Exhibit 99.1
Strong Sales Performance in Sprint Markets Continues; Uses Cash Flow to
Reduce Net Debt by $116 Million; Increases Cash Flow Guidance
CARY, N.C.--(BUSINESS WIRE)--Oct. 26, 2005--R.H. Donnelley
Corporation (NYSE: RHD), a leading yellow pages publisher and local
online search company, today reported third quarter 2005 cash flow
from operations of $119.6 million, compared to $117.4 million in third
quarter 2004, excluding a federal income tax refund of $58.9 million
received during the prior year quarter.
David C. Swanson, Chairman and Chief Executive Officer, said, "We
continued to generate solid publication sales, EBITDA and free cash
flow during the third quarter. Our combined 1.7 percent publication
sales growth was the result of strong performance in our Sprint
markets, partially offset by a decline in Illinois driven by actions
we have taken to position that business for long-term sustainable
growth. Meanwhile, we have maintained focus on our long-term strategic
objectives as evidenced by the announcement earlier this month of our
agreement to purchase Dex Media."
Third Quarter - Reported GAAP Results
Third quarter net revenue was $255.2 million compared to $144.4
million in the prior year. Operating expenses, including depreciation
and amortization, were $152.5 million compared to $90.0 million in the
prior year. The Company did not generate partnership income in the
third quarter of 2005 due to the SBC transaction, which was completed
in September 2004. Partnership income in the third quarter of 2004 was
$19.3 million. Operating income in the quarter was $102.7 million
versus $73.7 million in the prior year. Net interest expense in the
quarter was $58.2 million compared to $43.2 million in the third
quarter of 2004. Net income available to common shareholders for the
quarter was $24.1 million or $0.62 per diluted share compared to
income available to common shareholders of $13.0 million or $0.31 per
diluted share for the third quarter of 2004.
Third Quarter Results - Including Adjustments and Non-GAAP
Measures
Publication sales for RHD's Sprint-branded directories during the
third quarter of 2005 were $160.3 million, up 4.4 percent from
publication sales of $153.5 million in the prior year. Publication
sales for RHD's SBC-branded directories during the third quarter of
2005 were $63.3 million, down 4.5 percent from publication sales of
$66.3 million in the prior year. Publication sales represent the total
billable value of advertising in directories that were published in
the period.
Adjusted net revenue in the quarter was $260.7 million, compared
to adjusted pro forma net revenue of $259.9 million in the third
quarter of 2004. Adjusted operating expenses including depreciation
and amortization were $134.4 million compared to adjusted pro forma
operating expenses of $124.2 million for the same period in 2004.
Adjusted operating income for the third quarter of 2005 was $126.3
million, compared to adjusted pro forma operating income for the third
quarter of 2004 of $135.7 million. Adjusted EBITDA for the quarter was
$147.8 million, compared to adjusted pro forma EBITDA of $157.4
million in the prior year. Third quarter 2005 net income, excluding
preferred dividends and adjusted to remove the effect of purchase
accounting, was $41.5 million, compared to adjusted pro forma net
income of $50.5 million for the third quarter of 2004. Adjusted net
income per diluted share in the third quarter of 2005 was $1.07,
compared to adjusted pro forma net income per diluted share of $1.19
in the prior year.
See the attached schedules for a reconciliation of non-GAAP
financial measures presented in this release to the most comparable
GAAP measures.
Cash Flow and Debt
The Company generated cash flow from operations of $119.6 million
in the quarter. Free cash flow (cash flow from operations less $8.4
million of capital expenditures and software investment) for the
quarter was $111.2 million. In aggregate, the Company reduced net debt
by $115.5 million during the third quarter. As of September 30, 2005,
net debt outstanding was $3,101.4 million.
Outlook
The Company is updating guidance for full year 2005. Details and
related reconciliations of non-GAAP financial measures appear in the
schedules to this press release. Updated 2005 guidance appears in
Schedule 9d and reconciliations of non-GAAP financial measures appear
in Schedules 9a through 9f at the end of this press release.
Comparative Financial Results
As a result of the SBC and Sprint transactions, and the related
financing and associated accounting, management believes that the 2005
and 2004 results reported in accordance with GAAP are not comparable,
nor do they reflect the Company's underlying operational or financial
performance. Accordingly management is presenting certain non-GAAP
financial measures in addition to results reported in accordance with
GAAP in order to better communicate underlying operational and
financial performance and to facilitate comparison of adjusted 2005
and adjusted pro forma 2004 results. Adjusted pro forma results
discussed in this press release and the attached schedules reflect the
combination of RHD with the SBC directory business in Illinois and
Northwest Indiana as if the transaction had been consummated at the
beginning of 2004, as well as certain other adjustments described
below. While management believes that the adjusted pro forma results
reasonably resemble operational performance as if the SBC transaction
had been consummated at the beginning of the year presented, because
of differences between RHD and predecessor accounting policies,
management does not believe these pro forma results are strictly
comparable.
The primary adjustments related to the SBC transaction are
recognition of pre-acquisition deferred revenue and deferred expenses
that are not reportable under GAAP due to purchase accounting
requirements, but that absent purchase accounting would have been
recognized during the periods presented. Adjusted results also exclude
deferred directory costs related to sales contracts executed prior to
the acquisition for directories that were scheduled to publish
subsequent to the acquisition, determined based on the estimated
billable value of the published directories less the expected costs to
complete the directories plus a normal margin. Similar adjustments
related to the Sprint transaction were made in 2004. Adjusted earnings
per share assumes conversion at the beginning of the period of the
preferred stock that was outstanding at September 30 of the applicable
year. The attached Schedules include a reconciliation of all non-GAAP
financial measures to the most comparable GAAP measures and a further
description of the related adjustments.
For the period ended August 31, 2004, the Company's investment in
DonTech was accounted for under the equity method. The Company did not
consolidate DonTech's revenue and expenses in its consolidated
results. Rather it reported the Company's share of DonTech's net
income and revenue participation income from SBC, both based on
DonTech's calendar sales, collectively as partnership income. On
September 1, 2004, RHD acquired SBC's directory business in Illinois
and Northwest Indiana, including SBC's interest in the DonTech
partnership. As a result, the Company did not generate partnership
income after August 31, 2004.
