##### 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 March 31, 2011
 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 þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 þ o
  Title of class
    
    Shares Outstanding at April 15, 2011Common Stock, par value $.001 per share
    
    50,058,556




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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 March 31, 2011 and December 31,
2010
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Income
for the three months ended March 31, 2011, the two months ended March 31,
2010 (Successor Company) and the one month ended January 31, 2010
(Predecessor Company)
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2011, the two months ended March 31, 2010 (Successor
Company) and the one month ended January 31, 2010 (Predecessor Company)
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 1A Risk Factors
    
    
    36Item 6. Exhibits
    
    
    36SIGNATURES
    
    
    37EX-10.1EX-10.2EX-10.3EX-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)
 (in thousands, except share data)
    
    March 31, 2011
    
    
    
    December 31, 2010AssetsCurrent AssetsCash and cash equivalents
    
    $
    136,642
    
    
    
    $
    127,852Accounts receivable:Billed
    
    
    194,716
    
    
    
    
    186,477Unbilled
    
    
    546,635
    
    
    
    
    567,839Allowance for doubtful accounts
    
    
    (79,065
    )
    
    
    
    (75,891
    )Net accounts receivable
    
    
    662,286
    
    
    
    
    678,425Deferred directory costs
    
    
    136,477
    
    
    
    
    147,025Short-term deferred income taxes, net
    
    
    58,630
    
    
    
    
    84,149Prepaid expenses and other current assets
    
    
    67,894
    
    
    
    
    82,656Total current assets
    
    
    1,061,929
    
    
    
    
    1,120,107Fixed assets and computer software, net
    
    
    177,303
    
    
    
    
    188,749Other non-current assets
    
    
    10,785
    
    
    
    
    9,762Intangible assets, net
    
    
    2,330,958
    
    
    
    
    2,369,156Goodwill, net
    
    
    801,074
    
    
    
    
    801,074Total Assets
    
    $
    4,382,049
    
    
    
    $
    4,488,848Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    143,834
    
    
    
    $
    154,540Accrued interest
    
    
    18,499
    
    
    
    
    30,905Deferred directory revenues
    
    
    701,117
    
    
    
    
    722,566Current portion of long-term debt
    
    
    224,555
    
    
    
    
    249,301Total current liabilities
    
    
    1,088,005
    
    
    
    
    1,157,312Long-term debt
    
    
    2,425,110
    
    
    
    
    2,487,920Deferred income taxes, net
    
    
    195,335
    
    
    
    
    205,812Other non-current liabilities
    
    
    91,425
    
    
    
    
    111,888Total liabilities
    
    
    3,799,875
    
    
    
    
    3,962,932Commitments and contingenciesShareholders EquityCommon stock, par value $.001 per share, authorized  300,000,000 shares;
issued and outstanding  50,058,556 shares at March 31,
2011 and 50,031,441 shares
at December 31, 2010
    
    
    50
    
    
    
    
    50Additional paid-in capital
    
    
    1,456,071
    
    
    
    
    1,455,223Accumulated deficit
    
    
    (868,182
    )
    
    
    
    (923,592
    )Accumulated other comprehensive loss
    
    
    (5,765
    )
    
    
    
    (5,765
    )Total shareholders equity
    
    
    582,174
    
    
    
    
    525,916Total Liabilities and Shareholders Equity
    
    $
    4,382,049
    
    
    
    $
    4,488,848
  3




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Dex One Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)
 Successor Company
    
    
    
    Predecessor CompanyThree Months Ended
    
    
    Two Months Ended
    
    
    
    One Month Ended(in thousands, except per share data)
    
    March 31, 2011
    
    
    March 31, 2010
    
    
    
    January 31, 2010Net revenues
    
    $
    391,235
    
    
    $
    53,145
    
    
    
    $
    160,372Expenses:Production and distribution expenses
(exclusive of depreciation and
amortization shown separately below)
    
    
    75,059
    
    
    
    27,564
    
    
    
