##### Table of Contents



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
 OR
 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 001-07155
 R.H. DONNELLEY CORPORATION
  Delaware
    
    13-2740040(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. 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)
 (Former Name, Former Address and Former
  þ o
  Large accelerated filer
þ

    

  Accelerated filer
o

    

    Non-accelerated filer o
(Do not check if a smaller reporting company)

  

    Smaller reporting company
o
 o þ
  Title of class
    
    Shares Outstanding at October 15, 2008Common Stock, par value $1 per share
    
    68,806,514




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##### 



R.H. DONNELLEY CORPORATION
 INDEX TO FORM 10-Q
 PAGEPART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at September 30, 2008 and December
31, 2007
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Income
(Loss) for the three and nine months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    23Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4.
    
    Controls and Procedures
    
    
    46PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    47Item 1A.
    
    Risk Factors
    
    
    47Item 6.
    
    Exhibits
    
    
    52SIGNATURES
    
    
    53EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Part I. FINANCIAL INFORMATION
 
  R.H. Donnelley Corporation and Subsidiaries
 
 Condensed Consolidated Balance Sheets (Unaudited)
 September 30,
    
    December 31,(in thousands, except share data)
    
    2008
    
    2007AssetsCurrent AssetsCash and cash equivalents
    
    $
    60,789
    
    
    $
    46,076Accounts receivableBilled
    
    
    296,549
    
    
    
    258,839Unbilled
    
    
    791,301
    
    
    
    847,446Allowance for doubtful accounts and sales claims
    
    
    (52,204
    )
    
    
    (42,817
    )Net accounts receivable
    
    
    1,035,646
    
    
    
    1,063,468Deferred directory costs
    
    
    175,043
    
    
    
    183,687Short-term deferred income taxes, net
    
    
    45,216
    
    
    
    47,759Prepaid expenses and other current assets
    
    
    79,531
    
    
    
    126,201Total current assets
    
    
    1,396,225
    
    
    
    1,467,191Fixed assets and computer software, net
    
    
    182,121
    
    
    
    187,680Other non-current assets
    
    
    179,937
    
    
    
    139,406Intangible assets, net
    
    
    10,859,121
    
    
    
    11,170,482Goodwill
    
    
    
    
    
    
    3,124,334Total Assets
    
    $
    12,617,404
    
    
    $
    16,089,093Liabilities and Shareholders (Deficit) EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    177,116
    
    
    $
    230,693Accrued interest
    
    
    147,555
    
    
    
    198,828Deferred directory revenues
    
    
    1,097,666
    
    
    
    1,172,035Current portion of long-term debt
    
    
    121,269
    
    
    
    177,175Total current liabilities
    
    
    1,543,606
    
    
    
    1,778,731Long-term debt
    
    
    9,594,367
    
    
    
    9,998,474Deferred income taxes, net
    
    
    1,356,231
    
    
    
    2,288,384Other non-current liabilities
    
    
    192,299
    
    
    
    200,768Total liabilities
    
    
    12,686,503
    
    
    
    14,266,357Commitments and contingenciesShareholders (Deficit) EquityCommon stock, par value $1 per share, authorized - 400,000,000 shares; issued
- 88,169,275
shares at September 30, 2008 and December 31, 2007; outstanding 
68,806,499 shares and 68,758,026 shares at September 30, 2008 and December
31, 2007, respectively
    
    
    88,169
    
    
    
    88,169Additional paid-in capital
    
    
    2,425,483
    
    
    
    2,402,181Accumulated deficit
    
    
    (2,321,472
    )
    
    
    (385,540
    )Treasury stock, at cost, 19,362,776 shares at September 30, 2008 and 19,411,249
shares at December 31, 2007
    
    
    (256,278
    )
    
    
    (256,334
    )Accumulated other comprehensive loss
    
    
    (5,001
    )
    
    
    (25,740
    )Total shareholders (deficit) equity
    
    
    (69,099
    )
    
    
    1,822,736Total Liabilities and Shareholders (Deficit) Equity
    
    $
    12,617,404
    
    
    $
    16,089,093
  3




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##### Table of Contents



R.H. Donnelley Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,(in thousands, except per share data)
    
    2008
    
    2007
    
    2008
    
    2007Net revenues
    
    $
    647,984
    
    
    $
    671,195
    
    
    $
    1,986,387
    
    
    $
    1,999,518Expenses:Production, publication and distribution expenses
(exclusive of depreciation and amortization shown
separately below)
    
    
    105,062
    
    
    
    106,860
    
    
    
    317,692
    
    
    
    335,477Selling and support expenses
    
    
    185,601
    
    
    
    181,751
    
    
    
    547,507
    
    
    
    531,225General and administrative expenses
    
    
    45,975
    
    
    
    33,545
    
    
    
    110,973
    
    
    
    104,460Depreciation and amortization
    
    
    125,445
    
    
    
    111,569
    
    
    
    363,252
    
    
    
    323,748Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    3,123,854
    
    
    
    Total expenses
    
    
    462,083
    
    
    
    433,725
    
    
    
    4,463,278
    
    
    
    1,294,910Operating income (loss)
    
    
    185,901
    
    
    
    237,470
    
    
    
    (2,476,891
    )
    
    
    704,608Interest expense, net
    
    
    (198,093
    )
    
    
    (201,103
    )
    
    
    (630,352
    )
    
    
    (601,740
    )Gain on debt transactions, net
    
    
    70,224
    
    
    
    
    
    
    
    231,539
    
    
    
    Income (loss) before income taxes
    
    
    58,032
    
    
    
    36,367
    
    
    
    (2,875,704
    )
    
    
    102,868(Provision) benefit for income taxes
    
    
    (31,949
    )
    
    
    (18,242
    )
    
    
    939,772
    
    
    
    (43,871
    )Net income (loss)
    
    $
    26,083
    
    
    $
    18,125
    
    
    $
    (1,935,932
    )
    
    $
    58,997Earnings (loss) per share:Basic
    
    $
    0.38
    
    
    $
    0.25
    
    
    $
    (28.15
    )
    
    $
    0.83Diluted
    
    $
    0.38
    
    
    $
    0.25
    
    
    $
    (28.15
    )
    
    $
    0.82Shares used in computing earnings (loss) per share:Basic
    
    
    68,808
    
    
    
    71,170
    
    
    
    68,783
    
    
    
    70,833Diluted
    
    
    68,909
    
    
    
    72,177
    
    
    
    68,783
    
    
    
    71,926Comprehensive Income (Loss)Net income (loss)
    
    $
    26,083
    
    
    $
    18,125
    
    
    $
    (1,935,932
    )
    
