<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-K/A
                                (AMENDMENT NO. 1)
(Mark one)

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from                      to

                        Commission file number 001-07155

                           R.H. DONNELLEY CORPORATION
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                         <C>
        Delaware                                         13-2740040
        --------                                         ----------
(State of Incorporation)                    (I.R.S. Employer Identification No.)

 One Manhattanville Road, Purchase N.Y.                    10577
(Address of principal executive offices)                (Zip Code)
</TABLE>


Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S>                                       <C>
           Title of Class                  Name of Exchange on Which Registered
Common Stock, par value $1 per share              New York Stock Exchange
</TABLE>


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]

The aggregate market value at March 1, 1999 of shares of the Registrant's common
stock (based upon the closing price per share of such stock on The New York
Stock Exchange) held by non-affiliates of the Registrant was $525,952,185.
Solely for the purposes of this calculation, shares held by directors and
officers of the Registrant have been excluded. Such exclusion should not be
deemed a determination or an admission by the Registrant that such individuals
are, in fact, affiliates of the Registrant. At March 1, 1999, there were
outstanding 33,979,883 shares of the Registrant's common stock.


(continued)
<PAGE>   2
                        Commission file number 333-59287

                              R.H. DONNELLEY INC. *
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                         <C>
      Delaware                                           36-2467635
      --------                                           ----------
(State of Incorporation)                    (I.R.S. Employer Identification No.)

  One Manhattanville Road, Purchase N.Y.                    10577
(Address of principal executive offices)                 (Zip Code)
</TABLE>


Registrants' telephone number, including area code      (914) 933-6400
                                                        -----------------

* R.H. Donnelley Inc. is a wholly owned subsidiary of R.H. Donnelley Corporation
which became subject to the filing requirements of Section 15(d) on October 1,
1998. As of March 1, 1999, 100 shares of R.H. Donnelley Inc. common stock, no
par value, were outstanding.


DOCUMENTS INCORPORATED BY REFERENCE


<TABLE>
<CAPTION>
Part III
-------------------------------------------------------------------------------------------------------------
<S>                       <C>                                             <C>
Item 10                   Directors and Executive Officers of the         Information pertaining to the
                          Registrant                                      Company's Directors can be found
                                                                          on pages 6 - 7 of the Company's
                                                                          Proxy Statement dated March 22,
                                                                          1999.

Item 11                   Executive Compensation                          Pages 8 - 18 of the Company's
                                                                          Proxy Statement dated March 22,
                                                                          1999.

Item 12                   Security Ownership of Certain Beneficial        Pages 19 - 20 of the Company's
                          Owners and Management                           Proxy Statement dated March 22,
                                                                          1999.

Item 13                   Certain Relationships and Related               Page 6 of the Company's Proxy
                          Transactions                                    Statement dated March 22, 1999.
</TABLE>







<PAGE>   3
                                     PART I

ITEM 1.       BUSINESS

As used in this report, except where the context indicates otherwise, the term
"Company" refers to R.H. Donnelley Corporation and its wholly owned subsidiary
R.H. Donnelley Inc. ("Donnelley"), which is the operating entity. The Company's
executive offices are located at One Manhattanville Road, Purchase, NY 10577 and
its telephone number is (914) 933-6400.

RECENT EVENTS

The Company's financial statements for the three years ended December 31, 1998
have been restated to reflect a change in the recording of revenues for certain
directories in the Sprint relationship. For certain Sprint directories, the
Company earns both revenue from commissions on the sale of directory
advertising, and a share of income from the CenDon partnership ("CenDon"), a
50/50 partnership between Donnelley and an operating unit of Sprint. Previously,
sales commission revenues from these directories, including the semi-annual Las
Vegas directory, were recorded in July and December. However, the Company's
share of income from the partnership, which publishes the directories, was
recorded in July and January when the directories were published. To be
consistent, the Company conformed the interim and year-end accounting to record
the sales commission revenue and its share of income from the partnership in
July and January. The change impacted the previously reported results for the
first and fourth quarters and had a minimal impact on the annual results. The
effect of the restatement on previously reported results for each of the three
years ended December 31, 1998 have been reflected in this Form 10-K/A.

THE DISTRIBUTION

Prior to July 1, 1998, the Company operated as part of The Dun & Bradstreet
Corporation ("Old D&B"). On December 17, 1997, the Board of Directors of Old D&B
approved in principle a plan to separate into two publicly traded companies -
the Company and The New Dun & Bradstreet Corporation ("New D&B"). The
distribution ("Distribution") was the method by which Old D&B distributed to its
shareholders shares of New D&B common stock. On July 1, 1998, as part of the
Distribution, Old D&B distributed to its shareholders shares of New D&B stock.
In connection with the Distribution, Old D&B changed its name to R.H. Donnelley
Corporation. After the Distribution, the Company's only operating subsidiary is
Donnelley.

THE COMPANY

The Company, together with its partnerships, is the largest independent marketer
of yellow pages advertising in the United States. The Company sold approximately
$1 billion of yellow pages advertising in 1998 and is the leader in all of its
major markets. The Company is also a provider of pre-press publishing services
for yellow pages directories (including a majority of the directories for which
it sells advertising). In operation since 1886, the Company provides services to
approximately 300 directories in 13 states which collectively had a total
circulation of over 30 million in 1998. The Company has a diversified customer
base of approximately 500,000 businesses, many of which rely on yellow pages
directories as their principal or sole form of advertising.

The Company is strategically aligned on a long-term basis with the established,
leading telephone service provider (the incumbent telephone company) in each of
its major markets, which include Illinois (including Chicago), New York State
(including New York City), Nevada (primarily Las Vegas) and Florida (including
Tallahassee and Orlando). The Company provides yellow pages advertising
marketing and sales in these markets through long-term contractual agreements
with subsidiaries of the incumbent telephone companies, which are Ameritech,
Bell Atlantic and Sprint. These agreements allow the incumbent telephone
companies to gain the benefits of the Company's long-term presence in its
markets, yellow pages marketing and publishing expertise, established
infrastructure and performance-focused, non-union sales force. The Company
benefits from its agreement with the incumbent telephone company, which
publishes the leading directories in terms of numbers of advertisers,
utilization and distribution in the majority of the Company's markets.

The Company organizes its business in three business segments: Directory
Advertising Services, DonTech Partnership and Directory Publishing Services. The
Directory Advertising Services segment is comprised of the Company's Bell
Atlantic and



                                       1
<PAGE>   4
Sprint business relationships and the Company's independent Cincinnati
operation. While DonTech also provides yellow pages directory advertising sales
and marketing services, the partnership is considered a separate operating
segment since, among other things, the employees of DonTech, including officers
and managers, are not employees of the Company. Directory Publishing Services
includes pre-press publishing and production services for yellow pages
directories.

In March 1999, the Company, in an effort to streamline operations, formed a
division, Directory Services. This division includes the operations referred to
herein as Directory Advertising Services and Directory Publishing Services, and
support functions related thereto.

DIRECTORY ADVERTISING SERVICES

The following is a brief discussion of each of the Company's major strategic
relationships included in its Directory Advertising Services segment, which
accounted for 26.3% of the Company's operating income before depreciation and
amortization in 1998.

Bell Atlantic
The Company's relationship with Bell Atlantic began with a contract with New
York Telephone Company entered into in 1909. Under the current agreement, which
was entered into in 1985 and extends through 2005, the Company is the exclusive
advertising sales agent for Bell Atlantic directories which cover substantially
all of New York State, including New York City. The arrangement was originally
with a subsidiary of NYNEX; however, as a result of the Bell Atlantic/NYNEX
merger in 1997, the agreement was transferred to a subsidiary of Bell Atlantic.
The Company earns a sales commission on advertising sold and recognizes these
commissions upon the signing of the related advertising contract.

In May 1998, the Company became the exclusive advertising sales agent, beginning
with directories published in 1999, for Bell Atlantic's 26 yellow pages
directories in the Buffalo and North Country markets in upstate New York. These
directories were previously serviced by another third-party marketer. The
contract which governs the relationship between the Company and the relevant
Bell Atlantic entity in the greater Buffalo area continues until 2002, unless
extended by Bell Atlantic.

In 1997, the Company sold its Proprietary East ("P-East") yellow pages business
to an independent yellow pages publisher and as part of the sale agreement,
agreed to forego certain business activities, including yellow pages advertising
sales, in certain mid-Atlantic states until September 1999.

Subject to regulatory approval and certain other conditions, Bell Atlantic
agreed to merge with GTE Corporation ("GTE"), which currently conducts all of
its yellow pages operations in-house. The proposed merger will not trigger any
change to the current contractual relationship between Bell Atlantic and the
Company. There can be no assurance as to what effect, if any, the proposed
merger will have on the Company's relationship with Bell Atlantic or the
prospect for the Company to renew such contract on expiration thereof.

Sprint
The Sprint relationship began in 1980 when the Company began publishing
directories for predecessors or affiliates of Central Telephone Company and
United Telephone Company of Florida, both since merged into Sprint. The Company
has a partnership with a Sprint operating unit, known as the CenDon partnership
("CenDon"), and sales agency agreements with CenDon and a separate operating
unit of Sprint.

CenDon. The Company and a Sprint operating unit each have a 50% interest in
CenDon, which publishes directories in selected Sprint markets in Nevada
(primarily Las Vegas), Florida (including Tallahassee), Virginia and North
Carolina. The Company earns a 50% share of CenDon's income and records its share
as income from partnerships and related fees, a component of the Company's
operating income.

In addition to the profits derived from its 50% stake in CenDon, the Company has
a contract to provide advertising sales, marketing and customer service on an
exclusive basis to CenDon and receives a sales commission for its services. The
Company recognizes these commissions as revenues upon the publication of the
related directory. Additionally, the Company also provides publishing services
to CenDon. The current CenDon partnership agreement and the sales agency
agreement were entered into in 1988 and extend through the end of December 2004.

Sprint Sales Agency. In the greater Orlando, Florida marketplace, the Company is
Sprint's exclusive advertising sales agent and earns sales commissions on local
advertising sales. The Company recognizes these commissions as revenues upon the
signing of



                                       2
<PAGE>   5
the related advertising contract. The contract which governs this relationship
was entered into in 1994 and extends through 2004, but could be terminated as a
result of a five year performance review required no later than March 1, 2000.
The Company also provides pre-press publishing services for Sprint's greater
Orlando directories, pursuant to its sales agency agreement, which is discussed
in Directory Publishing Services.

Cincinnati Independent Directory
The Company's sales agency contract with Cincinnati Bell expired in 1997. The
Company made a strategic decision to leverage its expertise in yellow pages
advertising sales and its knowledge of the Cincinnati area to launch its own
independent yellow pages directory. The Company published its initial directory
in 1998 and the revenues from the publication placed it among the nation's top
five independent directories. The Company recognizes revenues when the directory
is published.

DONTECH PARTNERSHIP

The Company's relationship with telephone companies currently owned by Ameritech
Corporation began in 1908 with the Chicago Telephone Company. Since then, the
Company has had a variety of contractual relationships with Ameritech
Corporation, including a series of partnerships. The latest partnership
agreement was signed in August 1997 with an operating unit of Ameritech
("Ameritech"), changing the structure of the then existing DonTech partnership
("DonTech I"). A new 50/50 general partnership was formed ("DonTech"), which was
appointed the exclusive sales agent, in perpetuity, for Ameritech's yellow pages
advertising for directories published by Ameritech in Illinois and northwest
Indiana, and any future electronic or Internet advertising (the "DonTech
Restructuring"). The Company receives 50% of the profits generated by DonTech
and also receives direct fees from Ameritech, which are tied to advertising
sales generated by DonTech. Income from these sources is included in the
Company's income statement as income from partnerships and related fees. Under
the new structure, DonTech now recognizes revenues and costs when a customer
signs a sales contract. Historically, a disproportionate number of directories
were published in the fourth quarter, which led to inefficient use of DonTech
I's sales force during other times of the year. In 1998, a two-year program to
reschedule the related directories' publication dates more evenly throughout the
year was completed. The DonTech partnership represented approximately 82.9% of
the Company's operating income before depreciation and amortization expense in
1998.

Subject to regulatory approval and certain other conditions, Ameritech agreed to
merge with SBC Communications Inc. ("SBC"), which currently conducts all of its
yellow pages operations in-house. The proposed merger will not trigger any
change to the current agreement governing the DonTech partnership and the
related yellow pages directories. There can be no assurance as to what effect,
if any, the proposed merger will have on the DonTech partnership.

DIRECTORY PUBLISHING SERVICES

The Company provides pre-press publishing services for yellow pages directories,
including advertisement creation, sales contract management, listing database
management, sales reporting and commissions, pagination, billing services and
imaging, to certain existing customers and independent yellow pages publishers
under separately negotiated contracts. In 1996, the Company completed its
publishing center in Raleigh, North Carolina, which utilizes digital technology
and custom designed relational databases to support the entire yellow pages
advertising sales and publishing process on an integrated basis, from lead
generation and sales presentation, to advertisement creation and printer-ready
final output. The Company also has a graphics center in Dunmore, Pennsylvania
which produces artwork for the majority of advertisements and specialty pages
included in the directories for which the Company provides publishing services.
The Dunmore graphics center is electronically integrated with the Raleigh
publishing center.

Under an agreement that extends through December 2003, the Company provides
publishing services for Ameritech's Illinois and northwest Indiana directories.
Additionally, pursuant to the CenDon partnership agreement, the Company provides
publishing services to CenDon. The fees for such services are based on a
separate pricing schedule. The Company also provides publishing services for
Sprint's greater Orlando directories pursuant to its sales agency agreement. The
publishing services portion of this contract could be terminated if a new
pricing schedule for such services is not agreed upon by March 1, 2000. The
Company is currently in the process of renegotiating a new pricing schedule for
the CenDon and Sprint publishing contracts. In addition, the Company provides
publishing services to the purchaser of its P-East business pursuant to an
agreement that extends through 2002.

NEW ADVERTISING MEDIA




                                       3
<PAGE>   6
As part of efforts to deliver additional value to its customer base, the Company
has initiated a program to offer bundled advertising packages that include
Internet, cable TV, as well as conventional print yellow pages. These new
services were introduced in 12 markets in 1998, and expansion into additional
markets is planned for 1999. The Company began selling Web sites on behalf of
Bell Atlantic and expanded its cable TV advertising offering in five additional
New York markets, after a successful test in Albany, New York. The Company also
began offering Web site advertising bundled with the print product in connection
with its Cincinnati operation, through an agreement with America Online's
Digital City. In addition, the Company, and an operating unit of Sprint and
InfoSpace.com will be offering Web site advertising in the Las Vegas, Nevada
market in 1999.

FOREIGN VENTURE

In November 1998, the Company entered into a joint venture with China United
Telecommunications Corporation and Teleway Communications Limited, to publish
yellow pages and to offer Internet directory services in the People's Republic
of China. The joint venture will initially introduce directories in four key
economic and regional centers in China. The first directory is scheduled to be
published later this year. The four-city introduction will be followed by a
carefully phased rollout to other cities in China. In addition, the joint
venture owns ChinaBiG (www.ChinaBiG.com), the first bilingual and most
comprehensive Internet directory covering China, Hong Kong, Taiwan and Macao.

Under the terms of the joint venture, which is subject to Chinese regulatory
approval, the Company will acquire a 15 percent equity position with an option
to increase its stake to 25 percent. The joint-venture agreement gives broad
operational and management control of the business to the Company.

COMPETITION

There is competition for yellow pages advertising sales to varying degrees in
the Company's markets from the sales forces of yellow pages publishers with
which the Company is either not affiliated or with divisions of such companies
for which the Company does not provide sales services. All of the telephone
companies which the Company is affiliated currently market yellow pages
advertising with internal sales forces in many of the markets in which the
Company does not provide sales agency services. In addition, the Company's
competitors include other local telephone companies, independent publishers
(publishers that are not affiliated with any telephone company) and national
yellow pages sales agents. In the majority of its markets, the Company benefits
from its long-term contractual relationships with the operating units of the
largest potential competitor in a directory market, the incumbent local
telephone company. The market position of incumbent local telephone companies
may be impacted by the Telecommunications Act of 1996, which effectively opened
local telephone markets to increased competition. There is also competition for
advertising sales from other media, including newspapers, magazines, radio,
direct mail, online information services, television and cable television.
Additionally, advances in technology have brought to the industry new
participants, new products and new channels, including increasing use of the
Internet as an advertising media.