    
    26,949Selling and support expenses
    
    
    104,059
    
    
    
    59,335
    
    
    
    
    40,866General and administrative expenses
    
    
    38,097
    
    
    
    22,191
    
    
    
    
    8,322Depreciation and amortization
    
    
    54,082
    
    
    
    39,425
    
    
    
    
    20,161Total expenses
    
    
    271,297
    
    
    
    148,515
    
    
    
    
    96,298Operating income (loss)
    
    
    119,938
    
    
    
    (95,370
    )
    
    
    
    64,074Gain on sale of assets
    
    
    13,437
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    (57,720
    )
    
    
    (48,934
    )
    
    
    
    (19,656
    )Income (loss) before reorganization items,
net and income taxes
    
    
    75,655
    
    
    
    (144,304
    )
    
    
    
    44,418Reorganization items, net
    
    
    
    
    
    
    
    
    
    
    
    7,793,132Income (loss) before income taxes
    
    
    75,655
    
    
    
    (144,304
    )
    
    
    
    7,837,550(Provision) benefit for income taxes
    
    
    (20,245
    )
    
    
    401,522
    
    
    
    
    (917,541
    )Net income
    
    $
    55,410
    
    
    $
    257,218
    
    
    
    $
    6,920,009Earnings per share:Basic
    
    $
    1.11
    
    
    $
    5.14
    
    
    
    $
    100.3Diluted
    
    $
    1.11
    
    
    $
    5.14
    
    
    
    $
    100.2Shares used in computing earnings per share:Basic
    
    
    50,040
    
    
    
    50,008
    
    
    
    
    69,013Diluted
    
    
    50,040
    
    
    
    50,008
    
    
    
    
    69,052Comprehensive IncomeNet income
    
    $
    55,410
    
    
    $
    257,218
    
    
    
    $
    6,920,009Amortization of gain on interest rate swaps,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    1,083Benefit plans adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    (4,535
    )Comprehensive income
    
    $
    55,410
    
    
    $
    257,218
    
    
    
    $
    6,916,557
  4




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Dex One Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows

(Unaudited)
 Successor Company
    
    
    
    Predecessor CompanyThree Months
    
    
    Two Months
    
    
    
    One MonthEnded
    
    
    Ended
    
    
    
    EndedMarch 31,
    
    
    March 31,
    
    
    
    January 31,(in thousands)
    
    2011
    
    
    2010
    
    
    
    2010Cash Flows Provided By Operating Activities
    
    $
    109,533
    
    
    $
    105,283
    
    
    
    $
    71,741Cash Flows from Investing ActivitiesAdditions to fixed assets and computer software
    
    
    (4,860
    )
    
    
    (6,386
    )
    
    
    
    (1,766
    )Proceeds from sale of assets
    
    
    15,391
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    10,531
    
    
    
    (6,386
    )
    
    
    
    (1,766
    )Cash Flows from Financing ActivitiesCredit facilities repayments
    
    
    (94,846
    )
    
    
    (153,179
    )
    
    
    
    (511,272
    )Debt issuance costs and other financing items, net
    
    
    315
    
    
    
    (949
    )
    
    
    
    (22,096
    )(Decrease) increase in checks not yet presented for payment
    
    
    (16,743
    )
    
    
    3,303
    
    
    
    
    (3,092
    )Net cash used in financing activities
    
    
    (111,274
    )
    
    
    (150,825
    )
    
    
    
    (536,460
    )Increase (decrease) in cash and cash equivalents
    
    
    8,790
    
    
    
    (51,928
    )
    
    
    
    (466,485
    )Cash and cash equivalents, beginning of period
    
    
    127,852
    
    
    
    199,455
    
    
    
    
    665,940Cash and cash equivalents, end of period
    
    $
    136,642
    
    
    $
    147,527
    
    
    
    $
    199,455Supplemental Information:Cash paid (received):Interest, net
    
    $
    63,716
    
    
    $
    19,208
    
    
    
    $
    15,460Income taxes, net
    
    $
    (626
    )
    
    $
    2,002
    
    
    
    $
    
  5




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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
  ® ®
 6




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2. Summary of Significant Accounting Policies
 Revenue Recognition
   
    
    Persuasive evidence of an arrangement exists: This criterion is satisfied with the
execution of a signed contract between the Company and our client. This contract includes
specifications that must be adhered to over the term of the agreement by both parties.
    
    Delivery has occurred: This criterion is satisfied for our print marketing solutions
when physical distribution of a given print directory is substantially complete. This
criterion is satisfied for our Internet-based marketing solutions upon fulfillment.
    
    The fee is fixed or determinable: This criterion is satisfied with the execution of a
signed contract between the Company and our client including the final negotiated price.
    
    Collectability is reasonably assured: This criterion is satisfied by performing credit
evaluations of our clients before the signed contract is executed or by requiring our
clients to prepay in full for our marketing solutions. Reasonable assurance of collection
is also evidenced by a review of the clients payment history.
  Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,
a consensus of the FASB Emerging Issues Task Force Revenue Recognition  Multiple Element Arrangements
 
    
    Provide updated guidance on determining whether multiple deliverables exist, how the
deliverables in an arrangement should be separated, and how consideration should be
allocated;
    
    Require an entity to allocate revenue in a multiple element arrangement using a selling
price hierarchy of (1) vendor specific objective evidence of selling price (VSOE), if
available; (2) third party evidence of selling price (TPE), if VSOE is not available; or
(3) estimated selling price (ESP), if a vendor does not have either VSOE or TPE; and
    
    Eliminate the use of the residual method for revenue recognition and require an entity
to allocate revenue using the relative selling price method.
  7




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
    
    The delivered item(s) has value to the customer on a stand-alone basis; and
    
    If the arrangement includes a general right of return relative to the delivered item(s),
delivery or performance of the undelivered item(s) is considered probable and substantially
in the control of the Company.
    8




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Identifiable Intangible Assets and Goodwill
  
    
    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 information.
   Allocation of Goodwill atReporting Unit
    
    March 31, 2011RHDI
    
    $
    250,518DME Inc.
    
    
    236,159DMW Inc.
    
    
    314,397Total
    
    $
    801,074
  Balance at February 1, 2010
    
    $
    2,097,124Goodwill impairment charges during 2010
    
    
    (1,137,623
    )Reduction in goodwill during 2010
    
    
    (158,427
    )Balance at March 31, 2011
    
    $
    801,074
   Technology,Directory
    
    
    Local
    
    
    National
    
    
    Trade
    
    
    AdvertisingServices
    
    
    Customer
    
    
    Customer
    
    
    Names and
    
    
    CommitmentsAgreements
    
    
    Relationships
    
    
    Relationships
    
    
    Trademarks
    
    
    & Other
    
    
    TotalNet intangible
assets carrying
value
    
    $
    1,330,000
    
    
    $
    560,000
    
    
    $
    175,000
    
    
    $
    380,000
    
    
    $
    85,500
    
    
    $
    2,530,500Accumulated
amortization
    
    
    (98,013
    )
    
    
    (60,511
    )
    
    
    (8,118
    )
    
    
    (24,437
    )
    
    
    (8,463
    )
    
    
    (199,542
    )Net intangible
assets at March 31,
2011
    
    $
    1,231,987
    
    
    $
    499,489
    
    
    $
    166,882
    
    
    $
    355,563
    
    
    $
    77,037
    
    
    $
    2,330,958
 9




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Weighted Average
    
    AmortizationIntangible Asset
    
    Useful Lives
    
    MethodologyDirectory services agreements
    
    26 years
    
    Income forecast method (1)Local customer relationships
    
    14 years
    
    Income forecast method (1)National customer relationships
    
    25 years
    
    Income forecast method (1)Trade names and trademarks
    
    14 years
    
    Straight-line methodTechnology, advertising commitments and other
    
    8 years
    
    Income forecast method (1)
 
 (1)
    
