 | news release Second Quarter 2008 Results Contacts: Investors - James M. Gruskin 800/497-6329 Media - Tyler D. Gronbach 919/297-1541 |
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R.H. DONNELLEY REPORTS STABLE REVENUE AND EBITDA — REDUCES NET DEBT BY OVER $230 MILLION
| · | Completes Over $3 Billion of Debt Refinancings |
| · | Updates 2008 Ad Sales and Cash Flow Outlook to Reflect Softer Economy and Higher Interest |
CARY, N.C., July 30, 2008 -- R.H. Donnelley Corporation (NYSE: RHD), one of the nation's leading Yellow Pages and online local commercial search companies, today reported second quarter 2008 net revenues of $664 million, essentially in line with the same period in the prior year. Adjusted EBITDA1 in the quarter was $366 million, also in line with last year. Adjusted free cash flow was $159 million, based on cash flow from operations of $176 million, capital expenditures of $20 million and $3 million of other adjustments. Second quarter advertising sales were $678 million, down 8.6 percent from pro forma advertising sales for the same period in the prior year. Net loss for the quarter was $339 million, reflecting a goodwill impairment charge of $660 million. Excluding the effect of goodwill impairment in the quarter, net income would have been $89 million. As of June 30, 2008, RHD’s net debt outstanding was $9,719 million, excluding the purchase accounting fair value adjustment of $95 million.
“EBITDA in the quarter was better than expected as we’ve been able to over achieve on our plans to capture efficiencies by standardizing products, processes and technologies across our entire business,” said David C. Swanson, chairman and CEO of R.H. Donnelley. “These savings were partially offset by the effect of lower ad sales, higher bad debt expense and continued investment in our interactive initiatives.”
Swanson continued, “Second quarter ad sales were weaker both sequentially and on a year over year basis due to deteriorating consumer sentiment and the impact of rising operating costs on small businesses. We are seeing the effect across all markets and products. While demand for our bundled advertising solutions through Triple Play remains strong, many advertisers currently lack the funds to invest in growing their business. We adjusted our guidance for full year 2008 ad sales to reflect this more challenging selling environment.”
Steven M. Blondy, executive vice president and CFO, added, “In addition to delivering solid EBITDA and free cash flow in the quarter, we also successfully completed over $3 billion of debt transactions that significantly reduce near-term maturities and enhance financial flexibility. The impact of these refinancings and debt repayment lowered net debt by over $230 million, reducing leverage to 6.8 times at June 30th. We’re pleased to confirm 2008 EBITDA guidance, although we’ve lowered our 2008 free cash flow outlook primarily to reflect higher interest rates following the refinancings. Both EBITDA and free cash flow will be further impacted by anticipated restructuring charges of approximately $40 million this year.”
The $660 million non-cash, pre-tax goodwill impairment charge reflects the further decline in the market value of the Company’s equity securities during the second quarter. The charge does not impact the Company’s current or future cash flow, compliance with debt covenants, tax attributes or management’s outlook for the business.
Outlook
The Company is updating full year 2008 guidance, summarized below:
| · | Ad sales decline of between 7% and 8%. |
| · | Net revenue of at least $2.6 billion. |
| · | Adjusted EBITDA2 of between $1,350 million and $1,400 million; operating loss of between $2,295 million and $2,345 million; and adjusted operating income2 of between $860 million and $910 million. |
| · | Adjusted free cash flow3 of between $475 million and $525 million and operating cash flow of between $495 million and $545 million. |
| · | Net debt at year end of approximately $9.5 billion, excluding the fair value adjustment of $0.1 billion. |
| · | Weighted average diluted shares outstanding during 2008 of approximately 70 million. |
See Schedule 6 for a reconciliation of the foregoing non-GAAP measures to the most comparable GAAP measures.
Further important information regarding operating results and related reconciliations of non-GAAP financial measures to the most comparable GAAP measures can be found in the schedules and related footnotes of this press release, which should be thoroughly reviewed. Advertising sales is a statistical measure and consists of sales of advertising in print directories distributed during the period and Internet-based products and services with respect to which such advertising first appeared publicly during the period. It is important to distinguish advertising sales from net revenues, which is recognized under the deferral and amortization method.