The Company's Current Report on Form 8-K furnished to the SEC on
October 28, 2004 provides additional details regarding the adjustments
and non-GAAP financial measures related to the SBC transaction.
Third Quarter Conference Call
R.H. Donnelley's third quarter conference call will be held on
October 27, 2005 at 10:00 a.m. (Eastern Time) and can be accessed by
dialing 888-387-9606 (domestic) or 517-645-6055 (international). The
passcode for the call is "RHD". Please dial in to the call by 9:50 a.m
(Eastern Time) to ensure a prompt start time. The call will also be
available through a Webcast, which can be accessed by visiting our Web
site at www.rhd.com, clicking on "Investor Information" and following
the instructions provided. Those unable to participate at the
scheduled time may access a recording by dialing 866-501-5087
(domestic) or 203-369-1833 (international). The recording will be
available through November 27, 2005. There is no passcode for the
replay.
About R.H. Donnelley
R.H. Donnelley is a leading Yellow Pages publisher and local
online search company. RHD publishes directories with total
distribution of approximately 28 million serving approximately 260,000
local and national advertisers in 19 states. RHD publishes directories
under the Sprint Yellow Pages(R) brand in 18 states with total
distribution of approximately 18 million serving approximately 160,000
local and national advertisers, with major markets including Las
Vegas, Nevada, and Orlando and Ft. Myers, Florida. In addition, RHD
publishes directories under the SBC Yellow Pages brand in Illinois and
Northwest Indiana with total distribution of approximately 10 million
serving approximately 100,000 local and national advertisers. RHD also
offers online city guides and search websites in its major Sprint
Yellow Pages markets under the Best Red Yellow Pages(R) brand at
www.bestredyp.com and in the Chicago area at www.chicagolandyp.com.
For more information, please visit R.H. Donnelley at www.rhd.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,"
"planned," "estimated," "potential," "goal," "outlook," and similar
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. Such risks,
uncertainties and contingencies include, but are not limited to,
statements about the benefits of the merger between RHD and Dex,
including future financial and operating results, RHD's plans,
objectives, expectations and intentions and other statements that are
not historical facts.
The following factors, among others, could cause actual results to
differ from those set forth in the forward-looking statements: (1) the
ability to obtain governmental approvals of the merger on the proposed
terms and schedule; (2) the failure of RHD and Dex stockholders to
approve the merger; (3) the risk that the businesses will not be
integrated successfully; (4) the risk that the cost savings and any
revenue synergies from the merger may not be fully realized or may
take longer to realize than expected; (5) disruption from the merger
making it more difficult to maintain relationships with customers,
employees or suppliers; and (6) general economic conditions and
consumer sentiment in our markets. Additional factors that could cause
RHD's results to differ materially from those described in the
forward-looking statements are described in detail in the Management's
Discussion and Analysis of Financial Condition and Results of
Operations in RHD's Annual Reports on Form 10-K for the year ended
December 31, 2004, as well as RHD's other periodic filings with the
SEC that are available on the SEC's internet site
(http://www.sec.gov).
Additional Information and Where to Find It
Stockholders are urged to read the joint proxy
statement/prospectus regarding the proposed transaction when it
becomes available, because it will contain important information.
Stockholders will be able to obtain a free copy of the joint proxy
statement/prospectus, as well as other filings containing information
about RHD, without charge, at the SEC's internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus
and the SEC filings that will be incorporated by reference in the
joint proxy statement/prospectus can also be obtained, without charge,
by directing a request to RHD.
Interests of Participants
The respective directors and executive officers of RHD and Dex and
other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding
RHD's directors and executive officers is available in its proxy
statement filed with the SEC by RHD on March 21, 2005, and information
regarding Dex's directors and executive officers is available in its
proxy statement filed with the SEC by Dex on April 20, 2005. Copies of
these documents can be obtained, without charge, by directing a
request to RHD or Dex. Other information regarding the participants in
the proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained the
joint proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available.
R.H. DONNELLEY CORPORATION Schedule 1
INDEX OF SCHEDULES
- ------------------
Schedule 1: Index of Schedules
Schedule 2: Unaudited Consolidated Statements of
Operations for the three and nine months
ended September 30, 2005
and 2004
Schedule 3: Unaudited Adjusted Consolidated Statements
of Operations for the three
months ended September 30,
2005 and 2004
Schedule 4: Unaudited Adjusted Consolidated Statements
of Operations for the nine
months ended September 30,
2005 and 2004
Schedule 5: Unaudited Consolidated Balance Sheets at
September 30, 2005, June 30, 2005
and December 31,
2004
Schedule 6: Unaudited Consolidated Statements of Cash Flows for
the three and nine months
ended September 30, 2005
and 2004
Schedule 7: Reconciliation of Reported to Adjusted
Unaudited Consolidated Statements
of Operations for the three months ended
September 30, 2005 and 2004
Schedule 8: Reconciliation of Reported to Adjusted
Unaudited Consolidated Statements
of Operations for the nine months ended
September 30, 2005 and 2004
Schedule 9: Reconciliation of Non-GAAP
Measures
Schedule 10: Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures
Note: These schedules are preliminary and subject to change pending
the Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 2
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
(unaudited)
Amounts in millions, except earnings per share
- ----------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------