    These identifiable intangible assets are being 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.   Interest Expense
 Successor Company
   Predecessor Company
  10




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Advertising Expense
  Concentration of Credit Risk
     Earnings Per Share
  Successor Company
    
    
    
    Predecessor CompanyThree Months
    
    
    Two Months
    
    
    
    One MonthEnded
    
    
    Ended
    
    
    
    EndedMarch 31, 2011
    
    
    March 31, 2010
    
    
    
    January 31, 2010Basic EPSNet income
    
    $
    55,410
    
    
    $
    257,218
    
    
    
    $
    6,920,009Weighted average common shares outstanding
    
    
    50,040
    
    
    
    50,008
    
    
    
    
    69,013Basic EPS
    
    $
    1.11
    
    
    $
    5.14
    
    
    
    $
    100.3Diluted EPSNet income
    
    $
    55,410
    
    
    $
    257,218
    
    
    
    $
    6,920,009Weighted average common shares outstanding
    
    
    50,040
    
    
    
    50,008
    
    
    
    
    69,013Dilutive effect of stock awards
    
    
    
    
    
    
    
    
    
    
    
    39Weighted average diluted shares outstanding
    
    
    50,040
    
    
    
    50,008
    
    
    
    
    69,052Diluted EPS
    
    $
    1.11
    
    
    $
    5.14
    
    
    
    $
    100.2
 11




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Fair Value of Financial Instruments
  Fair Value Measurements and Disclosures
 Fair Value MeasurementsUsing Significant Other Observable Inputs (Level 2)Derivatives:
    
    March 31, 2011
    
    
    December 31, 2010Interest Rate Swap 
Liabilities
    
    $
    (5,513
    )
    
    
    $
    (6,365
    )Interest Rate Cap  Assets
    
    $
    163
    
    
    
    $
    308
     12




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Estimates
  New Accounting Pronouncements
  3. Reorganization Items, Net
 Predecessor Company
  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
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4. Restructuring Charges
  2010 ActionsBalance at January 1, 2011
    
    $
    17,858Additions to reserve charged to earnings
    
    
    6,012Payments
    
    
    (8,457
    )Balance at March 31, 2011
    
    $
    15,413
  5. Long-Term Debt
  Fair Market Value
    
    
    Carrying ValueMarch 31, 2011
    
    
    March 31, 2011RHDI Amended and Restated Credit Facility
    
    $
    767,204
    
    
    $
    986,073Dex Media East Amended and Restated Credit Facility
    
    
    558,879
    
    
    
    717,081Dex Media West Amended and Restated Credit Facility
    
    
    571,218
    
    
    
    646,511Dex One 12%/14% Senior Subordinated Notes due 2017
    
    
    190,500
    
    
    
    300,000Total Dex One consolidated
    
    
    2,087,801
    
    
    
    2,649,665Less current portion
    
    
    181,961
    
    
    
    224,555Long-term debt
    
    $
    1,905,840
    
    
    $
    2,425,110
 RHDI Amended and Restated Credit Facility
  Dex Media East Amended and Restated Credit Facility
  14




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Dex Media West Amended and Restated Credit Facility
  Impact of Fresh Start Accounting
  Outstanding Debt atUnamortized Fair
    
    
    March 31, 2011 ExcludingCarrying Value at
    
    
    Value Adjustments
    
    
    the Impact of UnamortizedMarch 31, 2011
    
    
    at March 31, 2011
    
    
    Fair Value AdjustmentsRHDI Amended and Restated Credit Facility
    
    $
    986,073
    
    
    $
    13,514
    
    
    $
    999,587Dex Media East Amended and Restated
Credit Facility
    
    
    717,081
    
    
    
    59,320
    
    
    
    776,401Dex Media West Amended and Restated
Credit Facility
    
    
    646,511
    
    
    
    10,844
    
    
    
    657,355Dex One 12%/14% Senior Subordinated
Notes due 2017
    
    
    300,000
    
    
    
    
    
    
    
    300,000Total
    
    $
    2,649,665
    
    
    $
    83,678
    
    
    $
    2,733,343
 6. Derivative Financial Instruments
     15




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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)
    
    
    1.688
    %
    
    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 29, 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  16




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(Gain) Loss Recognized inInterest ExpenseFrom the Change in Fair Value ofInterest Rate SwapsThree Months
    
    
    Two MonthsFair Value Measurements at
    
    
    Ended
    
    
    EndedMarch 31, 2011
    
    
    December 31, 2010
    
    
    March 31, 2011
    
    
    March 31, 2010Interest Rate Swaps:Accounts payable and accrued
liabilities
    
    $
    (4,343
    )
    
    $
    (4,376
    )
    
    $
    (33
    )
    
    $
    (2,511
    )Other non-current liabilities
    
    
    (1,170
    )
    
    
    (1,989
    )
    
    
    (819
    )
    
    
    3,134Total
    
    $
    (5,513
    )
    
    $
    (6,365
    )
    
    $
    (852
    )
    
    $
    623
 Loss Recognized inInterest ExpenseFrom the Change in Fair Value ofInterest Rate CapsThree Months
    
    
    Two MonthsFair Value Measurements at
    
    
    Ended
    
    
    EndedMarch 31, 2011
    
    
    December 31, 2010
    
    
    March 31, 2011
    
    
    March 31, 2010Interest Rate Caps:Prepaid expenses and other current assets
    
    $
    2
    
    
    $
    5
    
    
    $
    3
    
    
    $
    43Other non-current assets
    
    
    161
    
    
    
    303
    
    
    
    142
    
    
    
    429Total
    
    $
    163
    
    
    $
    308
    
    
    $
    145
    
    
    $
    472
  Predecessor Company
  7. Income Taxes
 Successor Company
  Income Taxes
  17




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##### Table of Contents



Predecessor Company
  8. Benefit Plans
  Pension BenefitsSuccessor Company
    
    
    
    Predecessor CompanyThree Months Ended
    
    
    Two Months Ended
    
    
    
    One Month EndedMarch 31, 2011
    
    
    March 31, 2010
    
    
    
    January 31, 2010Interest cost
    
    $
    3,190
    
    
    $
    2,235
    
    
    
    $
    1,124Expected return on plan assets
    
    
    (3,523
    )
    
    
    (2,424
    )
    
    
    
    (1,385
    )Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    81Amortization of net loss
    
    
    
    
    
    
    
    
    
    
    
    122Net periodic benefit (credit)
    
    $
    (333
    )
    
    $
    (189
    )
    
    
    $
    (58
    )Postretirement BenefitsSuccessor Company
    
    
    
    Predecessor CompanyThree Months Ended
    
    
    Two Months Ended
    
    
    
    One Month EndedMarch 31, 2011
    
    
    March 31, 2010
    
    
    
    January 31, 2010Interest cost
    
    $
    6
    
    
    $
    25
    
    
    
    $
    10Amortization of net (gain)
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Net periodic benefit cost (credit)
    
    $
    6
    
    
    $
    25
    
    
    
    $
    (11
    )
   9. Business Segments
  18




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##### Table of Contents



10. Legal Proceedings
  11. Other Information
  19




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##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Forward-Looking Information
    Recent Trends and Developments Related to Our Business
 Results of Operations
  20




---



##### Table of Contents



Our Plan
 ® ®
   21




---



##### Table of Contents



Liquidity and Going Concern Analysis
  Impairment Analysis
   Fresh Start Accounting
  Climate Change
  Healthcare Reform Legislation
  Segment Reporting
  22




---



##### Table of Contents



New Accounting Pronouncements
  RESULTS OF OPERATIONS
 Factors Affecting Comparability
 Fresh Start Accounting Adjustments
  Business Combinations
   23




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##### Table of Contents



GAAP
Results for the Three Months Ended March 31, 2011 compared to Non-GAAP Combined Adjusted
Results for the Three Months Ended March 31, 2010  Net Revenues Through Operating Income
(Loss)
 Net Revenues
  Non-GAAPSuccessor
    