    $
    58,997Unrealized gain (loss) on interest rate swaps, net of tax
    
    
    (4,422
    )
    
    
    (10,242
    )
    
    
    19,959
    
    
    
    (10,622
    )Benefit plans adjustment, net of tax
    
    
    266
    
    
    
    371
    
    
    
    780
    
    
    
    1,109Comprehensive income (loss)
    
    $
    21,927
    
    
    $
    8,254
    
    
    $
    (1,915,193
    )
    
    $
    49,484
  4




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##### Table of Contents



R.H. Donnelley Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Nine months endedSeptember 30,(in thousands)
    
    2008
    
    2007Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    (1,935,932
    )
    
    $
    58,997Reconciliation of net income (loss) to net cash provided by operating activities:Goodwill impairment
    
    
    3,123,854
    
    
    
    Gain on debt transactions, net
    
    
    (231,539
    )
    
    
    Depreciation and amortization
    
    
    363,252
    
    
    
    323,748Deferred income tax (benefit) provision
    
    
    (942,970
    )
    
    
    36,648Provision for bad debts
    
    
    102,470
    
    
    
    61,307Stock based compensation expense
    
    
    23,427
    
    
    
    30,013Interest rate swap ineffectiveness
    
    
    30,276
    
    
    
    Other non-cash items, net
    
    
    44,312
    
    
    
    37,930Changes in assets and liabilities, net of effects from acquisitions:(Increase) in accounts receivable
    
    
    (74,647
    )
    
    
    (49,833
    )Decrease in other assets
    
    
    49,508
    
    
    
    34,629(Decrease) in accounts payable and accrued liabilities
    
    
    (99,119
    )
    
    
    (41,406
    )(Decrease) in deferred directory revenues
    
    
    (74,369
    )
    
    
    (30,813
    )Increase in other non-current liabilities
    
    
    8,123
    
    
    
    9,114Net cash provided by operating activities
    
    
    386,646
    
    
    
    470,334Cash Flows from Investing ActivitiesAdditions to fixed assets and computer software
    
    
    (47,304
    )
    
    
    (61,819
    )Acquisitions, net of cash received
    
    
    
    
    
    
    (328,937
    )Equity investment disposition (investment)
    
    
    4,318
    
    
    
    (2,500
    )Net cash used in investing activities
    
    
    (42,986
    )
    
    
    (393,256
    )Cash Flows from Financing ActivitiesAdditional borrowings under Credit facilities, net of costs
    
    
    1,018,202
    
    
    
    Credit facilities repayments
    
    
    (1,224,716
    )
    
    
    (562,286
    )Proceeds from issuance of debt, net of costs
    
    
    
    
    
    
    323,656Note repurchases and related costs
    
    
    (84,682
    )
    
    
    Revolver borrowings
    
    
    398,100
    
    
    
    570,650Revolver repayments
    
    
    (422,150
    )
    
    
    (566,050
    )Debt issuance costs in connection with Debt Exchanges
    
    
    (9,617
    )
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    9,000Repurchase of common stock
    
    
    (6,112
    )
    
    
    Increase (decrease) in checks not yet presented for payment
    
    
    1,932
    
    
    
    (1,996
    )Proceeds from employee stock option exercises
    
    
    96
    
    
    
    12,741Net cash used in financing activities
    
    
    (328,947
    )
    
    
    (214,285
    )Increase (decrease) in cash and cash equivalents
    
    
    14,713
    
    
    
    (137,207
    )Cash and cash equivalents, beginning of year
    
    
    46,076
    
    
    
    156,249Cash and cash equivalents, end of period
    
    $
    60,789
    
    
    $
    19,042Supplemental Information:Cash paid:Interest, net
    
    $
    584,394
    
    
    $
    587,376Income taxes, net
    
    $
    1,713
    
    
    $
    1,951Non-cash financing activities:Reduction of debt from Debt Exchanges
    
    $
    (172,804
    )
    
    $
    
  5




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##### Table of Contents



R.H. Donnelley Corporation and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 (tabular amounts in thousands, except share and per share data)
 1. Business and Basis of Presentation
   Significant Financing Developments
      6




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Accounting for
Derivative Instruments and Hedging Activities
  Reclassifications
  Three Months Ended September 30, 2007
    
    Nine Months Ended September 30, 2007As
    
    
    
    
    
    
    
    
    
    AsPreviously
    
    
    
    
    
    As
    
    Previously
    
    
    
    
    
    AsReported
    
    Reclass
    
    Reclassified
    
    Reported
    
    Reclass
    
    ReclassifiedNet revenues
    
    $
    669,939
    
    
    $
    1,256
    
    
    $
    671,195
    
    
    $
    1,999,332
    
    
    $
    186
    
    
    $
    1,999,518Production,
publication and
distribution
expenses
    
    
    286,574
    
    
    
    (179,714
    )
    
    
    106,860
    
    
    
    866,206
    
    
    
    (530,729
    )
    
    
    335,477Selling and support
expenses
    
    
    
    
    
    
    181,751
    
    
    
    181,751
    
    
    
    
    
    
    
    531,225
    
    
    
    531,225General and
administrative
expenses
    
    
    34,326
    
    
    
    (781
    )
    
    
    33,545
    
    
    
    104,770
    
    
    
    (310
    )
    
    
    104,460
  7




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##### Table of Contents



2. Summary of Significant Accounting Policies
 Identifiable Intangible Assets and Goodwill
 Business Combinations Goodwill and Other
Intangible Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets
      8




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Interest Expense and Deferred Financing Costs
    Gain on Debt Transactions, Net
  Notes Repurchased
    
    Accreted or Par Value6.875% Senior Notes due 2013
    
    $
    45,5296.875% Series A-1 Senior Discount Notes due 2013
    
    
    12,1946.875% Series A-2 Senior Discount Notes due 2013
    
    
    72,1958.875% Series A-3 Senior Notes due 2016
    
    
    30,000Total Notes Repurchased
    
    
    159,918Total Purchase Price Including Fees
    
    
    (84,682
    )Write-off of unamortized deferred financing costs
    
    
    (2,856
    )Net gain on September 2008 Debt Repurchases
    
    $
    72,380
  9




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##### Table of Contents



RHD Notes Exchanged
    
    Accreted or Par Value6.875% Senior Notes due 2013
    
    $
    47,6636.875% Series A-1 Senior Discount Notes due 2013
    
    
    29,1856.875% Series A-2 Senior Discount Notes due 2013
    
    
    93,0318.875% Series A-3 Senior Notes due 2016
    
    
    151,1198.875% Series A-4 Senior Notes due 2017
    
    
    264,677Total RHD Notes exchanged
    
    
    585,675RHDI Notes Issued11.75% Senior Notes due 2015
    
    
    412,871Reduction of debt from Debt Exchanges
    
    
    172,804Write-off of unamortized deferred financing costs
    
    
    (11,489
    )Net gain on Debt Exchanges
    
    $
    161,315
   Advertising Expense
  Concentration of Credit Risk
   10




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##### Table of Contents



Earnings (Loss) Per Share
 Earnings Per
Share .
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Basic EPSNet income (loss)
    