2005 2004 2005 2004
Reported Reported Reported Reported
- ----------------------------------------------------------------------
Net revenue (1) $255.2 $144.4 $695.5 $432.9
Expenses 131.0 73.0 367.9 212.0
Depreciation and
amortization 21.5 17.0 63.7 46.3
Partnership income - 19.3 - 78.0
-----------------------------------------
Operating income 102.7 73.7 263.9 252.6
Interest expense, net (58.2) (43.2) (173.9) (121.0)
-----------------------------------------
Pre-tax income 44.5 30.5 90.0 131.6
Tax provision (17.4) (12.0) (35.1) (52.0)
-----------------------------------------
Net income 27.1 18.5 54.9 79.6
Loss on repurchase of
Preferred Stock - - 133.7 -
Preferred dividend 3.0 5.5 9.2 16.2
----------------------------------------
Income (loss) available to
common shareholders $24.1 $13.0 $(88.0) $63.4
========================================
Earnings per share (EPS):(5)
Basic $0.65 $0.32 $(2.78) $1.57
Diluted $0.62 $0.31 $(2.78) $1.51
Shares used in computing EPS:(5)
Basic 31.8 31.3 31.7 31.2
Diluted 33.6 32.7 31.7 32.5
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change pending
the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 3
ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------
(unaudited)
Amounts in millions, except earnings per share
- ----------------------------------------------------------------------
Three months ended
Sept. 30,
--------------------
2004
2005 Adjusted
Adjusted Pro Forma Variance
(2) (2)(3) $ %
- ----------------------------------------------------------------------
Net revenue (1) $260.7 $259.9 0.8 0.3%
Expenses 112.9 102.5 (10.4)(10.1%)
Depreciation and amortization 21.5 21.7 0.2 0.9%
---------------------------------
Operating income 126.3 135.7 (9.4) (6.9%)
Interest expense, net (58.2) (52.3) (5.9)(11.3%)
---------------------------------
Pre-tax income 68.1 83.4 (15.3)(18.3%)
Tax provision (26.6) (32.9) 6.3 19.1%
---------------------------------
Net income 41.5 50.5 (9.0)(17.8%)
Preferred dividend (4) - - - -
--------------------------------
Income available to common
shareholders $41.5 $50.5 (9.0)(17.8%)
================================
Earnings per share (EPS): (6)
Basic $1.12 $1.23 (0.11) (8.9%)
Diluted $1.07 $1.19 (0.12)(10.1%)
Shares used in computing EPS: (6)
Basic 37.0 40.9
Diluted 38.8 42.3
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10. See Schedule 7 for a
reconciliation of reported to adjusted and adjusted pro forma amounts.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change pending
the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 4
ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------
(unaudited)
Amounts in millions, except earnings per share
- ----------------------------------------------------------------------
Nine months
ended Sept. 30,
--------------------
2004
2005 Adjusted
Adjusted Pro Forma Variance
(2) (2)(3) $ %
- ----------------------------------------------------------------------
Net revenue (1) $780.5 $774.5 6.0 0.8%
Expenses 328.0 303.6 (24.4) (8.0%)
Depreciation and amortization 63.7 65.2 1.5 2.3%
----------------------------------
Operating income 388.8 405.7 (16.9) (4.2%)
Interest expense, net (173.9) (157.2)(16.7) (10.6%)
----------------------------------
Pre-tax income 214.9 248.5 (33.6) (13.5%)
Tax provision (83.8) (98.1) 14.3 14.6%
----------------------------------
Net income 131.1 150.4 (19.3) (12.8%)
Preferred dividend (4) - - - -
---------------------------------
Income available to common
shareholders $131.1 $150.4 (19.3) (12.8%)
=================================
Earnings per share (EPS): (6)
Basic $3.56 $3.69 (0.13) (3.5%)
Diluted $3.41 $3.57 (0.16) (4.5%)
Shares used in computing EPS: (6)
Basic 36.8 40.8
Diluted 38.5 42.1
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10. See Schedule 8 for a
reconciliation of reported to adjusted and adjusted pro forma amounts.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 5
CONSOLIDATED BALANCE SHEETS
- ---------------------------
(unaudited)
Amounts in millions
- ---------------------------------------- --------- --------- ---------
Sept. 30, June 30, Dec. 31,
2005 2005 2004
Reported Reported Reported
- ---------------------------------------- --------- --------- ---------
Assets
Cash and cash equivalents $5.5 $5.8 $10.8
Accounts receivable, net 412.2 448.6 455.4
Deferred directory costs 78.9 100.3 116.5
Other current assets 37.2 33.2 40.6
--------- --------- ---------
Total current assets 533.8 587.9 623.3
Fixed assets and computer
software, net 48.5 43.9 37.7
Intangible assets, net 2,851.1 2,869.2 2,905.3
Other non-current assets 106.1 103.0 102.6
Goodwill 319.0 319.0 310.0
--------- --------- ---------
Total Assets $3,858.5 $3,923.0 $3,978.9
========= ========= =========
Liabilities, Redeemable Convertible
Preferred Stock and
Shareholders' (Deficit) Equity
Accounts payable and accrued
liabilities $92.8 $69.0 $80.4
Deferred directory revenue 422.5 452.9 381.4
Current portion of long-term debt 118.5 132.5 162.0
--------- --------- ---------
Total current liabilities 633.8 654.4 623.8
Long-term debt 2,988.4 3,090.2 2,965.3
Deferred income taxes, net 152.1 133.9 118.8
Other non-current liabilities 44.0 44.1 36.9
--------- --------- ---------
Total liabilities 3,818.3 3,922.6 3,744.8
Redeemable convertible preferred stock 115.3 112.8 216.1
Shareholders' (deficit) equity (75.1) (112.4) 18.0
--------- --------- ---------
Total Liabilities, Redeemable
Convertible Preferred
Stock and Shareholders' (Deficit) Equity $3,858.5 $3,923.0 $3,978.9
========= ========= =========
- ---------------------------------------- --------- --------- ---------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
For the three and nine months ended September 30, 2005 and 2004
(unaudited)
Amounts in millions
- ----------------------------------------------------------------------
Reported Reported Reported Reported
Three Three Nine Nine
Months Months months Months
ended ended ended ended
Operating activities: Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
----------------------------------------
Net income $27.1 $18.5 $54.9 $79.6
Depreciation and
amortization 21.5 17.0 63.7 46.3
Deferred income tax 6.0 12.0 43.3 52.0
Cash (less than) in excess
of partnership income - (0.1) - 1.5
Changes in working capital 58.8 154.9 135.5 149.4
Other 6.2 (26.0) 16.9 (5.1)
--------- --------- --------- ----------
Net cash provided by
operating activities 119.6 176.3 314.3 323.7
Investment activities:
Additions to fixed assets
and computer software (8.4) (3.3) (20.5) (12.1)
Acquisition of SBC
Directories - (1,413.6) - (1,413.6)
--------- --------- --------- ----------
Net cash used in investing
activities (8.4) (1,416.9) (20.5) (1,425.7)
Financing activities:
Increase (decrease) in checks
not yet presented for
payment 2.0 (5.8) (0.3) 3.7
Proceeds from issuance of
debt, net of costs (0.4) 1,318.9 291.1 1,318.9
Repurchase of Preferred
shares (4) - - (277.2) -
Repayment of debt (118.9) (112.5) (302.2) (261.9)
Revolver repayments (119.9) (4.9) (281.2) (6.3)
Borrowings under the
Revolver 122.9 35.2 263.0 36.6
Proceeds from option
exercises 2.8 2.0 7.7 6.2
--------- --------- --------- ----------
Net cash (used in) provided
by financing activities (111.5) 1,232.9 (299.1) 1,097.2
Decrease in cash and cash
equivalents (0.3) (7.7) (5.3) (4.8)
Cash and cash equivalents,
beginning of period 5.8 10.6 10.8 7.7
--------- --------- --------- ----------
Cash and cash equivalents,
end of period $5.5 $2.9 $5.5 $2.9
========= ========= ========= ==========
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 7
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
Reconciliation of Reported to Adjusted and Adjusted Pro Forma Amounts
(unaudited)
Amounts in millions, except earnings per share
- ---------------------------------------------------------------------
Three Months Ended September 30, 2005
-----------------------------------------------
Sprint SBC
Reported Adjustments(3) Adjustments(2) Adjusted
- --------------------- -----------------------------------------------
Net revenue (1) $255.2 $- $5.5 (7) $260.7
Expenses 131.0 - (18.1)(7) 112.9
Depreciation and
amortization 21.5 - - 21.5
-------- ----------- ----------- --------
Total expenses 152.5 - (18.1) 134.4
Partnership income - - - -
--------- ----------- ----------- --------
Operating income 102.7 - 23.6 126.3
Interest expense, net (58.2) - - (58.2)
--------- ----------- ----------- --------
Pre-tax income 44.5 - 23.6 68.1
Tax provision (17.4) - (9.2)(11) (26.6)
--------- ----------- ----------- --------
Net income 27.1 - 14.4 41.5
Preferred dividend 3.0 (3.0)(4) - -
-------- ----------- ----------- --------
Income available to
common shareholders $24.1 $3.0 $14.4 $41.5
======== =========== =========== ========
Earnings per share
(EPS): (4)(5)(6)
Basic $0.65 $1.12
Diluted $0.62 $1.07
Shares used in computing
EPS: (4)(5)(6)
Basic 31.8 5.2 37.0
Diluted 33.6 5.2 38.8
Three Months Ended September 30, 2004
-------------------------------------------------------
Sprint SBC Adjusted
Reported Adjustments(3) Adjustments(2) Pro Forma
- -------------- -------------------------------------------------------
Net revenue
(1) $144.4 $- $115.5 (7)(14) $259.9 (14)
Expenses 73.0 (0.1)(7) 29.6 (7)(14) 102.5 (14)
Depreciation and
amortization 17.0 - 4.7 (8) 21.7
-------- ----------- ------------ ---------
Total expenses 90.0 (0.1) 34.3 124.2
Partnership
income 19.3 - (19.3) (9) -
-------- ----------- ------------ ---------
Operating
income 73.7 0.1 61.9 135.7 (14)
Interest
expense, net (43.2) - (9.1)(10) (52.3)
-------- ----------- ------------ ---------
Pre-tax income 30.5 0.1 52.8 83.4 (14)
Tax provision (12.0) - (20.9)(11) (32.9)(14)
-------- ----------- ------------ ---------
Net income 18.5 0.1 31.9 50.5 (14)
Preferred
dividend 5.5 (5.5)(4) - -
-------- ----------- ------------ ---------
Income
available to
common
shareholders $13.0 $5.6 $31.9 $50.5
======== =========== ============ =========
Earnings per share
(EPS): (4)(5)(6)
Basic $0.32 $1.23 (14)
Diluted $0.31 $1.19 (14)
Shares used in computing
EPS: (4)(5)(6)
Basic 31.3 9.6 40.9
Diluted 32.7 9.6 42.3
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 8
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
Reconciliation of Reported to Adjusted and Adjusted Pro Forma Amounts
(unaudited)
Amounts in millions, except earnings per share
------------------------------------------------
Nine Months Ended September 30, 2005
------------------------------------------------
Sprint SBC
Reported Adjustments(3) Adjustments(2) Adjusted
- --------------------- ------------------------------------------------
Net revenue (1) $695.5 $- $85.0 (7) $780.5
Expenses 367.9 - (39.9)(7) 328.0
Depreciation and
amortization 63.7 - - 63.7
-------- ---------- ------------ ---------
Total expenses 431.6 - (39.9) 391.7
Partnership income - - - -
--------- ---------- ------------ ---------
Operating income 263.9 - 124.9 388.8
Interest expense, net (173.9) - - (173.9)
--------- ---------- ------------ ---------
Pre-tax income 90.0 - 124.9 214.9
Tax provision (35.1) - (48.7)(11) (83.8)
--------- ---------- ------------ ---------
Net income 54.9 - 76.2 131.1
Loss on repurchase of
Preferred Stock 133.7 (133.7)(4) - -
Preferred dividend 9.2 (9.2)(4) - -
-------- ---------- ------------ ---------
(Loss) income
available to common
shareholders $(88.0) $142.9 $76.2 $131.1
======== ========== ============ =========
Earnings per share
(EPS): (4)(5)(6)
Basic $(2.78) $3.56
Diluted $(2.78) $3.41
Shares used in computing
EPS: (4)(5)(6)
Basic 31.7 5.1 36.8
Diluted 31.7 6.8 38.5
------------------------------------------------
Nine Months Ended September 30, 2004
------------------------------------------------
Sprint SBC Adjusted
Reported Adjustments(3) Adjustments(2) Pro Forma
- ----------------------------------------------------------------------
Net revenue(1) $432.9 $1.1(14) $340.5(7) $774.5(14)
Expenses 212.0 (3.6)(7) 95.2(7)(14) 303.6(14)
Depreciation and
amortization 46.3 - 18.9(8) 65.2
-------- -------- --------- ---------
Total expenses 258.3 (3.6) 114.1 368.8
Partnership income 78.0 - (78.0)(9) -
-------- -------- --------- ---------
Operating income 252.6 4.7 148.4 405.7(14)
Interest expense, net (121.0) - (36.2)(10) (157.2)
-------- -------- --------- ---------
Pre-tax income 131.6 4.7 112.2 248.5(14)
Tax provision (52.0) (1.9)(11) (44.2)(11) (98.1)
-------- -------- --------- ---------
Net income 79.6 2.8 68.0 150.4(14)
Loss on repurchase of
Preferred Stock - - - -
Preferred dividend 16.2 (16.2)(4) - -
-------- -------- --------- ---------
(Loss) income
available to common
shareholders $63.4 $19.0 $68.0 $150.4
======== ======== ========= =========
Earnings per share
(EPS): (4)(5)(6)
Basic $1.57 $3.69(14)
Diluted $1.51 $3.57(14)
Shares used in computing
EPS: (4)(5)(6)
Basic 31.2 9.6 40.8
Diluted 32.5 9.6 42.1
- ----------------------------------------------------------------------
See accompanying Notes to Consolidated Statements of Operations
and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 9a
RECONCILIATION OF NON-GAAP MEASURES
- -----------------------------------
(unaudited)
Amounts in millions, except per share amounts
- ----------------------------------------------------- ----------------
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
--------------- ----------------
2005 2004 2005 2004
- --------------------------------------------- ------- ------- --------
Reconciliation of publication sales for
Sprint-branded and SBC-branded directories
to net revenue -GAAP and net revenue
- -adjusted and net revenue -adjusted
pro forma
Publication sales - Sprint-branded
directories (12) $160.3 $153.5 $464.6 $443.3
Publication sales - Sprint-branded
directories - percentage change over
prior year 4.4% 4.8%
Adjustments for changes in directory
publication date(s) (12) (0.1) (0.8)
------- --------
Publication sales disclosed in
September 30, 2004 Form 10-Q 153.4 442.5
Publication sales - SBC-branded
directories (12) 63.3 66.3 268.8 277.5
Publication sales - SBC-branded
directories - percentage change over
prior year -4.5% -3.1%
Adjustments for changes in directory
publication date(s) (12) 5.7 (0.1)
------- --------
Publication sales disclosed in
September 30, 2004 Form 10-Q 72.0 277.4
Less pre-acquisition publication sales
for SBC-branded directories not
recognized as revenue in current
period due to purchase accounting (71.9) (277.3)
Less publication sales for all September
2004 SBC-branded directories not
recognized as revenue in current period
due to purchase accounting (0.1) (0.1)
Less current period publication sales
for Sprint-branded directories not
recognized as revenue in current
period due to the deferral method of
accounting (117.1) (112.7) (353.6) (231.0)
Less current period publication sales
for SBC-branded directories not
recognized as revenue in current
period due to the deferral method
of accounting (52.5) (226.2)
Plus net revenue reported in the
period for publication sales from
prior periods for Sprint-branded
directories 102.8 98.9 321.8 204.3
Plus net revenue reported in the
period for publication sales from
prior periods for SBC-branded
directories 95.8 212.1
------- ------- ------- --------
Net directory advertising revenue 252.6 139.6 687.5 415.8
Pre-press publishing revenue - 3.1 - 13.0
Other revenue 2.6 1.7 8.0 4.1
------- ------- ------- --------
Net revenue - GAAP 255.2 144.4 695.5 432.9
Plus net revenue from Sprint-branded
directories that published prior to
the acquisition that would have been
recognized during the period absent
purchase accounting adjustments
required under GAAP - - - 1.1
Plus net revenue from SBC-branded
directories that published prior to
the acquisition that would have been
recognized during the period absent
purchase accounting adjustments required
under GAAP had the transaction occurred
on January 1, 2004 5.5 119.5 85.0 353.5
Less pre-press publishing revenue that
would not have been recorded had the
SBC transaction occurred on
January 1, 2004 - (4.0) - (13.0)
------- -------
Net revenue - Adjusted $260.7 $780.5
======= ------- ======= --------
Net revenue - Adjusted pro forma $259.9 $774.5
======== =========
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 9b
RECONCILIATION OF NON-GAAP MEASURES (cont'd)
- -------------------------------------------
(unaudited)
Amounts in millions, except per share amounts
- ------------------------------------------------------ ---------------
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
---------------- ---------------
2005 2004 2005 2004
- ------------------------------------------------------ ---------------
Reconciliation of net income - GAAP to
EBITDA, adjusted EBITDA and adjusted
pro forma EBITDA
Net income - GAAP $27.1 $18.5 $54.9 $79.6
Plus tax provision 17.4 12.0 35.1 52.0
Plus interest expense, net 58.2 43.2 173.9 121.0
Plus depreciation and amortization 21.5 17.0 63.7 46.3
------- -------- ------- -------
EBITDA (13) 124.2 90.7 327.6 298.9
Plus net revenue from Sprint-branded
directories that published prior to
the acquisition that would have been
recognized during the period absent
purchase accounting adjustments
required under GAAP - - - 1.1
Less pre-press publishing revenue that
would not have been recorded had the
SBC transaction occurred on
January 1, 2004 - (4.0) - (13.0)
Plus net revenue from SBC-branded
directories that published prior to
the acquisition that would have been
recognized during the period absent
purchase accounting adjustments
required under GAAP had the
transaction occurred on
January 1, 2004 5.5 119.5 85.0 353.5
Plus amortized deferred cost uplift
on Sprint sales contracts as of the
date of the acquisition, net of
expenses on Sprint-branded directories
that published prior to the acquisition
that would not have been recognized
during the period absent purchase
accounting adjustments required
under GAAP - 0.1 - 3.6
Plus amortized deferred cost uplift
on SBC sales contracts as of the
date of the acquisition, net of
expenses on SBC-branded directories
that published prior to the acquisition
that would not have been recognized
during the period absent purchase
accounting required under GAAP 18.1 (29.6) 39.9 (95.2)
Less partnership income that would
not have been recognized during the
period assuming the SBC transaction
occurred on January 1, 2004 - (19.3) - (78.0)
------- -------- ------- -------
Net effect of adjustments to GAAP
results $23.6 $66.7 $124.9 $172.0
------- -------
Adjusted EBITDA (13) $147.8 $452.5
======= -------- ======= -------
Adjusted pro forma EBITDA (13) $157.4 $470.9
========
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 9c
RECONCILIATION OF NON-GAAP MEASURES (cont'd)
- --------------------------------------------
(unaudited)
Amounts in millions, except per share amounts
- ------------------------------------------------------ ---------------
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
---------------- ---------------
2005 2004 2005 2004
- ------------------------------------------------------ ---------------
Reconciliation of cash flow from operations
to Free Cash Flow - GAAP
Cash flow from operations - GAAP $119.6 $176.3 $314.3 $323.7
