		Filed herewith.

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.


	DEX MEDIA WEST LLC
	By:	/s/ Steven M. Blondy
Date: November 5, 2008		Steven M. Blondy
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

	By:	/s/ R. Barry Sauder
Date: November 5, 2008		R. Barry Sauder
		Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)

Exhibit Index


Number		Document

31.1*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2008 by David C. Swanson, Chairman and Chief Executive Officer of Dex Media West LLC under Section 302 of the Sarbanes-Oxley Act.

31.2*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2008 by Steven M. Blondy, Executive Vice President and Chief Financial Officer of Dex Media West LLC under Section 302 of the Sarbanes-Oxley Act.

32.1*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2008 under Section 906 of the Sarbanes-Oxley Act David C. Swanson, Chairman and Chief Executive Officer, and Steven M. Blondy, Executive Vice President and Chief Financial Officer of Dex Media West LLC.


*		Filed herewith.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

Dex Media West Inactive 10-Q2008 Q3 Quarterly report

Content analysis

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents