##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 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
 DEX ONE 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
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ
  þ o
  Title of class
    
    Shares Outstanding at July 31, 2010Common Stock, par value $.001 per share
    
    50,015,691




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##### 



DEX ONE CORPORATION
 INDEX TO FORM 10-Q
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at June 30, 2010 (Successor
Company) and December 31, 2009 (Predecessor Company)
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive
        Income (Loss) for the three and five months ended June 30, 2010 (Successor Company), the one month ended January 31, 2010 and the three and
        six months ended June 30, 2009 (Predecessor Company)
    
    
    4Condensed Consolidated Statements of Cash Flows for the five months
        ended June 30, 2010 (Successor Company), the one month ended January 31, 2010 and the six months ended June 30, 2009
        (Predecessor Company)
    
    
    5Condensed Consolidated Statements of Changes in
        Shareholders Equity (Deficit) for the five months ended June 30, 2010 (Successor Company) and the one month ended
        January 31, 2010 (Predecessor Company)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    46Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    77Item 4. Controls and Procedures
    
    
    79PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    80Item 1A Risk Factors
    
    
    80Item 6. Exhibits
    
    
    81SIGNATURES
    
    
    82EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Part I. FINANCIAL INFORMATION
 
  Dex One Corporation and Subsidiaries
 
 Condensed Consolidated Balance Sheets (Unaudited)
 Successor Company
    
    
    
    Predecessor Company(in thousands, except share data)
    
    June 30, 2010
    
    
    
    December 31, 2009AssetsCurrent AssetsCash and cash equivalents
    
    $
    121,755
    
    
    
    $
    665,940Accounts receivable:Billed
    
    
    211,492
    
    
    
    
    244,048Unbilled
    
    
    599,537
    
    
    
    
    636,350Allowance for doubtful accounts
    
    
    (54,557
    )
    
    
    
    (54,612
    )Net accounts receivable
    
    
    756,472
    
    
    
    
    825,786Deferred directory costs
    
    
    133,084
    
    
    
    
    138,061Prepaid expenses and other current assets
    
    
    61,479
    
    
    
    
    90,928Total current assets
    
    
    1,072,790
    
    
    
    
    1,720,715Fixed assets and computer software, net
    
    
    197,506
    
    
    
    
    157,272Deferred income taxes, net
    
    
    
    
    
    
    
    399,885Other non-current assets
    
    
    4,489
    
    
    
    
    62,699Intangible assets, net
    
    
    2,463,363
    
    
    
    
    2,158,223Goodwill, net
    
    
    1,344,784
    
    
    
    
    Total Assets
    
    $
    5,082,932
    
    
    
    $
    4,498,794Liabilities and Shareholders Equity (Deficit)Current Liabilities Not Subject to CompromiseAccounts payable and accrued liabilities
    
    $
    119,215
    
    
    
    $
    168,488Short-term deferred income taxes, net
    
    
    47,345
    
    
    
    
    108,184Accrued interest
    
    
    33,274
    
    
    
    
    4,643Deferred directory revenues
    
    
    564,015
    
    
    
    
    848,775Current portion of long-term debt
    
    
    165,524
    
    
    
    
    993,528Total current liabilities not subject to compromise
    
    
    929,373
    
    
    
    
    2,123,618Long-term debt
    
    
    2,809,480
    
    
    
    
    2,561,248Deferred income taxes, net
    
    
    294,803
    
    
    
    
    Other non-current liabilities
    
    
    109,227
    
    
    
    
    380,163Total liabilities not subject to compromise
    
    
    4,142,883
    
    
    
    
    5,065,029Liabilities subject to compromise
    
    
    
    
    
    
    
    6,352,813Commitments and contingenciesShareholders Equity (Deficit)Successor Company common stock, par value $.001 per share, authorized  300,000,000
shares;
issued and outstanding50,015,691 shares at June 30, 2010
    
    
    50
    
    
    
    
    Predecessor Company common stock, par value $1 per share, authorized  400,000,000
shares; issued88,169,275 shares and outstanding68,955,674 shares at December 31,
2009
    
    
    
    
    
    
    
    88,169Additional paid-in capital
    
    
    1,452,704
    
    
    
    
    2,442,549Accumulated deficit
    
    
    (512,705
    )
    
    
    
    (9,137,160
    )Predecessor Company treasury stock, at cost, 19,213,601 shares at December 31, 2009
    
    
    
    
    
    
    
    (256,114
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    
    (56,492
    )Total shareholders equity (deficit)
    
    
    940,049
    
    
    
    
    (6,919,048
    )Total Liabilities and Shareholders Equity (Deficit)
    
    $
    5,082,932
    
    
    
    $
    4,498,794
  3




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##### Table of Contents



Dex One Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
 Successor Company
    
    
    
    Predecessor CompanyThree Months Ended
    
    
    Five Months Ended
    
    
    
    One Month Ended
    
    
    Three Months Ended
    
    
    Six Months Ended(in thousands, except per share data)
    
    
    June 30, 2010
    
    
    
    June 30, 2010
    
    
    
    
    January 31, 2010
    
    
    
    June 30, 2009
    
    
    
    June 30, 2009Net revenues
    
    $
    160,891
    
    
    $
    214,035
    
    
    
    $
    160,372
    
    
    $
    565,628
    
    
    $
    1,167,615Expenses:Production and distribution expenses
(exclusive of depreciation and amortization
shown separately below)
    
    
    51,476
    
    
    
    80,485
    
    
    
    
    27,069
    
    
    
    92,739
    
    
    
    194,640Selling and support expenses
    
    
    93,502
    
    
    
    151,855
    
    
    
    
    40,882
    
    
    
    160,736
    
    
    
    312,738General and administrative expenses
    
    
    40,202
    
    
    
    61,930
    
    
    
    
    8,186
    
    
    
    25,973
    
    
    
    67,568Depreciation and amortization
    
    
    59,581
    
    
    
    99,005
    
    
    
    
    20,161
    
    
    
    142,322
    
    
    
    285,167Impairment charges
    
    
    769,674
    
    
    
    769,674
    
    
    
    
    
    
    
    
    
    
    
    
    Total expenses
    
    
    1,014,435
    
    
    
    1,162,949
    
    
    
    
    96,298
    
    
    
    421,770
    
    
    
    860,113Operating income (loss)
    
    
    (853,544
    )
    
    
    (948,914
    )
    
    
    
    64,074
    
    
    
    143,858
    
    
    
    307,502Interest expense, net
    
    
    (73,423
    )
    
    
    (122,357
    )
    
    
    
    (19,656
    )
    
    
    (161,469
    )
    
    
    (360,305
    )Income (loss) before reorganization items, net and
income taxes
    
    
    (926,967
    )
    
    
    (1,071,271
    )
    
    
    
    44,418
    
    
    
    (17,611
    )
    
    
    (52,803
    )Reorganization items, net
    
    
    
    
    
    
    
    
    
    
    
    7,793,132
    
    
    
    (70,781
    )
    
    
    (70,781
    )Income (loss) before income taxes
    
    
    (926,967
    )
    
    
    (1,071,271
    )
    
    
    
    7,837,550
    
    
    
    (88,392
    )
    
    
    (123,584
    )(Provision) benefit for income taxes
    
    
    157,044
    
    
    
    558,566
    
    
    
    
    (917,541
    )
    
    
    12,910
    
    
    
    (353,108
    )Net income (loss)
    
    $
    (769,923
    )
    
    $
    (512,705
    )
    
    
    $
    6,920,009
    
    
    $
    (75,482
    )
    
    $
    (476,692
    )Earnings (loss) per share:Basic
    
    $
    (15.39
    )
    
    $
    (10.25
    )
    
    
    $
    100.3
    
    
    $
    (1.10
    )
    
    $
    (6.92
    )Diluted
    
    $
    (15.39
    )
    
    $
    (10.25
    )
    
    
    $
    100.2
    
    
    $
    (1.10
    )
    
    $
    (6.92
    )Shares used in computing earnings (loss) per share:Basic
    
    
    50,016
    
    
    
    50,013
    
    
    
    
    69,013
    
    
    
    68,918
    
    
    
    68,892Diluted
    
    
    50,016
    
    
    
    50,013
    
    
    
    
    69,052
    
    
    
    68,918
    
    
    
    68,892Comprehensive Income (Loss)Net income (loss)
    
    $
    (769,923
    )
    
    $
    (512,705
    )
    
    
    $
    6,920,009
    
    
    $
    (75,482
    )
    
    $
    (476,692
    )Amortization of gain (loss) on interest rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    1,083
    
    
    
    (4,212
    )
    
    
    (3,884
    )Benefit plans adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    (4,535
    )
    
    
    17,215
    
    
    
    17,232Comprehensive income (loss)
    
    $
    (769,923
    )
    
    $
    (512,705
    )
    
    
    $
    6,916,557
    
    
    $
    (62,479
    )
    
    $
    (463,344
    )
  4




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##### Table of Contents



Dex One Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Successor Company
    
    
    
    Predecessor CompanyFive Months
    
    
    
    One Month
    
    
    Six MonthsEnded
    
    
    
    Ended
    
    
    EndedJune 30,
    
    
    
    January 31,
    
    
    June 30,(in thousands)
    
    2010
    
    
    
    2010
    
    
    2009Cash Flows Provided By Operating Activities
    
    $
    240,060
    
    
    
    $
    71,741
    
    
    $
    176,622Cash Flows from Investing ActivitiesAdditions to fixed assets and computer software
    
    
    (15,192
    )
    
    
    
    (1,766
    )
    
    
    (9,846
    )Net cash used in investing activities
    
    
    (15,192
    )
    
    
    
    (1,766
    )
    
    
    (9,846
    )Cash Flows from Financing ActivitiesCredit facilities repayments
    
    
    (303,436
    )
    
    
    
    (511,272
    )
    
    
    (229,415
    )Debt issuance and other financing costs
    
    
    (2,785
    )
    
    
    
    (22,096
    )
    
    
    Revolver borrowings
    
    
    
    
    
    
    
    
    
    
    
    361,000Revolver repayments
    
    
    
    
    
    
    
    
    
    
    
    (18,749
    )Increase (decrease) in checks not yet presented for payment
    
    
    3,653
    
    
    
    
    (3,092
    )
    
    
    (3,864
    )Net cash provided by (used in) financing activities
    
    
    (302,568
    )
    
    
    
    (536,460
    )
    
    
    108,972Increase (decrease) in cash and cash equivalents
    
    
    (77,700
    )
    
    
    
    (466,485
    )
    
    
    275,748Cash and cash equivalents, beginning of year
    
    
    199,455
    
    
    
    
    665,940
    
    
    
    131,199Cash and cash equivalents, end of period
    
    $
    121,755
    
    
    
    $
    199,455
    
    
    $
    406,947Supplemental Information:Cash paid:Interest, net
    
    $
    69,263
    
    
    
    $
    15,460
    
    
    $
    282,839Income taxes, net
    
    $
    2,148
    
    
    
    $
    
    
    
    $
    1,062
  5




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##### Table of Contents



Dex One Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Changes in Shareholders Equity (Deficit)
 AccumulatedOther
    
    
    TotalCommon
    
    
    Additional
    
    
    Accumulated
    
    
    Treasury
    
    
    Comprehensive
    
    
    Shareholders(in thousands)
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Stock
    
    
    Income (Loss)
    
    
    Equity (Deficit)Balance, December 31, 2009 (Predecessor
Company)
    
    $
    88,169
    
    
    $
    2,442,549
    
    
    $
    (9,137,160
    )
    
    $
    (256,114
    )
    
    $
    (56,492
    )
    
    $
    (6,919,048
    )Net income
    
    
    
    
    
    
    
    
    
    
    6,920,009
    
    
    
    
    
    
    
    
    
    
    