    
    
    Successor
    
    
    Predecessor
    
    
    
    
    
    
    CombinedCompany
    
    
    
    Company
    
    
    Company
    
    
    
    
    
    
    AdjustedThree Months Ended
    
    
    
    Two Months Ended
    
    
    One Month Ended
    
    
    
    
    
    
    Three Months EndedMarch 31,
    
    
    
    March 31,
    
    
    January 31,
    
    
    Fresh Start
    
    
    March 31,(amounts in millions)
    
    2011
    
    
    
    2010
    
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    $ Change
    
    
    % ChangeGross advertising revenues
    
    $
    390.6
    
    
    
    $
    53.3
    
    
    $
    161.4
    
    
    $
    257.9
    (1)
    
    $
    472.6
    
    
    $
    (82.0
    )
    
    
    (17.4
    )%Sales claims and allowances
    
    
    (4.7
    )
    
    
    
    (2.5
    )
    
    
    (3.5
    )
    
    
    (4.6
    )(1)
    
    
    (10.6
    )
    
    
    5.9
    
    
    
    55.7Net advertising revenues
    
    
    385.9
    
    
    
    
    50.8
    
    
    
    157.9
    
    
    
    253.3
    
    
    
    462.0
    
    
    
    (76.1
    )
    
    
    (16.5
    )Other revenues
    
    
    5.3
    
    
    
    
    2.3
    
    
    
    2.5
    
    
    
    1.8
    (1)
    
    
    6.6
    
    
    
    (1.3
    )
    
    
    (19.7
    )Total
    
    $
    391.2
    
    
    
    $
    53.1
    
    
    $
    160.4
    
    
    $
    255.1
    
    
    $
    468.6
    
    
    $
    (77.4
    )
    
    
    (16.5
    )%
 
 (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 two months ended March 31, 2010 absent our adoption of fresh start
accounting required under GAAP.  24




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##### Table of Contents



Expenses
  Non-GAAPSuccessor
    
    
    
    Successor
    
    
    Predecessor
    
    
    
    
    
    
    CombinedCompany
    
    
    
    Company
    
    
    Company
    
    
    
    
    
    
    AdjustedThree Months Ended
    
    
    
    Two Months Ended
    
    
    One Month Ended
    
    
    
    
    
    
    Three Months EndedMarch 31,
    
    
    
    March 31,
    
    
    January 31,
    
    
    Fresh Start
    
    
    March 31,(amounts in millions)
    
    2011
    
    
    
    2010
    
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    $ Change
    
    
    % ChangeProduction and distribution expenses
    
    $
    75.0
    
    
    
    $
    27.6
    
    
    $
    26.9
    
    
    $
    27.1
    (1)
    
    $
    81.6
    
    
    $
    (6.6
    )
    
    
    (8.1
    )%Selling and support expenses
    
    
    104.1
    
    
    
    
    59.3
    
    
    
    40.9
    
    
    
    27.9
    (1)
    
    
    128.1
    
    
    
    (24.0
    )
    
    
    (18.7
    )General and administrative expenses
    
    
    38.1
    
    
    
    
    22.2
    
    
    
    8.3
    
    
    
    
    
    
    
    30.5
    
    
    
    7.6
    
    
    
    24.9Depreciation and amortization expenses
    
    
    54.1
    
    
    
    
    39.4
    
    
    
    20.2
    
    
    
    
    
    
    
    59.6
    
    
    
    (5.5
    )
    
    
    (9.2
    )Total
    
    $
    271.3
    
    
    
    $
    148.5
    
    
    $
    96.3
    
    
    $
    55.0
    
    
    $
    299.8
    
    
    $
    (28.5
    )
    
    
    (9.5
    )%
 
 (1)
    
    Represents (a) certain deferred expenses for advertising sales
fulfilled prior to the Fresh Start Reporting Date, which would have been recognized during the two
months ended March 31, 2010 absent our adoption of fresh start accounting required under GAAP and
(b) the exclusion of cost-uplift recorded under fresh start accounting.  25




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##### Table of Contents



Production and Distribution Expenses
  ThreeMonths Ended(amounts in millions)
    
    March 31, 2011Lower Internet production and distribution expenses
    
    $
    (3.6
    )Lower print, paper and distribution expenses
    
    
    (2.8
    )All other, net
    
    
    (0.2
    )Total decrease in GAAP
production and distribution
expenses for the three
months ended March 31, 2011
    
    $
    (6.6
    )
   Selling and Support Expenses
  ThreeMonths Ended(amounts in millions)
    
    March 31, 2011Lower bad debt expense
    
    $
    (12.9
    )Lower commissions and salesperson expenses
    
    
    (7.3
    )Lower advertising expenses
    
    
    (2.1
    )All other, net
    
    
    (1.7
    )Total decrease in GAAP selling
and support expenses for the
three months ended March 31,
2011
    
    $
    (24.0
    )
   26




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##### Table of Contents



General and Administrative Expenses
  ThreeMonths Ended(amounts in millions)
    
    March 31, 2011Higher restructuring expenses
    
    $
    6.0All other, net
    
    
    1.6Total increase in GAAP G&A expenses for the three months ended March 31, 2011
    
    $
    7.6
  Depreciation and Amortization Expenses
   Operating Income (Loss)
  Non-GAAPSuccessor
    
    
    
    Successor
    
    
    Predecessor
    
    
    
    
    
    
    CombinedCompany
    
    
    
    Company
    
    
    Company
    
    
    
    
    
    
    AdjustedThree Months Ended
    
    
    
    Two Months Ended
    
    
    One Month Ended
    
    
    
    
    
    
    Three Months EndedMarch 31,
    
    
    
    March 31,
    
    
    January 31,
    
    
    Fresh Start
    
    
    March 31,(amounts in millions)
    
    2011
    
    
    
    2010
    
    
    2010
    
    
    Adjustments
    
    
    2010
    
    
    $ Change
    
    
    % ChangeTotal
    
    $
    119.9
    
    
    
    $
    (95.4
    )
    
    $
    64.1
    
    
    $
    200.1
    (1)
    
    $
    168.8
    
    
    $
    (48.9
    )
    
    
    (29.0
    )%
 
 (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 two months ended March 31, 2010 absent our adoption of fresh start accounting required under
GAAP and (b) the exclusion of cost-uplift recorded under fresh start accounting. 27




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##### Table of Contents



GAAP
Results for the Three Months Ended March 31, 2011, Two Months Ended March 31, 2010
(Successor Company) and One Month Ended January 31, 2010 (Predecessor Company)
 Gain on Sale of Assets
  Interest Expense, Net
 Successor Company
    Predecessor Company
  Reorganization Items, Net
 Predecessor Company
  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
    
    
    4,524,155
 28




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##### Table of Contents



Predecessor CompanyOne Month Ended(amounts in thousands)
    
    January 31, 2010Fresh 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
 Income Taxes
 Successor Company
  Income Taxes
   Predecessor Company
  29




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##### Table of Contents



Net Income and Earnings Per Share
 Successor Company
   Predecessor Company
  Non-GAAP Statistical Measures
    30




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  Fair Market Value
    
    
    Carrying ValueMarch 31, 2011
    
    
    March 31, 2011RHDI Amended and Restated Credit Facility
    
    $
    767,204
    
    
    $
    986,073Dex Media East Amended and Restated Credit Facility
    
    
    558,879
    
    
    
    717,081Dex Media West Amended and Restated Credit Facility
    
    
    571,218
    
    
    
    646,511Dex One 12%/14% Senior Subordinated Notes due 2017
    
    
    190,500
    
    
    
    300,000Total Dex One consolidated
    
    
    2,087,801
    
    
    
    2,649,665Less current portion
    
    
    181,961
    
    
    