Less: additions to fixed assets and
computer software (8.4) (3.3) (20.5) (12.1)
---------------- ---------------
Free cash flow $111.2 $173.0 $293.8 $311.6
================ ===============
- ------------------------------------------------------ ---------------
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
---------------- ---------------
2005 2004 2005 2004
- ------------------------------------------------------ ---------------
Reconciliation of diluted shares
outstanding - GAAP to diluted
shares outstanding - adjusted
Diluted shares outstanding - GAAP 33.6 32.7 31.7 32.5
Additional diluted shares outstanding
assuming the preferred stock is
converted to common stock at the
beginning of the period plus
common stock equivalents 5.2 9.6 6.8 9.6
---------------- ---------------
Diluted shares outstanding - adjusted 38.8 42.3 38.5 42.1
================ ===============
- ------------------------------------------------------ ---------------
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
---------------- ---------------
2005 2004 2005 2004
- ------------------------------------------------------ ---------------
Reconciliation of diluted earnings
per share - GAAP to diluted earnings
per share - adjusted and diluted
earnings per share - adjusted pro
forma
Diluted earnings per share - GAAP $0.62 $0.31 $(2.78) $1.51
Effect of converting preferred stock
to common stock at the beginning
of the period 0.08 - 4.21 -
Impact of Sprint transaction,
including adjustments to eliminate
purchase accounting - 0.13 - 0.45
Pro forma impact of SBC transaction,
including adjustments to eliminate
purchase accounting - 0.75 - 1.61
Impact of SBC transaction, including
adjustments to eliminate purchase
accounting 0.37 - 1.98 -
------- --------
Diluted earnings per share
- adjusted $1.07 $3.41
======= ========
Diluted earnings per share
- adjusted pro forma $1.19 $3.57
======== ========
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 9d
Full Year 2005 Guidance
Amounts in millions, except per share amounts
- ----------------------------------------------------------------------
As Changes Revised
provided in as of
on 6/7/05 Guidance 10/26/05
--------- --------- ---------
Publication sales
- -----------------
Sprint Up 4.0% Up 0.4% Up 4.4%
SBC Down 2.0% Down 1.0% Down 3.0%
Adjusted Net Revenue $1,040.0 $- $1,040.0
Adjusted EBITDA 580.0 10.0 590.0
Depreciation and Amortization 90.0 - 90.0
--------- --------- ---------
Adjusted Operating Income 490.0 10.0 500.0
Interest Expense 237.0 - 237.0
Income Tax Expense 98.7 3.9 102.6
--------- --------- ---------
Adjusted Net Income 154.3 6.1 160.4
Adjusted Wtd. Avg. Diluted Shares 38.7 - 38.7
Adjusted EPS $3.99 $0.16 $4.15
- ----------------------------------------------------------------------
Cash Flow From Operations $375.0 $10.0 $385.0
Less: Capital Expenditures (35.0) 5.0 (30.0)
--------- --------- ---------
Free Cash Flow $340.0 $15.0 $355.0
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
See Schedules 9e and 9f for reconciliations of full year 2005
Guidance non-GAAP measures to the most comparable GAAP measures.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION
RECONCILIATION OF NON-GAAP MEASURES (cont'd) Schedule 9e
- -------------------------------------------
(unaudited)
Amounts in millions
- ----------------------------------------------------------------------
Outlook Revised
As Changes Full Year
provided in 2005
on 6/7/2005 Guidance Outlook
- ----------------------------------------------------------------------
Reconciliation of publication sales
outlook to net revenue -GAAP outlook and
net revenue -adjusted outlook
Publication sales outlook
Publication sales -Sprint-branded
directories $590.0 $3.0 $593.0
Publication sales -Sprint-branded
directories - percentage gain over 2004 4.0% 0.4% 4.4%
Publication sales -SBC-branded
directories 453.9 (21.6) 432.3
Publication sales -SBC-branded
directories - percentage gain over 2004 (2.0%) (1.0%) (3.0%)
--------- -------- ---------
Total publication sales outlook $1,043.9 $(18.6) $1,025.3
Publication sales -percentage gain
over 2004 1.3% (0.2%) 1.1%
Less current period publication sales
for Sprint-branded directories not
recognized as revenue in current period (225.4) 3.8 (221.6)
Plus net revenue reported in the period
for Sprint-branded publication sales
from prior periods 217.3 3.9 221.2
Less current period pre-acquisition
publication sales for SBC-branded
directories not recognized as revenue
in current period (238.0) 6.5 (231.5)
Plus net revenue reported in the period
for SBC-branded publication sales
from prior periods 156.5 4.4 160.9
--------- -------- ---------
Net revenue -GAAP outlook $954.3 $- $954.3
Plus pro forma net revenue that would
have been reported assuming the SBC
transaction had occurred on
January 1, 2003 85.7 - 85.7
--------- -------- ---------
Net revenue - Adjusted outlook $1,040.0 $- $1,040.0
========= ======== =========
- ----------------------------------------------------------------------
Outlook Revised
As Changes Full Year
provided in 2005
on 6/7/2005 Guidance Outlook
- ----------------------------------------------------------------------
Reconciliation of adjusted operating
income outlook to operating
income - GAAP outlook
Adjusted operating income outlook $490.0 $10.0 $500.0
Less revenue from SBC-branded
directories that published prior
to the acquisition plus all
September 2004 SBC-branded directories
that would have been recognized
during the period absent purchase
accounting adjustments required
under GAAP (86.0) - (86.0)
Plus expenses from SBC-branded
directories that would have been
recognized during the period absent
purchase accounting adjustments (51.0) - (51.0)
--------- -------- ---------
Operating income - GAAP outlook $353.0 $10.0 $363.0
========= ======== =========
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 9f
RECONCILIATION OF NON-GAAP MEASURES (cont'd)
- --------------------------------------------
(unaudited)
Amounts in millions
- ----------------------------------------------------------------------
Outlook Revised
As Changes Full Year
provided in 2005
on 6/7/2005 Guidance Outlook
- ----------------------------------------------------------------------
Reconciliation of adjusted EBITDA outlook
and adjusted operating income outlook
to adjusted net income outlook and
net income - GAAP outlook
Adjusted EBITDA outlook $580.0 $10.0 $590.0
Less expected depreciation and amortization (90.0) - (90.0)
--------- -------- --------
Adjusted operating income outlook $490.0 $10.0 $500.0
Less expected tax provision (98.7) (3.9) (102.6)
Less expected interest expense, net (237.0) - (237.0)
--------- -------- --------
Adjusted net income outlook $154.3 $6.1 $160.4
Less revenue from SBC-branded directories
that published prior to the acquisition
plus all September 2004 SBC-branded
directories that would have been
recognized during the period absent
purchase accounting adjustments
required under GAAP (86.0) - (86.0)
Plus expenses from SBC-branded directories
that would have been recognized during
the period absent purchase accounting
adjustments (51.0) - (51.0)
Plus net tax reduction resulting from the
exclusion of the SBC revenue and expenses
due to purchase accounting 53.4 (1.0) 52.4
--------- -------- --------
Net income - GAAP outlook $70.7 $5.1 $75.8
========= ======== ========
- ----------------------------------------------------------------------
Outlook Revised
As Changes Full Year
provided in 2005
on 6/7/2005 Guidance Outlook
- ----------------------------------------------------------------------
Reconciliation of cash flow from operations
outlook - GAAP to free cash flow outlook
Cash flow from operations outlook - GAAP $375.0 $10.0 $385.0
Less: additions to fixed assets and
computer software (35.0) 5.0 (30.0)
--------- -------- --------
Free cash flow outlook $340.0 $15.0 $355.0
========= ======== ========
- ----------------------------------------------------------------------
Outlook Revised
AsChanges Full Year
provided in 2005
on 6/7/2005 Guidance Outlook
- ----------------------------------------------------------------------
Reconciliation of expected diluted shares
outstanding - GAAP to expected adjusted
diluted shares outstanding
Expected diluted shares outstanding - GAAP $33.7 $- $33.7
Additional diluted shares outstanding
assuming the preferred stock is converted
to common stock at the beginning of
the period 5.0 - 5.0
--------- -------- --------
Expected adjusted diluted shares
outstanding $38.7 $- $38.7
========= ======== ========
- ----------------------------------------------------------------------
Outlook Revised
As Changes Full Year
provided in 2005
on 6/7/2005 Guidance Outlook
- ----------------------------------------------------------------------
Reconciliation of diluted earnings per
share - GAAP outlook to diluted
earnings per share - adjusted outlook
Diluted earnings per share - GAAP outlook $(2.36) $0.18 $(2.18)
Effect of converting preferred stock to
common stock at the beginning of the
period 4.21 - 4.21
Impact of SBC transaction, including
adjustments to eliminate purchase
accounting 2.14 (0.02) 2.12
--------- -------- --------
Diluted earnings per share - adjusted
outlook $3.99 $0.16 $4.15
========= ======== ========
- ----------------------------------------------------------------------
See accompanying Notes to Unaudited Consolidated Statements of
Operations and Non-GAAP Measures - Schedule 10.
- ----------------------------------------------------------------------
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
- ----------------------------------------------------------------------
R.H. DONNELLEY CORPORATION Schedule 10
NOTES TO UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND NON-GAAP MEASURES
- ----------------------------------------------------------------------
(1) Publishing revenue is recognized using the deferral and
amortization method of accounting. Under this method, when a directory
is published, the publication sales value is deferred and amortized
into the income statement ratably over the life of the directory,
which is typically 12 months.
(2) As a result of the SBC transaction and the related financing and
associated accounting, management believes that the 2005 and 2004
results reported in accordance with GAAP are not comparable, nor do
they reflect the Company's underlying operational or financial
performance. Accordingly, management is presenting certain non-GAAP
financial measures in addition to results reported in accordance with
GAAP in order to better communicate underlying operational and
financial performance and to facilitate comparison of adjusted 2005
performance with adjusted pro forma 2004 results. Adjusted results for
2005 exclude the impact of purchase accounting as well as certain
other adjustments. Adjusted pro forma results for 2004 also reflect
the combination of RHD with the SBC directory business in Illinois and
Northwest Indiana as if the transaction had been consummated at the
beginning of the year presented and certain other adjustments. While
management believes that the adjusted pro forma results reasonably
resemble operational performances as if the SBC transaction had been
consummated at the beginning of the period presented, because of
differences between RHD and predecessor accounting policies,
management does not believe these pro forma results are strictly
comparable. The adjusted and adjusted pro forma results assume that
the appropriate pro rata portion of the revenues and direct costs of
directories acquired from SBC that published prior to the acquisition
plus, in the case of 2004 adjusted pro forma results, all September
2004 directories were recognized during the period pursuant to the
deferral and amortization method. As a result of purchase accounting,
these pre-acquisition revenues and expenses are not included in
reported GAAP results. For the periods prior to the actual acquisition
date of September 1, 2004, adjusted pro forma interest expense assumes
the transaction occurred at the beginning of the periods presented and
is based on the incremental debt actually incurred at the time of the
acquisition and the interest rate in effect at the time of the
acquisition with no assumption for additional debt repayments. For
periods after the acquisition date, interest expense is determined in
accordance with GAAP results. See Schedules 7 and 8 for details of all
adjustments to the reported GAAP results. Additionally, the cost
uplift reported under GAAP to eliminate profit on sales contracts
completed before the acquisition date for SBC directories not yet
published at the acquisition date has also been excluded from adjusted
and adjusted pro forma results.