    $
    26,083
    
    
    $
    18,125
    
    
    $
    (1,935,932
    )
    
    $
    58,997Weighted average common shares outstanding
    
    
    68,808
    
    
    
    71,170
    
    
    
    68,783
    
    
    
    70,833Basic earnings (loss) per share
    
    $
    0.38
    
    
    $
    0.25
    
    
    $
    (28.15
    )
    
    $
    0.83Diluted EPSNet income (loss)
    
    $
    26,083
    
    
    $
    18,125
    
    
    $
    (1,935,932
    )
    
    $
    58,997Weighted average common shares outstanding
    
    
    68,808
    
    
    
    71,170
    
    
    
    68,783
    
    
    
    70,833Dilutive effect of stock awards (1)
    
    
    101
    
    
    
    1,007
    
    
    
    
    
    
    
    1,093Weighted average diluted shares outstanding
    
    
    68,909
    
    
    
    72,177
    
    
    
    68,783
    
    
    
    71,926Diluted earnings (loss) per share
    
    $
    0.38
    
    
    $
    0.25
    
    
    $
    (28.15
    )
    
    $
    0.82
 
 (1)
    
    Due to the reported net loss for the nine months ended September 30, 2008, the effect of all
stock-based awards was anti-dilutive and therefore not included in the calculation of diluted
EPS. For the three months ended September 30, 2008 and 2007, 4.4 million and 2.7 million
shares, respectively, of stock-based awards had exercise prices that exceeded the average
market price of the Companys common stock for the respective period. For the nine months
ended September 30, 2008 and 2007, 1.7 million and 1.1 million shares, respectively, of
stock-based awards had exercise prices that exceeded the average market price of the Companys
common stock for the respective period. Stock-Based Awards
 Share-Based Payment
   11




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.
  12




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Fair Value of Financial Instruments
 Fair
Value Measurements
 Fair Value Measurements atSeptember 30, 2008Using Significant OtherDescription
    
    Observable Inputs (Level 2)Derivatives  Assets
    
    $
    4,834Derivatives  Liabilities
    
    $
    (25,262
    )
 Effective Date of FASB Statement No.
157
 Estimates
  New Accounting Pronouncements
 Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133
  13




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3. Acquisitions
   4. Restructuring Charges
  2003
    
    2006
    
    2007
    
    2008Three months ended
    
    Restructuring
    
    Restructuring
    
    Restructuring
    
    RestructuringSeptember 30, 2008
    
    Actions
    
    Actions
    
    Actions
    
    Actions
    
    TotalBalance at June 30, 2008
    
    $
    689
    
    
    $
    2,137
    
    
    $
    3,560
    
    
    $
    3,111
    
    
    $
    9,497Net increase to reserve
charged to earnings
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    14,329
    
    
    
    14,405Payments
    
    
    (46
    )
    
    
    (619
    )
    
    
    (401
    )
    
    
    (13,509
    )
    
    
    (14,575
    )Balance at September
30, 2008
    
    $
    643
    
    
    $
    1,518
    
    
    $
    3,235
    
    
    $
    3,931
    
    
    $
    9,327
 2003
    
    2006
    
    2007
    
    2008Nine months ended
    
    Restructuring
    
    Restructuring
    
    Restructuring
    
    RestructuringSeptember 30, 2008
    
    Actions
    
    Actions
    
    Actions
    
    Actions
    
    TotalBalance at December
31, 2007
    
    $
    763
    
    
    $
    3,327
    
    
    $
    5,542
    
    
    $
    
    
    
    $
    9,632Net increase to
reserve charged to
earnings
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    18,920
    
    
    
    19,244Payments
    
    
    (120
    )
    
    
    (1,809
    )
    
    
    (2,631
    )
    
    
    (14,989
    )
    
    
    (19,549
    )Balance at
September 30, 2008
    
    $
    643
    
    
    $
    1,518
    
    
    $
    3,235
    
    
    $
    3,931
    
    
    $
    9,327
    14




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##### Table of Contents



5. Long-Term Debt, Credit Facilities and Notes
  September 30, 2008
    
    December 31, 2007RHD6.875% Senior Notes due 2013
    
    $
    206,791
    
    
    $
    300,0006.875% Series A-1 Senior Discount Notes due 2013
    
    
    300,845
    
    
    
    339,2226.875% Series A-2 Senior Discount Notes due 2013
    
    
    453,671
    
    
    
    613,6498.875% Series A-3 Senior Notes due 2016
    
    
    1,028,839
    
    
    
    1,210,0008.875% Series A-4 Senior Notes due 2017
    
    
    1,235,260
    
    
    
    1,500,000R.H. Donnelley Inc. (RHDI)Credit Facility
    
    
    1,400,311
    
    
    
    1,571,53611.75% Senior Notes due 2015
    
    
    412,871
    
    
    
    Dex Media, Inc.8% Senior Notes due 2013
    
    
    510,842
    
    
    
    512,0979% Senior Discount Notes due 2013
    
    
    764,154
    
    
    
    719,112Dex Media EastCredit Facility
    
    
    1,100,000
    
    
    
    1,106,050Dex Media WestNew Credit Facility
    
    
    1,080,000
    
    
    
    Former Credit Facility
    
    
    
    
    
    
    1,071,4918.5% Senior Notes due 2010
    
    
    395,128
    
    
    
    398,7365.875% Senior Notes due 2011
    
    
    8,765
    
    
    
    8,7749.875% Senior Subordinated Notes due 2013
    
    
    818,159
    
    
    
    824,982Total RHD Consolidated
    
    
    9,715,636
    
    
    
    10,175,649Less current portion
    
    
    121,269
    
    
    
    177,175Long-term debt
    
    $
    9,594,367
    
    
    $
    9,998,474
 Credit Facilities
  15




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##### Table of Contents



RHDI
    
    
    The highest of (i) a base rate as determined by the Administrative Agent, Deutsche
Bank Trust Company Americas, (ii) the Federal Funds Effective Rate (as defined) plus 0.50%,
and (iii) 4.0%, in each case, plus a 2.50% margin on the RHDI Revolver and a 2.75% margin
on Term Loan D-1 and Term Loan D-2; or
    
    The higher of (i) LIBOR rate and (ii) 3.0%, in each case, plus a 3.50% margin on the
RHDI Revolver and a 3.75% margin on Term Loan D-1 and Term Loan D-2. 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.
  Dex Media East
  Dex Media West
  16




---



##### Table of Contents




    
    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.
 Notes
    th th
  6. Income Taxes
  17




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Statutory U.S. Federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local taxes, net of U.S. Federal tax benefit
    
    
    14.6
    
    
    
    7.8
    
    
    
    3.0
    
    
    
    4.9Non-deductible goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    (5.1
    )
    
    
    Other non-deductible expenses
    
    
    1.2
    
    
    
    0.8
    
    
    
    
    
    
    
    0.6Change in valuation allowance
    
    
    4.5
    
    
    
    
    
    
    
    (0.2
    )
    
    
    Other
    
    
    (0.2
    )
    
    
    6.6
    
    
    
    
    
    
    
    2.1Effective tax rate
    
    
    55.1
    %
    
    
    50.2
    %
    
    
    32.7
    %
    
    
    42.6
    %
 7. Benefit Plans
 Employers Disclosures About Pensions and Other Postretirement
Benefits (Revised 2003),
 Pension BenefitsThree Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,2008
    
    2007
    
    2008
    
    2007Service cost
    
    $
    2,986
    
    
    $
    3,645
    
    
    $
    9,722
    
    
    $
    10,936Interest cost
    
    
    4,730
    
    
    
    4,429
    
    
    
    13,909
    
    
    
    13,288Expected return on plan assets
    
    
    (4,864
    )
    
    
    (4,830
    )
    
    
    (15,019
    )
    
    
    (14,490
    )Amortization of prior service cost
    
    
    47
    
    
    
    41
    
    
    
    145
    
    
    
    507Amortization of net loss
    
    
    205
    
    
    
    353
    
    
    
    597
    
    
    
    674Net periodic benefit cost
    
    $
    3,104
    
    
    $
    3,638
    
    
    $
    9,354
    
    
    $
    10,915
 Postretirement BenefitsThree Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,2008
    
    2007
    
    2008
    
    2007Service cost
    
    $
    471
    
    
    $
    492
    
    
    $
    1,414
    
    
    $
    1,476Interest cost
    
    
    1,484
    
    
    
    1,331
    
    
    
    4,452
    
    
    
    3,993Amortization of prior service cost
    
    
    167
    
    
    
    201
    
    
    
    501
    
    
    
    604Amortization of net loss
    
    
    9
    
    
    
    
    
    
    
    27
    
    
    
    Net periodic benefit cost
    
    $
    2,131
    
    
    $
    2,024
    
    
    $
    6,394
    
    
    $
    6,073
  18




---



##### Table of Contents




    
    A comprehensive redesign of the Companys employee retirement savings plans;
    
    A freeze of the Companys qualified and non-qualified pension plans as they pertain
to non-union employees; and
    
    A phased in elimination of the Company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 the Company.
  8. Business Segments
  9. Legal Proceedings
     10. R.H. Donnelley Corporation (Parent Company) Financial Statements
   19




---



##### Table of Contents



R.H. Donnelley Corporation
Condensed Parent Company Balance Sheets
 September 30,
    
    December 31,2008
    
    2007AssetsCash and cash equivalents
    
    $
    1,770
    
    
    $
    18,900Intercompany, net
    
    
    304,734
    
    
    
    279,244Short-term deferred income taxes, net.
    
    
    889
    
    
    
    Prepaid and other current assets
    
    
    1,311
    
    
    
    8,948Total current assets
    
    
    308,704
    
    
    
    307,092Investment in subsidiaries
    
    
    2,574,063
    
    
    
    5,231,597Fixed assets and computer
software, net
    
    
    8,423
    
    
    
    10,462Other non-current assets
    
    
    69,033
    
    
    
    91,506Intercompany note receivable
    
    
    300,000
    
    
    
    300,000Total assets
    
    $
    3,260,223
    
    
    $
    5,940,657Liabilities and Shareholders (Deficit) EquityAccounts payable and accrued liabilities.
    
    $
    4,247
    
    
    $
    14,032Accrued interest
    
    
    83,749
    
    
    
    123,882Current portion of long-term debt
    
    
    21,500
    
    
    
    Total current liabilities
    
    
    109,496
    
    
    
    137,914Long-term debt
    
    
    3,203,906
    
    
    
    3,962,871Deferred income taxes, net
    
    
    5,147
    
    
    
    5,161Other non-current liabilities
    
    
    10,773
    
    
    
    11,975Shareholders (deficit) equity
    
    
    (69,099
    )
    
    
    1,822,736Total liabilities and shareholders (deficit)
equity
    
    $
    3,260,223
    
    
    $
    5,940,657
 20




---



##### Table of Contents



R.H. Donnelley Corporation
Condensed Parent Company Statements of Operations
 For the Three Months EndedSeptember 30,2008
    
    2007Expenses
    
    $
    6,431
    
    
    $
    4,414Partnership and equity income
    
    
    60,146
    
    
    
    97,457Operating income
    
    
    53,715
    
    
    
    93,043Interest expense, net
    
    
    (68,062
    )
    
    
    (56,676
    )Gain on debt transactions, net
    
    
    72,379
    
    
    
    Income before income taxes
    
    
    58,032
    
    
    
    36,367Provision for income taxes
    
    
    (31,949
    )
    
    
    (18,242
    )Net income
    
    $
    26,083
    
    
    $
    18,125
 For the Nine Months EndedSeptember 30,2008
    
    2007Expenses
    
    $
    19,279
    
    
    $
    11,179Partnership and equity income (loss)
    
    
    (2,873,423
    )
    
    
    277,257Operating income (loss)
    
    
    (2,892,702
    )
    
    
    266,078Interest expense, net
    
    
    (230,621
    )
    
    
    (163,210
    )Gain on debt transactions, net
    
    
    233,694
    
    
    
    Income (loss) before income taxes
    
    
    (2,889,629
    )
    
    
    102,868Benefit (provision) for income taxes
    
    
    953,697
    
    
    
    (43,871
    )Net income (loss)
    
    $
    (1,935,932
    )
    
    $
    58,997
 R.H. Donnelley Corporation
Condensed Parent Company Statements of Cash Flows
 For the Nine Months EndedSeptember 30,2008
    
    2007Cash flow from operating activities
    
    $
    (248,790
    )
    
    $
    (217,839
    )Cash flow from investing activitis:Additions to fixed assets and
computer software
    
    
    (1,092
    )
    
    
    (2,919
    )Acquisitions, net of cash received
    
    
    
    
    
    
    (334,260
    )Equity investment disposition
(investment)
    
    
    4,318
    
    
    
    (2,500
    )Net cash provided by (used in) investing
activities
    
    
    3,226
    
    
    
    (339,679
    )Cash flow from financing activities:Proceeds from the issuance of debt,
net of costs
    
    
    (349
    )
    
    
    323,656Proceeds from the issuance of common
stock
    
    
    
    
    
    
    9,000Increase (decrease) in checks not yet
presented for payment
    
    
    172
    
    
    
    (336
    )Proceeds from employee stock option
exercises
    
    
    96
    
    
    
    12,741Note repurchases
    
    
    (84,426
    )
    
    
    Repurchase of common stock
    
    
    (6,112
    )
    
    
    Excess tax benefits from the exercise
of stock options
    
    
    (47
    )
    
    
    Dividends from subsidiaries
    
    
    319,100
    
    
    
    94,278Net cash provided by financing activities
    
    
    228,434
    
    
    
    439,339Change in cash
    
    
    (17,130
    )
    
    
    (118,179
    )Cash at beginning of year
    
    
    18,900
    
    
    
    122,565Cash at end of period
    
    $
    1,770
    
    
    $
    4,386
 21




---



##### Table of Contents



11. Subsequent Events
 Long-Term Debt, Credit Facilities and Notes
  Notes Repurchased
    
    Par Value8.875% Series A-3 Senior Notes due 2016
    
    $
    16,0008.875% Series A-4 Senior Notes due 2017
    
    
    5,500Total Notes Repurchased
    
    
    21,500Total Purchase Price Including Fees
    
    
    (7,448
    )Write-off of unamortized deferred financing costs
    
    
    (437
    )Net gain on October 2008 Debt Repurchases
    
    $
    13,615
  Employee Retirement Savings and Pension Plans
     22




---



##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Information
  Corporate Overview
  TM TM ®
  23




---



##### Table of Contents



® ®
 TM
 Significant Financing Developments
  Notes Repurchased(amounts in
millions)
    
    Accreted or Par Value6.875% Senior Notes due 2013
    
    $
    45,5296.875% Series A-1 Senior Discount Notes due 2013
    
    
    12,1946.875% Series A-2 Senior Discount Notes due 2013
    
    
    72,1958.875% Series A-3 Senior Notes due 2016
    
    
    30,000Total Notes Repurchased
    
    
    159,918Total Purchase Price Including Fees
    
    
    (84,682
    )Write-off of unamortized deferred financing costs
    
    
    (2,856
    )Net gain on September 2008 Debt Repurchases
    
    $
    72,380
  Notes Repurchased(amounts in
millions)
    
    Par Value8.875% Series A-3 Senior Notes due 2016
    
    $
    16,0008.875% Series A-4 Senior Notes due 2017
    
    
    5,500Total Notes Repurchased
    
    
    21,500Total Purchase Price Including Fees
    
    
    (7,448
    )Write-off of unamortized deferred financing costs
    
    
    (437
    )Net gain on October 2008 Debt Repurchases
    
    $
    13,615
  24




---



##### Table of Contents



RHD Notes Exchanged(amounts in
millions)
    
    Accreted or Par Value6.875% Senior Notes due 2013
    
    $
    47,6636.875% Series A-1 Senior Discount Notes due 2013
    
    
    29,1856.875% Series A-2 Senior Discount Notes due 2013
    
    
    93,0318.875% Series A-3 Senior Notes due 2016
    
    
    151,1198.875% Series A-4 Senior Notes due 2017
    
    
    264,677Total RHD Notes exchanged
    
    
    585,675RHDI Notes Issued11.75% Senior Notes due 2015
    
    
    412,871Reduction of debt from Debt Exchanges
    
    
    172,804Write-off of unamortized deferred financing costs
    
    
    (11,489
    )Net gain on Debt Exchanges
    
    $
    161,315
      Accounting for
Derivative Instruments and Hedging Activities
 25




---



##### Table of Contents



Employee Retirement Savings and Pension Plans
     Recent Trends Related to Our Business
  26




---



##### Table of Contents



Goodwill and Other Intangible Assets
  Segment Reporting
  New Accounting Pronouncements
 Disclosures
about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133
  27




---



##### Table of Contents



RESULTS OF OPERATIONS
Three and nine months ended September 30, 2008 and 2007
 Factors Affecting Comparability
 Reclassifications
  Three months ended September 30, 2007
    
    Nine months ended September 30, 2007As
    
    
    
    
    
    
    
    
    
    AsPreviously
    
    
    
    
    
    As
    
    Previously
    
    
    
    
    
    As(amounts in millions)
    
    Reported
    
    Reclass
    
    Reclassified
    
    Reported
    
    Reclass
    
    ReclassifiedNet revenues
    
    $
    669.9
    
    
    $
    1.3
    
    
    $
    671.2
    
    
    $
    1,999.3
    
    
    $
    0.2
    
    
    $
    1,999.5Production,
publication and
distribution
expenses
    
    
    286.6
    
    
    
    (179.7
    )
    
    
    106.9
    
    
    
    866.2
    
    
    
    (530.7
    )
    
    
    335.5Selling and support
expenses
    
    
    
    
    
    
    181.7
    
    
    
    181.7
    
    
    
    
    
    
    
    531.2
    
    
    
    531.2General and
administrative
expenses
    
    
    34.3
    
    
    
    (0.8
    )
    
    
    33.5
    
    
    
    104.8
    
    
    
    (0.3
    )
    
    
    104.5
 Acquisitions
  Impact of Purchase Accounting
  28




---



##### Table of Contents



Net Revenues
  Three months ended September 30,(amounts in millions)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeGross directory advertising
revenues
    
    $
    649.5
    
    
    $
    675.9
    
    
    $
    (26.4
    )
    
    
    (3.9
    )%Sales claims and allowances
    
    
    (11.1
    )
    
    
    (11.6
    )
    
    
    0.5
    
    
    
    4.3Net directory advertising revenues
    
    
    638.4
    
    
    
    664.3
    
    
    
    (25.9
    )
    
    
    (3.9
    )Other revenues
    
    
    9.6
    
    
    
    6.9
    
    
    
    2.7
    
    
    
    39.1Total
    
    $
    648.0
    
    
    $
    671.2
    
    
    $
    (23.2
    )
    
    
    (3.5
    )%
 Nine months ended September 30,(amounts in millions)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeGross directory advertising
revenues
    
    $
    1,992.0
    
    
    $
    2,015.3
    
    
    $
    (23.3
    )
    
    
    (1.2
    )%Sales claims and allowances
    
    
    (34.2
    )
    
    
    (44.1
    )
    
    
    9.9
    
    
    
    22.4Net directory advertising revenues
    
    
    1,957.8
    
    
    
    1,971.2
    
    
    
    (13.4
    )
    
    
    (0.7
    )Other revenues
    
    
    28.6
    
    
    
    28.3
    
    
    
    0.3
    
    
    
    1.1Total
    
    $
    1,986.4
    
    
    $
    1,999.5
    
    
    $
    (13.1
    )
    
    
    (0.7
    )%
    29




---



##### Table of Contents



Expenses
  Three months ended September 30,(amounts in millions)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeProduction, publication and
distribution expenses
    
    $
    105.1
    
    
    $
    106.9
    
    
    $
    (1.8
    )
    
    
    (1.7
    )%Selling and support expenses
    
    
    185.6
    
    
    
    181.7
    
    
    
    3.9
    
    
    
    2.1General and administrative expenses
    
    
    46.0
    
    
    
    33.5
    
    
    
    12.5
    
    
    
    37.3Depreciation and amortization
    
    
    125.4
    
    
    
    111.6
    
    
    
    13.8
    
    
    
    12.4Total
    
    $
    462.1
    
    
    $
    433.7
    
    
    $
    28.4
    
    
    
    6.5
    %
 Nine months ended September 30,(amounts in millions)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeProduction, publication and
distribution expenses
    
    $
    317.7
    
    
    $
    335.5
    
    
    $
    (17.8
    )
    
    
    (5.3
    )%Selling and support expenses
    
    
    547.5
    
    
    
    531.2
    
    
    
    16.3
    
    
    
    3.1General and administrative expenses
    
    
    111.0
    
    
    
    104.5
    
    
    
    6.5
    
    
    
    6.2Depreciation and amortization
    
    
    363.2
    
    
    
    323.7
    
    
    
    39.5
    
    
    
    12.2Goodwill impairment
    
    
    3,123.9
    
    
    
    
    
    
    
    3,123.9
    
    
    
    100.0Total
    
    $
    4,463.3
    
    
    $
    1,294.9
    
    
    $
    3,168.4
    
    
    
    244.7
    %
 30




---



##### Table of Contents



Production, Publication and Distribution Expenses
  Three months ended
    
    Nine months ended(amounts in millions)
    
    September 30, 2008
    
    September 30, 2008$ ChangeDecreased print, paper and distribution costs
    
    $
    (8.1
    )
    
    $
    (17.8
    )Decreased cost uplift expense
    
    
    (1.8
    )
    
    
    (14.6
    )Increase (decrease) in information technology (IT) expenses
    
    
    3.5
    
    
    
    (9.3
    )Increased internet and distribution costs
    
    
    3.2
    
    
    
    20.7All other, net
    
    
    1.4
    
    
    
    3.2Total decrease in production,
publication and distribution
expenses for the three and
nine months ended September
30, 2008
    
    $
    (1.8
    )
    
    $
    (17.8
    )
    31




---



##### Table of Contents



Selling and Support Expenses
  Three months
    
    Nine monthsended September 30,
    
    ended September(amounts in millions)
    
    2008
    
    30, 2008$ ChangeIncreased bad debt expense
    
    $
    17.2
    
    
    $
    41.2(Decrease) increase in advertising and branding expenses
    
    
    (2.5
    )
    
    
    11.1Decreased commissions and salesperson costs
    
    
    (6.0
    )
    
    
    (14.9
    )Decreased cost uplift expense
    
    
    (1.5
    )
    
    
    (13.3
    )Decreased directory publishing support costs
    
    
    (0.9
    )
    
    
    (5.2
    )All other, net
    
    
    (2.4
    )
    
    
    (2.6
    )Total increase in selling
and support expenses for
the three and nine months
ended September 30, 2008
    
    $
    3.9
    
    
    $
    16.3
      32




---



##### Table of Contents



General and Administrative Expenses
  Three months
    
    Nine monthsended September
    
    ended September(amounts in millions)
    

30, 2008
    
    30, 2008$ ChangeIncrease in restructuring expenses
    
    $
    14.4
    
    
    $
    19.2Decrease in non-cash stock-based
compensation expense under SFAS No. 123(R)
    
    
    (2.1
    )
    
    
    (8.0
    )Decrease in IT expenses
    
    
    (1.5
    )
    
    
    (4.1
    )All other, net
    
    
    1.7
    
    
    
    (0.6
    )Total increase in
G&A expenses for
the three and nine
months ended
September 30, 2008
    
    $
    12.5
    
    
    $
    6.5
    Depreciation and Amortization
  33




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##### Table of Contents



Goodwill Impairment
 Accounting for the Impairment or Disposal of Long-Lived Assets
      Operating Income (Loss)
  Three months ended September 30,(amounts in millions)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeTotal
    
    $
    185.9
    
    
    $
    237.5
    
    
    $
    (51.6
    )
    
    
    (21.7
    )%
 34




---



##### Table of Contents



Nine months ended September 30,(amounts in millions)
    
    2008
    
    2007
    
    $ Change
    
    % ChangeTotal
    
    $
    (2,476.9
    )
    
    $
    704.6
    
    
    $
    (3,181.5
    )
    
    
    (451.5
    )%
  Interest Expense, Net
    Gain on Debt Transactions, Net
  35




---



##### Table of Contents



Income Taxes
   Net Income (Loss) and Earnings (Loss) Per Share
  Earnings Per
Share .
  36




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  September 30, 2008
    
    December 31, 2007RHD6.875% Senior Notes due 2013
    
    $
    206,791
    
    
    $
    300,0006.875% Series A-1 Senior Discount Notes due 2013
    
    
    300,845
    
    
    
    339,2226.875% Series A-2 Senior Discount Notes due 2013
    
    
    453,671
    
    
    
    613,6498.875% Series A-3 Senior Notes due 2016
    
    
    1,028,839
    
    
    
    1,210,0008.875% Series A-4 Senior Notes due 2017
    
    
    1,235,260
    
    
    
    1,500,000R.H. Donnelley Inc. (RHDI)Credit Facility
    
    
    1,400,311
    
    
    
    1,571,53611.75% Senior Notes due 2015
    
    
    412,871
    
    
    
    Dex Media, Inc.8% Senior Notes due 2013
    
    
    510,842
    
    
    
    512,0979% Senior Discount Notes due 2013
    
    
    764,154
    
    
    
    719,112Dex Media EastCredit Facility
    
    
    1,100,000
    
    
    
    1,106,050Dex Media WestNew Credit Facility
    
    
    1,080,000
    
    
    
    Former Credit Facility
    
    
    
    
    
    
    1,071,4918.5% Senior Notes due 2010
    
    
    395,128
    
    
    
    398,7365.875% Senior Notes due 2011
    
    
    8,765
    
    
    
    8,7749.875% Senior Subordinated Notes due 2013
    
    
    818,159
    
    
    
    824,982Total RHD Consolidated
    
    
    9,715,636
    
    
    
    10,175,649Less current portion
    
    
    121,269
    
    
    
    177,175Long-term debt
    
    $
    9,594,367
    
    
    $
    9,998,474
 Credit Facilities
  RHDI
   37




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##### Table of Contents




    
    The highest of (i) a base rate as determined by the Administrative Agent, Deutsche
Bank Trust Company Americas, (ii) the Federal Funds Effective Rate (as defined) plus 0.50%,
and (iii) 4.0%, in each case, plus a 2.50% margin on the RHDI Revolver and a 2.75% margin
on Term Loan D-1 and Term Loan D-2; or
    
    The higher of (i) LIBOR rate and (ii) 3.0%, in each case, plus a 3.50% margin on the
RHDI Revolver and a 3.75% margin on Term Loan D-1 and Term Loan D-2. 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.
  Dex Media East
  Dex Media West
    
    
    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.
 38




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##### Table of Contents



Notes
   th th
  Debt Refinancings and Repurchases
     Impact of Purchase Accounting
 Business Combinations
 39




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##### Table of Contents



Long-TermDebt atSeptember 30,Unamortized
    
    Long-
    
    2008Fair Value
    
    Term
    
    ExcludingAdjustment at
    
    Debt at
    
    UnamortizedSeptember 30,
    
    September
    
    Fair Value(amounts in millions)
    
    2008
    
    30, 2008
    
    AdjustmentDex Media, Inc. 8% Senior Notes
    
    $
    10.8
    
    
    $
    510.8
    
    
    $
    500.0Dex Media, Inc. 9% Senior Discount Notes
    
    
    13.2
    
    
    
    764.2
    
    
    
    751.0Dex Media West 8.5% Senior Notes
    
    
    10.1
    
    
    
    395.1
    
    
    
    385.0Dex Media West 5.875% Senior Notes
    
    
    0.1
    
    
    
    8.8
    
    
    
    8.7Dex Media West 9.875% Senior Subordinated Notes
    
    
    56.5
    
    
    
    818.2
    
    
    
    761.7Total Dex Media Outstanding Debt at January
31, 2006
    
    $
    90.7
    
    
    $
    2,497.1
    
    
    $
    2,406.4
 Impact of Economic Instability on Prospective Pension Funding
  Liquidity and Cash Flows
   40




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##### Table of Contents




    
    $(1,935.9) million in net loss, which includes the impact of the non-cash goodwill
impairment charges.
    
    $2,180.9 million of net non-cash items consisting of the non-cash goodwill impairment
charge of $3,123.9 million, offset by $943.0 million in deferred income taxes, which
includes the tax impact of the non-cash goodwill impairment charges.
    
    $231.5 million net gain on the debt transactions.
    
    $563.7 million of other net non-cash items primarily consisting of $363.2 million of
depreciation and amortization, $102.5 million in bad debt provision, $30.3 million of
net additional interest expense associated with ineffective interest rate swaps, $23.4
million of stock-based compensation expense and $44.3 million in other non-cash items,
primarily consisting of $54.4 million related to the accretion of our discounted debt,
$20.5 million related to the amortization of deferred financing costs, offset by $17.5
million associated with the change in fair value of our interest rate swaps and $13.1
million associated with the amortization of the fair value adjustments required by GAAP
as a result of the Dex Media Merger, which reduced interest expense.
    
    $149.1 million net use of cash from a decrease in deferred directory revenues of
$74.4 million due to lower advertising sales and an increase in accounts receivable of
$74.7 million due to an increase in days outstanding of customer balances and
deterioration in accounts receivable aging categories, which has been driven by the
extension of the write-off policy in our Qwest markets to conform to the legacy RHD
markets, weaker economic conditions, the transition to in-house billing and collection
services for certain local customers in our Qwest markets that were previously performed
by Qwest on our behalf, as well as publication cycle seasonality. The change in deferred
revenues and accounts receivable are analyzed together given the fact that when a
directory is published, the annual billable value of that directory is initially
deferred and unbilled accounts receivable are established. Each month thereafter,
typically one twelfth of the billing value is recognized as revenues and billed to
customers.
    
    $49.5 million net source of cash from a decrease in other assets, consisting of a
$42.7 million decrease in prepaid directory costs resulting from publication seasonality
as well as a $6.8 million decrease in other current and non-current assets, primarily
relating to deferred commissions, print, paper and delivery costs and changes in the
fair value of the Companys interest rate swap agreements.
    
    $99.1 million net use of cash from a decrease in accounts payable and accrued
liabilities, primarily reflecting a $47.5 million decrease in trade accounts payable
resulting from timing of invoice processing versus payment thereon, a $51.3 million
decrease in accrued interest payable on outstanding debt and a $0.3 million decrease in
other accrued liabilities.
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
    
    $8.1 million increase in other non-current liabilities, including pension and
postretirement long-term liabilities.
  
    
    $47.3 million used to purchase fixed assets, primarily computer equipment, software
and leasehold improvements.
    
    $4.3 million in cash proceeds from the disposition of an equity investment in the
fourth quarter of 2007, which were received in January 2008.
  
    
    $1,018.2 million in proceeds, net of costs, from borrowings under our new Dex Media
West credit facility, which was used to refinance the former Dex Media West credit
facility and pay related fees and expenses.
    
    $1,224.7 million in principal payments on term loans under our credit facilities and
notes. With regard to our credit facilities, $38.7 million represents scheduled
principal payments and $1,186.0 million represents principal payments made on an
accelerated basis, at our option, from proceeds received with the new Dex Media West
credit facility and from available cash flow generated from operations.
    
    $398.1 million in borrowings under our revolvers, used primarily to fund temporary
working capital requirements.
    
    $422.1 million in principal payments on our revolvers.
    
    $84.7 million associated with the September 2008 Debt Repurchases.
    
    $9.6 million in fees associated with the issuance of the RHDI Senior Notes, which has
been accounted for as a non-cash financing activity.
    
    $6.1 million used to repurchase our common stock. This use of cash pertains to common
stock repurchases made during 2007 that settled in January 2008.
    
    $1.9 million in the increased balance of checks not yet presented for payment.
    
    $0.1 million in proceeds from the exercise of employee stock options.
  
    
    $59.0 million in net income.
    
    $489.6 million of net non-cash charges primarily consisting of $323.7 million of
depreciation and amortization, $61.3 million in bad debt provision, $30.0 million of
stock-based compensation expense, $37.9 million in other non-cash charges, primarily
related to the amortization of deferred financing costs and amortization of the fair
value adjustments required by GAAP as a result of the Dex Media Merger, and $36.7
million in deferred income taxes.
    
    $80.6 million net use of cash from an increase in accounts receivable of $49.8
million and a decrease in deferred directory revenue of $30.8 million. The change in
deferred revenue and accounts receivable are analyzed together given the fact that when
a directory is published, the annual billable value of that directory is initially
deferred and unbilled accounts receivable are established. Each month thereafter,
typically one twelfth of the billing value is recognized as revenue and billed to
customers.
 42




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##### Table of Contents




    
    $34.6 million net source of cash from a decrease in other assets, consisting of a
$22.6 million decrease in prepaid expenses and a $12.0 million decrease in other current
and non-current assets, primarily relating to deferred commissions, print, paper and
delivery costs and changes in the fair value of the Companys interest rate swap
agreements.
    
    $41.4 million net use of cash from a decrease in accounts payable and accrued
liabilities, primarily reflecting an $11.9 million decrease in accrued liabilities,
which include accrued salaries and related bonuses and accrued income taxes, and a $33.9
million decrease in accrued interest payable on outstanding debt, offset by a $4.4
million increase in trade accounts payable.
    
    $9.1 million increase in other non-current liabilities, including pension and
postretirement long-term liabilities.
  
    
    $61.8 million used to purchase fixed assets, primarily computer equipment, software
and leasehold improvements.
    
    $328.9 million of net cash payments to acquire Business.com.
    
    $2.5 million used to fund an equity investment.
  
    
    $1,128.4 million in principal payments on debt borrowed under each of the credit
facilities. Of this amount, $208.3 million represents scheduled principal payments,
$354.0 million represents principal payments made on an accelerated basis, at our
option, from available cash flow generated from operations and $566.1 million represents
principal payments on the revolvers.
    
    $323.7 million source associated with borrowings under the RHD Credit Facility, which
was used to fund the Business.com Acquisition, net of costs.
    
    $570.7 million source in borrowings under the revolvers.
    
    $9.0 million source from the issuance of common stock in connection with the
Business.com Acquisition.
    
    $12.7 million in proceeds from the exercise of employee stock options.
    
    $2.0 million used in the decreased balance of checks not yet presented for payment.
 43




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##### Table of Contents



Contractual Obligations
  Payment Due by PeriodLess than
    
    1-3
    
    3-5
    
    More than 5(amounts in millions)
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsLong-term debt (1)
    
    $
    9,624.9
    
    
    $
    99.8
    
    
    $
    2,043.5
    
    
    $
    2,266.4
    
    
    $
    5,215.2Interest on long-term
debt(2)
    
    
    3,926.1
    
    
    
    677.5
    
    
    
    1,321.2
    
    
    
    1,103.8
    
    
    
    823.6Total long-term debt and
related interest contractual
obligations
    
    $
    13,551.0
    
    
    $
    777.3
    
    
    $
    3,364.7
    
    
    $
    3,370.2
    
    
    $
    6,038.8
 
 (1)
    
    Included in long-term debt are principal amounts owed under our credit facilities
and our senior notes and senior subordinated notes, including the current portion of long-term
debt.(2)
    
    Interest on debt represents cash interest payment obligations assuming all
indebtedness at September 30, 2008 will be paid in accordance with its contractual maturity and
assumes interest rates on variable interest debt as of September 30, 2008 will remain unchanged in
future periods. The weighted average interest rates under the RHDI, Dex Media East and new Dex
Media West Credit Facilities were 6.83%, 5.03% and 7.38%, respectively, at September 30, 2008.
Please refer to Liquidity and Capital Resources for interest rates on our senior notes and our
senior subordinated notes. 44




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##### Table of Contents



Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk and Risk Management
      Accounting for Derivative Instruments and Hedging Activities
  45




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##### Table of Contents



Market Risk Sensitive Instruments
 , Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FAS
133 Amendment of Statement 133 on Derivative Instruments and Hedging Activities
  
 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.
 46




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
     
 Item1A. Risk Factors
  3) Competition
    47




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48




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##### Table of Contents



5) Recognition of impairment charges for our intangible assets, other long-lived assets or goodwill
 Accounting for
the Impairment or Disposal of Long-lived Assets
     9) Future changes in directory publishing obligations in Qwest and AT&T markets and other
regulatory matters
   49




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10) Reliance on, and extension of credit to, small and medium-sized businesses
  50




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19) Economic, financial and liquidity instability
  51




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Exhibits
 Exhibit No.
    
    Document10.1
    
    Form of New Stock Appreciation Rights Agreement for Senior
Management Members (incorporated by reference to Exhibit 10.1
to the Registrants Form 8-K, filed on July 17, 2008 (SEC No.
001-07155)).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 R.H. Donnelley Corporation under
Section 302 of the Sarbanes-Oxley Act31.2*
    
    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 R.H. Donnelley
Corporation under Section 302 of the Sarbanes-Oxley Act32.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended September 30, 2008 under Section 906 of the
Sarbanes-Oxley Act by David C. Swanson, Chairman and Chief
Executive Officer, and Steven M. Blondy, Executive Vice
President and Chief Financial Officer, for R.H. Donnelley
Corporation
 
 *
    
    Filed herewith. 52




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##### Table of Contents



SIGNATURES
  R.H. DONNELLEY CORPORATIONDate: October 29, 2008
    By:
    /s/ Steven M. BlondySteven M. BlondyExecutive Vice President and Chief Financial Officer
(Principal Financial Officer)/s/ R. Barry SauderR. Barry SauderVice President, Corporate Controller and Chief
Accounting Officer
(Principal Accounting Officer) 53




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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Document10.1
    
    Form of New Stock Appreciation Rights Agreement for Senior
Management Members (incorporated by reference to Exhibit 10.1 to the
Registrants Form 8-K, filed on July 17, 2008 (SEC No. 001-07155)).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 R.H. Donnelley Corporation under Section 302 of the
Sarbanes-Oxley Act31.2*
    
    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 R.H. Donnelley Corporation under Section
302 of the Sarbanes-Oxley Act32.1*
    
    Certification of Quarterly Report on Form 10-Q for the period ended
September 30, 2008 under Section 906 of the Sarbanes-Oxley Act by
David C. Swanson, Chairman and Chief Executive Officer, and Steven
M. Blondy, Executive Vice President and Chief Financial Officer, for
R.H. Donnelley Corporation
 
 *
    
    Filed herewith. 54