    6,920,009Compensatory stock awards
    
    
    
    
    
    
    613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    613Other adjustments related to compensatory
stock awards
    
    
    
    
    
    
    (103
    )
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    Amortization of gain on interest rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,083
    
    
    
    1,083Benefit plans adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,535
    )
    
    
    (4,535
    )Cancellation of Predecessor Company
common stock
    
    
    (88,169
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88,169
    )Elimination of Predecessor Company
additional paid-in capital, accumulated
deficit, treasury stock and accumulated
other comprehensive loss
    
    
    
    
    
    
    (2,443,059
    )
    
    
    2,217,151
    
    
    
    256,011
    
    
    
    59,944
    
    
    
    90,047Balance, January 31, 2010 (Predecessor
Company)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of Successor Company Common
Stock
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    50Establishment of Successor Company
additional paid-in capital
    
    
    
    
    
    
    1,450,734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,450,734Balance, February 1, 2010 (Successor Company)
    
    
    50
    
    
    
    1,450,734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,450,784Net loss
    
    
    
    
    
    
    
    
    
    
    (512,705
    )
    
    
    
    
    
    
    
    
    
    
    (512,705
    )Compensatory stock awards
    
    
    
    
    
    
    1,970
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,970Balance, June 30, 2010 (Successor Company)
    
    $
    50
    
    
    $
    1,452,704
    
    
    $
    (512,705
    )
    
    $
    
    
    
    $
    
    
    
    $
    940,049
  6




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##### Table of Contents



Dex One Corporation and Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)  (tabular amounts in thousands, except share and per share data and where otherwise indicated)
 1. Business and Basis of Presentation
   Corporate Overview
 ® ® ® ®
 Retirement of Chairman and Chief Executive Officer
   7




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##### Table of Contents



Reclassifications
  Three Months Ended June 30, 2009AsPreviously
    
    
    
    
    
    AsReported
    
    Reclass
    
    ReclassifiedProduction and distribution
expenses
    
    $
    88,499
    
    
    $
    4,240
    
    
    $
    92,739Selling and support
expenses
    
    
    172,184
    
    
    
    (11,448
    )
    
    
    160,736General and administrative
expenses
    
    
    18,765
    
    
    
    7,208
    
    
    
    25,973
 Six Months Ended June 30, 2009AsPreviously
    
    
    
    
    
    AsReported
    
    Reclass
    
    ReclassifiedProduction and distribution
expenses
    
    $
    184,651
    
    
    $
    9,989
    
    
    $
    194,640Selling and support
expenses
    
    
    337,068
    
    
    
    (24,330
    )
    
    
    312,738General and administrative
expenses
    
    
    53,227
    
    
    
    14,341
    
    
    
    67,568
  8




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##### Table of Contents



Filing of Voluntary Petitions in Chapter 11
  Confirmed Plan of Reorganization and Emergence from the Chapter 11 Proceedings
  In re R.H.
Donnelley Corporation
 Restructuring
  
    
    DonTech Holdings, LLC and R.H. Donnelley Publishing & Advertising of Illinois
Holdings, LLC were merged into their sole member, RHDI;
    
    The DonTech II Partnership and R.H. Donnelley Publishing & Advertising of
Illinois Partnership technically terminated their respective partnership agreements
due to the loss of a second partner;
    
    Dex Media East Finance Co. was merged into Dex Media East LLC;
    
    Dex Media West Finance Co. was merged into Dex Media West LLC;
    
    Work.com, Inc. was merged into Business.com, Inc.;
    
    GetDigitalSmart.com, Inc. was merged into RHDI;
    
    Dex Media East LLC was merged into Dex Media East, Inc. (DME Inc.);
    
    Dex Media West LLC was merged into Dex Media West, Inc. (DMW Inc.); and
    
    R.H. Donnelley Publishing & Advertising, Inc. was merged into RHDI.
  Consummation of the Plan
 Issuance of New Common Stock
  9




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##### Table of Contents



Distributions Pursuant to the Plan
  
    
    On the Effective Date, in accordance with the Plan, the Company issued the
following number of shares of Dex One common stock: (i) approximately 10.5 million
shares, representing 21.0% of total outstanding common stock, to all holders of
notes issued by RHD; (ii) approximately 11.65 million shares, representing 23.3% of
total outstanding common stock, to all holders of notes issued by Dex Media, Inc.;
(iii) approximately 12.9 million shares, representing 25.8% of total outstanding
common stock, to all holders of notes issued by RHDI; (iv) approximately 6.5
million shares, representing 13.0% of total outstanding common stock, to all
holders of senior notes issued by Dex Media West; and (v) approximately 8.45
million shares, representing 16.9% of total outstanding common stock, to all
holders of senior subordinated notes issued by Dex Media West.
    
    On the Effective Date, in accordance with the terms of the Plan, holders of the
Dex Media West 8.5% Senior Notes due 2010 and 5.875% Senior Notes due 2011 also
received their pro rata share of Dex Ones $300.0 million aggregate principal
amount of 12%/14% Senior Subordinated Notes due 2017 (Dex One Senior Subordinated
Notes).
   Discharge, Releases, and Injunctions Pursuant to the Plan and the Confirmation Order
  Registration Rights Agreement
  Impact on Long-Term Debt Upon Emergence from the Chapter 11 Proceedings
  10




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##### Table of Contents



Accounting Matters Resulting from the Chapter 11 Proceedings
    Reorganizations
  Going Concern
  11




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##### Table of Contents



2. Summary of Significant Accounting Policies
 Identifiable Intangible Assets and Goodwill
 st Intangibles  Goodwill and Other .
  
    
    Historical financial information, including revenue, profit margins, customer attrition
data and price premiums enjoyed relative to competing independent publishers;
    
    Long-term financial projections, including, but not limited to, revenue trends and
profit margin trends;
    
    Intangible asset carrying values;
    
    Trading values of our debt and equity securities; and
    
    Other Company-specific and Predecessor Company-specific information.
  Property, Plant and Equipment
  12




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##### Table of Contents



Reporting Unit
    
    Goodwill Impairment ChargeRHDI
    
    $
    243,674DME Inc.
    
    
    241,512DMW Inc.
    
    
    225,955Business.com
    
    
    41,199Total
    
    $
    752,340
  PercentageBy WhichReportingUnit FairReporting
    
    
    ValueYears of Cash
    
    
    Unit
    
    
    ExceedsTerminal
    
    
    Flow Before
    
    
    Fair Value
    
    
    itsGoodwill
    
    
    Percentage of
    
    
    Discount
    
    
    Growth
    
    
    Terminal
    
    
    at June 30,
    
    
    CarryingReporting Unit
    
    Balance
    
    
    Total
    
    
    Rate
    
    
    Rate (1)
    
    
    Value
    
    
    2010
    
    
    ValueRHDI
    
    $
    380,161
    
    
    
    28.3
    %
    
    
    10.5
    %
    
    
    0.0
    %
    
    3.5 years
    
    $
    1,540,000
    
    
    
    0.0
    %DME Inc.
    
    
    430,571
    
    
    
    32.0
    
    
    
    10.5
    %
    
    
    0.0
    %
    
    3.5 years
    
    
    1,180,000
    
    
    
    0.0
    %DMW Inc.
    
    
    527,878
    
    
    
    39.2
    
    
    
    10.5
    %
    
    
    0.0
    %
    
    3.5 years
    
    
    1,335,000
    
    
    
    0.0
    %Business.com
    
    
    6,174
    
    
    
    0.5
    
    
    
    16.0
    %
    
    
    1.0
    %
    
    9.5 years
    
    
    15,600
    
    
    
    0.0
    %Total
    
    $
    1,344,784
    
    
    
    100.0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,070,600
    
    
    
    
 
 (1)
    
    Terminal growth rate is determined by reconciling the market value of our debt and
equity securities as of June 30, 2010 to the Companys long-term financial projections.  Balance at February 1, 2010
    
    $
    2,097,124Goodwill impairment charge
    
    
    (752,340
    )Balance at June 30, 2010
    
    $
    1,344,784
 13




---



##### Table of Contents



Technology,Directory
    
    
    Local
    
    
    National
    
    
    Trade
    
    
    AdvertisingServices
    
    
    Customer
    
    
    Customer
    
    
    Names and
    
    
    CommitmentsAgreements
    
    
    Relationships
    
    
    Relationships
    
    
    Trademarks
    
    
    & Other
    
    
    TotalNet intangible
assets fair value
    
    $
    1,330,000
    
    
    $
    561,400
    
    
    $
    175,000
    
    
    $
    381,900
    
    
    $
    88,400
    
    
    $
    2,536,700Accumulated
amortization
    
    
    (36,368
    )
    
    
    (22,449
    )
    
    
    (2,972
    )
    
    
    (8,567
    )
    
    
    (2,981
    )
    
    
    (73,337
    )Net intangible
assets at June 30,
2010
    
    $
    1,293,632
    
    
    $
    538,951
    
    
    $
    172,028
    
    
    $
    373,333
    
    
    $
    85,419
    
    
    $
    2,463,363
    Weighted Average
    
    AmortizationIntangible Asset
    
    Useful Lives
    
    MethodologyDirectory services agreements
    
    27 years
    
    Income forecast method (1)Local customer relationships
    
    15 years
    
    Income forecast method (1)National customer relationships
    
    26 years
    
    Income forecast method (1)Trade names and trademarks
    
    15 years
    
    Straight-line methodTechnology, advertising commitments and other
    
    9 years
    
    Income forecast method (1)
 
 (1)
    
    The fair value assigned to these identifiable intangible assets is amortized under
the income forecast method, which assumes the value derived from these intangible assets is greater
in the earlier years and steadily declines over time. 14




---



##### Table of Contents



Interest Expense and Deferred Financing Costs
    15




---



##### Table of Contents



Advertising Expense
  Concentration of Credit Risk
  16




---



##### Table of Contents



Earnings (Loss) Per Share
  Successor CompanyThree Months
    
    
    Five MonthsEnded
    
    
    EndedJune 30, 2010
    
    
    June 30, 2010Basic EPSNet loss
    
    $
    (769,923
    )
    
    $
    (512,705
    )Weighted average common shares outstanding
    
    
    50,016
    
    
    
    50,013Basic EPS
    
    $
    (15.39
    )
    
    $
    (10.25
    )Diluted EPSNet loss
    
    $
    (769,923
    )
    
    $
    (512,705
    )Weighted average common shares outstanding
    
    
    50,016
    
    
    
    50,013Dilutive effect of stock awards (1)
    
    
    
    
    
    
    Weighted average diluted shares outstanding
    
    
    50,016
    
    
    
    50,013Diluted EPS
    
    $
    (15.39
    )
    
    $
    (10.25
    )
 Predecessor CompanyOne Month
    
    
    Three Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    EndedJanuary 31, 2010
    
    
    June 30, 2009
    
    
    June 30, 2009Basic EPSNet income (loss)
    
    $
    6,920,009
    
    
    $
    (75,482
    )
    
    $
    (476,692
    )Weighted average common shares outstanding
    
    
    69,013
    
    
    
    68,918
    
    
    
    68,892Basic EPS
    
    $
    100.3
    
    
    $
    (1.10
    )
    
    $
    (6.92
    )Diluted EPSNet income (loss)
    
    $
    6,920,009
    
    
    $
    (75,482
    )
    
    $
    (476,692
    )Weighted average common shares outstanding
    
    
    69,013
    
    
    
    68,918
    
    
    
    68,892Dilutive effect of stock awards (1)
    
    
    39
    
    
    
    
    
    
    
    Weighted average diluted shares outstanding
    
    
    69,052
    
    
    
    68,918
    
    
    
    68,892Diluted EPS
    
    $
    100.2
    
    
    $
    (1.10
    )
    
    $
    (6.92
    )
 
 (1)
    
    Due to the Companys reported net loss for the three and five months ended June 30,
2010 and the Predecessor Companys reported net loss for the three and six months ended June
30, 2009, the effect of all stock-based awards was anti-dilutive and therefore not included in
the calculation of diluted EPS. For the three and five months ended June 30, 2010, 1.0 million
shares and 1.0 million shares, respectively, of the Companys stock-based awards had exercise
prices that exceeded the average market price of the Companys common stock for the period.
For the one month ended January 31, 2010 and three and six months ended June 30, 2009, 4.6
million shares, 5.7 million shares and 5.7 million shares, respectively, of the Predecessor
Companys stock-based awards had exercise prices that exceeded the average market price of the
Predecessor Companys common stock for the respective period. 17




---



##### Table of Contents



Stock-Based Awards
     Long-Term Incentive Program
   18




---



##### Table of Contents



Fair Value of Financial Instruments
  Fair Value Measurements and Disclosures
     Fair Value MeasurementsUsing Significant Other Observable Inputs (Level 2)Successor Company
    
    
    Predecessor CompanyDerivatives:
    
    June 30, 2010
    
    
    December 31, 2009Interest Rate Swap 
Liabilities
    
    $
    (5,070
    )
    
    
    $
    (6,695
    )Interest Rate Cap  Assets
    
    $
    551
    
    
    
    $
    
    19




---



##### Table of Contents



Estimates
  New Accounting Pronouncements
 Improving Disclosures
about Fair Value Measurements
 20




---



##### Table of Contents



Revenue Arrangements with Multiple Deliverables Revenue Arrangements with Multiple Deliverables
  3. Fresh Start Accounting
   Materiality Considering the Effects of
Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements
  Enterprise Value / Reorganization Value Determination
  21




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##### Table of Contents



Business Combinations
  Methodology, Analysis and Assumptions
    Discounted Cash Flow Methodology
  22




---



##### Table of Contents



Publicly Traded Company Analysis
  Precedent Transaction Analysis
  Analysis of Post-Emergence Tax Attributes
  23




---



##### Table of Contents



Final Enterprise Value, Accounting Policies and Reorganized Consolidated Balance Sheet
    Reorganized Condensed Consolidated Balance Sheet
As of January 31, 2010
(Unaudited)
 January 31, 2010Predecessor
    
    
    Reorganization
    
    
    Fresh Start
    
    
    SuccessorCompany
    
    
    Adjustments(1)
    
    
    Adjustments(2)
    
    
    Company(10)AssetsCurrent AssetsCash and cash equivalents
    
    $
    725,955
    
    
    $
    (526,500
    )(3)
    
    $
    
    
    
    $
    199,455Net accounts receivable
    
    
    798,113
    
    
    
    
    
    
    
    (41,156
    )(2)
    
    
    756,957Deferred directory costs
    
    
    135,479
    
    
    
    
    
    
    
    (135,479
    )(2)
    
    
    Prepaid expenses and other current assets
    
    
    86,925
    
    
    
    (1,401
    )(4)(7)
    
    
    9,657
    (2)
    
    
    95,181Total current assets
    
    
    1,746,472
    
    
    
    (527,901
    )
    
    
    (166,978
    )
    
    
    1,051,593Fixed assets and computer software, net
    
    
    154,439
    
    
    
    
    
    
    
    49,814
    (2)
    
    
    204,253Other non-current assets
    
    
    60,664
    
    
    
    
    
    
    
    (57,952
    )(9)
    
    
    2,712Deferred income taxes, net
    
    
    423,485
    
    
    
    (333,275
    )(7)
    
    
    (90,210
    )(2)
    
    
    Intangible assets, net
    
    
    2,142,668
    
    
    
    
    
    
    
    415,132
    (2)
    
    
    2,557,800Goodwill
    
    
    
    
    
    
    
    
    
    
    2,097,124
    (2)
    
    
    2,097,124Total Assets
    
    $
    4,527,728
    
    
    $
    (861,176
    )
    
    $
    2,246,930
    
    
    $
    5,913,482Liabilities and Shareholders (Deficit) EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    150,974
    
    
    $
    13,910
    (4)(7)
    
    $
    (3,172
    )(2)
    
    $
    161,712Short-term deferred income taxes, net
    
    
    134,080
    
    
    
    (66,651
    )(7)
    
    
    153,573
    (2)
    
    
    221,002Accrued interest
    
    
    20,417
    
    
    
    (20,417
    )(3)(4)
    
    
    
    
    
    
    Deferred directory revenues
    
    
    811,999
    
    
    
    
    
    
    
    (791,034
    )(2)
    
    
    20,965Current portion of long-term debt
    
    
    993,526
    
    
    
    (827,579
    )(3)(4)
    
    
    (31,575
    )(4)(8)
    
    
    134,372Total current liabilities
    
    
    2,110,996
    
    
    
    (900,737
    )
    
    
    (672,208
    )
    
    
    538,051Long-term debt
    
    
    2,561,248
    
    
    
    657,628
    (3)(4)
    
    
    (88,670
    )(4)(8)
    
    
    3,130,206Deferred income taxes, net
    
    
    
    
    
    
    245,025
    (7)
    
    
    66,322
    (2)
    
    
    311,347Other non-current liabilities
    
    
    380,091
    
    
    
    120,391
    (4)(7)
    
    
    (17,388
    )(2)
    
    
    483,094Liabilities subject to compromise
    
    
    6,352,813
    
    
    
    (6,352,813
    )(5)
    
    
    
    
    
    
    Total liabilities
    
    
    11,405,148
    
    
    
    (6,230,506
    )
    
    
    (711,944
    )
    
    
    4,462,698Shareholders (Deficit) EquityCommon stock  Predecessor
    
    
    88,169
    
    
    
    (88,169
    )(6)
    
    
    
    
    
    
    Additional paid-in capital  Predecessor
    
    
    2,443,059
    
    
    
    (2,443,059
    )(6)
    
    
    
    
    
    
    (Accumulated deficit) retained earnings
    
    
    (9,092,693
    )
    
    
    6,133,819
    (6)
    
    
    2,958,874
    (2)
    
    
    Treasury Stock  Predecessor
    
    
    (256,011
    )
    
    
    256,011
    (6)
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (59,944
    )
    
    
    59,944
    (6)
    
    
    
    
    
    
    Common stock  Successor
    
    
    
    
    
    
    50
    (5)
    
    
    
    
    
    
    50Additional paid-in capital  Successor
    
    
    
    
    
    
    1,450,734
    (5)
    
    
    
    
    
    
    1,450,734Total shareholders (deficit) equity.
    
    
    (6,877,420
    )
    
    
    5,369,330
    
    
    
    2,958,874
    
    
    
    1,450,784Total Liabilities and Shareholders
(Deficit) Equity
    
    $
    4,527,728
    
    
    $
    (861,176
    )
    
    $
    2,246,930
    
    
    $
    5,913,482
 24




---



##### Table of Contents



(1)
    
    Represents amounts to be recorded on the Fresh Start Reporting Date for the
implementation of the Plan, including the settlement of liabilities subject to compromise and
related payments, distributions of cash and new shares of Dex One common stock to pre-petition
creditors, the cancellation of RHD common stock and the elimination of the Predecessor Companys
additional paid-in capital, a portion of accumulated deficit, treasury stock and accumulated other
comprehensive loss. The reorganization adjustments also include the establishment of Dex One
additional paid-in capital of $1.5 billion based on the fair value of equity of $1.5 billion less
the par value of Dex One common stock of less than $0.1 million. Common shares outstanding of the
Predecessor Company immediately prior to their cancellation on the Effective Date were 69,058,991.(2)
    
    Represents the adjustments for fresh start accounting primarily related to recording
goodwill, recording our intangible assets, accounts receivable, fixed assets and computer software
and other assets and liabilities at fair value and related deferred income taxes in accordance with
ASC 805. Additionally, such fresh start accounting adjustments reflect the elimination of
substantially all of our deferred directory revenue of $791.0 million and all of the related
deferred directory costs of $135.5 million, based on the minimal obligations we have subsequent to
the Fresh Start Reporting Date for advertising sales fulfilled prior to the Fresh Start
Reporting Date. The remaining deferred directory revenues of $21.0 million have been recorded at
fair value in fresh start accounting and pertain to billings ahead of publications and revenues
associated with our internet products and services for which we have future obligations subsequent
to the Fresh Start Reporting Date. Prepaid expenses and other current assets include $14.4 million
of cost-uplift, which is defined and discussed below. The fresh start accounting adjustments also
include the elimination of (1) the remaining portion of the Predecessor Companys accumulated
deficit, (2) prepaid director and officer insurance included in prepaid expenses and other current
assets and (3) deferred rent included in accounts payable and accrued liabilities as well as other
non-current liabilities.  Enterprise value attributed to Dex One
    
    $
    4,515,907Plus: cash and cash equivalents
    
    
    199,455Plus: liabilities (excluding amended and restated credit
facilities and Dex One Senior Subordinated Notes)
    
    
    1,198,120Total reorganization value to be allocated to assets
    
    
    5,913,482Less: fair value assigned to tangible and intangible
assets
    
    
    (3,816,358
    )Value of Dex One assets in excess of fair value (goodwill)
    
    $
    2,097,124Total reorganization value to be allocated to assets
    
    $
    5,913,482Less: amended and restated credit facilities and Dex One
Senior Subordinated Notes
    
    
    (3,264,578
    )Less: other liabilities
    
    
    (1,198,120
    )New Dex One common stock (less than $0.1 million) and
additional paid-in capital ($1,450.7 million)
    
    $
    1,450,784
  Fresh start accounting adjustments:Goodwill
    
    $
    2,097,124Write off of deferred revenue and deferred directory costs
    
    
    655,555Fair value adjustment to intangible assets
    
    
    415,132Fair value adjustment to the amended and restated credit
facilities
    
    
    120,245Fair value adjustment to fixed assets and computer
software
    
    
    49,814Write-off of deferred financing costs
    
    
    (48,443
    )Other fresh start accounting adjustments
    
    
    (20,450
    )Impact of fresh start accounting on statement of operations
    
    
    3,268,977Adjustment to income tax provision
    
    
    (310,103
    )Total impact on retained earnings for fresh start accounting
adjustments
    
    $
    2,958,874
 25




---



##### Table of Contents



Directory services agreements
    
    $
    (92,061
    )Local customer relationships
    
    
    303,326National customer relationships
    
    
    116,976Trade names and trademarks
    
    
    16,074Technology, advertising commitments and other
    
    
    70,817Total increase in fair value of intangible assets
    
    $
    415,132
 
 (3)
    
    In accordance with the Plan, cash disbursements of $526.5 million were made on
the Effective Date related to the repayment of principal and accrued interest on outstanding debt.(4)
    
    Reflects the amendment and restatement of our credit facilities as well as the
issuance of the $300.0 million Dex One Senior Subordinated Notes completed on the Effective Date.
The following tables present a reconciliation of outstanding debt, including the current portion,
at January 31, 2010 to reorganized outstanding debt, including the current portion, at January 31,
2010. January 31, 2010Current portion of long-term debt
    
    $
    993,526Reclass of current portion of long-term debt
    
    
    (827,579
    )Adjustment to record the current portion of
long-term debt at fair value
    
    
    (31,575
    )Reorganized current portion of long-term debt
    
    $
    134,372
 January 31, 2010Long-term debt
    
    $
    2,561,248Reorganization adjustments:Repayment of long-term debt
    
    
    (511,272
    )Reclass of current portion of long-term debt
    
    
    827,579Dex One Senior Subordinated Notes
    
    
    300,000Interest rate swaps and accrued interest
    
    
    41,321Total reorganization adjustments
    
    
    657,628Adjustment to record long-term debt at fair value
    
    
    (88,670
    )Reorganized long-term debt
    
    $
    3,130,206
 
 (5)
    