(3) As a result of the Sprint transaction and the related financing
and associated accounting, management believes that the 2005 and 2004
results reported in accordance with GAAP are not comparable, nor do
they reflect the Company's underlying operational or financial
performance. Accordingly, management is presenting certain non-GAAP
financial measures in addition to results reported in accordance with
GAAP in order to better communicate underlying operational and
financial performance and to facilitate comparison of adjusted 2005
performance with adjusted 2004 results. Adjusted results reflect the
elimination of purchase accounting and certain other adjustments. The
2005 and 2004 adjusted results assume that the appropriate pro rata
portion of the revenue and direct costs of directories acquired from
Sprint that published prior to the acquisition plus all January 2003
Sprint directories were recognized during the period pursuant to the
deferral and amortization method. As a result of purchase accounting,
these pre-acquisition revenues and expenses are not included in
reported GAAP results. See Schedules 7 and 8 for details of all
adjustments to the reported GAAP results. Additionally, the cost
uplift reported under GAAP to eliminate profit on sales contracts
completed before the acquisition date for Sprint directories not yet
published at the acquisition date has also been removed.
(4) The preferred dividend and the loss on repurchase of Preferred
Stock is excluded because the adjusted results for the three and nine
months ended September 30, 2005 and the adjusted pro forma results for
the three and nine months ended September 30, 2004 assume the
Preferred Stock was completely converted to Common Stock at the
beginning of the period and therefore no dividends would have been
payable and no loss on the repurchase would have been recorded.
(5) On a reported basis, basic EPS are calculated under the
"two-class" method that requires earnings available to common
shareholders, after deducting preferred dividends, to be allocated
between the common and preferred shareholders based on the respective
rights to receive dividends. Basic EPS are then calculated by dividing
income allocable to common shareholders by the weighted average number
of shares outstanding. Diluted EPS are calculated by dividing income
allocable to common shareholders by the weighted average common shares
outstanding plus potentially dilutive common stock equivalents. In
periods that result in a net loss, the net loss is not allocated
between common and preferred shareholders since the preferred
shareholders do not have a contractual obligation to share in any
loss.
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
R.H. DONNELLEY CORPORATION Schedule 10
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF OPERATIONS
AND NON-GAAP MEASURES (cont'd)
(6) On an adjusted and adjusted pro forma basis, basic and diluted
EPS are calculated as net income (loss) divided by the weighted
average basic and diluted shares outstanding for the period assuming
the Preferred Stock was converted to Common Stock at the beginning of
the period.
(7) Adjustments for the three and nine months months ended September
30, 2005 include revenue and expenses for directories acquired from
SBC that published prior to the acquisition that would have been
recognized during the period absent purchase accounting adjustments
required under GAAP. Pro forma adjustments for the three and nine
months ended September 30, 2004 include (a) the revenue and expenses
for directories acquired from SBC that published prior to the
acquisition that would have been recognized during the period absent
purchase accounting adjustments required under GAAP, (b) DonTech's
selling and operational expenses prior to the acquisition, (c) certain
differences between historical and current accounting policies of RHD
and the acquired entities, and (d) the revenue and expenses for
directories acquired from Sprint in 2003 that published prior to the
acquisition, plus all January 2003 directories that would have been
recognized during the period absent purchase accounting adjustments
required under GAAP. Additionally, the cost uplift reported under GAAP
to eliminate profit on sales contracts completed before the
acquisition date for directories not yet published at the acquisition
date has also been removed from both periods presented. See Note 14
below for detail of corrected pro forma amounts previously disclosed
in our adjusted third quarter 2004 press release.
(8) Represents the additional depreciation and amortization expense
related to the tangible and identifiable intangible assets acquired
from SBC over their estimated useful lives.
(9) Represents the elimination of equity accounting used to account
for RHD's 50% ownership interest in DonTech prior to the SBC
transaction.
(10) Represents the additional interest expense from the incremental
borrowings used to finance the SBC transaction. For the periods prior
to the actual acquisition date of September 1, 2004, pro forma
interest expense is based on the incremental debt actually incurred at
the time of the acquisition and the interest rate in effect at the
time of the acquisition with no assumption for additional debt
repayments. For periods after the acquisition date, interest expense
is determined in accordance with GAAP results.
(11) Represents the tax effect of adjustments.
(12) Publication sales represent the billable value of advertising
sales in directories that published during the period. If events occur
during the current period that affect the comparability of sales to
the prior year period, such as changes in directory publication dates,
then prior year sales are adjusted to conform to the current period
presentation and to maintain comparability.
(13) EBITDA represents earnings before interest, taxes, depreciation
and amortization. Adjusted EBITDA and adjusted pro forma EBITDA
represent adjusted earnings and adjusted pro forma earnings before
interest, taxes, depreciation and amortization. EBITDA, adjusted
EBITDA and adjusted pro forma EBITDA are not measurements of operating
performance computed in accordance with GAAP and should not be
considered as a substitute for operating income or net income prepared
in conformity with GAAP. In addition, EBITDA may not be comparable to
similarly titled measures of other companies.
(14) Adjusted pro forma amounts differ from amounts previously
disclosed in the Company's Form 8-K filed on October 28, 2004
pertaining to its 2004 third quarter press release due to a clerical
error as follows:
Nine Months Ended Three Months Ended
Sept. 30, 2004 Sept. 30, 2004
Previously Previously
Disclosed Restated Disclosed Restated
------------------ ------------------
Net revenue - Sprint adjustments $1.4 $1.1 $- $-
Net revenue - SBC adjustments -- -- 115.4 115.5
Net revenue - adjusted pro forma 774.8 774.5 259.8 259.9
Expenses - SBC adjustments 95.0 95.2 27.1 29.6
Expenses - adjusted pro forma 303.4 303.6 100.0 102.5
Operating income - adjusted
pro forma 406.3 405.7 138.1 135.7
Pre-Tax income - adjusted
pro forma 248.9 248.5 85.8 83.4
Tax provision - adjusted
pro forma -- -- 34.0 32.9
Net income - adjusted pro forma 150.8 150.4 51.8 50.5
Adjusted EPS - basic $3.70 $3.69 $1.27 $1.23
Adjusted EPS - diluted $3.58 $3.57 $1.22 $1.19
Note: These schedules are preliminary and subject to change
pending the Company's filing of its Form 10-Q.
CONTACT: R.H. Donnelley Corporation
James M. Gruskin, 800-497-6329