    224,555Long-term debt
    
    $
    1,905,840
    
    
    $
    2,425,110
 RHDI Amended and Restated Credit Facility
  Dex Media East Amended and Restated Credit Facility
  Dex Media West Amended and Restated Credit Facility
  Impact of Fresh Start Accounting
  31




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##### Table of Contents



Outstanding Debt atMarch 31, 2011Unamortized Fair
    
    
    Excluding theValue Adjustments
    
    
    Impact ofCarrying Value at
    
    
    at March 31,
    
    
    Unamortized FairMarch 31, 2011
    
    
    2011
    
    
    Value AdjustmentsRHDI Amended and Restated Credit Facility
    
    $
    986,073
    
    
    $
    13,514
    
    
    $
    999,587Dex Media East Amended and Restated Credit Facility
    
    
    717,081
    
    
    
    59,320
    
    
    
    776,401Dex Media West Amended and Restated Credit Facility
    
    
    646,511
    
    
    
    10,844
    
    
    
    657,355Dex One 12%/14% Senior Subordinated Notes due 2017
    
    
    300,000
    
    
    
    
    
    
    
    300,000Total
    
    $
    2,649,665
    
    
    $
    83,678
    
    
    $
    2,733,343
 Liquidity and Cash Flows
       32




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##### Table of Contents



Successor Company
 Three Months Ended March 31, 2011
     
    
    $94.8 million in principal payments on our amended and restated credit
facilities;
    
    $0.3 million provided by other financing items; and
    
    $16.7 million in the decreased balance of checks not yet presented for
payment.
 Two Months Ended March 31, 2010
    
    
    $153.2 million in principal payments on our amended and restated credit
facilities;
    
    $0.9 million in other financing costs; and
    
    $3.3 million in the increased balance of checks not yet presented for
payment.
 Predecessor Company
 One Month Ended January 31, 2010
   33




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##### Table of Contents




    
    $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; and
    
    $3.1 million in the decreased balance of checks not yet presented for payment.
 Off-Balance Sheet Arrangements
  
 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)
    
    
    1.688
    %
    
    January 31, 2013March 10, 2010
    
    
    100
    (1)
    
    
    1.75
    %
    
    January 31, 2013Total
    
    $
    500
   34




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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 29, 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   Market Risk Sensitive Instruments
  
 Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  35




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Exhibits
 Exhibit No.
    
    Document10.1*
    
    Form of Restricted Stock Award Agreement for Executive Officers.10.2*
    
    Form of Non-Qualified Stock Option Agreement (Time-Vested
Award) for Executive Officers.10.3*
    
    Form of Non-Qualified Stock Option Agreement (Price-Vested
Award) for Executive Officers.31.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended March 31, 2011 by Alfred T. Mockett, Chief Executive
Officer and President 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 March 31, 2011 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 March 31, 2011, under Section 906 of the Sarbanes-Oxley
Act by Alfred T. Mockett, Chief Executive Officer and
President, and Steven M. Blondy, Executive Vice President and
Chief Financial Officer, for Dex One Corporation
 
 *
    
    Filed herewith. 36




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##### Table of Contents



SIGNATURES
  DEX ONE CORPORATIONDate: May 2, 2011
    
    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)
 37




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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Document10.1*
    
    Form of Restricted Stock Award Agreement for Executive Officers.10.2*
    
    Form of Non-Qualified Stock Option Agreement (Time-Vested
Award) for Executive Officers.10.3*
    
    Form of Non-Qualified Stock Option Agreement (Price-Vested
Award) for Executive Officers.31.1*
    
    Certification of Quarterly Report on Form 10-Q for the period
ended March 31, 2011 by Alfred T. Mockett, Chief Executive
Officer and President 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 March 31, 2011 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 March 31, 2011, under Section 906 of the Sarbanes-Oxley
Act by Alfred T. Mockett, Chief Executive Officer and
President, and Steven M. Blondy, Executive Vice President and
Chief Financial Officer, for Dex One Corporation
 
 *
    
    Filed herewith. 38