    Liabilities subject to compromise generally refer to pre-petition obligations,
secured or unsecured, that may be impaired by a plan of reorganization. FASB ASC 852 requires such
liabilities, including those that became known after filing the Chapter 11 petitions, be reported
at the amounts expected to be allowed, even if they may be settled for lesser amounts. These
liabilities represented the estimated amount expected to be resolved on known or potential claims
through the Chapter 11 process. Liabilities subject to compromise also includes items that may be
assumed under the plan of reorganization, and may be subsequently reclassified to liabilities not
subject to compromise. The Company has classified all of its notes in default as liabilities
subject to compromise at January 31, 2010. Liabilities subject to compromise also include certain
pre-petition liabilities including accrued interest, accounts payable and accrued liabilities, tax
related liabilities and lease related liabilities. The table below identifies the principal
categories of liabilities subject to compromise at January 31, 2010: January 31, 2010Notes in default
    
    $
    6,071,756Accrued interest
    
    
    241,585Tax related liabilities
    
    
    28,845Accounts payable and accrued liabilities
    
    
    10,627Total liabilities subject to compromise
    
    $
    6,352,813
 26




---



##### Table of Contents



One Month EndedJanuary 31, 2010Liabilities subject to compromise
    
    $
    6,352,813Less:Issuance of new Dex One common stock (par value)
    
    
    (50
    )Dex One additional paid-in capital
    
    
    (1,450,734
    )Dex One Senior Subordinated Notes
    
    
    (300,000
    )Reclassified into other balance sheet liability accounts
    
    
    (39,471
    )Professional fees and other
    
    
    (38,403
    )Gain on reorganization / settlement of liabilities subject
to compromise
    
    $
    4,524,155
   
 (6)
    
    Represents the impact of reorganization adjustments on accumulated deficit: Gain on reorganization / settlement of liabilities subject
to compromise
    
    $
    4,524,155Elimination of Predecessor Company common stock
    
    
    88,169Elimination of Predecessor Company additional
paid-in capital
    
    
    2,443,059Elimination of Predecessor Company treasury stock
    
    
    (256,011
    )Elimination of Predecessor Company accumulated
other comprehensive loss
    
    
    (59,944
    )Adjustment to income tax provision
    
    
    (607,487
    )Other charges
    
    
    1,878Total impact on accumulated deficit for reorganization
adjustments
    
    $
    6,133,819
  Interest rate swaps, net
    
    $
    15,278Employee benefit plans, net
    
    
    44,666Total
    
    $
    59,944
 
 (7)
    
    Represents reorganization adjustments associated with the Predecessor Companys
deferred income taxes, interest rate swap liabilities and related interest receivables that have
been converted into a new tranche of term loans under the amended and restated credit facilities
and the reclass of certain liabilities from liabilities subject to compromise. 27




---



##### Table of Contents



(8)
    
    Represents the adjustment to record our long-term debt, including the current
portion, at fair value as of the Fresh Start Reporting Date. See Note 2, Summary of Significant
Accounting Policies  Interest Expense and Deferred Financing Costs and            Note 6,
Long-Term Debt, Credit Facilities and Notes for additional information. The following tables
present the fair value adjustments to our long-term debt, including the current portion, by
issuance: Current portion of long-term debt:RHDI Amended and Restated Credit Facility
    
    $
    4,149Dex Media East Amended and Restated Credit Facility
    
    
    22,424Dex Media West Amended and Restated Credit Facility
    
    
    5,002Total fair value adjustments
    
    $
    31,575Long-term debt:RHDI Amended and Restated Credit Facility
    
    $
    14,224Dex Media East Amended and Restated Credit Facility
    
    
    63,633Dex Media West Amended and Restated Credit Facility
    
    
    10,813Total fair value adjustments
    
    $
    88,670
 
 (9)
    
    Represents elimination of deferred financing costs associated with the Predecessor
Companys existing credit facilities and the write-off of other non-current assets as a result of
fresh start accounting.10)
    
    The following table summarizes the allocation of fair values of the Predecessor
Companys assets and liabilities as shown in the reorganized condensed consolidated balance sheet
at January 31, 2010: January 31, 2010Cash and cash equivalents
    
    $
    199,455Net accounts receivable
    
    
    756,957Prepaid expenses and other current assets
    
    
    95,181Fixed assets and computer software, net
    
    
    204,253Other non-current assets
    
    
    2,712Goodwill
    
    
    2,097,124Intangible assets, net
    
    
    2,557,800Total assets
    
    
    5,913,482Less: accounts payable and accrued liabilities
    
    
    161,712Less: short-term deferred income taxes, net
    
    
    221,002Less: deferred directory revenues
    
    
    20,965Less: current portion of long-term debt
    
    
    134,372Less: long-term debt
    
    
    3,130,206Less: deferred income taxes, net
    
    
    311,347Less: other non-current liabilities
    
    
    483,094Net assets acquired
    
    $
    1,450,784
  Cash
  Accounts Receivable
  28




---



##### Table of Contents



Deferred Directory Costs
  Deferred income taxes, net
 Income Taxes,
  Successor Company
    
    
    
    Predecessor CompanyFebruary 1, 2010
    
    
    
    December 31, 2009Gross deferred tax assets
    
    $
    139,326
    
    
    
    $
    1,988,997Valuation allowance
    
    
    (7,876
    )
    
    
    
    (1,531,905
    )Gross deferred tax liabilities
    
    
    (663,799
    )
    
    
    
    (165,391
    )Net deferred tax asset (liability)
    
    $
    (532,349
    )
    
    
    $
    291,701
  Prepaid expenses & other current assets
   Fixed Assets
  29




---



##### Table of Contents



Other non-current assets
  Intangible Assets
  Directory Services Agreements 
 Local and National Customer Relationships
 Trade Names and Trademarks
 Technology, Advertising Commitments and Other 
  30




---



##### Table of Contents



4. Reorganization Items, Net
  Predecessor CompanyOne Month EndedJanuary 31, 2010Liabilities subject to compromise
    
    $
    6,352,813Issuance of new Dex One common stock (par value)
    
    
    (50
    )Dex One additional paid-in capital
    
    
    (1,450,734
    )Dex One Senior Subordinated Notes
    
    
    (300,000
    )Reclassified into other balance sheet liability accounts
    
    
    (39,471
    )Professional fees and other
    
    
    (38,403
    )Gain on reorganization / settlement of liabilities subject to compromise
    
    
    4,524,155Fresh start accounting adjustments:Goodwill
    
    
    2,097,124Write off of deferred revenue and deferred directory costs
    
    
    655,555Fair value adjustment to intangible assets
    
    
    415,132Fair value adjustment to the amended and restated credit facilities
    
    
    120,245Fair value adjustment to fixed assets and computer software
    
    
    49,814Write-off of deferred financing costs
    
    
    (48,443
    )Other fresh start accounting adjustments
    
    
    (20,450
    )Total fresh start accounting adjustments
    
    
    3,268,977Total reorganization items, net
    
    $
    7,793,132
   Predecessor CompanyThree and Six MonthsEnded June 30, 2009Write-off of unamortized deferred financing costs
    
    $
    64,475Professional fees
    
    
    50,463Write-off of net premiums / discounts on long-term
debt
    
    
    34,886Write-off of fair value adjustments
    
    
    (78,511
    )Lease rejections
    
    
    (532
    )Total reorganization items
    
    $
    70,781
   31




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##### Table of Contents



5. Restructuring Charges
   6. Long-Term Debt, Credit Facilities and Notes
  Successor CompanyFair Market Value
    
    
    Carrying ValueJune 30, 2010
    
    
    June 30, 2010RHDI Amended and Restated Credit Facility
    
    $
    986,067
    
    
    $
    1,091,403Dex Media East Amended and Restated Credit Facility
    
    
    717,932
    
    
    
    810,040Dex Media West Amended and Restated Credit Facility
    
    
    708,402
    
    
    
    773,561Dex One 12%/14% Senior Subordinated Notes due 2017
    
    
    279,000
    
    
    
    300,000Total Dex One consolidated
    
    
    2,691,401
    
    
    
    2,975,004Less current portion
    
    
    165,185
    
    
    
    165,524Long-term debt
    
    $
    2,526,216
    
    
    $
    2,809,480
 RHDI Amended and Restated Credit Facility
  
    
    The highest (subject to a floor of 4.00%) of (i) the Prime Rate (as
defined in the RHDI Amended and Restated Credit Facility), (ii) the Federal Funds
Effective Rate (as defined in the RHDI Amended and Restated Credit Facility) plus
0.50%, and (iii) one month LIBOR plus 1.00% in each case, plus an interest rate
margin for base rate loans. The interest rate margin for base rate loans is
initially 5.25% per annum, and such interest rate margin adjusts pursuant to a
pricing grid that provides for a margin equal to 5.25% per annum if RHDIs
consolidated leverage ratio is greater than or equal to 4.25 to 1.00, and equal to
5.00% per annum if RHDIs consolidated leverage ratio is less than 4.25 to 1.00; or
    
    The higher of (i) LIBOR rate and (ii) 3.00%, in each case, plus an
interest rate margin for Eurodollar loans. The interest rate margin for
Eurodollar loans is initially 6.25% per annum, and such interest rate
margin adjusts pursuant to a pricing grid that provides for a margin equal to 6.25%
per annum if RHDIs consolidated leverage ratio is greater than or equal to 4.25 to
1.00, and equal to 6.00% per annum if RHDIs consolidated leverage ratio is less
than 4.25 to 1.00. RHDI may elect interest periods of 1, 2, 3 or 6 months for LIBOR
borrowings.
 32




---



##### Table of Contents



Dex Media East Amended and Restated Credit Facility
  
    
    The highest of (i) the Prime Rate (as defined in the Dex Media East
Amended and Restated Credit Facility), (ii) the Federal Funds Effective Rate (as
defined in the Dex Media East Amended and Restated Credit Facility) plus 0.50%, and
(iii) one month LIBOR plus 1.00% in each case, plus an interest rate margin for
base rate loans. The interest rate margin for base rate loans is initially 1.50%
per annum, and such interest rate margin adjusts pursuant to a pricing grid that
provides for a margin equal to 1.50% per annum if DME Inc.s consolidated leverage
ratio is greater than or equal to 2.75 to 1.00, equal to 1.25% per annum if DME
Inc.s consolidated leverage ratio is greater than or equal to 2.50 to 1.00 but
less than 2.75 to 1.00 and equal to 1.00% per annum if DME Inc.s consolidated
leverage ratio is less than 2.50 to 1.00; or
    
    The LIBOR rate plus an interest rate margin for Eurodollar
loans. The interest rate margin for Eurodollar loans is initially 2.50%
per annum, and such interest rate margin adjusts pursuant to a pricing grid that
provides for a margin equal to 2.50% per annum if DME Inc.s consolidated leverage
ratio is greater than or equal to 2.75 to 1.00, equal to 2.25% per annum if DME
Inc.s consolidated leverage ratio is greater than or equal to 2.50 to 1.00 but
less than 2.75 to 1.00 and equal to 2.00% per annum if DME Inc.s consolidated
leverage ratio is less than 2.50 to 1.00. DME Inc. may elect interest periods of
1, 2, 3 or 6 months for LIBOR borrowings.
  Dex Media West Amended and Restated Credit Facility
  
    
    The highest (subject to a floor of 4.00%) of (i) the Prime Rate (as
defined in the Dex Media West Amended and Restated Credit Facility), (ii) the
Federal Funds Effective Rate (as defined in the Dex Media West Amended and Restated
Credit Facility) plus 0.50%, and (iii) one month LIBOR plus 1.00% in each case,
plus an interest rate margin for base rate loans. The interest rate margin for
base rate loans is initially 3.50% per annum, and such interest rate margin adjusts
pursuant to a pricing grid that provides for a margin equal to 3.50% per annum if
DMW Inc.s consolidated leverage ratio is greater than or equal to 2.75 to 1.00,
equal to 3.25% per annum if DMW Inc.s consolidated leverage ratio is greater than
or equal to 2.50 to 1.00 but less than 2.75 to 1.00 and equal to 3.00% per annum if
DMW Inc.s consolidated leverage ratio is less than 2.50 to 1.00; or
    
    The higher of (i) LIBOR rate and (ii) 3.00%, in each case, plus an
interest rate margin for Eurodollar loans. The interest rate margin for
Eurodollar loans is initially 4.50% per annum, and such interest rate
margin adjusts pursuant to a pricing grid that provides for a margin equal to 4.50%
per annum if DMW Inc.s consolidated leverage ratio is greater than or equal to
2.75 to 1.00, equal to 4.25% per annum if DMW Inc.s consolidated leverage ratio is
greater than or equal to 2.50 to 1.00 but less than 2.75 to 1.00 and equal to 4.00%
per annum if DMW Inc.s consolidated leverage ratio is less than 2.50 to 1.00. DMW
Inc. may elect interest periods of 1, 2, 3 or 6 months for LIBOR borrowings.
  33




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##### Table of Contents



Dex One Senior Subordinated Notes
 st th
 34




---



##### Table of Contents



Redemption Year
    
    Price2011
    
    
    106.000
    %2012
    
    
    102.000
    %2013
    
    
    101.000
    %2014 and thereafter
    
    
    100.000
    %
  Predecessor CompanyNotes in Default
    
    
    Credit FacilitiesDecember 31, 2009RHD6.875% Senior Notes due 2013
    
    $
    206,791
    
    
    $
    6.875% Series A-1 Senior Discount Notes due 2013
    
    
    320,903
    
    
    
    6.875% Series A-2 Senior Discount Notes due 2013
    
    
    483,365
    
    
    
    8.875% Series A-3 Senior Notes due 2016
    
    
    1,012,839
    
    
    
    8.875% Series A-4 Senior Notes due 2017
    
    
    1,229,760
    
    
    
    R.H. Donnelley Inc.Credit Facility
    
    
    
    
    
    
    1,424,04811.75% Senior Notes due 2015
    
    
    412,871
    
    
    
    Dex Media, Inc.8% Senior Notes due 2013
    
    
    500,000
    
    
    
    9% Senior Discount Notes due 2013
    
    
    749,857
    
    
    
    Dex Media EastCredit Facility
    
    
    
    
    
    
    1,039,436Dex Media WestCredit Facility
    
    
    
    
    
    
    1,091,2928.5% Senior Notes due 2010
    
    
    385,000
    
    
    
    5.875% Senior Notes due 2011
    
    
    8,720
    
    
    
    9.875% Senior Subordinated Notes due 2013
    
    
    761,650
    
    
    
    Total Predecessor Company consolidated
    
    
    6,071,756
    
    
    
    3,554,776Less current portion not subject to compromise
    
    
    
    
    
    
    993,528Long-term debt subject to compromise
    
    $
    6,071,756
    
    
    
    Long-term debt not subject to compromise
    
    
    
    
    
    $
    2,561,248
 35




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##### Table of Contents



Impact of Fresh Start Accounting
  Outstanding Debt atUnamortized Fair
    
    
    June 30, 2010 Excluding theCarrying Value at
    
    
    Value Adjustments
    
    
    Impact of Unamortized FairJune 30, 2010
    
    
    at June 30, 2010
    
    
    Value AdjustmentsRHDI Amended and Restated Credit Facility
    
    $
    1,091,403
    
    
    $
    16,536
    
    
    $
    1,107,939Dex Media East Amended and Restated
Credit Facility
    
    
    810,040
    
    
    
    76,296
    
    
    
    886,336Dex Media West Amended and Restated
Credit Facility
    
    
    773,561
    
    
    
    13,552
    
    
    
    787,113Dex One 12%/14% Senior Subordinated
Notes due 2017
    
    
    300,000
    
    
    
    
    
    
    
    300,000Total
    
    $
    2,975,004
    
    
    $
    106,384
    
    
    $
    3,081,388
 7. Derivative Financial Instruments
  Successor Company
  Interest Rate Swaps  Dex Media East
 Effective Dates
    
    Notional Amount
    
    
    Pay Rates
    
    
    Maturity Dates(amounts in millions)February 26, 2010
    
    $
    300
    (2)
    
    
    1.20% - 1.796
    %
    
    February 29, 2012  February 28, 2013March 5, 2010
    
    
    100
    (1)
    
    
    1.668
    %
    
    January 31, 2013March 10, 2010
    
    
    100
    (1)
    
    
    1.75
    %
    
    January 31, 2013Total
    
    $
    500
  36




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##### Table of Contents



Interest Rate Caps  RHDI
 Effective Dates
    
    Notional Amount
    
    
    Cap Rates
    
    
    Maturity Dates(amounts in millions)February 26, 2010
    
    $
    200
    (3)
    

    3.0% - 3.5%

    
    February 28, 2012  February 28, 2013March 8, 2010
    
    
    100
    (4)
    

    3.5%

    
    January 31, 2013March 10, 2010
    
    
    100
    (4)
    

    3.0%
    
    April 30, 2012Total
    
    $
    400
 
 (1)
    
    Consists of one swap(2)
    
    Consists of three swaps(3)
    
    Consists of two caps(4)
    
    Consists of one cap  Loss Recognized inInterest ExpenseFrom the Change in FairValue of Interest RateSwapsFair Value
    
    
    Three Months
    
    
    Five MonthsMeasurements
    
    
    Ended
    
    
    Endedat June 30, 2010
    
    
    June 30, 2010
    
    
    June 30, 2010Interest Rate Swaps:Other non-current assets
    
    $
    
    
    
    $
    2,511
    
    
    $
    Accounts payable and accrued liabilities
    
    
    (3,428
    )
    
    
    294
    
    
    
    3,428Other non-current liabilities
    
    
    (1,642
    )
    
    
    1,642
    
    
    
    1,642Total
    
    $
    (5,070
    )
    
    $
    4,447
    
    
    $
    5,070
 Loss Recognized inInterest ExpenseFrom the Change in FairValue of Interest RateCapsFair Value
    
    
    Three Months
    
    
    Five MonthsMeasurements
    
    
    Ended
    
    
    Endedat June 30, 2010
    
    
    June 30, 2010
    
    
    June 30, 2010Interest Rate Caps:Prepaid expenses and other current assets
    
    $
    1
    
    
    $
    23
    
    
    $
    66Other non-current assets
    
    
    550
    
    
    
    1,091
    
    
    
    1,520Total
    
    $
    551
    
    
    $
    1,114
    
    
    $
    1,586
  37




---



##### Table of Contents



Predecessor Company
  (Gain) Loss Recognized inInterest ExpenseFrom the Change in FairFair Value
    
    
    Value of Interest RateSwapsMeasurements at
    
    
    One Month EndedDecember 31, 2009
    
    
    January 31, 2010Interest Rate Swaps:Accounts payable and accrued liabilities
    
    $
    (5,043
    )
    
    $
    3,898Other non-current liabilities
    
    
    (1,652
    )
    
    
    (1,600
    )Total
    
    $
    (6,695
    )
    
    $
    2,298
   RHDI Amended and Restated Credit Facility
    
    $
    11,346Dex Media East Amended and Restated Credit Facility
    
    
    26,301Dex Media West Amended and Restated Credit Facility
    
    
    121Total
    
    $
    37,768
    38




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##### Table of Contents



8. Income Taxes
  Successor CompanyThree Months Ended
    
    
    Five Months EndedJune 30, 2010
    
    
    June 30, 2010Loss before income taxes
    
    $
    (926,967
    )
    
    $
    (1,071,271
    )Statutory U.S. Federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %State and local taxes, net of U.S. Federal tax benefit
    
    
    3.6
    
    
    
    3.2Non-deductible impairment charges
    
    
    (21.8
    )
    
    
    (18.8
    )Section 382 limitation
    
    
    
    
    
    
    32.8Change in valuation allowance
    
    
    0.1
    
    
    
    Change in state tax law
    
    
    
    
    
    
    (0.1
    )Effective tax rate
    
    
    16.9
    %
    
    
    52.1
    %
 39




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##### Table of Contents



Predecessor CompanyOne Month Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJanuary 31, 2010
    
    
    June 30, 2009
    
    
    June 30, 2009Income (loss) before income taxes
    
    $
    7,837,550
    
    
    $
    (88,392
    )
    
    $
    (123,584
    )Statutory U.S. Federal tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State and local taxes, net of U.S. Federal tax benefit
    
    
    2.6
    
    
    
    (10.5
    )
    
    
    (6.8
    )Tax-exempt reorganization gain
    
    
    (28.0
    )
    
    
    
    
    
    
    Other non-deductible expenses
    
    
    
    
    
    
    (7.5
    )
    
    
    (5.4
    )Section 382 limitation
    
    
    1.1
    
    
    
    
    
    
    
    (303.7
    )Section 108 tax attribution reduction
    
    
    21.4
    
    
    
    
    
    
    
    Change in valuation allowance
    
    
    (19.5
    )
    
    
    (1.8
    )
    
    
    (1.3
    )Change in state tax law
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Other
    
    
    (0.9
    )
    
    
    (0.6
    )
    
    
    (1.6
    )Effective tax rate
    
    
    11.7
    %
    
    
    14.6
    %
    
    
    (285.7
    )%
       40




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##### Table of Contents



9. Benefit Plans
  Pension BenefitsSuccessor CompanyThree Months Ended
    
    
    Five Months EndedJune 30, 2010
    
    
    June 30, 2010Interest cost
    
    $
    3,425
    
    
    $
    5,660Expected return on plan assets
    
    
    (3,328
    )
    
    
    (5,751
    )Curtailment (gain)
    
    
    (3,754
    )
    
    
    (3,754
    )Net periodic benefit (credit)
    
    $
    (3,657
    )
    
    $
    (3,845
    )
 Pension BenefitsPredecessor CompanyOne Month Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJanuary 31, 2010
    
    
    June 30, 2009
    
    
    June 30, 2009Service cost
    
    $
    
    
    
    $
    1,378
    
    
    $
    2,819Interest cost
    
    
    1,124
    
    
    
    3,844
    
    
    
    7,452Expected return on plan assets
    
    
    (1,385
    )
    
    
    (4,546
    )
    
    
    (9,125
    )Amortization of prior service cost
    
    
    81
    
    
    
    
    
    
    
    Amortization of net loss (gain)
    
    
    122
    
    
    
    (57
    )
    
    
    (27
    )Settlement loss
    
    
    
    
    
    
    3,546
    
    
    
    3,546Net periodic benefit (credit) cost
    
    $
    (58
    )
    
    $
    4,165
    
    
    $
    4,665
 Postretirement BenefitsSuccessor CompanyThree Months Ended
    
    
    Five Months EndedJune 30, 2010
    
    
    June 30, 2010Interest cost
    
    $
    28
    
    
    $
    53Net periodic benefit cost
    
    $
    28
    
    
    $
    53
 Postretirement BenefitsPredecessor CompanyOne Month Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJanuary 31, 2010
    
    
    June 30, 2009
    
    
    June 30, 2009Service cost
    
    $
    
    
    
    $
    146
    
    
    $
    414Interest cost
    
    
    10
    
    
    
    644
    
    
    
    1,403Amortization of prior service cost
    
    
    
    
    
    
    (2
    )
    
    
    (4
    )Amortization of net (gain)
    
    
    (21
    )
    
    
    (261
    )
    
    
    (261
    )Curtailment (gain)
    
    
    
    
    
    
    (13,460
    )
    
    
    (13,460
    )Net periodic benefit (credit)
    
    $
    (11
    )
    
    $
    (12,933
    )
    
    $
    (11,908
    )
 41




---



##### Table of Contents



10. Capital Stock
  11. Business Segments
  42




---



##### Table of Contents



12. Legal Proceedings
      13. Dex One Corporation (Parent Company) Financial Statements
   43




---



##### Table of Contents



Condensed Parent Company Balance Sheets
 Successor
    
    
    
    PredecessorCompany
    
    
    
    CompanyJune 30,
    
    
    
    December, 312010
    
    
    
    2009AssetsCash and cash equivalents
    
    $
    1,189
    
    
    
    $
    5,007Intercompany, net
    
    
    
    
    
    
    
    109,102Intercompany loan receivable
    
    
    1,900
    
    
    
    
    5,000Prepaid and other current assets
    
    
    367
    
    
    
    
    8,055Total current assets
    
    
    3,456
    
    
    
    
    127,164Investment in subsidiaries
    
    
    1,274,875
    
    
    
    
    Fixed assets and computer software, net
    
    
    
    
    
    
    
    5,990Deferred income taxes, net
    
    
    286
    
    
    
    
    71,878Intercompany note receivable
    
    
    
    
    
    
    
    300,000Total assets
    
    $
    1,278,617
    
    
    
    $
    505,032Liabilities and Shareholders Equity (Deficit)Accounts payable, accrued liabilities and other
    
    $
    93
    
    
    
    $
    80,061Accrued interest
    
    
    9,049
    
    
    
    
    Intercompany, net
    
    
    16,079
    
    
    
    
    Short-term deferred income taxes, net
    
    
    12,307
    
    
    
    
    Total current liabilities not subject to compromise
    
    
    37,528
    
    
    
    
    80,061Long-term debt
    
    
    300,000
    
    
    
    
    Deficit in subsidiaries
    
    
    
    
    
    
    
    3,950,031Other non-current liabilities
    
    
    1,040
    
    
    
    
    8,232Total liabilities not subject to compromise
    
    
    338,568
    
    
    
    
    4,038,324Liabilities subject to compromise
    
    
    
    
    
    
    
    3,385,756Shareholders equity (deficit)
    
    
    940,049
    
    
    
    
    (6,919,048
    )Total liabilities and shareholders equity (deficit)
    
    $
    1,278,617
    
    
    
    $
    505,032
 44




---



##### Table of Contents



Condensed Parent Company Statements of Operations
 Successor Company
    
    
    
    Predecessor CompanyThree Months Ended
    
    
    Five Months Ended
    
    
    
    One Month Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    June 30, 2010
    
    
    
    January 31, 2010
    
    
    June 30, 2009
    
    
    June 30, 2009Expenses
    
    $
    9,193
    
    
    $
    12,095
    
    
    
    $
    891
    
    
    $
    4,947
    
    
    $
    10,253Partnership and equity income (loss)
    
    
    (908,838
    )
    
    
    (1,043,949
    )
    
    
    
    643,971
    
    
    
    57,365
    
    
    
    92,028Operating income (loss)
    
    
    (918,031
    )
    
    
    (1,056,044
    )
    
    
    
    643,080
    
    
    
    52,418
    
    
    
    81,775Interest expense, net
    
    
    (8,936
    )
    
    
    (15,227
    )
    
    
    
    
    
    
    
    (41,487
    )
    
    
    (106,036
    )Income (loss) before reorganization
items, net and income taxes
    
    
    (926,967
    )
    
    
    (1,071,271
    )
    
    
    
    643,080
    
    
    
    10,931
    
    
    
    (24,261
    )Reorganization items, net
    
    
    
    
    
    
    
    
    
    
    
    7,194,470
    
    
    
    (99,323
    )
    
    
    (99,323
    )Income (loss) before income taxes
    
    
    (926,967
    )
    
    
    (1,071,271
    )
    
    
    
    7,837,550
    
    
    
    (88,392
    )
    
    
    (123,584
    )(Provision) benefit for income taxes
    
    
    157,044
    
    
    
    558,566
    
    
    
    
    (917,541
    )
    
    
    12,910
    
    
    
    (353,108
    )Net income (loss)
    
    $
    (769,923
    )
    
    $
    (512,705
    )
    
    
    $
    6,920,009
    
    
    $
    (75,482
    )
    
    $
    (476,692
    )
 Condensed Parent Company Statements of Cash Flows
 Successor Company
    
    
    
    Predecessor CompanyFive Months Ended
    
    
    
    One Month Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    
    January 31, 2010
    
    
    June 30, 2009Cash flow used in operating
activities
    
    $
    (5,419
    )
    
    
    $
    (531
    )
    
    $
    (120,776
    )Cash flow from investing activities:Additions to fixed assets and
computer software, net
    
    
    
    
    
    
    
    (643
    )
    
    
    (134
    )Intercompany loan
    
    
    (1,900
    )
    
    
    
    
    
    
    
    (7,000
    )Net cash used in investing activities
    
    
    (1,900
    )
    
    
    
    (643
    )
    
    
    (7,134
    )Cash flow from financing activities:Debt issuance and other
financing costs
    
    
    
    
    
    
    
    (370
    )
    
    
    Decrease in checks not yet
presented for payment
    
    
    (1,073
    )
    
    
    
    (182
    )
    
    
    (905
    )Dividends from subsidiaries
    
    
    6,300
    
    
    
    
    
    
    
    
    129,600Net cash provided by (used in)
financing activities
    
    
    5,227
    
    
    
    
    (552
    )
    
    
    128,695Change in cash
    
    
    (2,092
    )
    
    
    
    (1,726
    )
    
    
    785Cash at beginning of period
    
    
    3,281
    
    
    
    
    5,007
    
    
    
    948Cash at end of period
    
    $
    1,189
    
    
    
    $
    3,281
    
    
    $
    1,733
 45




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Information
  Corporate Overview
 ® ® ® ®
 46




---



##### Table of Contents



Recent Trends Related to Our Business
     Impairment Charges
 Intangibles  Goodwill and Other Property, Plant and Equipment
 47




---



##### Table of Contents



Retirement of Chairman and Chief Executive Officer
     Filing of Voluntary Petitions in Chapter 11
  Confirmed Plan of Reorganization and Emergence from the Chapter 11 Proceedings
  48




---



##### Table of Contents



In re R.H.
Donnelley Corporation
  Restructuring
  
    
    DonTech Holdings, LLC and R.H. Donnelley Publishing & Advertising of Illinois
Holdings, LLC were merged into their sole member, RHDI;
    
    The DonTech II Partnership and R.H. Donnelley Publishing & Advertising of
Illinois Partnership technically terminated their respective partnership agreements
due to the loss of a second partner;
    
    Dex Media East Finance Co. was merged into Dex Media East LLC;
    
    Dex Media West Finance Co. was merged into Dex Media West LLC;
    
    Work.com, Inc. was merged into Business.com, Inc.;
    
    GetDigitalSmart.com, Inc. was merged into RHDI;
    
    Dex Media East LLC was merged into Dex Media East, Inc. (DME Inc.);
    
    Dex Media West LLC was merged into Dex Media West, Inc. (DMW Inc.); and
    
    R.H. Donnelley Publishing & Advertising, Inc. was merged into RHDI.
  Consummation of the Plan
 Issuance of New Common Stock
  Distributions Pursuant to the Plan
  
    
    On the Effective Date, in accordance with the Plan, the Company issued the
following number of shares of Dex One common stock: (i) approximately 10.5 million
shares, representing 21.0% of total outstanding common stock, to all holders of
notes issued by RHD; (ii) approximately 11.65 million shares, representing 23.3% of
total outstanding common stock, to all holders of notes issued by Dex Media, Inc.;
(iii) approximately 12.9 million shares, representing 25.8% of total outstanding
common stock, to all holders of notes issued by RHDI; (iv) approximately 6.5
million shares, representing 13.0% of total outstanding common stock, to all
holders of senior notes issued by Dex Media West; and (v) approximately 8.45
million shares, representing 16.9% of total outstanding common stock, to all
holders of senior subordinated notes issued by Dex Media West.
 49




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##### Table of Contents




    
    On the Effective Date, in accordance with the terms of the Plan, holders of the
Dex Media West 8.5% Senior Notes due 2010 and 5.875% Senior Notes due 2011 also
received their pro rata share of Dex Ones $300.0 million aggregate principal
amount of 12%/14% Senior Subordinated Notes due 2017 (Dex One Senior Subordinated
Notes).
   Discharge, Releases, and Injunctions Pursuant to the Plan and the Confirmation Order
  Registration Rights Agreement
  Impact on Long-Term Debt Upon Emergence from the Chapter 11 Proceedings
  Accounting Matters Resulting from the Chapter 11 Proceedings
  50




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##### Table of Contents



Fresh Start Accounting
 Reorganizations
 st
  Climate Change
  Going Concern
  Segment Reporting
  51




---



##### Table of Contents



New Accounting Pronouncements
 Improving Disclosures
about Fair Value Measurements
 Revenue Arrangements with Multiple Deliverables Revenue Arrangements with Multiple Deliverables
  52




---



##### Table of Contents



RESULTS OF OPERATIONS
 Factors Affecting Comparability
 Fresh Start Accounting Adjustments
   Business Combinations
   53




---



##### Table of Contents



Impairment Charges
  Reclassifications
  Three Months Ended June 30, 2009As Previously(amounts in millions)
    
    Reported
    
    
    Reclass
    
    
    As ReclassifiedProduction and
distribution
expenses
    
    $
    88.5
    
    
    $
    4.2
    
    
    $
    92.7Selling and support
expenses
    
    
    172.2
    
    
    
    (11.5
    )
    
    
    160.7General and
administrative
expenses
    
    
    18.7
    
    
    
    7.3
    
    
    
    26.0
 Six Months Ended June 30, 2009As Previously(amounts in millions)
    
    Reported
    
    
    Reclass
    
    
    As ReclassifiedProduction and
distribution
expenses
    
    $
    184.6
    
    
    $
    10.0
    
    
    $
    194.6Selling and support
expenses
    
    
    337.1
    
    
    
    (24.4
    )
    
    
    312.7General and
administrative
expenses
    
    
    53.2
    
    
    
    14.4
    
    
    
    67.6
 GAAP Reported Results
 Successor Company  Three and Five Months Ended June 30, 2010
 Net Revenues
  Successor CompanyThree Months Ended
    
    
    Five Months Ended(amounts in millions)
    
    June 30, 2010
    
    
    June 30, 2010Gross advertising revenues
    
    $
    157.6
    
    
    $
    210.2Sales claims and allowances
    
    
    (1.7
    )
    
    
    (4.2
    )Net advertising revenues
    
    
    155.9
    
    
    
    206.0Other revenues
    
    
    5.0
    
    
    
    8.0Total
    
    $
    160.9
    
    
    $
    214.0
 54




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##### Table of Contents



Expenses
  Successor CompanyThree Months Ended
    
    
    Five Months Ended(amounts in millions)
    
    June 30, 2010
    
    
    June 30, 2010Production and distribution expenses
    
    $
    51.5
    
    
    $
    80.5Selling and support expenses
    
    
    93.5
    
    
    
    151.9General and administrative expenses
    
    
    40.2
    
    
    
    61.9Depreciation and amortization
    
    
    59.6
    
    
    
    99.0Impairment charges
    
    
    769.7
    
    
    
    769.7Total
    
    $
    1,014.5
    
    
    $
    1,163.0
 55




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##### Table of Contents



Production and Distribution Expenses
  Selling and Support Expenses
  56




---



##### Table of Contents



General and Administrative Expenses
  Depreciation and Amortization
   Impairment Charges
  57




---



##### Table of Contents



Operating Loss
  Interest Expense, Net
    Income Taxes
     58




---



##### Table of Contents



Net Loss and Loss Per Share
   Predecessor Company  One Month Ended January 31, 2010
 Net Revenues
  Predecessor CompanyOne Month Ended(amounts in millions)
    
    January 31, 2010Gross advertising revenues
    
    $
    161.0Sales claims and allowances
    
    
    (3.5
    )Net advertising revenues
    
    
    157.5Other revenues
    
    
    2.9Total
    
    $
    160.4
    Expenses
  Predecessor CompanyOne Month Ended(amounts in millions)
    
    January 31, 2010Production and distribution expenses
    
    $
    27.0Selling and support expenses
    
    
    40.9General and administrative expenses
    
    
    8.2Depreciation and amortization
    
    
    20.2Total
    
    $
    96.3
 59




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##### Table of Contents



Production and Distribution Expenses
  Selling and Support Expenses
  General and Administrative Expenses
  Depreciation and Amortization
   Operating Income
  60




---



##### Table of Contents



Interest Expense, Net
    Reorganization Items, Net
  Predecessor CompanyOne Month Ended(amounts in thousands)
    
    January 31, 2010Liabilities subject to compromise
    
    $
    6,352,813Issuance of new Dex One common stock (par value)
    
    
    (50
    )Dex One additional paid-in capital
    
    
    (1,450,734
    )Dex One Senior Subordinated Notes
    
    
    (300,000
    )Reclassified into other balance sheet liability accounts
    
    
    (39,471
    )Professional fees and other
    
    
    (38,403
    )Gain on reorganization / settlement of liabilities subject to compromise
    
    
    4,524,155Fresh start accounting adjustments:Goodwill
    
    
    2,097,124Write off of deferred revenue and deferred directory costs
    
    
    655,555Fair value adjustment to intangible assets
    
    
    415,132Fair value adjustment to the amended and restated credit facilities
    
    
    120,245Fair value adjustment to fixed assets and computer software
    
    
    49,814Write-off of deferred financing costs
    
    
    (48,443
    )Other fresh start accounting adjustments
    
    
    (20,450
    )Total fresh start accounting adjustments
    
    
    3,268,977Total reorganization items, net
    
    $
    7,793,132
  61




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##### Table of Contents



Income Taxes
    Net Income and Earnings Per Share
   62




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##### Table of Contents



Non-GAAP Financial Information  Adjusted and Combined Adjusted Results
  Adjusted Results for the Three Months Ended June 30, 2010  compared to Predecessor Company GAAP Results for the Three Months Ended June 30, 2009
 Net Revenues
  Successor
    
    
    
    
    
    
    
    
    
    
    PredecessorCompany
    
    
    
    
    
    
    Adjusted
    
    
    CompanyThree Months Ended
    
    
    
    
    
    
    Three Months Ended
    
    
    Three Months EndedJune 30,
    
    
    Fresh Start
    
    
    June 30,
    
    
    June 30,(amounts in millions)
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeGross advertising
revenues
    
    $
    157.6
    
    
    $
    294.0
    (1)
    
    $
    451.6
    
    
    $
    569.9
    
    
    $
    (118.3
    )
    
    
    (20.8
    )%Sales claims and
allowances
    
    
    (1.7
    )
    
    
    (5.1
    )(1)
    
    
    (6.8
    )
    
    
    (11.7
    )
    
    
    4.9
    
    
    
    41.9Net advertising revenues
    
    
    155.9
    
    
    
    288.9
    
    
    
    444.8
    
    
    
    558.2
    
    
    
    (113.4
    )
    
    
    (20.3
    )Other revenues
    
    
    5.0
    
    
    
    2.0
    (1)
    
    
    7.0
    
    
    
    7.4
    
    
    
    (0.4
    )
    
    
    5.4Total
    
    $
    160.9
    
    
    $
    290.9
    
    
    $
    451.8
    
    
    $
    565.6
    
    
    $
    (113.8
    )
    
    
    (20.1
    )%
 
 (1)
    
    Represents gross advertising revenues, sales claims and allowances and other
revenues for advertising sales fulfilled prior to the Fresh Start Reporting Date, which would have
been recognized during the three months ended June 30, 2010 absent our adoption of fresh start
accounting required under GAAP.   63




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##### Table of Contents



Expenses
  Successor
    
    
    
    
    
    
    
    
    
    
    PredecessorCompany
    
    
    
    
    
    
    Adjusted
    
    
    CompanyThree Months Ended
    
    
    Fresh Start
    
    
    Three Months Ended
    
    
    Three Months EndedJune 30,
    
    
    and Other
    
    
    June 30,
    
    
    June 30,(amounts in millions)
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeProduction and
distribution expenses
    
    $
    51.5
    
    
    $
    30.5
    (1)
    
    $
    82.0
    
    
    $
    92.7
    
    
    $
    (10.7
    )
    
    
    (11.5
    )%Selling and support
expenses
    
    
    93.5
    
    
    
    28.5
    (1)
    
    
    122.0
    
    
    
    160.7
    
    
    
    (38.7
    )
    
    
    (24.1
    )General and
administrative
expenses
    
    
    40.2
    
    
    
    
    
    
    
    40.2
    
    
    
    26.0
    
    
    
    14.2
    
    
    
    54.6Depreciation and
amortization
    
    
    59.6
    
    
    
    
    (2)
    
    
    59.6
    
    
    
    142.3
    
    
    
    (82.7
    )
    
    
    (58.1
    )Impairment charges
    
    
    769.7
    
    
    
    (769.7
    )(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    1,014.5
    
    
    $
    (710.7
    )
    
    $
    303.8
    
    
    $
    421.7
    
    
    $
    (117.9
    )
    
    
    (28.0
    )%
 
 (1)
    
    Represents (a) certain deferred expenses for advertising sales fulfilled
prior to the Fresh Start Reporting Date, which would have been recognized during the three months
ended June 30, 2010 absent our adoption of fresh start accounting required under GAAP, and (b) the
exclusion of cost-uplift recorded under fresh start accounting.(2)
    
    Depreciation and amortization expense has not been adjusted for the increase in
fair value of our intangible assets and fixed assets and computer software as a result of our
adoption of fresh start accounting, the reduced carrying values of intangible assets resulting from
impairment charges recorded by the Predecessor Company during the fourth quarter of 2009 and the
associated reduction in remaining useful lives effective January 1, 2010.(3)
    
    Goodwill and intangible asset impairment charges have been excluded for the
adjusted three months ended June 30, 2010. 64




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##### Table of Contents



Production and Distribution Expenses
  Adjusted ThreeMonths Ended June(amounts in millions)
    
    30, 2010Lower print, paper and distribution expenses
    
    $
    (8.5
    )Lower internet production and distribution expenses
    
    
    (1.5
    )All other, net
    
    
    (0.7
    )Total decrease in
adjusted production and
distribution expenses for
the three months ended
June 30, 2010
    
    $
    (10.7
    )
   Selling and Support Expenses
  Adjusted ThreeMonths Ended June(amounts in millions)
    
    30, 2010Lower bad debt expense
    
    $
    (31.6
    )Lower commissions and salesperson expenses
    
    
    (6.4
    )Lower occupancy expenses
    
    
    (1.2
    )All other, net
    
    
    0.5Total decrease in
adjusted selling and
support expenses for
the three months ended
June 30, 2010
    
    $
    (38.7
    )
    65




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##### Table of Contents



General and Administrative Expenses
  Adjusted ThreeMonths Ended June(amounts in millions)
    
    30, 2010Change in net curtailment gains
    
    $
    9.7One-time expenses associated with retirement of Chief Executive Officer
    
    
    9.5Lower restructuring expenses
    
    
    (2.0
    )All other, net
    
    
    (3.0
    )Total increase in adjusted G&A
expenses for the three months ended
June 30, 2010
    
    $
    14.2
    Depreciation and Amortization
   66




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##### Table of Contents



Operating Income (Loss)
  Successor
    
    
    
    
    
    
    
    
    
    
    PredecessorCompany
    
    
    
    
    
    
    Adjusted
    
    
    CompanyThree Months Ended
    
    
    Fresh Start
    
    
    Three Months Ended
    
    
    Three Months EndedJune 30,
    
    
    and Other
    
    
    June 30,
    
    
    June 30,(amounts in millions)
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeTotal
    
    $
    (853.5
    )
    
    $
    1,001.6
    (1)
    
    $
    148.1
    
    
    $
    143.9
    
    
    $
    4.2
    
    
    
    2.9
    %
 
 (1)
    
    Represents the net effect of (a) eliminating gross advertising revenues,
sales claims and allowances, other revenues and certain deferred expenses for advertising sales
fulfilled prior to the Fresh Start Reporting Date, which would have been recognized during the
three months ended June 30, 2010 absent our adoption of fresh start accounting required under GAAP,
(b) the exclusion of cost-uplift recorded under fresh start accounting and (c) excludes the
goodwill and intangible asset impairment charges during the three months ended June 30, 2010.  Combined Adjusted Results for the Six Months Ended June 30, 2010
compared to Predecessor Company GAAP Results for the Six Months Ended June 30, 2009
 Net Revenues
  Successor
    
    
    Predecessor
    
    
    
    
    
    
    Combined
    
    
    PredecessorCompany
    
    
    Company
    
    
    
    
    
    
    Adjusted
    
    
    CompanyFive Months Ended
    
    
    One Month Ended
    
    
    
    
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30,
    
    
    January 31,
    
    
    Fresh Start
    
    
    June 30,
    
    
    June 30,(amounts in millions)
    
    2010
    
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeGross advertising
revenues
    
    $
    210.2
    
    
    $
    161.0
    
    
    $
    551.9
    (1)
    
    $
    923.1
    
    
    $
    1,178.1
    
    
    $
    (255.0
    )
    
    
    (21.6
    )%Sales claims and
allowances
    
    
    (4.2
    )
    
    
    (3.5
    )
    
    
    (9.7
    ) (1)
    
    
    (17.4
    )
    
    
    (25.9
    )
    
    
    8.5
    
    
    
    32.8Net advertising revenues
    
    
    206.0
    
    
    
    157.5
    
    
    
    542.2
    
    
    
    905.7
    
    
    
    1,152.2
    
    
    
    (246.5
    )
    
    
    (21.3
    )Other revenues
    
    
    8.0
    
    
    
    2.9
    
    
    
    3.8
    (1)
    
    
    14.7
    
    
    
    15.4
    
    
    
    (0.7
    )
    
    
    4.5Total
    
    $
    214.0
    
    
    $
    160.4
    
    
    $
    546.0
    
    
    $
    920.4
    
    
    $
    1,167.6
    
    
    $
    (247.2
    )
    
    
    (21.2
    )%
 
 (1)
    
    Represents gross advertising revenues, sales claims and allowances and other
revenues for advertising sales fulfilled prior to the Fresh Start Reporting Date, which would have
been recognized during the six months ended June 30, 2010 absent our adoption of fresh start
accounting required under GAAP.  67




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##### Table of Contents



Expenses
  Successor
    
    
    Predecessor
    
    
    
    
    
    
    Combined
    
    
    PredecessorCompany
    
    
    Company
    
    
    
    
    
    
    Adjusted
    
    
    CompanyFive Months Ended
    
    
    One Month Ended
    
    
    Fresh Start
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30,
    
    
    January 31,
    
    
    and Other
    
    
    June 30,
    
    
    June 30,(amounts in millions)
    
    2010
    
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeProduction and
distribution expenses
    
    $
    80.5
    
    
    $
    27.0
    
    
    $
    57.5
    (1)
    
    $
    165.0
    
    
    $
    194.6
    
    
    $
    (29.6
    )
    
    
    (15.2
    )%Selling and support
expenses
    
    
    151.9
    
    
    
    40.9
    
    
    