Second Quarter Conference Call
R.H. Donnelley will host a conference call to discuss its second quarter 2008 results today at 10:00 a.m. (ET). The call can be accessed by dialing 888-387-9606 (domestic) or 517-645-6055 (international). The pass code for the call is "RHD". Please dial in to the call by 9:50 a.m. (ET) to ensure a prompt start time. The call will also be available through a Web cast, which can be accessed by visiting our Web site at www.rhd.com, clicking on "Investor Relations" and following the instructions provided. Those unable to participate at the scheduled time may access a recorded replay by dialing 800-879-6405 (domestic) or 402-220-4745 (international). There is no pass code for the replay, which will be available through August 13, 2008. In addition, an archived version of the Web cast will be available on RHD’s Web site for up to one year from the date of the call.
1 Before the following expenses: (a) restructuring, (b) FAS 123 R and (c) restricted stock units related to the Business.com acquisition.
2 Before the following expenses: (a) a restructuring charge of approximately $40 million, (b) FAS 123 R and (c) restricted stock units related to the Business.com acquisition.
3 Before restructuring costs of approximately $40 million and restricted stock unit costs related to the Business.com acquisition.
Helping Local Businesses Reach More Customers
R.H. Donnelley's interactive offerings are essential to its Triple Play™ solution suite -- an integrated set of products and services that efficiently and effectively extend the marketing reach of local businesses. Spanning multiple media platforms -- print Yellow Pages directories, DexKnows.com™ search site and the major search engines (e.g., Yahoo!® and Google®) via the Company's Dex Search Marketing® tools -- Triple Play delivers the advertisements of local businesses to a wider set of ready-to-buy consumers.
About R.H. Donnelley
R.H. Donnelley connects businesses and consumers through its portfolio of print and interactive marketing solutions. Small- and medium-sized businesses look to R.H. Donnelley's experienced team of marketing consultants to help them grow their companies and drive sales leads. Consumers depend on the Company's reliable, local business content to deliver the most relevant search results when they are seeking local goods and services. For more information, visit www.rhd.com and DexKnows.com.
Safe Harbor Provision
Certain statements contained in this press release regarding RHD’s future operating results or performance or business plans or prospects and any other statements not constituting historical fact are “forward-looking statements” subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Where possible, the words “believe,” “expect,” “anticipate,” “intend,” “should,” “will,” “would,” “planned,” “estimated,” “potential,” “goal,” “outlook,” “may,” “predicts,” “could,” or the negative of such terms, or other comparable expressions, as they relate to RHD or its management, have been used to identify such forward-looking statements. All forward-looking statements reflect only RHD’s current beliefs and assumptions with respect to future business plans, prospects, decisions and results, and are based on information currently available to RHD. Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause RHD’s actual operating results, performance or business plans or prospects to differ materially from those expressed in, or implied by, these statements.
Factors that could cause actual results to differ materially from current expectations include risks and other factors described in RHD’s publicly available reports filed with the SEC, which contain a discussion of various factors that may affect RHD’s business or financial results. Such risks and other factors, which in some instances are beyond RHD’s control, include: our ability to generate sufficient cash to service our significant debt levels; our ability to comply with or obtain modifications or waivers of the financial covenants contained in our debt agreements, and the potential impact to operations and liquidity as a result of restrictive covenants in such debt agreements; our ability to refinance our debt on reasonable terms and conditions as might be necessary from time to time; increasing LIBOR rates; changes in directory advertising spend and consumer usage; regulatory and judicial rulings; competition and other economic conditions; changes in the Company’s and the Company’s subsidiaries credit ratings; changes in accounting standards; adverse results from litigation, governmental investigations or tax related proceedings or audits; the effect of labor strikes, lock-outs and negotiations; successful integration and realization of the expected benefits of acquisitions; the continued enforceability of the commercial agreements with Qwest, Embarq and AT&T; our reliance on third-party vendors for various services; and other events beyond our control that may result in unexpected adverse operating results. RHD is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet service providers. This press release is being furnished to the SEC through a Form 8-K. The Company’s next 10-Q report to be filed with the SEC may contain updates to the information included in this release.
(See attached tables)