With respect to the business conducted by the Company's Directory Publishing
Services segment, yellow pages publishers which are not customers of the
Company, typically derive such services from internal divisions or through
independent providers of such services or some combination of both. The
telephone companies and many of the significant independent yellow pages
publishers, are making investments to acquire publishing services technology
similar to the technology used at the Company's Raleigh publishing center.

EMPLOYEES

As of December 31, 1998, the Company had approximately 1,500 full-time
employees. This number does not include the employees of DonTech. None of the
Company's employees are covered by collective bargaining agreements. The Company
considers its relations with its employees to be good.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information concerning the individuals who serve
as executive officers of the Company.

<TABLE>
<CAPTION>
NAME                                    AGE*                 POSITION(S)
----                                    ----                 -----------
<S>                                     <C>      <C>
Frank R. Noonan                          56      Chairman of the Board, President and Chief Executive Officer
</TABLE>



                                       4
<PAGE>   7
<TABLE>
<S>                                     <C>      <C>
Philip C. Danford                        55      Senior Vice President and Chief Financial Officer
Alexander R. Marasco                     46      Senior Vice President
Judith A. Norton                         55      Senior Vice President Human Resources
David C. Swanson                         44      Senior Vice President
Stephen B. Wiznitzer                     48      Senior Vice President and General Counsel
</TABLE>


The following table sets forth information concerning the individuals who serve
as executive officers and directors of Donnelley.

<TABLE>
<CAPTION>
NAME                                    AGE*                 POSITION(S)
----                                    ----                 -----------
<S>                                     <C>      <C>
Frank R. Noonan                          56      Director, President and Chief Executive Officer
Philip C. Danford                        55      Director, Senior Vice President and Chief Financial Officer
Alexander R. Marasco                     46      Executive Vice President Corporate Development
Judith A. Norton                         55      Senior Vice President Human Resources
David C. Swanson                         44      President Directory Services
Stephen B. Wiznitzer                     48      Director, Senior Vice President and General Counsel
</TABLE>


*  As of March 1, 1999.

FRANK R. NOONAN has been a director of the Company since April 1998, a director
of Donnelley since February 1995, President since August 1991, and has been
Chairman and Chief Executive Officer of the Company and Donnelley since June
1998. Mr. Noonan joined Old D&B in 1989 as Senior Vice President Finance of Dun
& Bradstreet Information Services. Prior to joining Old D&B, Mr. Noonan served
as Senior Vice President and Chief Financial Officer of UNUM Corporation and in
various financial positions for the General Electric Company. Mr. Noonan is
Chairman of the Board of Trustees for United Hospital Medical Center in Port
Chester, New York, a member of the Board of Trustees of Manhattanville College,
the Vice Chairman of the Board of Governors for the Buick Classic, and a member
of the Board of Directors of the Yellow Pages Publishers Association.

PHILIP C. DANFORD has been Senior Vice President and Chief Financial Officer of
Donnelley since March 1998 and has been a director and Senior Vice President and
Chief Financial Officer of the Company since June 1998. Previously, Mr. Danford
served as Vice President and Treasurer for Old D&B from September 1992. In 1988,
Mr. Danford joined Old D&B as Assistant Treasurer. Before joining Old D&B, Mr.
Danford served as Vice President and Treasurer at The Perkin-Elmer Corporation
and as Assistant Vice President and Manager at W.R. Grace & Co.

ALEXANDER R. MARASCO has been a Senior Vice President of the Company since June
1998 and was appointed Donnelley's Executive Vice President Corporate
Development in March 1999. Prior to this appointment, Mr. Marasco served as
Donnelley's Executive Vice President Operations and Technology since October
1995. Prior thereto, Mr. Marasco served as a Senior Vice President Planning for
Donnelley from April 1991, and as an Assistant Vice President of Strategic
Planning for Donnelley from March 1989. Mr. Marasco joined Old D&B in 1976 in
its finance department in New York.

JUDITH A. NORTON has been a Senior Vice President Human Resources of Donnelley
since June 1998 and has served as the Company's Senior Vice President Human
Resources since January 1998. Prior thereto, Ms. Norton was an independent human
resources consultant from January 1997, a Senior Vice President Human Resources
for The Chase Manhattan Bank from April 1996, and a Senior Vice President and
Director of Staffing and Development for Chemical Bank from January 1991.

DAVID C. SWANSON was appointed President of the Directory Services division in
March 1999, and has served as a Senior Vice President of the Company since June
1998. Prior to becoming the division president, he served as Donnelley's
Executive Vice President Corporate Strategy since June 1998. Prior thereto, Mr.
Swanson was an Executive Vice President and General Manager for Proprietary
Operations from July 1997, an Executive Vice President Sales for Donnelley from
October 1995, Donnelley's Vice President and General Manager Cincinnati
Operations from September 1993, an Assistant Vice President Operations for
Donnelley from January 1993 and a General Sales Manager for Donnelley from
January 1992.

STEPHEN B. WIZNITZER is a Senior Vice President and General Counsel of
Donnelley, has been a director of Donnelley since June 1998, and is Senior Vice
President and General Counsel of the Company. Mr. Wiznitzer has served as the
Company's Senior Vice President and General Counsel since June 1997. Prior
thereto, Mr. Wiznitzer served as counsel for NYNEX Corporation from 1989.
Earlier, Mr. Wiznitzer had been Senior Counsel for SSMC, Inc. from 1986.




                                       5
<PAGE>   8
ITEM 2.  PROPERTIES

The Company's operations are conducted from 22 leased locations in 7 states. The
Company leases approximately 74,000 square feet for its administrative
headquarters and offices in Purchase, New York, and approximately 72,000 square
feet in New York City for its Bell Atlantic sales force. The Company's Raleigh
publishing facility center is located in a 55,000 square foot building which the
Company leases. The Company leases 20,000 square feet in a building for its
graphics center in Dunmore, Pennsylvania.

ITEM 3. LEGAL PROCEEDINGS

Information Resources
On July 29, 1996, Information Resources Inc. ("IRI") filed a complaint in the
United States District Court for the Southern District of New York, naming as
defendants Old D&B, ACNielsen Corporation and IMS Health Incorporated (both of
which are former subsidiaries of Old D&B). The complaint alleges, among other
things, various violations of the antitrust laws and seeks damages in excess of
$350 million, which IRI is seeking to have trebled under the antitrust laws. IRI
also seeks punitive damages in an unspecified amount. Pursuant to the
Distribution Agreement executed in connection with the Distribution, New D&B
will assume the defense of and indemnify the Company against any payments to be
made by the Company or Donnelley in respect of the IRI Action, under the
Indemnity and Joint Defense Agreement or otherwise, including any ongoing legal
fees and expenses related thereto.

Tax Matters
Certain tax planning strategies entered into by Old D&B are currently subject to
review by tax authorities. The Internal Revenue Service (the "IRS") is currently
reviewing Old D&B's utilization of certain capital losses during 1989 and 1990.
While the IRS has not issued a formal assessment with respect to these
transactions, the IRS has assessed other companies that had entered into similar
types of transactions. If an assessment is made and should the IRS prevail, the
total cash obligation to the IRS at December 31, 1998, would approximate $500
million for taxes and accrued interest. Pursuant to a series of agreements, IMS
Health Incorporated ("IMS") and Nielsen Media Research, Inc. ("NMR") (both of
which are former subsidiaries of Old D&B) are each jointly and severally liable
to pay 50%, and Old D&B is liable for the remaining 50%, of any payments for
taxes and accrued interest arising from this matter and certain other potential
tax liabilities after Old D&B pays the first $137 million. As previously stated,
as the result of the form of the Distribution, the Company is the legal entity
and the taxpayer referred to herein as Old D&B. However, New D&B, pursuant to
the terms of the Distribution Agreement and the Tax Allocation Agreement,
executed in connection with the Distribution, has assumed and will indemnify the
Company and Donnelley against any payments to be made by the Company or
Donnelley in respect of any tax liability that may be assessed and any costs and
expenses relating thereto including any ongoing legal fees. Accordingly,
management believes that such tax liabilities and the costs and expenses
relating thereto will not have a material impact on the consolidated financial
position of the Company. Management further believes that New D&B, IMS and NMR
have sufficient financial resources to satisfy all such liabilities and to
reimburse the Company for all costs and expenses relating thereto.

Other than the matters described above, the Company and Donnelley are involved
in legal proceedings, claims and litigation arising in the ordinary conduct of
its business. Although there can be no assurances, the Company's management
believes that the outcome of such legal proceedings will not have a material
adverse effect on the Company's financial position, results of operations or
cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1998.



                                       6
<PAGE>   9
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS

As discussed above ("Item 1 - Business - The Distribution"), the Distribution
was completed on June 30, 1998. Accordingly, as of July 1, 1998, the Company's
common stock began trading on the New York Stock Exchange under the symbol
"RHD." The table below indicates the high and low sales price of the Company's
common stock for each period and the dividends declared.

<TABLE>
<CAPTION>
                                    Price Per Share           Dividends Paid
                                    High          Low           Per share
                                    ----          ---           ---------
<S>                               <C>           <C>           <C>
1998
3rd Quarter                        19 3/8       10 3/4            $0.175
4th Quarter                       14 15/16       10 1/8            $0.175
</TABLE>


At March 1, 1999, there were approximately 9,623 holders of record of the common
stock. In 1998, the Company announced that it would cease paying a quarterly
dividend after the payment of the fourth quarter 1998 cash dividend. The
Company's Credit Agreement and Indenture contain various financial restrictions
that may place limitations on the ability of the Company to pay dividends in the
future (see "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity").

During 1998, the Company executed a one-for-five split of its outstanding common
stock. All share and per share data provided herein has been adjusted to give
effect to such reverse stock split.

ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data of the Company as of December 31, 1998, 1997 and
1996 and for each of the four years in the period ended December 31, 1998 are
derived from the audited consolidated financial statements of the Company. The
Company's audited consolidated financial statements are presented as if the
Company were a stand-alone entity for all periods. The historical selected
financial data as of December 31, 1995 and 1994 and for the year ended December
31, 1994 are derived from the unaudited consolidated financial statements of the
Company, and include, in the opinion of management, all necessary adjustments
for a fair presentation in conformity with generally accepted accounting
principles. The information set forth below should be read in conjunction with
the audited consolidated financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
                                                                              YEARS ENDED DECEMBER 31,
                                                     ------------------------------------------------------------------------
                                                        1998 (4)        1997 (4)     1996 (4)         1995          1994
                                                        --------        --------     --------         ----          ----
                                                                      (in thousands, except per share data)
<S>                                                  <C>             <C>            <C>            <C>            <C>
STATEMENT OF INCOME DATA (1):
Revenues .......................................     $  169,090      $  238,823     $  268,937     $  312,940     $  310,313
Income from partnerships and related fees ......        135,854         130,171        132,945        137,180        148,770
Operating income ...............................        125,235         134,470        166,658        182,795        213,249
Net income .....................................         61,268          84,743         77,645        108,397        127,949

EARNINGS PER SHARE (2):
Basic ..........................................     $     1.79      $     2.48     $     2.28     $     3.20     $     3.76
Diluted ........................................     $     1.77      $     2.48     $     2.28     $     3.19     $     3.76

DIVIDENDS PER SHARE (2) ........................     $     0.35

SHARES USED IN COMPUTING EARNINGS PER SHARE (2):
Basic ..........................................         34,237          34,153         34,003         33,904         33,989
Diluted ........................................         34,522          34,213         34,058         33,977         33,989
</TABLE>



                                       7
<PAGE>   10
<TABLE>
<S>                                                  <C>             <C>            <C>            <C>            <C>
BALANCE SHEET DATA (1):
Total assets ...................................     $  385,841      $  377,507     $  497,683     $  520,214     $  526,168
Long-term debt .................................        464,500              --             --             --             --
Shareholders' equity (deficit) .................       (224,770)        255,807        376,478        386,565        370,314

ADVERTISING SALES DATA (UNAUDITED) (1, 3):
Calendar cycle .................................     $  991,575      $1,064,745     $1,110,597     $1,145,944     $1,108,705
Publication cycle ..............................        989,984       1,083,818      1,076,937      1,078,200      1,044,900
</TABLE>


(1)    The selected financial data above include amounts related to businesses
       that were sold prior to 1998. To facilitate comparison of the financial
       data, the amounts related to these businesses included above are as
       follows:

<TABLE>
<CAPTION>
                                                                            1997         1996          1995           1994
                                                                            ----         ----          ----           ----
<S>                                                                      <C>          <C>           <C>           <C>
       Revenues...............................................           $ 77,979     $ 97,263      $140,104      $ 148,785
       Operating income.......................................             10,969       18,587        22,250         27,926
       Total assets...........................................                 --       80,962       131,751        138,345
       Advertising sales (calendar and publication cycle) (3).             73,753       89,939       133,389        139,060
</TABLE>


       See "Item 7 - Management's Discussion and Analysis of Financial Condition
       and Results of Operations Factors Affecting Comparability" for a
       discussion of certain factors which affect the comparability of the
       information presented in this table.

(2)    Amounts have been adjusted to give effect to a one-for-five reverse
       split of the Company's common stock executed in 1998.

(3)    Advertising sales represents the billing value of advertisements sold by
       the Company and DonTech. Management reviews the performance of its
       operating segments on, among other things, the advertising sales
       generated on a calendar cycle and a publication cycle basis. Calendar
       cycle advertising sales represent the billing value of advertisements
       sold stated on the same basis for which revenue is recognized in the
       consolidated financial statements (that is, when a sales contract is
       signed where the Company is a sales agent and when a directory is
       published where the Company is the publisher). Advertising sales on a
       publication cycle basis represent the billing value of advertisements
       sold based on when a directory is published, regardless of the Company's
       role and the recognition of revenue in the consolidated financial
       statements.

(4)    Certain amounts have been restated from amounts previously reported. See
       Note 2 to the consolidated financial statements.




                                       8
<PAGE>   11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

The matters discussed in this Form 10-K of R.H. Donnelley Corporation (the
"Company") and R.H. Donnelley Inc. ("Donnelley") contain forward looking
statements subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995. Where possible, the words "believe," "expect,"
"anticipate," "should," "planned," "estimated," "potential," "goal," "outlook,"
and similar expressions, as they relate to the Company, Donnelley or its
management, have been used to identify such forward looking statements. These
statements and all other forward looking statements reflect the Company's and
Donnelley's current beliefs and specific assumptions with respect to future
business decisions and are based on information currently available.
Accordingly, the statements are subject to significant risks, uncertainties and
contingencies which could cause the Company's and Donnelley's actual operating
results, performance or business prospects to differ from those expressed in, or
implied by, these statements. Such risks, uncertainties and contingencies
include the following: (1) loss of market share through competition; (2)
uncertainties caused by the consolidation of the telecommunications industry;
(3) introduction of competing products or technologies by other companies; (4)
complexity and uncertainty regarding the development of new high technology
products; (5) pricing pressures from competitors and/or customers; (6) changes
in the yellow pages industry and markets; (7) the Company's inability to
complete the implementation of its Year 2000 plans on a timely basis; and (8) a
sustained economic downturn in the United States.


THE COMPANY

Except where otherwise indicated, the term "Company" refers to R.H. Donnelley
Corporation and its wholly owned subsidiary R.H. Donnelley Inc. ("Donnelley").
Donnelley is a wholly owned subsidiary of the Company. The Company has no other
operations other than through its Donnelley subsidiary. Therefore, on a
consolidated basis, the financial statements of the Company and Donnelley are
substantially identical.

The Company provides advertising sales and marketing services for yellow pages
and other directory products under long-term sales agency agreements and joint
venture partnerships with operating units of major telephone companies as well
as through its own independent operations. The Company is a sales agent in New
York State for an operating unit of Bell Atlantic and in Florida for an
operating unit of Sprint. It also serves as a sales agent for the CenDon
partnership ("CenDon"), a 50/50 partnership between Donnelley and an operating
unit of Sprint that was formed to publish directories in Florida, Nevada,
Virginia and North Carolina. The Company also began publishing its own
independent yellow pages directory in the Cincinnati area in 1998. Due to their
similarities, the Company aggregates these businesses in its Directory
Advertising Services segment.