    56.6
    (1)
    
    
    249.4
    
    
    
    312.7
    
    
    
    (63.3
    )
    
    
    (20.2
    )General and
administrative expenses
    
    
    61.9
    
    
    
    8.2
    
    
    
    
    
    
    
    70.1
    
    
    
    67.6
    
    
    
    2.5
    
    
    
    3.7Depreciation and
amortization
    
    
    99.0
    
    
    
    20.2
    
    
    
    
    (2)
    
    
    119.2
    
    
    
    285.2
    
    
    
    (166.0
    )
    
    
    (58.2
    )Impairment charges
    
    
    769.7
    
    
    
    
    
    
    
    (769.7
    )(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    1,163.0
    
    
    $
    96.3
    
    
    $
    (655.6
    )
    
    $
    603.7
    
    
    $
    860.1
    
    
    $
    (256.4
    )
    
    
    (29.8
    )%
 
 (1)
    
    Represents (a) certain deferred expenses for advertising sales fulfilled
prior to the Fresh Start Reporting Date, which would have been recognized during the five months
ended June 30, 2010 absent our adoption of fresh start accounting required under GAAP, and (b) the
exclusion of cost-uplift recorded under fresh start accounting.(2)
    
    Depreciation and amortization expense has not been adjusted for the increase in
fair value of our intangible assets and fixed assets and computer software as a result of our
adoption of fresh start accounting, the reduced carrying values of intangible assets resulting from
impairment charges recorded by the Predecessor Company during the fourth quarter of 2009 and the
associated reduction in remaining useful lives effective January 1, 2010.(3)
    
    Goodwill and intangible asset impairment charges have been excluded for the
combined adjusted six months ended June 30, 2010. 68




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##### Table of Contents



Production and Distribution Expenses
  CombinedAdjusted Six(amounts in millions)
    
    Months Ended June30, 2010Lower print, paper and distribution expenses
    
    $
    (18.7
    )Lower internet production and distribution expenses
    
    
    (9.3
    )All other, net
    
    
    (1.6
    )Total decrease in
combined adjusted
production and
distribution expenses for
the six months ended June
30, 2010
    
    $
    (29.6
    )
   Selling and Support Expenses
  CombinedAdjusted Six Months(amounts in millions)
    
    Ended June 30, 2010Lower bad debt expense
    
    $
    (47.7
    )Lower commissions and salesperson expenses
    
    
    (13.0
    )Lower occupancy expenses
    
    
    (2.9
    )All other, net
    
    
    0.3Total decrease in
combined adjusted
selling and support
expenses for the six
months ended June 30,
2010
    
    $
    (63.3
    )
    69




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##### Table of Contents



General and Administrative Expenses
  Combined AdjustedSix Months Ended June(amounts in millions)
    
    30, 2010Change in net curtailment gains
    
    $
    9.7One-time expenses associated with retirement of Chief Executive Officer
    
    
    9.5Lower restructuring expenses
    
    
    (11.1
    )All other, net
    
    
    (5.6
    )Total increase in combined adjusted
G&A expenses for the six months
ended June 30, 2010
    
    $
    2.5
     Depreciation and Amortization
   70




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##### Table of Contents



Operating Income (Loss)
  Successor
    
    
    Predecessor
    
    
    
    
    
    
    Combined
    
    
    PredecessorCompany
    
    
    Company
    
    
    
    
    
    
    Adjusted
    
    
    CompanyFive Months Ended
    
    
    One Month Ended
    
    
    
    
    
    
    Six Months Ended
    
    
    Six Months EndedJune 30,
    
    
    January 31,
    
    
    Fresh Start
    
    
    June 30,
    
    
    June 30,(amounts in millions)
    
    2010
    
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeTotal
    
    $
    (948.9
    )
    
    $
    64.1
    
    
    $
    1,201.6
    (1)
    
    $
    316.8
    
    
    $
    307.5
    
    
    $
    9.3
    
    
    
    3.0
    %
 
 (1)
    
    Represents the net effect of (a) eliminating gross advertising revenues,
sales claims and allowances, other revenues and certain deferred expenses for advertising sales
fulfilled prior to the Fresh Start Reporting Date, which would have been recognized during the five
months ended June 30, 2010 absent our adoption of fresh start accounting required under GAAP, (b)
the exclusion of cost-uplift recorded under fresh start accounting (c) excludes the goodwill and
intangible asset impairment charges during the five months ended June 30, 2010.  71




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LIQUIDITY AND CAPITAL RESOURCES
  Successor CompanyFair Market Value
    
    
    Carrying ValueJune 30, 2010
    
    
    June 30, 2010RHDI Amended and Restated Credit Facility
    
    $
    986,067
    
    
    $
    1,091,403Dex Media East Amended and Restated Credit Facility
    
    
    717,932
    
    
    
    810,040Dex Media West Amended and Restated Credit Facility
    
    
    708,402
    
    
    
    773,561Dex One 12%/14% Senior Subordinated Notes due 2017
    
    
    279,000
    
    
    
    300,000Total Dex One consolidated
    
    
    2,691,401
    
    
    
    2,975,004Less current portion
    
    
    165,185
    
    
    
    165,524Long-term debt
    
    $
    2,526,216
    
    
    $
    2,809,480
 RHDI Amended and Restated Credit Facility
  Dex Media East Amended and Restated Credit Facility
  Dex Media West Amended and Restated Credit Facility
  Dex One Senior Subordinated Notes
 st th
 72




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Impact of Fresh Start Accounting
  Outstanding Debt atUnamortized Fair
    
    June 30, 2010 ExcludingCarrying Value at
    
    Value Adjustments
    
    the Impact of UnamortizedJune 30, 2010
    
    at June 30, 2010
    
    Fair Value AdjustmentsRHDI Amended and Restated Credit Facility
    
    $
    1,091,403
    
    
    $
    16,536
    
    
    $
    1,107,939Dex Media East Amended and Restated
Credit Facility
    
    
    810,040
    
    
    
    76,296
    
    
    
    886,336Dex Media West Amended and Restated
Credit Facility
    
    
    773,561
    
    
    
    13,552
    
    
    
    787,113Dex One 12%/14% Senior Subordinated
Notes due 2017
    
    
    300,000
    
    
    
    
    
    
    
    300,000Total
    
    $
    2,975,004
    
    
    $
    106,384
    
    
    $
    3,081,388
  Issuance of New Common Stock
  Registration Rights Agreement
  73




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Liquidity and Cash Flows
     Successor Company
     
    
    $303.4 million in principal payments on our amended and restated credit
facilities.
    
    $2.8 million in other financing costs.
    
    $3.6 million in the increased balance of checks not yet presented for
payment.
 Predecessor Company
    74




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
    
    $511.3 million in principal payments on term loans under the Predecessor Companys
credit facilities in accordance with the Plan and in conjunction with our emergence from
Chapter 11.
    
    $22.1 million in costs associated with the issuance of the Dex One Senior
Subordinated Notes and other financing related costs.
    
    $3.1 million in the decreased balance of checks not yet presented for payment.
    
    
    $229.4 million in principal payments on term loans under the Predecessor
Companys credit facilities.
    
    $361.0 million in borrowings under the Predecessor Companys revolvers. The
Predecessor Company made the borrowings under the various revolving credit facilities to
preserve its financial flexibility in light of the continuing uncertainty in the global
credit markets.
    
    $18.7 million in principal payments on the Predecessor Companys revolvers.
    
    $3.9 million in the decreased balance of checks not yet presented for
payment.
 75




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##### Table of Contents



Off-Balance Sheet Arrangements
  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)
    
    $
    3,081.4
    
    
    $
    196.0
    
    
    $
    625.9
    
    
    $
    1,959.5
    
    
    $
    300.0Interest on long-term
debt (2)
    
    
    1,003.2
    
    
    
    218.5
    
    
    
    400.0
    
    
    
    318.9
    
    
    
    65.8Total long-term debt and
related interest
contractual
obligations
    
    $
    4,084.6
    
    
    $
    414.5
    
    
    $
    1,025.9
    
    
    $
    2,278.4
    
    
    $
    365.8
 
 (1)
    
    Included in long-term debt are principal amounts owed under the amended and
restated credit facilities and the Dex One Senior Subordinated Notes, including the current portion
of long-term debt and an estimate of additional debt repayments resulting from cash flow sweep
requirements under our amended and restated credit facilities, as of June 30, 2010.(2)
    
    Interest on debt represents cash interest payment obligations assuming all
indebtedness as of June 30, 2010 will be paid in accordance with its contractual maturity and
assumes interest rates on variable interest debt as of June 30, 2010 will remain unchanged in
future periods.  76




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk and Risk Management
   Interest Rate Swaps  Dex Media East
 Effective Dates
    
    Notional Amount
    
    
    Pay Rates
    
    
    Maturity Dates(amounts in millions)February 26, 2010
    
    $
    300
    (2)
    
    
    1.20% - 1.796
    %
    
    February 29, 2012  February 28, 2013March 5, 2010
    
    
    100
    (1)
    
    
    1.668
    %
    
    January 31, 2013March 10, 2010
    
    
    100
    (1)
    
    
    1.75
    %
    
    January 31, 2013Total
    
    $
    500
   Interest Rate Caps  RHDI
 Effective Dates
    
    Notional Amount
    
    
    Cap Rates
    
    
    Maturity Dates(amounts in millions)February 26, 2010
    
    $
    200
    (3)
    
    
    3.0% - 3.5
    %
    
    February 28, 2012  February 28, 2013March 8, 2010
    
    
    100
    (4)
    
    
    3.5
    %
    
    January 31, 2013March 10, 2010
    
    
    100
    (4)
    
    
    3.0
    %
    
    April 30, 2012Total
    
    $
    400
 
 (1)
    
    Consists of one swap(2)
    
    Consists of three swaps(3)
    
    Consists of two caps(4)
    
    Consists of one cap  77




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##### Table of Contents



Market Risk Sensitive Instruments
   78




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##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  79




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
      
 Item 1A. Risk Factors
  80




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##### Table of Contents



Exhibits
 Exhibit No.
    
    Document31.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended June 30, 2010 by W. Kirk Liddell, Interim Principal
Executive Officer of Dex One Corporation under Section 302 of
the Sarbanes-Oxley Act31.2*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended June 30, 2010 by Steven M. Blondy, Executive Vice
President and Chief Financial Officer of Dex One Corporation
under Section 302 of the Sarbanes-Oxley Act32.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended June 30, 2010, under Section 906 of the Sarbanes-Oxley
Act by W. Kirk Liddell, Interim Principal Executive Officer,
and Steven M. Blondy, Executive Vice President and Chief
Financial Officer, for Dex One Corporation
 
 *
    
    Filed herewith. 81




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##### Table of Contents



SIGNATURES
  DEX ONE CORPORATIONDate: August 11, 2010
    By:
    /s/ Steven M. BlondySteven M. BlondyExecutive Vice President and Chief Financial Officer
(Principal Financial Officer)/s/ Sylvester J. JohnsonSylvester J. JohnsonVice President, Corporate Controller and Chief
Accounting Officer
(Principal Accounting Officer) 82




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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Document31.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended June 30, 2010 by W. Kirk Liddell, Interim Principal
Executive Officer of Dex One Corporation under Section 302 of
the Sarbanes-Oxley Act31.2*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended June 30, 2010 by Steven M. Blondy, Executive Vice
President and Chief Financial Officer of Dex One Corporation
under Section 302 of the Sarbanes-Oxley Act32.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended June 30, 2010, under Section 906 of the Sarbanes-Oxley
Act by W. Kirk Liddell, Interim Principal Executive Officer,
and Steven M. Blondy, Executive Vice President and Chief
Financial Officer, for Dex One Corporation
 
 *
    
    Filed herewith. 83