The Company is also a 50% partner in the DonTech Partnership ("DonTech"), a
partnership with an operating unit of Ameritech, which acts as the exclusive
sales agent for yellow pages directories published by Ameritech in Illinois and
northwest Indiana. In addition to receiving 50% of the profits of DonTech, the
Company also receives direct fees ("Revenue Participation") from an operating
unit of Ameritech, which are tied to advertising sales. While DonTech provides
advertising sales of yellow pages and other directory products, the partnership
is considered a separate operating segment since, among other things, the
employees of DonTech, including officers and managers, are not employees of the
Company.

The Company also provides pre-press publishing services for yellow pages
directories, including advertisement creation, sales contract management,
listing database management, sales reporting and commissions, pagination,
billing services and imaging, to independent yellow pages publishers and certain
existing customers under separately negotiated contracts. This business is
classified as Directory Publishing Services.

FACTORS AFFECTING COMPARABILITY

All data included herein has been restated to reflect a change in the recording
of revenues for certain directories in the Sprint relationship. See Note 2 to
the consolidated financial statements.

Prior to July 1, 1998, the Company operated as part of The Dun & Bradstreet
Corporation ("Old D&B"). On December 17, 1997, the Board of Directors of Old D&B
approved in principle a plan to separate into two publicly-traded companies -
R.H. Donnelley Corporation and The New Dun & Bradstreet Corporation ("New D&B").
The distribution ("Distribution") was the method by which Old D&B distributed to
its shareholders shares of New D&B common stock. On July 1, 1998, as part of the



                                       9
<PAGE>   12
Distribution, Old D&B distributed to its shareholders shares of New D&B stock.
In connection with the Distribution, Old D&B changed its name to R.H. Donnelley
Corporation.

The historical consolidated financial statements reflect the financial position,
results of operations and cash flows of the Company as if it were a stand-alone
entity for all periods presented. The historical financial statements include
allocations of certain Old D&B general and administrative expenses and corporate
assets and liabilities related to the Company's business. Management believes
these allocations are reasonable; however, these costs and allocations are not
necessarily indicative of the costs that would have been incurred had the
Company performed or provided these functions as a separate entity. For example,
the Company estimates that general and administrative expenses would have been
approximately $4.4 million and $8.6 million higher than the amounts allocated
from Old D&B during the first six months of 1998 and the full year of 1997,
respectively. Additionally, in connection with the Distribution, the Company
issued Debt (as defined below; see - "Liquidity and Capital Resources") and
estimates that additional interest expense of $18.4 million and $42.7 million
would have been incurred in 1998 and 1997, respectively, assuming the Debt was
outstanding as of January 1, 1997.

Other items affecting the comparability of 1998 results to the prior periods
include the sale of the Company's Proprietary-East ("P-East") business in
December 1997 and the Proprietary-West ("P-West") business in May 1996. Also, in
August 1997, the Company's sales agency contract with Cincinnati Bell expired.
The Company made a strategic decision to leverage its expertise in yellow pages
advertising sales and its knowledge of the Cincinnati area to launch its own
independent yellow pages directory. During 1998, the Company published its
initial Cincinnati directory. The revenues from the publication placed the
Cincinnati directory among the nation's top five independent directories.

ADVERTISING SALES

Calendar Cycle Sales
Advertising sales is the billing value of advertisements sold by the Company and
DonTech in a given calendar year. This is referred to as calendar cycle sales.
The Company recognizes advertising sales on the same basis on which revenues are
recognized (that is, when a sales contract is signed where the Company is a
sales agent and when a directory is published where the Company is the publisher
of the directories). For 1998, calendar cycle sales were $991.6 million compared
to $1,064.7 million in 1997. Excluding sales from P-East of $73.8 million in
1997, sales in 1998 were consistent with 1997. However, advertising sales from
the Cincinnati area were significantly lower in 1998 due to the expiration of
the sales agency agreement with Cincinnati Bell, which was partially offset by
the initiation of an independent directory. Excluding the impact of this change,
sales showed a 4.4% increase in the underlying comparable businesses over 1997.

Advertising sales for the Directory Advertising Services segment decreased 14.3%
in 1998 compared to 1997. However, excluding the sales from P-East and adjusting
for the change in the Cincinnati operations, sales in the Directory Advertising
Services segment showed a 3.9% increase in 1998 over 1997. This increase was
driven by growth of 7.0% in the Sprint markets, particularly the Las Vegas,
Nevada; Hickory, North Carolina; and Tallahassee, Florida areas, and a 2.6%
increase in the Bell Atlantic markets. The increase in the Bell Atlantic markets
was primarily due to $6.3 million of sales in the Buffalo and North Country
markets. During 1998, the Company was appointed the exclusive sales agent by
Bell Atlantic to service these markets. Advertising sales for DonTech increased
5.0% in 1998 compared to 1997 primarily due to strong growth in Chicago and
surrounding areas.

Calendar cycle sales decreased 4.1% in 1997 to $1,064.7 million from $1,110.6
million in 1996. In the Directory Advertising Services segment, advertising
sales decreased 7.2% in 1997 compared to 1996. Sales from Bell Atlantic
directories were 7.4% lower than in 1996 due to the rescheduling of publication
dates of certain directories from 1997 into 1998. Sales from Cincinnati Bell
decreased 22.9% as the Company did not sell advertising for the November 1997
directories due to the expiration of the sales agency contract, and sales from
P-East were down 18.0% due to the sale of that business. These declines were
partially offset by 7.3% growth in the Sprint markets, primarily in Las Vegas.
Advertising sales from DonTech increased 1.3% in 1997 over 1996.

Publication Cycle Sales
The Company believes that an additional measurement of sales performance is the
publication cycle method. This method calculates sales on the basis of the
annual value of a directory according to its publication date regardless of when
the advertising for that directory was sold. If a directory publication date
changes from one year to the next, the prior year publication date is adjusted
to conform to the present year to maintain comparability. In 1998, publication
cycle sales were $990.0 million compared to $1,083.8 million in 1997. Sales in
1998 of $990.0 million were 2.0% lower than 1997 sales of



                                       10
<PAGE>   13
$1,010.0 million, after excluding 1997 sales of P-East of $73.8 million. After
further excluding advertising sales related to the Company's changing Cincinnati
operations, as noted above, advertising sales increased 2.0% from $960.0 million
to $979.5 million in 1998. The increase was due to strong growth in the Sprint
and DonTech markets.

Advertising sales from the Directory Advertising Services segment decreased
16.0% in 1998 compared to 1997. Excluding sales from P-East and sales related to
the Company's changing Cincinnati operations, sales for 1998 were 0.3% higher
than 1997. Strong growth of 7.0% in the Sprint markets was offset by a decline
in sales in the Bell Atlantic markets of 2.2%. This decrease was driven
primarily by lower sales in the New York City area (including Manhattan, Queens,
Staten Island and Brooklyn).

Advertising sales from DonTech increased 4.6% over 1997 due to growth in the
DonTech markets and sales efficiencies as a result of the completion of the
final phase of a two-year initiative to rebalance the publication schedules for
the Ameritech directories. Prior to 1997, sales and production inefficiencies
arose from an unbalanced production schedule in which the majority of the
directories with which DonTech is affiliated were published in the fourth
quarter. The publication dates of the directories are now more evenly
distributed throughout the year, enabling DonTech to achieve higher sales
through increased productivity and utilization and enhanced customer
satisfaction.

Publication cycle sales of $1,083.8 million in 1997 were consistent with 1996
sales of $1,076.9 million. Sales from the Directory Advertising Services segment
decreased approximately 1.3% as strong growth from the Sprint markets was offset
by a decrease resulting from the expiration of the Cincinnati Bell contract and
the sale of the P-East business during 1997. Sales from DonTech increased 4.3%
over 1996 due to growth in the Chicago markets.

RESULTS OF OPERATIONS - 1998 VS. 1997

Revenues in 1998 of $169.1 million decreased 29.2% from $238.8 million in 1997.
Excluding revenues from P-East ($78.0 million), 1998 revenues increased 5.2%, or
$8.3 million. The increase was due to higher revenues from the Directory
Advertising Services and Directory Publishing Services segments. The increase in
Directory Advertising Services' revenues was due to strong growth in the Sprint
markets of Nevada and Florida, partially offset by lower revenues in the Bell
Atlantic and Cincinnati markets. The increase in Directory Publishing Services'
revenues resulted from a new long-term contract with the purchaser of the
Company's P-East business.

Operating expenses in 1998 of $123.1 million decreased 25.2% from $164.6 million
in 1997; however, excluding the operating expenses of P-East in 1997 ($50.6
million), operating expenses increased 8.0%, or $9.1 million. This increase is
primarily attributable to an increase in costs related to the new Buffalo
operation, costs relating to the publication of the Company's first Cincinnati
independent directory and higher information technology costs.

General and administrative expenses in 1998 of $28.4 million decreased 3.8% from
$29.6 million in 1997, but excluding the general and administrative expenses of
P-East ($8.6 million), general and administrative expenses increased 35.3%, or
$7.4 million. This increase is due to increased costs related to being a
stand-alone company, increased information technology spending and costs
associated with the start-up of a Chinese joint venture with China Unicom (see -
"Liquidity and Capital Resources").

Provision for bad debts of $8.5 million in 1998 decreased $9.8 million from
1997; however, excluding $7.1 million related to P-East, the provision decreased
$2.7 million. This reduction is mainly attributable to lower Bell Atlantic
revenues.

Income from partnerships and related fees includes the Company's share of the
profits from the CenDon and DonTech partnerships and Revenue Participation. This
income increased 4.4% in 1998 to $135.9 million from $130.2 million in 1997,
driven mainly by a 3.3% increase in DonTech income. DonTech's increase was
primarily due to the strong growth in advertising sales. However, DonTech income
was held down by a charge for adjustments for billing and receivables. The
charge mainly relates to the Company's share of those accounts deemed
uncollectible. Equity income from CenDon increased $3.6 million in 1998 to $15.8
million, primarily due also to strong growth in advertising sales.

Interest expense of $23.1 million in 1998 represents interest on the Debt
incurred in connection with the Distribution. In June, the Company borrowed $350
million under variable rate credit facilities and issued $150 million of fixed
rate notes. At the current level of debt and interest rates, the Company
anticipates interest expense to be in the range of $40 - $42 million per year.



                                       11
<PAGE>   14
The effective tax rate in 1998 was 40.0% compared to 41.1% in 1997. The higher
effective tax rate in 1997 was due to the amortization of goodwill, which is a
non-deductible expense for tax purposes. The Company anticipates that its
effective tax rate in future years will approximate 40%.

Net income in 1998 was $61.3 million, or $1.77 per diluted share compared to
$84.7 million, or $2.48 per diluted share in 1997. As previously stated,
management believes that the historical results are not indicative of the
current operations as they include the results of businesses that have been sold
by the Company and do not include the full year effect of certain costs and
expenses that the Company has incurred as a result of its separation from Old
D&B. If the historical results are adjusted to (i) exclude the operations of the
P-East business, (ii) include the estimated additional general and
administrative expenses associated with being a stand-alone company and (iii)
assume the Debt was outstanding for all periods prior to the Distribution, net
income for 1998 would have been $47.6 million or $1.38 per diluted share
compared to $42.5 million or $1.24 per diluted share for 1997.

Directory Advertising Services Segment
Revenues from Directory Advertising Services consist of sales commissions from
the Company's sales agency agreements and the billing value of advertisements
sold from the Company's independent operation. Sales commission revenues from
the Bell Atlantic and Sprint sales agency operations are recognized when an
advertising contract is signed with a customer. Sales commission revenues from
CenDon, for which CenDon is the publisher, are recognized when a directory is
published. The Company does not record its share of the revenues of CenDon, but
recognizes its share of the profits as Income from partnerships and related
fees, a component of operating income. Revenues from the Company's independent
operation are recognized when a directory is published. Revenues from Directory
Advertising Services were $137.2 million in 1998 compared to $213.7 million in
1997. Excluding P-East revenues of $78.0 million, revenues increased 1.1% in
1998. Revenues from the Sprint markets were up 11.5%, but were offset by a 19.6%
decrease in Cincinnati and a 2.3% decrease in the Bell Atlantic markets.

Operating income from Directory Advertising Services includes the revenues and
direct costs incurred by these businesses plus an allocation of certain
centralized operating and general and administrative costs not charged directly
to the businesses. Operating income in 1998 for Directory Advertising Services
was $32.1 million compared to $40.8 million in 1997. Excluding P-East operating
income of $11.0 million in 1997, operating income increased 7.7% due to a 30.4%
increase in the operating income from the Sprint markets, including CenDon,
partially offset by lower operating income from Cincinnati and the Bell Atlantic
business.

DonTech Partnership Segment
The Company does not record its share of the revenues and costs of the DonTech
Partnership, but recognizes its share of the profits as Income from partnerships
and related fees. The Company's income from partnerships related to DonTech
increased 3.3% in 1998, or $3.9 million, due to a 5.0% increase in sales. The
increase in income was held down by the charge previously mentioned.

Directory Publishing Services Segment
Revenues of $31.9 million were 27.2% higher than 1997 revenues of $25.1 million,
after elimination of intercompany revenues of $0.8 million and $9.9 million,
respectively. This increase was primarily due to increased revenue resulting
from a new long-term contract with the purchaser of the Company's P-East
business. This revenue replaced the work that Directory Publishing Services
performed for the P-East business when it was owned by the Company.

Operating income from Directory Publishing Services includes the revenues and
direct costs incurred by this business, plus an allocation of certain
centralized operating and general and administrative costs not charged directly
to the business. This segment incurred an operating loss of $3.0 million in 1998
compared to $4.6 million in 1997. This improvement is principally due to reduced
expenses. Depreciation and amortization of $6.3 million and $6.9 million,
respectively, in 1998 and 1997, is the result of the Company's investment in the
Raleigh operations.

RESULTS OF OPERATIONS - 1997 VS. 1996

Revenues in 1997 were $238.8 million compared to $268.9 million in 1996. This
decrease of 11.2% was primarily due to lower revenues from P-East due to the
sale of the business in 1997 and lower revenues in Cincinnati due to the
expiration of



                                       12
<PAGE>   15
the Company's sales agency agreement in 1997. Revenues were also adversely
affected by scheduling shifts in the publication schedules for certain Bell
Atlantic directories.

Total expenses in 1997 of $234.5 million were consistent with the 1996 amount of
$235.2 million. Expenses in 1997 related to P-East and P-West were $10.8 million
lower than in 1996. However, offsetting this decrease was $4.0 million in
start-up costs in 1997 associated with the Cincinnati independent directories
and $5.7 million higher depreciation due to the completion of the Raleigh
publishing facility.

Income from partnerships and related fees decreased 2.1% to $130.2 million in
1997 compared to $132.9 million in 1996. Of this, income and related fees from
DonTech decreased 4.2% in 1997 to $116.2 million compared to $121.4 million in
1996. The decrease in DonTech earnings is principally due to a contractual
reduction in the Company's share of DonTech profits from 54% in 1996 to 53% in
1997. A portion of the decline was also due to sales and production
inefficiencies that arose from an unbalanced production schedule in which the
majority of the directories with which DonTech is affiliated were published in
the fourth quarter. The Company's partnership income from CenDon increased to
$12.2 million in 1997 from $9.7 million in 1996, primarily due to strong sales
growth in the Sprint markets, especially Las Vegas.

Operating income in 1997 decreased $32.2 million, or 19.3%, compared to 1996.
This decrease was primarily due to lower operating income due to the sale of
P-East, lower income from partnerships from DonTech, the expiration of the
Cincinnati Bell contract during 1997 and the decrease in Bell Atlantic revenues
mentioned above.

The effective tax rate in 1997 was 41.1% compared to 43.8% in 1996. The higher
tax rate in 1996 was due to a non-deductible capital loss for tax purposes
related to the sale of the P-West business in 1996.

Directory Advertising Services Segment
Revenues from Directory Advertising Services decreased 12.5% to $213.7 million
in 1997 compared to $244.2 million in 1996. This decrease was due to the sale of
the P-East business and the rescheduling of certain Bell Atlantic directories in
1997, partially offset by higher revenues from the Sprint markets. Operating
income from Directory Advertising Services decreased 36.1% in 1997 primarily due
to the sale of the P-East business in 1997, additional start-up costs associated
with the Cincinnati independent directories and the decrease in revenues from
Bell Atlantic directories.

DonTech Partnership Segment
As previously stated, the Company's income from partnerships from DonTech
decreased 4.2%, or $5.1 million, in 1997, primarily due to the contractual
decrease in the Company's share of the profits and sales and production
inefficiencies that arose from an unbalanced production schedule.

Directory Publishing Services Segment
Revenues of $25.1 million in 1997 were consistent with 1996 revenues of $24.7
million, after elimination of intercompany revenues of $9.9 million and $10.1
million, respectively. Operating loss in 1997 of $4.6 million was $2.3 million
higher than in 1996 due to higher depreciation on the Company's investment in
the Raleigh facility, which became operational in the second quarter of 1997.
Operating income excluding depreciation was $2.3 million, which was consistent
with 1996.

LIQUIDITY AND CAPITAL RESOURCES

In connection with the Distribution, Donnelley borrowed $300 million under its
Senior Secured Term Facilities ("Term Facilities") and issued $150 million of
Senior Subordinated Notes (the "Notes"). Donnelley also borrowed $50 million
against its $100 million Senior Revolving Credit Facility (the "Revolver",
together with the Term Facilities, the "Credit Agreement"). The net proceeds
from these borrowings (the "Debt"), were dividended to Old D&B and distributed
to New D&B in connection with the Distribution. The Term Facilities mature
between June 4, 2004, and December 5, 2006, and require quarterly principal
repayments. The Notes pay interest semi-annually at the annual rate of 9.125%,
and are due in 2008. The Credit Agreement and the Indenture governing the Notes
each contain various financial and other restrictive covenants, including
restrictions on indebtedness, capital expenditures and commitments. At February
28, 1999, Donnelley had $310.9 million of outstanding debt under the Credit
Agreement at a weighted average interest rate of 7.2% per annum, and available
borrowing capacity of $88.0 million under the Revolver.

To reduce the exposure to changes in interest rates on its floating rate
long-term debt under the Credit Agreement, Donnelley entered into interest rate
swap agreements having a total notional principal amount of $175 million. These
agreements



                                       13
<PAGE>   16
effectively change the interest rate on $175 million of floating rate borrowing
to fixed rates. The interest rate swap agreements expire between June 2001 and
June 2003. The notional amount of the swap agreements is used to measure
interest to be paid or received and does not represent the amount of exposure to
credit loss. Donnelley is exposed to credit risk in the event of nonperformance
by the other party to the interest rate swap agreements. However, Donnelley does
not anticipate nonperformance by the counterparty. In June 1998, the Financial
Accounting Standards Board issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. Because of the Company's limited use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a significant effect on earnings or the financial position
of the Company.

During 1998, the Company entered into a joint venture with China United
Telecommunications Corporation ("China Unicom") to publish yellow pages
directories and to offer Internet directory services in the People's Republic of
China. Under the terms of the joint venture agreement, the Company will invest
cash of approximately $15.6 million to acquire a 15% equity interest in the
joint venture. In 1998, the Company invested $1.3 million and will make
additional contributions totaling $14.3 million over the next two to three
years. The Company anticipates contributing approximately $8.0 million in 1999,
$3.8 million in 2000 and $2.5 million in 2001. These payments will be funded
from cash flows from operations or from borrowings under the Revolver.

During 1998, the Board of Directors authorized the Company to repurchase its
common stock under a systematic repurchase plan to offset the dilutive effect on
earnings from the exercise of employee stock options and also authorized a
general repurchase plan of up to $20 million of its common stock, from time to
time, depending on market conditions. At February 28, 1999, the Company had
spent approximately $4.7 million to repurchase shares under both the systematic
and general repurchase plans.

The Company believes that cash from operations, together with available debt
capacity under the Revolver, will be sufficient to permit the Company to fund
its cash requirements, including its operating expenses, anticipated capital
expenditures and debt service requirements, for the foreseeable future.

Cash Flow
Net cash flow provided by operations was $97.7 million in 1998, $99.7 million in
1997, and $100.5 million in 1996. Net income has declined in the three year
period mainly due to the loss of income from businesses that were sold, lower
earnings in the Bell Atlantic and Cincinnati operations, and increases in
expenses, principally interest and general and administrative expenses, as a
result of the Company's separation from Old D&B. This decline was offset by the
timing of partnership cash receipts, receivables changes and certain changes in
liabilities over the three year period. Fluctuations from cash received in
partnerships relative to income from partnerships is a result of the timing of
receipts and is not anticipated to fluctuate significantly in the future. Cash
generated by accounts receivable was positive in 1997, mainly due to lower Bell
Atlantic sales because of timing of directory publications. This situation
reversed itself in 1998. New receivables associated with the Cincinnati
directory in 1998 coupled with the reversal of the Bell Atlantic receivables
situation caused a negative effect on cash flow that year. Cash flow from
operations was also impacted by changes in net deferred tax liabilities over the
three year period principally as a result of estimates used to approximate tax
balances as if the Company was a separate entity for 1996 and 1997. Accounts
payable, accrued liabilities and other current liabilities were higher in 1998
as a result of accrued interest payable related to the Debt. It is not
anticipated that cash flow will fluctuate in the future as it had in this three
year period with respect to these liabilities.

Net cash flow from investing activities used $12.7 million in 1998, provided
$105.7 million in 1997 and used $16.5 million in 1996. The amount in 1997
includes $122.0 million from the sale of the P-East business and the 1996 amount
includes $21.4 million received from the sale of the P-West business.
Expenditures for property and equipment and computer software were $12.7 million
in 1998, $16.3 million in 1997 and $37.8 million in 1996. The higher spending in
1996 was due to the Company's investment in its new publishing facility in
Raleigh, North Carolina. The Company currently has no material commitments for
capital expenditures.

Net cash used in financing activities was $82.8 million in 1998, $205.4 million
in 1997 and $85.5 million in 1996. Prior to July 1, 1998, all cash deposits were
transferred to Old D&B on a daily basis and Old D&B funded the Company's
disbursement bank accounts as required. The net amounts transferred to Old D&B
were $529.3 million in 1998, $205.4 million in 1997 and $85.5 million in 1996.
The amount transferred in 1998 includes the net proceeds from the Debt and the
amounts for 1997 and 1996 include the proceeds from the sale of the P-East and
P-West businesses, respectively. Additionally, cash was used in 1998 to repay
debt ($31.4 million), to repurchase common stock under the Company's



                                       14
<PAGE>   17
systematic stock repurchase plan ($1.0 million) and to pay dividends to
shareholders ($12.0 million). During 1998, the Company announced that it would
cease paying a dividend after the payment of the fourth quarter 1998 cash
dividend.

YEAR 2000 ISSUE

The Year 2000 ("Y2K") issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. Computer
programs that have date sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions.

As part of its Y2K compliance program, all of the Company's installed computer
systems and software products have been assessed for Y2K problems. The Company
has replaced its financial systems (General Ledger, Accounts Payable, and Fixed
Assets) with systems that use programs from Oracle Corporation, which have been
tested and certified to be Y2K compliant. For all remaining systems, software
programs are being modified or replaced. The Company is requesting assurances
from all software vendors from which it has purchased or licensed software, or
from which it may purchase or license software, that such software will
correctly process all date information at all times. Additionally, all
modifications to existing software, or new software installed by the Company are
subjected to the Company's internal Y2K compliance program described below.
Through continued modifications to existing software and the conversions to new
software, the Company believes that it will be able to mitigate its exposure to
the Y2K issue before 2000. However, if continued modifications and conversions
are not made, or not completed on a timely basis, the Y2K issue could have a
material adverse effect on the Company's operating results and financial
condition.

The Company's Y2K compliance program is divided into five major phases - (1) the
assessment of all computer systems and software products (collectively the
"Computer Systems") for Y2K compliance, (2) the remediation (i.e. conversion or
modification) of each Computer System to be Y2K compliant, (3) the testing of
the remediation to confirm that such remediation has not adversely impacted the
operation of the Computer Systems, and that it can process dates in the year
2000 and beyond, (4) the implementation of the remediated Computer Systems into
production and (5) certification of the remediation for Y2K compliance. The
percentage of completion of each phase at the end of February 1999 is shown in
the table below:

<TABLE>
<S>                                              <C>
         Assessment.........................     100%
         Remediation........................     100%
         Testing............................      98%
         Implementation.....................      96%
         Certification......................      75%
</TABLE>


In addition, it is possible that certain computer systems or software products
with which the Company's computer systems, software, databases or other
technology interface or are integrated with may not accept input of, store,
manipulate and output dates in the year 2000 or thereafter without error or
interruption. The Company has conducted a review of its computer systems to
attempt to identify ways in which its systems could be affected by interface- or
integration-related problems in correctly processing date information. The
Company is communicating with those third parties with which it maintains
business relationships to monitor and evaluate their progress in identifying and
addressing their Y2K issues and assessing the potential impact, if any, to the
Company. Currently, nothing has come to the Company's attention that would
indicate that the Y2K compliance efforts of a major third party would have a
material adverse effect on the Company's results of operations and financial
condition. However, there can be no assurance that the Company will identify all
interface- or integration-related or third party-related problems in advance of
their occurrence, or that the Company will be able to successfully remedy
problems that are discovered. The expenses of the Company's efforts to identify
and address such problems, or the expenses and liabilities to which the Company
may become subject to as a result of such problems, could have a material
adverse effect on its results of operations and financial condition.

The Company expects to have its Y2K compliance program substantially completed
by the first quarter of 1999. The Company continually assesses the risk of
non-compliance of its systems and the systems of major third parties and is
currently in the process of developing contingency plans and alternative
arrangements for circumstances outside the direct control of the Company.



                                       15
<PAGE>   18
The Company has spent approximately $4.1 million addressing the Y2K issues and
estimates that it will spend an additional $1.2 million in 1999. These costs
will be funded through cash flows from operations.

MARKET RISK SENSITIVE INSTRUMENTS

Interest Rate Risk
The Company is exposed to interest rate risk through its Credit Agreement, where
it borrows at prevailing short-term variable rates. In order to manage its
exposure to fluctuations in interest rates, the Company uses interest rate swap
agreements which allow the Company to raise funds at floating rates and
effectively swap them into fixed rates that are lower than those available to it
if fixed rate borrowings were made directly. These derivative financial
instruments are viewed by the Company as risk management tools that are entered
into for hedging purposes only. The Company does not use derivative financial
instruments for trading or speculative purposes. A discussion of the Company's
accounting policies for derivative financial instruments is included in Note 2 -
Summary of Significant Accounting Policies, and further disclosure relating to
financial instruments is included in Note 12 - Financial Instruments.

The fair value of interest rate risk is calculated by the Company utilizing
estimates of the termination value of the Company's interest rate swaps based
upon a 10% increase, or decrease in interest rates from December 31, 1998,
levels. Fair values are the present value of projected future cash flows based
on the market rates and prices chosen. At December 31, 1998, the unrealized fair
value of the interest rate swaps was a loss of $3.6 million. Assuming an
instantaneous parallel upward shift in the yield curve of 10% from December 31,
1998, levels, the unrealized fair value of the Company's interest rate swaps
would be a loss of $0.6 million. Assuming an instantaneous parallel downward
shift in the yield curve of 10% from December 31, 1998, levels, the unrealized
fair value of the Company's interest rate swaps would be a loss of $6.5 million.

Foreign Exchange Risk
The Company's 15% equity interest in the joint venture with China Unicom
represents the Company's only foreign operations. Given the current size of the
joint venture operations and the Company's 15% equity interest, exposure to
changes in foreign exchange rates at this time is minimal.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


The requirements of this Item are discussed in Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations.







                                       16
<PAGE>   19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
R.H. DONNELLEY CORPORATION

Report of Independent Accountants................................................................         18
Consolidated Statements of Operations for the three years ended December 31, 1998................         19
Consolidated Balance Sheets at December 31, 1998 and 1997........................................         20
Consolidated Statements of Cash Flows for the three years ended December 31, 1998................         21
Consolidated Statement of Changes in Shareholders' Equity (Deficit)
    for the three years ended December 31, 1998..................................................         22
Notes to Consolidated Financial Statements.......................................................         23



DONTECH

Report of Independent Accountants................................................................         38
Combined Statements of Operations for the three years ended December 31, 1998....................         39
Combined Balance Sheets at December 31, 1998 and 1997............................................         40
Combined Statements of Cash Flows for the three years ended December 31, 1998....................         41
Combined Statements of Partners' Capital for the three years ended December 31, 1998.............         42
Notes to Combined Financial Statements...........................................................         43
</TABLE>





                                       17
<PAGE>   20
                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and
Shareholders of R.H. Donnelley Corporation:


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of R.H.
Donnelley Corporation (the "Company") and its subsidiary at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As indicated in Note 2, the consolidated balance sheets at December 31, 1998 and
1997 and the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1998 have been restated.




                                        /s/ PRICEWATERHOUSECOOPERS LLP



New York, New York
February 19, 1999, except for the restatement
paragraph in Note 2, as to which
the date is July 27, 1999







                                       18
<PAGE>   21
                           R.H. DONNELLEY CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                              YEARS ENDED DECEMBER 31,
                                                                              -----------------------------------------------------
                                                                               1998 (1)             1997 (1)              1996 (1)
                                                                              --------             --------              --------
<S>                                                                           <C>                  <C>                   <C>
(in thousands, except per share data)

Revenues ........................................................             $ 169,090             $ 238,823             $ 268,937

Expenses
  Operating expenses ............................................               123,146               164,636               170,168
  General and administrative expenses ...........................                28,447                29,576                30,999
  Provision for bad debts .......................................                 8,538                18,382                17,828
  Depreciation and amortization .................................                19,578                21,930                16,229
                                                                              ---------             ---------             ---------
     Total expenses .............................................               179,709               234,524               235,224

Income from partnerships and related fees .......................               135,854               130,171               132,945
                                                                              ---------             ---------             ---------

     Operating income ...........................................               125,235               134,470               166,658

Interest expense, net ...........................................                23,141                    --                    --

Gain (loss) on dispositions .....................................                    --                 9,412               (28,500)
                                                                              ---------             ---------             ---------

     Income before provision for income taxes ...................               102,094               143,882               138,158

Provision for income taxes ......................................                40,826                59,139                60,513
                                                                              ---------             ---------             ---------

     Net income .................................................             $  61,268             $  84,743             $  77,645
                                                                              =========             =========             =========

Earnings per share
     Basic ......................................................             $    1.79             $    2.48             $    2.28
                                                                              =========             =========             =========
     Diluted ....................................................             $    1.77             $    2.48             $    2.28
                                                                              =========             =========             =========

Shares used in computing earnings per share
     Basic ......................................................                34,237                34,153                34,003
                                                                              =========             =========             =========
     Diluted ....................................................                34,522                34,213                34,058
                                                                              =========             =========             =========
</TABLE>




               The accompanying notes are an integral part of the
                       consolidated financial statements.

(1)   Restated - see Note 2 to the consolidated financial statements.





                                       19
<PAGE>   22
                           R.H. DONNELLEY CORPORATION

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                                            DECEMBER 31,
                                                                                               ----------------------------------
                                                                                                1998 (1)                 1997 (1)
                                                                                               --------                  --------
<S>                                                                                            <C>                       <C>
(in thousands, except share and per share data)
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ..................................................                 $   2,302                  $      32
  Accounts receivable:
    Billed ...................................................................                     6,941
                                                                                                                              5,208
    Unbilled .................................................................                    63,392                     68,483
    Other ....................................................................                     8,712
                                                                                                                              4,562
    Allowance for doubtful accounts ..........................................                    (4,503)                    (3,295)
                                                                                               ---------                  ---------
     Total accounts receivable--net ..........................................                    74,542                     74,958
  Deferred contract costs ....................................................                    10,746                     10,973
  Other current assets .......................................................                     4,278                        388
                                                                                               ---------                  ---------
     Total current assets ....................................................                    91,868                     86,351

  Property and equipment--net ................................................                    21,077                     25,460
  Computer software--net .....................................................                    33,523                     37,546
  Partnership investments and related receivables ............................                   216,482                    218,620
  Other non-current assets ...................................................                    22,891                      9,530
                                                                                               ---------                  ---------

     Total Assets ............................................................                 $ 385,841                  $ 377,507
                                                                                               =========                  =========

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable ...............................................................             $   1,654                  $   1,395
  Accrued and other current liabilities ..........................................                67,360                     56,159
  Current portion of long-term debt ..............................................                 4,125                         --
                                                                                               ---------                  ---------
     Total current liabilities ...................................................                73,139                     57,554

  Long-term debt .................................................................               464,500                         --
  Deferred income taxes ..........................................................                50,909                     34,456
  Postretirement and postemployment benefits .....................................                 9,648                     12,920
  Other liabilities ..............................................................                12,415                     16,770


Commitments and contingencies

SHAREHOLDERS' EQUITY (DEFICIT):
  Preferred stock, par value $1 per share,
    authorized--10,000,000 shares, outstanding -- none ...........................                      --                       --
  Common stock, par value $1 per share, authorized--
    400,000,000 shares; issued--51,621,894 and 51,967,121
    shares for 1998 and 1997, respectively .......................................                  51,622                   51,967
  Additional paid-in capital .....................................................                     274                       --
  Retained earnings (deficit) ....................................................                (258,594)                 221,694
  Treasury stock, at cost, 17,419,739 and 17,853,652
    shares for 1998 and 1997, respectively .......................................                 (18,072)                 (17,854)
                                                                                                 ---------                ---------
     Total shareholders' equity (deficit) ........................................                (224,770)                 255,807
                                                                                                 ---------                ---------

     Total Liabilities and Shareholders' Equity (Deficit) ........................               $ 385,841                $ 377,507
                                                                                                 =========                =========
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.

(1)   Restated - see Note 2 to the consolidated financial statements.






                                       20
<PAGE>   23
                           R.H. DONNELLEY CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                       YEARS ENDED DECEMBER 31,
                                                                           ---------------------------------------------
                                                                            1998 (1)         1997 (1)            1996 (1)
                                                                           ---------         --------            --------
<S>                                                                         <C>              <C>                <C>
(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income...........................................................     $ 61,268         $ 84,743           $ 77,645
  Reconciliation of net income to net cash
   provided by operating activities:
    Depreciation and amortization......................................       19,578           21,930             16,229
    Amortization of deferred financing costs...........................          793               --                 --
    Provision for doubtful accounts....................................        8,538           18,382             17,828
    (Gain) loss from sale of business..................................           --           (9,412)            28,500
    Cash received (less than) in excess of
      income from partnerships.........................................       (1,061)          10,930            (18,593)
    Loss on sale of property and equipment.............................           --            1,551                724
    (Increase) decrease in accounts receivable.........................       (8,122)          16,566             (8,882)
    Decrease (increase) in deferred contract costs.....................          227           (7,428)            (8,364)
    (Increase) decrease in other assets................................       (5,223)           1,806              4,090
    Increase (decrease) in accounts payable,
      accrued and other current liabilities............................       12,908          (39,100)           (27,125)
    Increase (decrease) in other liabilities...........................        8,826             (314)            18,486
                                                                            --------         --------           --------
     Net cash provided by operating activities.........................       97,732           99,654            100,538

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of business.......................................           --          122,000             21,368
  Additions to property and equipment..................................       (5,207)          (9,078)           (15,965)
  Additions to computer software.......................................       (7,443)          (7,190)           (21,859)
                                                                            --------         --------           --------
     Net cash (used in) provided by investing activities...............      (12,650)         105,732            (16,456)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from long-term borrowings...............................      490,408               --                 --
  Repayment of debt....................................................      (31,375)              --                 --
  Net distributions to Old D&B.........................................     (529,306)        (205,414)           (85,466)
  Purchase of treasury stock...........................................       (1,017)              --                 --
  Payment of dividend..................................................      (12,016)              --                 --
  Other, net...........................................................          494               --                 --
                                                                            --------         --------           --------
     Net cash used in financing activities.............................      (82,812)        (205,414)           (85,466)
                                                                            --------         --------           --------

     Increase (decrease) in cash and cash equivalents..................        2,270              (28)            (1,384)

Cash and cash equivalents, beginning of year...........................           32               60              1,444
                                                                            --------         --------           --------

Cash and cash equivalents, end of year.................................    $   2,302      $        32        $        60
                                                                            ========         ========           ========
</TABLE>


               The accompanying notes are an integral part of the consolidated
financial statements.

(1)   Restated - see Note 2 to the consolidated financial statements.




                                       21
<PAGE>   24
                           R.H. DONNELLEY CORPORATION

      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>

                                                                                                                          Total
                                                                                            Retained                   Shareholders
                                                               Common         Paid-in       Earnings      Treasury         Equity
                                                               Stock          Capital     (Deficit) (1)     Shares     (Deficit) (1)
                                                               -----          -------     -------------     ------     -------------

<S>                                                           <C>            <C>            <C>            <C>            <C>
(in thousands, except per share data)

Balance, January 1, 1996 as previously reported .........     $  52,910      $      --      $ 352,687      $ (19,032)     $ 386,565
Prior period adjustment - See Note 2 ....................                                      (2,266)                       (2,266)
                                                              ---------      ---------      ---------      ---------      ---------
Balance January 1, 1996 as restated .....................        52,910             --        350,421        (19,032)       384,299

Net income ..............................................                                      77,645                        77,645
Net distribution to Old D&B .............................                                     (85,466)                      (85,466)
Net change due to treasury stock activity ...............        (1,136)                         (283)         1,419             --
                                                                             ---------      ---------      ---------      ---------
Balance, December 31, 1996 ..............................        51,774             --        342,317        (17,613)       376,478

Net income ..............................................                                      84,743                        84,743
Net distribution to Old D&B .............................                                    (205,414)                     (205,414)
Net change due to treasury stock activity ...............           193                            48           (241)            --
                                                              ---------      ---------      ---------      ---------      ---------
Balance, December 31, 1997 ..............................        51,967             --        221,694        (17,854)       255,807

Net income ..............................................                                      61,268                        61,268
Dividends paid ($0.35 per share) ........................                                     (12,016)                      (12,016)
Net distribution to Old D&B .............................                                    (529,306)                     (529,306)
Net change due to treasury stock activity
    prior to the Distribution ...........................          (345)           274           (234)           799            494
Purchase of treasury shares .............................                                                     (1,017)        (1,017)
                                                              ---------      ---------      ---------      ---------      ---------
Balance, December 31, 1998 ..............................     $  51,622      $     274      $(258,594)     $ (18,072)     $(224,770)
                                                              =========      =========      =========      =========      =========
</TABLE>







         The accompanying notes are an integral part of the consolidated
                             financial statements.


(1)   Restated - see Note 2 to the consolidated financial statements.




                                       22
<PAGE>   25
                           R.H. DONNELLEY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT SHARE DATA, UNLESS OTHERWISE NOTED)

1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

R.H. Donnelley Corporation (the "Company") provides advertising sales and
marketing services for yellow pages and other directory products under long-term
sales agency agreements and joint venture partnerships with operating units of
major telephone companies as well as through its own independent operations. The
Company is a sales agent in New York State for an operating unit of Bell
Atlantic and in Florida for an operating unit of Sprint. It also serves as a
sales agent for the CenDon partnership ("CenDon"), a 50/50 partnership between
the Company and an operating unit of Sprint that was formed to publish
directories in Florida, Nevada, Virginia and North Carolina. The Company also
has a 50/50 partnership ("DonTech") with an operating unit of Ameritech
Corporation which acts as the exclusive sales agent for yellow pages directories
published by Ameritech in Illinois and northwest Indiana. The Company's
independent operations are located in Cincinnati, Ohio. The Company also
provides pre-press publishing services for yellow pages directories, including
advertisement creation, sales contract management, listing database management,
sales reporting and commissions, pagination, billing services and imaging, to
other yellow pages publishers and its existing customers under separately
negotiated contracts.

Prior to July 1, 1998, the Company operated as part of The Dun & Bradstreet
Corporation ("Old D&B"). On December 17, 1997, the Board of Directors of Old D&B
approved in principle a plan to separate into two publicly traded companies -
R.H. Donnelley Corporation and The New Dun & Bradstreet Corporation ("New D&B").
The distribution ("Distribution") was the method by which Old D&B distributed to
its shareholders shares of New D&B common stock. On July 1, 1998, as part of the
Distribution, Old D&B distributed to its shareholders shares of New D&B stock.
In connection with the Distribution, Old D&B changed its name to R.H. Donnelley
Corporation. After the Distribution, the Company's only operating subsidiary is
R.H. Donnelley Inc. ("Donnelley"). Therefore, on a consolidated basis, the
financial statements of the Company and Donnelley are substantially identical.

The financial statements reflect the financial position, results of operations,
and cash flows of the Company as if it were a separate entity for all periods
presented. Old D&B provided certain centralized services to the Company, the
cost of which was allocated to the Company. Management believes these
allocations were reasonable; however, the costs of these services are not
necessarily indicative of the costs that would have been incurred if the Company
had performed or provided these services as a separate entity. These allocations
were $11,570 for the six months ended June 30, 1998, $21,531 and $18,626 for the
years ended 1997 and 1996, respectively, and are included in operating expenses
and general and administrative expenses in the Consolidated Statements of
Operations.

The Company retained all the assets and liabilities related to the yellow pages
and other directory product sales, marketing and publishing service businesses
after the Distribution as well as an allocation of certain Old D&B corporate
headquarters assets and liabilities relating to the Company's businesses.
Management believes these allocations were reasonable. The financial information
included herein may not necessarily reflect the results of operations, financial
position, changes in shareholders' equity and cash flows of the Company in the
future or what they would have been had the Company been a separate, stand-alone
entity during the periods presented.

In connection with the Distribution, Donnelley entered into a credit agreement
with the Chase Manhattan Bank, and the Lenders party thereto. Under the terms of
the agreement, Donnelley obtained a Senior Revolving Credit Facility of $100,000
and Senior Secured Term Facilities in the aggregate amount of $300,000 of which
Donnelley initially borrowed $350,000. In addition, Donnelley issued $150,000 of
Senior Subordinated Notes. The aggregate $500,000 was dividended to Old D&B, but
repayment of such indebtedness remains an obligation of Donnelley, as guaranteed
by the Company. Net distributions to Old D&B include net cash transfers, third
party liabilities paid on behalf of the Company by Old D&B and amounts due
to/from Old D&B for services and other charges. No interest was charged on these
intercompany transactions.

For purposes of governing certain of the ongoing relationships between the
Company and New D&B after the Distribution and to provide for orderly
transition, the Company and New D&B entered into various agreements including a
Distribution



                                       23
<PAGE>   26
Agreement, Tax Allocation Agreement, Employee Benefits Agreement, Shared
Transaction Services Agreement, Intellectual Property Agreement, Data Services
Agreement, and Transition Services Agreement.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Restatement. The Company's financial statements for the three years ended
December 31, 1998 have been restated to reflect a change in the recording of
revenues for certain directories in the Sprint relationship. For certain Sprint
directories, the Company earns both revenue from commissions on the sale of
directory advertising, and a share of income from the CenDon partnership.
Previously, sales commission revenues from these directories, including the
semi-annual Las Vegas directory, were recorded in July and December. However,
the Company's share of income from the partnership, which publishes the
directories, was recorded in July and January when the directories were
published. To be consistent, the Company conformed the interim and year-end
accounting to record the sales commission revenue and its share of income from
the partnership in July and January. The change impacted the previously reported
results for the first and fourth quarters and had a minimal impact on the annual
results. The effect of the restatement on the previously reported quarterly
results for 1998 and 1997 and the full year impact for each of the three years
ended December 31, 1998 is as follows:


<TABLE>
<CAPTION>
                                    First Quarter             Fourth Quarter            Full Year
                                  --------------------       -------------------    --------------------
                                     As         As             As         As           As         As
                                  Reported    Restated       Reported   Restated     Reported   Restated
                                  --------    --------       --------   --------     --------   --------
<S>                               <C>         <C>            <C>        <C>          <C>        <C>
1998
Revenue                            $24,344    $33,871         $54,259    $43,834     $169,988   $169,090
Operating income                    20,245     25,024          23,305     18,020      125,741    125,235
Net income                          12,147     15,015           8,121      4,961       61,560     61,268
EPS-Basic                             0.36       0.44            0.24       0.15         1.80       1.79
EPS-Diluted                           0.35       0.44            0.24       0.14         1.78       1.77

1997
Revenue                             20,207     28,692          96,465     86,938      239,865    238,823
Operating income                    (2,290)     2,220          80,407     75,628      134,739    134,470
Net income                          (1,374)     1,332          52,306     49,438       84,905     84,743
EPS-Basic                           (0.04)       0.04            1.53       1.45         2.49       2.48
EPS-Diluted                         (0.04)       0.04            1.53       1.45         2.48       2.48

1996
Revenue                                                                               270,029    268,937
Operating income                                                                      167,442    166,658
Net income                                                                             78,085     77,645
EPS-Basic                                                                                2.30       2.28
EPS-Diluted                                                                              2.29       2.28
</TABLE>



<TABLE>
<CAPTION>
Balance Sheet Data:                               1998                     1997
                                           --------------------       -----------------
                                              As         As             As         As
                                           Reported   Restated       Reported   Restated
                                           --------   --------       --------   --------
<S>                                        <C>        <C>            <C>        <C>
Total Assets                              $ 391,126   $ 385,841      $382,286   $377,507
Shareholders' (Deficit) Equity             (221,610)   (224,770)      258,675    255,807
</TABLE>



Principles of Consolidation. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All intercompany
transactions and balances have been eliminated. Investments in the Company's 50%
or less owned partnerships are accounted for under the equity method of
accounting. The Company's share of partnerships' operating results is reflected
in Income from partnerships and related fees. Related fees represent the revenue
participation earnings from an operating unit of Ameritech Corporation
("Ameritech") (see Note 4).


                                       24
<PAGE>   27
Revenue Recognition. The Company recognizes revenue as earned, which is based on
contractual relationships. For agreements where the Company is a sales agent,
revenue is comprised of sales commissions and is recognized upon execution of
contracts for the sale of advertising. For businesses where the Company is the
publisher, revenues are recognized when directories are published. Revenues from
publishing services are recognized on a straight-line basis throughout the year
as the services are performed.

Cash and Cash Equivalents. Cash equivalents include highly liquid investments
with a maturity of less than three months at the time of acquisition.

Unbilled Receivables. For agreements where the Company is a sales agent,
unbilled receivables represent revenues earned from the sale of advertising in
directories that are scheduled to be published by the publisher. These
receivables will be billed to the publisher upon directory publication in
accordance with contractual provisions. For businesses where the Company is the
publisher, unbilled receivables represent revenues earned on published
directories. In most cases, advertisers are billed ratably over the life of the
directories, which is generally 12 months.

Deferred Contract Costs. Direct costs incurred by the Company as publisher are
deferred until the related directory is published. Direct costs incurred where
the Company is a sales agent are expensed in the period incurred.

Property and Equipment. Property and equipment are recorded at cost.
Depreciation is provided over the estimated useful lives of depreciable assets
using the straight-line method. Estimated useful lives are five years for
machinery and equipment, ten years for furniture and fixtures, and three to five
years for computer equipment. Leasehold improvements are amortized on a
straight-line basis over the shorter of the term of the lease or the estimated
useful life of the improvement.

Capitalized Software Costs. Certain direct costs incurred for computer software
to meet the needs of the Company and its customers are capitalized. These costs
are amortized on a straight-line basis over five years. In March 1998, the
Accounting Standards Executive Committee of the AICPA issued Statement of
Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." The SOP requires the capitalization of certain costs
incurred in connection with developing or obtaining software for internal use
and is effective for fiscal years beginning after December 15, 1998. The
Company's existing accounting policy is in compliance with the requirements of
the SOP.

Long-Lived Assets. The Company has adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of." This statement
requires that long-lived assets and certain identifiable intangibles held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In general, an impairment loss would be recognized when the sum of
the undiscounted expected future cash flows is less than the carrying amount of
such assets. The measurement for such an impairment loss is then based on the
fair value of the asset.

Income Taxes. The Company accounts for income taxes under the liability method
in accordance with SFAS 109, "Accounting for Income Taxes." Prior to the
Distribution, the Company was included in the Federal and certain state income
tax returns of Old D&B. The provision for income taxes for the three years ended
December 31, 1998, 1997 and 1996 have been calculated on a separate-company
basis and the income taxes paid on behalf of the Company through June 30, 1998,
by Old D&B have been included in equity.

Concentration of Credit Risk. The Company maintains significant accounts
receivable balances from its agreements with operating units of Ameritech, Bell
Atlantic and Sprint. The Company establishes an allowance for doubtful accounts
based on the expected collectibility of accounts receivable from advertisers
principally from historical trends. The Company does not currently foresee a
credit risk associated with these receivables due to the high credit ratings of
its counterparties.

Comprehensive Income. Effective January 1, 1998, the Company adopted SFAS No.
130, "Reporting Comprehensive Income." This statement requires that all items
recognized under accounting standards as components of comprehensive earnings be
reported in a financial statement for the period in which they are recognized
and displayed with the same prominence as other financial statements. There were
no additional components of comprehensive income and, as a result, the Company's
total comprehensive income for the periods presented were equal to net income.

Derivative Financial Instruments. The Company uses interest rate swap contracts
to manage market risk and reduce its exposure to fluctuations in interest rates
on its variable rate debt. Periodic payments and receipts under the interest
rate



                                       25
<PAGE>   28
swaps are recorded as part of interest expense. The related amounts payable to,
or receivable from, the counterparty are included in accrued and other current
liabilities or other current assets. The fair value of the interest rate swaps
are not recognized in the consolidated financial statements as they are
accounted for as hedges. If the interest rate swaps cease to qualify as a hedge,
any subsequent gains and losses are recognized currently in income. The Company
is subject to credit risk in the event of nonperformance by the counterparty to
the interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparty. The Company does not use derivative
financial instruments for trading or speculative purposes.

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's limited use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.

Earnings Per Share of Common Stock. Basic earnings per share are calculated by
dividing net income by the weighted average common shares outstanding during the
year. Diluted earnings per share are calculated by dividing net income by the
weighted average common shares outstanding and potentially dilutive common
shares, primarily employee stock options. Potentially dilutive common shares are
calculated in accordance with the treasury stock method, which assumes that
proceeds from the exercise of all employee options are used to repurchase common
stock at market value. The amount of shares remaining after the proceeds are
exhausted represent the number of potentially dilutive options.

The table below provides a reconciliation of basic weighted average shares
outstanding to dilutive weighted average shares outstanding. At December 31,
1998, options to purchase 2,026,740 shares of common stock were not included in
the computation of diluted earnings per share because the effect would have been
antidilutive.

<TABLE>
<CAPTION>
                                                                     1998         1997         1996
                                                                     ----         ----         ----
                                                                             (in thousands)
<S>                                                                  <C>         <C>          <C>
Weighted average shares outstanding - basic.....................     34,237      34,153       34,003
Effect of potentially dilutive stock options as of year end.....        285          60           55
                                                                     ------      ------       ------
Weighted average shares outstanding - assuming dilution.........     34,522      34,213       34,058
                                                                     ======      ======       ======
</TABLE>



During 1998, the Company executed a one-for-five split of its outstanding common
stock. All share and per share data provided herein has been adjusted to reflect
such a reverse stock split.

Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosure of contingent assets and liabilities. Actual
results could differ from those estimates. Estimates are used in the
determination of allowances for bad debts, depreciation and amortization and
employee benefit plans, among others.

Reclassifications. In 1998, the Company reclassified certain expenses related to
the sale of advertising, historically included as general and administrative
expenses, to operating expenses. To better measure the contribution of each
operating unit and facilitate decision making and resource allocation, these
costs have been reclassified from general and administrative to operating
expenses on the Consolidated Statements of Operations. As a result, general and
administrative costs of $33,040 and $34,629 were reclassified to operating
expenses for 1997 and 1996, respectively. In addition, certain prior year
amounts have been restated to conform to the 1998 presentation. These
reclassifications had no impact on previously reported results of operations or
shareholders' equity.

3.  NON-RECURRING ITEMS

Post-Distribution Adjustments
The asset and liability amounts allocated to the Company by Old D&B pursuant to
the Distribution Agreement were based on preliminary estimates and subject to
revision based on final determinations of amounts. Accordingly, adjustments have
been made to reflect approximately $13.6 million of additional deferred tax
liabilities and to decrease benefit liabilities originally assumed by
approximately $8.1 million. These adjustments have been reflected as an
adjustment to equity and did not have any impact on the Consolidated Statements
of Operations.


                                       26
<PAGE>   29
Sale of Businesses
The 1997 operating results include a pretax gain of $9,412 related to the sale
of its Proprietary-East business ("P-East"). In connection with the sale of the
P-East business, the Company maintained a continuing obligation to provide
publishing services through the year 2002 to the acquirer. This obligation has
been adequately provided for in the financial statements.

The 1996 results reflect a pre-tax charge of $28,500 incurred as a result of the
sale of the Proprietary-West business ("P-West").

4.  PARTNERSHIPS

DonTech. In 1991, the Company formed a general partnership with an operating
unit of Ameritech, the DonTech Partnership ("DonTech I"). Prior to August 1997,
DonTech I published various directories, solicited advertising, and manufactured
and delivered directories in Illinois and northwest Indiana. Under this
agreement, the Company's share in the profits of DonTech I was 54% in 1996 and
53% during 1997. In August 1997, the Company signed a series of agreements with
Ameritech changing the structure of the existing partnership. A new partnership
was formed ("DonTech") appointing DonTech the exclusive sales agent in
perpetuity for yellow pages directories published by Ameritech in Illinois and
northwest Indiana. Under the new sales agency partnership, DonTech performs the
advertising sales function for the directories and earns a commission while
Ameritech serves as the publisher. The Company has a 50% interest in the profits
of DonTech. The Company also receives direct fees ("Revenue Participation"),
from an operating unit of Ameritech, which are tied to advertising sales.

The Company recognized equity earnings, including Revenue Participation, of
$120,087, $116,228, and $121,354 from the DonTech partnership during 1998, 1997,
and 1996, respectively. The Company's investment in DonTech was $198,848 and
$203,589 at December 31, 1998 and 1997, respectively. The Revenue Participation
receivable from Ameritech, included in the Company's total investment, was
$100,748 at December 31, 1998, and $51,610 at December 31, 1997.

CenDon. The Company has a 50% interest in the profits of CenDon. The Company
recognized equity earnings of $15,767, $12,219 and $9,695 from CenDon during
1998, 1997 and 1996, respectively. The Company's investment in CenDon was
$17,634 and $15,031 at December 31, 1998 and 1997, respectively. The CenDon
agreement extends through the end of December 2004.

The Company also provides sales and publishing services to CenDon. The
partnership is billed upon the publication of each directory based on a
contractual rate for sales and is billed pro rata during the year for publishing
services based on a contractual fee. Sales commissions and publishing services
revenue for the Company from CenDon were $37,507, $34,084, and $31,166 for 1998,
1997 and 1996, respectively.

5.  PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1998 and 1997, consisted of the
following:

<TABLE>
<CAPTION>
                                                                              1998             1997
                                                                              ----             ----

<S>                                                                         <C>              <C>
Computer equipment.....................................................     $ 40,143         $ 35,587
Machinery and equipment................................................        5,365            4,949
Furniture and fixtures.................................................        8,082            7,928
Leasehold improvements.................................................        7,121            7,121
                                                                            --------         --------
     Total cost........................................................       60,711           55,585
Less accumulated depreciation..........................................       39,634           30,125
                                                                            --------         --------
     Net property and equipment........................................     $ 21,077         $ 25,460
                                                                            ========         ========
</TABLE>







                                       27
<PAGE>   30
6.  COMPUTER SOFTWARE

Computer software costs capitalized at December 31, 1998 and 1997, consisted of
the following:

<TABLE>
<CAPTION>
                                                                              1998             1997
                                                                              ----             ----
<S>                                                                         <C>              <C>
Computer software, at cost.............................................     $ 60,253         $ 52,784
Less accumulated amortization..........................................       26,730           15,238
                                                                            --------         --------
     Net computer software.............................................     $ 33,523         $ 37,546
                                                                            ========         ========
</TABLE>


Amortization expense charged to earnings was $10,017 in 1998 and $9,789 in 1997.

7.  LONG-TERM DEBT AND CREDIT FACILITIES

Long-term debt at December 31, 1998 consisted of the following:

<TABLE>
<CAPTION>
                                                                              1998
                                                                              ----

<S>                                                                        <C>
Senior subordinated 9.125% Notes.......................................    $ 150,000
Senior secured term facilities.........................................      298,875
Senior revolving credit facility.......................................       19,750
                                                                           ---------
     Total.............................................................      468,625
Less current portion                                                           4,125
                                                                           ---------
     Net long-term debt................................................    $ 464,500
                                                                           =========
</TABLE>


All long-term debt was incurred on June 5, 1998, in connection with the
Distribution. Accordingly, no long-term debt was outstanding at December 31,
1997. In connection with the issuance of long-term debt, the Company incurred
deferred financing costs of $9,592, which are being amortized over the term of
the debt. During 1998, $793 was amortized and included in interest expense.

The Senior Subordinated Notes (the "Notes") pay interest semi-annually and
mature in 2008. The Notes Indenture contains covenants which, among other
things, restricts the ability of the Company and its subsidiary to incur certain
additional debt and liens and engage in mergers, consolidations and asset sales.
The Notes are callable at the option of the Company at any time on or after June
1, 2003.

The Company's committed bank facilities consist of an aggregate $300,000 Senior
Secured Term Facilities ("Term Facilities") and a $100,000 Senior Revolving
Credit Facility (the "Revolver"). The Term Facilities require quarterly
principal repayments and mature between June 2004 and December 2006. The
Revolver matures in June 2004. These facilities bear interest at a floating rate
based on a spread over London interbank offered rate (LIBOR) or the greater of
either the Prime rate or the Fed Funds rate plus 50 basis points, at the
election of the Company. The committed facilities contain covenants that, among
other things, restrict the ability of the Company and its subsidiary to engage
in mergers, consolidations and asset sales, incur additional indebtedness and
liens and require the Company to maintain certain financial ratios. At December
31, 1998, the Company had $318,625 of outstanding debt under the Term Facilities
and Revolver at a weighted average interest rate of 7.1% per annum. At December
31, 1998, the Company had available borrowing capacity of $80,250 under the
Revolver.

Aggregate maturities of long-term debt are:

<TABLE>
<S>                                                                        <C>
       1999............................................................     $  4,125
       2000............................................................        9,750
       2001............................................................       15,375
       2002............................................................       19,125
       2003............................................................       24,750
       Thereafter......................................................      395,500
                                                                            --------
         Total.........................................................     $468,625
                                                                            ========
</TABLE>



                                       28
<PAGE>   31
At December 31, 1998, interest payable of $11,392 was recorded in the financial
statements as a component of accrued and other current liabilities. Cash
interest paid for the period ended December 31, 1998 totaled $15,866.

8.  COMMITMENTS AND CONTINGENCIES

The Company leases office facilities and computer and other equipment under
operating leases with terms expiring at various dates through 2011. Rent expense
under real estate operating leases for the years 1998, 1997, and 1996 was
$6,948, $8,612 and $9,482, respectively. Lease expense under computer and other
equipment leases was $2,032, $2,245 and $1,762 for 1998, 1997, and 1996
respectively.

The approximate minimum rental payments applicable to noncancelable operating
leases at December 31, 1998, are:

<TABLE>
<CAPTION>
<S>                                                                         <C>
       1999............................................................     $  7,994
       2000............................................................        7,397
       2001............................................................        5,808
       2002............................................................        5,909
       2003............................................................        5,876
       Thereafter......................................................       23,588
                                                                            --------
         Total.........................................................     $ 56,572
                                                                            ========
</TABLE>



During 1998, the Company entered into a joint venture with China United
Telecommunications Corporation ("China Unicom") and Teleway Communications
Limited to publish yellow pages directories and to offer Internet directory
services in the People's Republic of China. Under the terms of the joint venture
agreement, the Company will invest cash of approximately $15.6 million to
acquire a 15% equity interest in the joint venture. In 1998, the Company
invested $1.3 million and will make additional contributions totaling $14.3
million over the next two to three years. The Company anticipates contributing
approximately $8.0 million in 1999, $3.8 million in 2000 and $2.5 million in
2001.

On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the
United States district court for the Southern district of New York, naming as
defendant Old D&B, ACNielsen Company, and IMS International Inc. ("the IRI
Action"). The complaint alleges, among other things, various violations of the
antitrust laws and seeks damages in excess of $350 million, which IRI is seeking
to have trebled under the antitrust laws. IRI also seeks punitive damages of an
unspecified amount. Under the Distribution Agreement, New D&B will assume the
defense and indemnify the Company against any payments to be made by the Company
or Donnelley in respect of the IRI Action, under the Indemnity and Joint Defense
Agreement or otherwise, including any ongoing legal fees and expenses related
thereto.

Certain tax planning strategies entered into by Old D&B are currently subject to
review by tax authorities. The Internal Revenue Service (the "IRS") is currently
reviewing Old D&B's utilization of certain capital losses during 1989 and 1990.
While the IRS has not issued a formal assessment with respect to these
transactions, the IRS has assessed other companies that had entered into similar
types of transactions. If an assessment is made and should the IRS prevail, the
total cash obligation to the IRS at December 31, 1998, would approximate $500
million for taxes and accrued interest. Pursuant to a series of agreements, IMS
Health Incorporated ("IMS") and Nielsen Media Research, Inc. ("NMR") (both of
which are former subsidiaries of Old D&B) are each jointly and severally liable
to pay 50%, and Old D&B is liable for the remaining 50% of any payments for
taxes and accrued interest arising from this matter and certain other potential
tax liabilities after Old D&B pays the first $137 million. As explained above,
as the result of the form of the Distribution, the Company is the legal entity
and the taxpayer referred to herein as Old D&B. However, New D&B, pursuant to
the terms of the Distribution Agreement and the Tax Allocation Agreement,
executed in connection with the Distribution, has assumed and will indemnify the
Company and Donnelley against any payments to be made by the Company or
Donnelley in respect of any tax liability that may be assessed and any costs and
expenses relating thereto including any ongoing legal fees. Accordingly,
management believes that such tax liabilities and the costs and expenses
relating thereto will have no impact on the consolidated financial position of
the Company. Management further believes that New D&B, IMS and NMR have
sufficient financial resources to satisfy all such liabilities and to reimburse
the Company for all costs and expenses relating thereto.

Other than the matters described above, the Company and Donnelley are involved
in legal proceedings, claims and litigation arising in the ordinary conduct of
its business. Although there can be no assurances, the Company's management
believes that the outcome of such legal proceedings will not have a material
adverse affect on the Company's financial position, results of operations or
cash flows.


                                       29
<PAGE>   32
9.  PENSION AND POSTRETIREMENT BENEFITS

Prior to the Distribution, substantially all employees of the Company and
Donnelley were eligible to participate in Old D&B's defined benefit and defined
contribution pension plans. These plans were accounted for as multi-employer
plans. Accordingly, the Company has recorded pension costs as allocated by Old
D&B relating to the defined benefit plan totaling $1,121 for the six months
ended June 30, 1998, $996 in 1997 and $1,082 in 1996. Allocated costs relating
to the defined contribution plan were $818 for the six months ended June 30,
1998, $2,243 in 1997 and $2,268 in 1996.

In addition to providing pension benefits, Old D&B provided certain health care
and life insurance benefits for retired employees of the Company and Donnelley.
The Company accounted for this plan as a multi-employer plan. Accordingly, the
Company has recorded postretirement benefits costs as allocated by Old D&B
totaling $893 for the six months ended June 30, 1998, $1,724 in 1997 and $1,873
in 1996.

Subsequent to the Distribution, the Company assumed responsibility for pension
benefits for active employees of the Company and Donnelley with vested benefits
under the Old D&B Retirement Plan. The responsibility for Donnelley retirees and
vested terminated employees prior to the Distribution will remain with New D&B.
The Company assumed responsibility for postretirement benefits for active
employees of Donnelley. An allocation of assets and liabilities related to
active employee benefits has been included in the financial statements. A
description of the Company's benefit plans follows.

Pension. The Company has a defined benefit plan covering substantially all
employees. The benefits to be paid to employees are based on years of service
and a percentage of total annual compensation. The percentage of compensation
allocated to a retirement account ranges from 3.0% to 12.5% depending on age and
years of service. Pension costs are determined actuarially. Due to the
overfunded status of the plan, the Company has not formally adopted a funding
policy as of December 31, 1998. The underlying pension plan assets are invested
in diversified portfolios consisting primarily of equity and debt securities.

The Company also has two unfunded non-qualified defined benefit plans, the
Pension Benefit Equalization Plan (PBEP) and the Supplemental Executive Benefit
Plan (SEBP). Senior executives and certain key employees are entitled to
participate in these plans which provide retirement benefits based on years of
service and compensation (including compensation not permitted to be taken into
account under the previously mentioned defined benefit plan).

The Company also maintains a defined contribution plan for substantially all its
employees. Contributions to the plan are generally determined based on a
percentage of each eligible employee's salary. The Company makes a matching
contribution of 50 cents for each dollar contributed up to 6% of each
participating employee's salary. The cost of this plan to the Company for the
six months ended December 31, 1998 was $808.

Postretirement Benefits. In addition to the Company's defined benefit and
defined contribution plans, the Company sponsors an unfunded defined benefit
postretirement plan that provides certain health care and life insurance
benefits to those full-time employees who reach normal retirement age while
working for the Company or Donnelley.

A summary of the funded status of the benefit plans at December 31, 1998 is as
follows:





                                       30
<PAGE>   33
<TABLE>
<CAPTION>
                                                                                         Retirement Plans             Postretirement
                                                                                    Qualified          SEBP/PBEP            Plan
                                                                                    ---------          ---------          ---------
<S>                                                                                 <C>                <C>            <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, July 1, 1998 ..........................................          $ 40,064           $  1,354           $  6,100
Service cost ..............................................................             1,160                208                240
Interest cost .............................................................             1,401                 48                200
Plan participant contributions ............................................                --                 --                 10
Actuarial loss ............................................................               974                 65                270
Benefits paid .............................................................               (25)                --                (60)
                                                                                     --------           --------           --------
     Benefit obligation at December 31, 1998 ..............................            43,574              1,675              6,760
                                                                                     --------           --------           --------

CHANGE IN PLAN ASSETS
Fair value of plan assets, July 1, 1998 ...................................            60,925                 --                 --
Return on plan assets .....................................................             2,476                 --                 --
Employer contributions ....................................................                --                 --                 50
Plan participant contributions ............................................                --                 --                 10
Benefits paid .............................................................               (25)                --                (60)
                                                                                     --------           --------           --------
     Fair value of plan assets at December 31, 1998 .......................            63,376                 --                 --
                                                                                     --------           --------           --------

Funded status of plans ....................................................            19,802             (1,675)            (6,760)
Unrecognized net (gain) loss ..............................................            (6,411)               484                710
Unrecognized prior service costs ..........................................               299                136                (80)
Unrecognized transition (asset) obligation ................................              (954)                 4                 --
                                                                                     --------           --------           --------
     Prepaid (accrued) benefit cost .......................................          $ 12,736           $ (1,051)          $ (6,130)
                                                                                     ========           ========           ========

The net periodic benefit (income) cost of the benefit plans
for the six months ended December 31, 1998 is as follows:

Service cost ..............................................................          $  1,160           $    208           $    240
Interest cost .............................................................             1,401                 48                200
Return on plan assets .....................................................            (2,476)                --                 --
Net amortization and deferral .............................................              (228)                34                (60)
                                                                                     --------           --------           --------
     Net periodic benefit (income) expense ................................          $   (143)          $    290           $    380
                                                                                     ========           ========           ========
</TABLE>



The following assumptions were used in determining the benefit obligation and
net periodic pension cost:


<TABLE>
<S>                                                                            <C>                <C>              <C>
Weighted average discount rate.........................................        6.75%              6.75%            6.75%
Rate of increase in future compensation................................        3.91%              3.91%            3.91%
Expected return on plan assets.........................................        9.75%                 --               --
</TABLE>



For measurement purposes, a 6.5% annual rate of increase in the per capita cost
of covered healthcare benefits was assumed for 1999. The rate was assumed to
decrease gradually to 5.0% through 2021 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one percentage point change in the assumed
health care cost trend rates would have the following effects:

<TABLE>
<CAPTION>
                                                                               One percentage-           One percentage-
                                                                               point increase            point decrease
                                                                               --------------            --------------
<S>                                                                            <C>                       <C>
Effect on benefit obligation at end of period..........................               $590                     $(540)
Effect on total service and interest costs.............................              $  40                   $  (30)
</TABLE>


10.  EMPLOYEE STOCK OPTION PLANS

SFAS No. 123, "Accounting for Stock-Based Compensation," requires that companies
with stock-based compensation plans either recognize compensation expense based
on the fair value of options granted or continue to apply the existing
accounting



                                       31
<PAGE>   34
rules and disclose pro forma net income and earnings per share assuming the fair
value method had been applied. The Company has chosen to continue applying
Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for the fixed stock option plans. The following table reflects the pro forma net
income and earnings per share assuming the fair value method had been applied in
accordance with SFAS No. 123.

<TABLE>
<CAPTION>
                                                                               1998                   1997                   1996
                                                                            ----------             ----------             ----------
<S>                                                                         <C>                    <C>                    <C>
Net income
     As reported ..............................................             $   61,268             $   84,743             $   77,645
     Pro forma ................................................                 59,809                 84,380                 77,404
Basic earnings per share of common stock
     As reported ..............................................             $     1.79             $     2.48             $     2.28
     Pro forma ................................................                   1.75                   2.47                   2.28
Diluted earnings per share of common stock
     As reported ..............................................             $     1.77             $     2.48             $     2.28
     Pro forma ................................................                   1.73                   2.47                   2.27
</TABLE>


The pro-forma disclosures shown are not representative of the effects on income
and earnings per share in future years.

The fair value of stock options used to compute the Company's pro forma income
disclosures is the estimated present value at grant date using the Black-Scholes
option-pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                                                                1998                 1997                      1996
                                                                             -------              -------                   -------
<S>                                                                         <C>                  <C>                       <C>
Dividend yield ............................................                        0%                 3.3%                      4.5%
Expected volatility .......................................                       35%                  20%                       15%
Risk-free interest rate ...................................                     5.46%                5.73%                     6.04%
Expected holding period ...................................                  4.7 years            4.5 years                4.9 years
</TABLE>


Under the terms of the Old D&B 1982 Key Employees Stock Option Plan and the 1991
Key Employees Stock Option Plan, as amended, (collectively "Stock Option
Plans"), certain key employees of the Company were eligible to receive stock
options, stock appreciation rights and limited stock appreciation rights in
tandem with stock options. Immediately after the Distribution, these plans were
amended and adopted by the Company and outstanding awards under the Stock Option
Plans held by Company employees were adjusted to have the same ratio of the
exercise price per option to the market value per share, the same aggregate
difference between market value and exercised price and the same vesting
provisions, option periods and other terms and conditions applicable prior to
the Distribution.

The vesting period for awards under the Stock Option Plans are determined by the
Board at the date of the grant. Options may not be granted at less than fair
market value of the Company's common stock at the date of the grant and may not
expire more than ten years from the grant date. At December 31, 1998, 1997 and
1996, options for 1,456,610 shares, 121,291 shares and 115,188 shares of common
stock, respectively, were exercisable. Options for 4,272,093 shares, 290,039
shares and 848,154 shares were available for future grants under the Stock
Option Plans at December 31, 1998, 1997 and 1996, respectively.





                                       32
<PAGE>   35
Changes in stock options for the three years ended December 31, 1998, are
summarized as follows:

<TABLE>
<CAPTION>
                                                                                           Weighted Average
                                                                             Shares       Exercise Price ($)
                                                                             ------       ------------------

<S>                                                                         <C>            <C>
Options outstanding, December 31, 1995.................................       78,468           280.35
     Granted...........................................................           --               --
     Exercised.........................................................      (10,427)          259.95
     Surrendered or expired............................................       (1,607)          285.90
                                                                            --------

Options outstanding, October 31, 1996..................................       66,434           283.40
Options converted, November 1, 1996....................................      175,227           107.40
     Granted...........................................................       94,861           114.35
     Exercised.........................................................       (1,811)          104.75
     Surrendered or expired............................................       (3,163)          110.60
                                                                            --------

Options outstanding, December 31, 1996.................................      265,114           109.85
     Granted...........................................................       75,798           149.75
     Exercised.........................................................      (35,013)          102.25
     Surrendered or expired............................................      (23,882)          114.35
                                                                            --------

Options outstanding, December 31, 1997.................................      282,017           121.15
     Granted...........................................................        1,808           159.53
     Exercised.........................................................      (16,436)          108.36
     Surrendered or expired............................................      (25,992)          126.71
                                                                            --------

Options outstanding, June 30, 1998.....................................      241,397           123.76
Options converted, July 1, 1998........................................    2,473,354            12.08
     Granted...........................................................    2,043,250            15.31
     Exercised.........................................................      (12,868)           10.89
     Surrendered or expired............................................     (118,743)           12.65
                                                                          ----------

Options outstanding, December 31, 1998.................................    4,384,993            13.55
                                                                           =========
</TABLE>



The weighted average fair value of options granted during 1998, 1997 and 1996
was $4.91, $27.70 and $18.00, respectively. The information above has been
prepared based on historical Old D&B prices after giving retroactive effect for
the reverse one-for-five stock split in August 1998. Options outstanding as of
June 30, 1998, were converted on July 1, 1998, to give effect to the
Distribution.

The following table summarizes information about stock options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
                                     Stock Options Outstanding                    Stock Options Exercisable
                            -----------------------------------------             -------------------------

                                                 Weighted Average
                                                 ----------------                                 Weighted
                                            Remaining                                              Average
    Range of                               Contractual       Exercise                             Exercise
 Exercise Prices            Shares             Life            Price                Shares          Price
 ---------------            ------             ----            -----                ------          -----
<S>                         <C>             <C>              <C>                  <C>             <C>
$ 7.67 - $ 11.79            1,635,163        6.3 years          $10.89            1,267,553         $ 10.80
  $12.08-$15.78             2,749,830        9.4 years          $15.13              189,057          $14.63
                            ---------                                             ---------

                            4,384,993                                             1,456,610
                            =========                                             =========
</TABLE>


In 1998, the Board of Directors adopted the 1998 Directors' Stock Option Plan.
Under the terms of the plan, non-employee directors receive an annual award of
1,500 shares of restricted common stock and options to purchase 1,500 shares of
the Company's common stock. Additionally, non-employee directors receive 1,500
shares of restricted common stock upon



                                       33
<PAGE>   36
election to the Board. These shares vest equally over a three year period. The
Company reserved 150,000 shares of common stock for issuance under the plan.
During the year, the Company granted 17,677 stock options and restricted shares
and at December 31, 1998, 132,323 shares remain available for future issuance.

11.  INCOME TAXES

Provision for income taxes consisted of:

<TABLE>
<CAPTION>
                                                                              1998          1997            1996
                                                                              ----          ----            ----
<S>                                                                        <C>            <C>             <C>
Current tax provision
     U.S. Federal......................................................    $ 31,006       $ 63,519        $ 28,290
     State and local...................................................       7,020          8,660          15,675
                                                                           --------       --------        --------
     Total current tax provision.......................................      38,026         72,179          43,965

Deferred tax provision (benefit)
     U.S. Federal......................................................       2,261        (15,777)         19,347
     State and local...................................................         539          2,734          (2,799)
                                                                           --------       --------        --------
     Total deferred tax provision (benefit)............................       2,800        (13,043)         16,548
                                                                           --------       --------        --------
Provision for income taxes.............................................    $ 40,826       $ 59,139        $ 60,513
                                                                           ========       ========        ========
</TABLE>


The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and the Company's effective tax rate for financial
statement purposes.

<TABLE>
<CAPTION>
                                                                                        1998               1997               1996
                                                                                       ------             ------             ------
<S>                                                                                    <C>                <C>                <C>
Statutory Federal tax rate ................................................              35.0%              35.0%              35.0%
State and local taxes, net of U.S. Federal tax benefit ....................               4.7                5.1                6.0
Non-deductible capital losses .............................................                --                 --                2.8
Non-deductible expense ....................................................               0.3                1.0                 --
                                                                                         ----               ----               ----
Effective tax rate ........................................................              40.0%              41.1%              43.8%
                                                                                         ====               ====               ====
</TABLE>



Deferred tax assets and liabilities consisted of the following at December 31,

<TABLE>
<CAPTION>
                                                                              1998             1997
                                                                              ----             ----
<S>                                                                        <C>              <C>
Deferred tax assets
     Postretirement benefits ..........................................    $   2,648        $   4,288
     Postemployment benefits...........................................          782            3,210
     Reorganization and restructuring costs............................          413              937
     Bad debts.........................................................        2,119            1,606
     Intangibles.......................................................           --            2,571
     Various accrued liabilities.......................................       11,572           15,535
                                                                            --------         --------
     Total deferred tax asset..........................................       17,534           28,147
                                                                            --------         --------

Deferred tax liabilities
     Revenue recognition...............................................       50,670           45,160
     Pension...........................................................        5,117            3,812
     Property and equipment............................................          152              829
     Intangibles.......................................................          309               --
     Capitalized project costs.........................................       12,195           12,802
                                                                            --------         --------
     Total deferred tax liabilities....................................       68,443           62,603
                                                                            ---------        --------
Net deferred tax liability.............................................     $ 50,909         $ 34,456
                                                                            ========         ========
</TABLE>


Federal and state income taxes paid in cash during the six months ended December
31, 1998 were $16,362.



                                       34
<PAGE>   37
12.  FINANCIAL INSTRUMENTS

The Company's financial instruments consists of cash and cash equivalents,
accounts receivables and long-term debt, including current maturities. The
carrying amount of cash and cash equivalents and accounts receivables reported
in the consolidated balance sheet approximates fair value due to the short-term
nature of these instruments.

Long-term debt consists of borrowings under committed bank facilities and the
Notes. The carrying amount of the Company's borrowings under the committed bank
facilities at December 31, 1998, of $318,625 approximates fair value as these
obligations bear interest at floating rates. The carrying amount of the Notes at
December 31, 1998, was $150,000 and the fair value was $157,875. Fair value was
determined based on quoted market prices of similar debt instruments.

The Company enters into interest rate swap agreements to manage market risk and
reduce its exposure to fluctuations in interest rates on its variable rate debt.
Interest rate swaps allow the Company to raise funds at floating rates and
effectively swap them into fixed rates that are lower than those available to it
if fixed-rate borrowings were made directly. These agreements involve the
exchange of floating-rate for fixed-rate payments without the exchange of the
underlying principal amount. At December 31, 1998, the Company had outstanding
interest rate swaps with a notional value of $175,000. The swap contracts expire
from June 2001 through June 2003. Fixed-rate payments are at rates ranging from
5.86% to 5.90%. Floating-rate payments received are based on rates tied to
prevailing short-term interest rates. At December 31, 1998, the average pay rate
of outstanding interest rate swaps was 5.88% and the average receive rate was
5.31%. Periodic payments and receipts under the interest rate swaps are recorded
as part of interest expense. If the Company terminates a swap agreement, the
gain or loss is amortized over the shorter of the remaining original life of the
debt or the swap. At December 31, 1998, the unrealized fair value of the
interest rate swaps was a loss of $3,582.

13.  BUSINESS SEGMENTS

The Company provides advertising sales and marketing services of yellow pages
and other directory products under long-term sales agency agreements and joint
venture partnerships with operating units of major telephone companies and
through its own independent operations. The Company also provides publishing and
production services for yellow pages directories. The Company's reportable
operating segments are Directory Advertising Services, DonTech Partnership and
Directory Publishing Services. The DonTech Partnership is viewed as a separate
reportable operating segment by the Company since, among other factors, the
employees of DonTech, including officers and managers, are not employees of the
Company. Essentially, all the Company's operations are conducted in the United
States.

The Company evaluates the performance of its operating segments and allocates
resources to them based on operating income and other factors. Operating income
for the reportable segments (except DonTech) includes those costs directly
incurred by each business unit plus an allocation of certain shared operating
and general and administrative expenses based on estimated business usage.
Interest expense, income tax expense and non-operating income and expenses are
not allocated to the operating segments.

Information for each operating segment for the years ended December 31, 1998,
1997 and 1996 are presented below.


<TABLE>
<CAPTION>
1998
                                              Directory                           Directory
                                             Advertising       DonTech           Publishing
                                               Services        Partnership         Services        Other
                                               --------        -----------         --------        ------
<S>                                          <C>               <C>               <C>              <C>
Advertising  sales (unaudited) (1)
  Calendar cycle ........................      $562,375          $429,200                --             --
  Publication cycle .....................       586,884           403,100                --             --
Revenues ................................       137,172                --          $ 32,711             --
Income from partnerships and related fees        15,767           120,087                --             --
EBITDA (3) ..............................        38,094           120,087             3,348       $(16,716)
Depreciation and amortization ...........         6,009                --             6,344          7,225
Operating income (loss) .................        32,085           120,087            (2,996)       (23,941)
Total assets ............................       119,081           198,848            21,948         45,964
</TABLE>


1998
<TABLE>
<CAPTION>
                                             Totals Before
                                             Reconciling       Reconciling         Consolidated
                                                 Items            Items (2)            Totals
                                                 -----            ---------            ------
<S>                                          <C>               <C>                 <C>
Advertising  sales (unaudited) (1)
  Calendar cycle ........................       $991,575                 --           $991,575
  Publication cycle .....................        989,984                 --            989,984
Revenues ................................        169,883           $   (793)           169,090
Income from partnerships and related fees        135,854                 --            135,854
EBITDA (3) ..............................        144,813                 --            144,813
Depreciation and amortization ...........         19,578                 --             19,578
Operating income (loss) .................        125,235                 --            125,235
Total assets ............................        385,841                 --            385,841
</TABLE>




                                       35
<PAGE>   38
1997
<TABLE>
<CAPTION>
                                                Directory                        Directory
                                              Advertising        DonTech        Publishing
                                               Services        Partnership       Services
                                               --------       -----------        --------
<S>                                           <C>             <C>              <C>
Advertising sales (unaudited) (1)
  Calendar cycle ........................     $  656,145      $  408,600               --
  Publication cycle .....................        698,318         385,500               --
Revenues ................................        213,732              --       $   34,984
Income from partnerships and related fees         13,943         116,228               --
EBITDA (3) ..............................         47,492         116,228            2,272
Depreciation and amortization ...........          6,741              --            6,895
Operating income (loss) .................         40,751         116,228           (4,623)
Total assets ............................        119,913         203,589           23,551
</TABLE>



1997
<TABLE>
<CAPTION>

                                                               Totals Before
                                                                 Reconciling      Reconciling     Consolidated
                                                  Other             Items          Items (2)          Totals
                                                  ------            -----          ---------          ------
<S>                                           <C>              <C>                <C>             <C>
Advertising sales (unaudited) (1)
  Calendar cycle ........................             --         $1,064,745              --       $1,064,745
  Publication cycle .....................             --          1,083,818              --        1,083,818
Revenues ................................             --            248,716       $  (9,893)         238,823
Income from partnerships and related fees             --            130,171              --          130,171
EBITDA (3) ..............................     $   (9,592)           156,400              --          156,400
Depreciation and amortization ...........          8,294             21,930              --           21,930
Operating income (loss) .................        (17,886)           134,470              --          134,470
Total assets ............................         30,454            377,507              --          377,507
</TABLE>



1996

<TABLE>
<CAPTION>
                                                 Directory                       Directory
                                               Advertising       DonTech         Publishing
                                                 Services       Partnership       Services
                                                 --------       -----------        --------

<S>                                            <C>             <C>              <C>
Advertising sales (unaudited) (1)
  Calendar cycle ........................       $  707,097       $  403,500               --
  Publication cycle .....................          707,337          369,600               --
Revenues                                           244,242               --       $   34,800
Income from partnerships and related fees           11,591          121,354               --
EBITDA (3) .............................            67,975          121,354            2,208
Depreciation and amortization ..........             4,169               --            4,507
Operating income (loss) ................            63,806          121,354           (2,299)
Total assets ...........................           221,718          215,373           28,317
</TABLE>


1996
<TABLE>
<CAPTION>

                                                                   Totals Before
                                                                     Reconciling       Reconciling      Consolidated
                                                   Other                Items           Items (2)           Totals
                                                   ------               -----           ---------           ------

<S>                                              <C>               <C>                 <C>              <C>
Advertising sales (unaudited) (1)
  Calendar cycle ........................              --             $1,110,597                --         $1,110,597
  Publication cycle .....................              --              1,076,937                --          1,076,937
Revenues                                               --                279,042        $  (10,105)           268,937
Income from partnerships and related fees              --                132,945                --            132,945
EBITDA (3) .............................         $ (8,650)               182,887                --            182,887
Depreciation and amortization ..........            7,553                 16,229                --             16,229
Operating income (loss) ................          (16,203)               166,658                --            166,658
Total assets ...........................           32,275                497,683               --           497,683
</TABLE>



(1)  Advertising sales represents the billing value of advertisements sold by
     the Company and DonTech. Management reviews the performance of its
     operating segments on, among other things, the advertising sales generated
     on a calendar cycle and a publication cycle basis. Calendar cycle
     advertising sales represent the billing value of advertisements sold stated
     on the same basis for which revenue is recognized in the consolidated
     financial statements (that is, when a sales contract is signed where the
     Company is a sales agent and when a directory is published where the
     Company is the publisher). Advertising sales on a publication cycle basis
     represent the billing value of advertisements sold based on when a
     directory is published, regardless of the Company's role and the
     recognition of revenue in the consolidated financial statements.

(2)  Reconciling items represent publishing services revenue charged to internal
     businesses based on costs incurred. These revenues are eliminated in the
     consolidated financial statements.

(3) EBITDA represents earnings before interest, taxes and depreciation and
    amortization.

The Directory Advertising Services segment information above includes data
relating to the P-East and P-West businesses sold in 1997 and 1996,
respectively. The amounts related to these businesses are as follows:

<TABLE>
<CAPTION>
                                                                              1997             1996
                                                                              ----             ----
<S>                                                                         <C>              <C>
Advertising sales (unaudited)
     Calendar .........................................................     $ 73,753         $ 89,939
     Publication ......................................................       73,753           89,939
Revenues...............................................................       77,979           97,263
Income from partnership and related fees...............................        1,724            1,710
EBITDA.................................................................       11,817           19,910
Depreciation and amortization..........................................          848            1,323
Operating income.......................................................       10,969           18,587
Total assets...........................................................           --           80,962
</TABLE>




                                       36
<PAGE>   39
The operating loss under the Other column represents general and administrative
expenses and other activities not allocated to the business units. Total assets
included in the Other column represent those assets not allocated to the
business units, such as cash and cash equivalents, prepaid expenses, deferred
financing costs and property and equipment.

The Company has two major customers within the Directory Advertising Services
segment from which it derives a significant portion of its total revenues.
Revenues from one of these major customers were 50% of total revenues in 1998,
36% in 1997 and 36% in 1996. Revenues from the other major customer were 25% of
total revenues in 1998, 16% in 1997 and 13% in 1996.

14.  VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                                        Additions
                                                        Balance at      Charged to                           Balance at
                                                       Beginning of      Cost and                              End of
               Description                               Period           Expenses        Deductions (1)       Period
               -----------                               ------           --------        --------------       ------
<S>                                                   <C>                <C>              <C>                <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the year ended December 31, 1998................   $  3,295            8,538              7,330          $ 4,503
For the year ended December 31, 1997................   $ 10,979           18,382             26,066          $ 3,295
For the year ended December 31, 1996................   $ 20,886           17,828             27,735          $10,979
</TABLE>



(1)      Includes accounts written off and amounts related to businesses sold
         during the year. The amount of allowance for doubtful accounts related
         to businesses sold for 1997 and 1996 were $6,658 and $6,432,
         respectively.

15.  QUARTERLY INFORMATION (UNAUDITED)

The quarterly results below have been restated from the amounts previously
reported. See Note 2 to the consolidated financial statements.

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                          ---------------------------------------------------------------------
                                                                                                                         Full
                                       March 31           June 30          September 30           December 31            Year
                                          --------           -------          ------------           -----------         ----
<S>                                       <C>               <C>               <C>                    <C>                <C>
1998
Revenues..............................      $33,871         $37,994              $53,391              $43,834           $169,090
Operating income......................       25,024          39,136               43,055               18,020            125,235
Net income............................       15,015          21,673               19,619                4,961             61,268
Earnings per share data:
     Basic............................       $ 0.44          $ 0.63               $ 0.57               $ 0.15             $ 1.79
     Diluted..........................       $ 0.44          $ 0.63               $ 0.57               $ 0.14             $ 1.77
</TABLE>


<TABLE>
<CAPTION>
                                                                Three Months Ended
                                          ----------------------------------------------------------------------
                                                                                                                         Full
                                          March 31           June 30          September 30           December 31         Year
                                          --------           -------          ------------           -----------         ----
<S>                                       <C>                <C>              <C>                    <C>                 <C>
1997
Revenues...............................     $28,692         $60,465              $62,728              $86,938           $238,823
Operating income.......................        2,220           9,789               46,833               75,628            134,470
Net income.............................        1,332           5,873               28,100               49,438             84,743
Earnings per share data:
     Basic.............................       $ 0.04          $ 0.17               $ 0.82               $ 1.45             $ 2.48
     Diluted...........................       $ 0.04          $ 0.17               $ 0.82               $ 1.45             $ 2.48
</TABLE>


The 1997 quarterly results were affected by an imbalance in the publication
dates of various directories in the DonTech markets in which a majority of the
directories were published in the fourth quarter. By the end of 1998, DonTech
had rescheduled the publication of the directories in these markets to more
evenly distribute the publication dates throughout the year. As a result, the
Company anticipates that its quarterly results should be more in line with 1998
trends, after adjusting for the impact of additional general and administrative
expenses associated with being an independent public company and a full year of
interest expense. The full year earnings per share amount may not equal the
sum of the quarters due to changes in the average share calculations and
rounding.




                                       37
<PAGE>   40
                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and
Partners of DonTech I and DonTech II

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, partners' capital, and cash flows present
fairly, in all material respects, the combined financial position of AM-DON
(doing business as "DonTech" and hereafter referred to as "DonTech I") and the
DonTech II Partnership ("DonTech II") at December 31, 1998 and 1997, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the management of DonTech I and DonTech II; our responsibility
is to express an opinion on these combined financial statements based on our
audits. We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.







                                             /s/ PRICEWATERHOUSECOOPERS LLP

Chicago, Illinois
January 8, 1999






                                       38
<PAGE>   41
                                     DONTECH

                        COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                           1998              1997           1996
                                                                           ----              ----           ----
<S>                                                                        <C>            <C>             <C>
(in thousands)
Sales..................................................................    $286,931       $503,912        $459,083
Less allowances........................................................      30,731         77,788          50,202
                                                                           --------       --------       ---------
     Net sales.........................................................     256,200        426,124         408,881
Expenses
  Selling..............................................................      68,235         52,927          33,060
  Telephone company fees...............................................       2,021         83,210          83,532
  Printing and manufacturing...........................................      14,036         39,085          35,221
  Compilation..........................................................       3,384          8,888           9,067
  Delivery.............................................................       1,074          7,703           7,316
  Administrative.......................................................       1,974          7,696           3,444
  Occupancy and depreciation...........................................       9,055          9,880           8,148
  Other................................................................       3,472         12,489           9,476
                                                                           --------       --------        --------
     Total operating expenses..........................................     103,251        221,878         189,264
                                                                           --------       --------        --------

     Income from operations............................................     152,949        204,246         219,617

Other income (expense).................................................       (507)          2,064           2,677
                                                                           -------        --------        --------
     Net income........................................................    $152,442       $206,310        $222,294
                                                                           ========       ========        ========
</TABLE>



    The accompanying notes are an integral part of the financial statements.




                                       39
<PAGE>   42
                                     DONTECH

                             COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                            DECEMBER 31,
                                                                                                   --------------------------------
                                                                                                       1998                1997
                                                                                                       ----                ----
<S>                                                                                                 <C>                  <C>
(in thousands)
Assets
Current Assets:
  Cash and cash equivalents                                                                          $  20,943            $   6,824
  Accounts receivable, net of allowance for doubtful
    accounts of $2,187 and $35,581, respectively                                                        30,205              225,240
  Commission receivable - due from Ameritech                                                           106,386               43,681
  Deferred expenses                                                                                         16               41,513
                                                                                                     ---------            ---------
     Total current assets                                                                              157,550              317,258

Fixed assets, net of accumulated depreciation and amortization                                           8,468                4,898
Other                                                                                                    6,845                6,241
                                                                                                     ---------            ---------

     Total Assets                                                                                    $ 172,863            $ 328,397
                                                                                                     =========            =========

                                         LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
  Accounts payable                                                                                   $   6,572            $  21,417
  Accrued liabilities                                                                                    6,828                5,623
  Deferred sales revenue                                                                                   466              162,760
                                                                                                     ---------            ---------
     Total current liabilities                                                                          13,866              189,800

Partners' capital                                                                                      158,997              165,597
Partnership contributions receivable                                                                        --              (27,000)
                                                                                                     ---------            ---------
     Total partners' capital                                                                           158,997              138,597
                                                                                                     ---------            ---------

     Total Liabilities and Partners' Capital                                                         $ 172,863            $ 328,397
                                                                                                     =========            =========
</TABLE>



    The accompanying notes are an integral part of the financial statements.







                                       40
<PAGE>   43
                                     DONTECH

                        COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                 YEAR ENDED DECEMBER 31,
                                                                                     ----------------------------------------------
                                                                                        1998              1997               1996
                                                                                        ----              ----               ----
<S>                                                                                   <C>               <C>               <C>
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .................................................................        $ 152,442         $ 206,310         $ 222,294
  Reconciliation of net income to net cash provided by operating
   activities:
     Depreciation and amortization ...........................................            3,088             3,246             3,526
     Provision for uncollectible accounts ....................................           20,832            32,474             7,105
     Decrease (increase) in accounts receivable ..............................          132,687           (61,332)          (27,791)
     Decrease (increase) in deferred printing and manufacturing ..............           13,913            20,788            (5,460)
     Decrease (increase) in deferred selling .................................           20,331            13,076            (1,430)
     Decrease in deferred compilation ........................................            3,310             5,309               255
     Decrease in deferred delivery ...........................................            1,087             1,895                19
     Decrease in deferred directory operating service ........................              750             1,468               322
     Decrease in deferred other ..............................................            2,105             2,280               702
     Increase in other current assets ........................................             (604)           (3,184)           (1,675)
     (Decrease) increase in accounts payable .................................          (36,033)           18,885               923
     Increase (decrease) in accrued liabilities ..............................              251               517            (5,420)
     (Decrease) increase in deferred sales revenue ...........................         (161,340)          (11,345)            5,280
                                                                                      ---------         ---------         ---------
         Net cash provided by operating activities ...........................          152,819           230,387           198,650

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of equipment .....................................................           (6,658)           (1,522)           (1,029)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payment of partnership contribution receivable .............................           27,000                --                --
  Partner contributions ......................................................           22,000             2,998                --
  Distributions to partners ..................................................         (181,042)         (229,598)         (195,553)
                                                                                      ---------         ---------         ---------
         Net cash used in financing activities ...............................         (132,042)         (226,600)         (195,553)
                                                                                      ---------         ---------         ---------

         Increase in cash and cash equivalents ...............................           14,119             2,265             2,068

Cash and cash equivalents, beginning of year .................................            6,824             4,559             2,491
                                                                                      ---------         ---------         ---------

Cash and cash equivalents, end of year .......................................        $  20,943         $   6,824         $   4,559
                                                                                      =========         =========         =========
NONCASH FINANCING ACTIVITIES:
  Partnership capital contribution receivable.................................        $      --         $  27,000         $      --
                                                                                      =========         =========         =========
</TABLE>



The accompanying notes are an integral part of the financial statements.





                                       41
<PAGE>   44
                                     DONTECH

                    COMBINED STATEMENTS OF PARTNERS' CAPITAL


<TABLE>
<CAPTION>


                                             R.H.           AMERITECH
                                           DONNELLEY        PUBLISHING OF
                                          CORPORATION       ILLINOIS, INC.      TOTAL
---------------------------------------------------------------------------------------
<S>                                      <C>               <C>               <C>
 (in thousands)
Balance, December 31, 1995 .......        $  72,670         $  59,476         $ 132,146
Net income .......................          120,039           102,255           222,294
Distributions to partners ........         (106,920)          (88,633)         (195,553)
                                          ---------         ---------         ---------

Balance, December 31, 1996 .......           85,789            73,098           158,887
Contributions, per agreement .....           13,500            13,500            27,000
Contribution receivable ..........          (13,500)          (13,500)          (27,000)
Net income .......................          118,162            88,148           206,310
Distributions to partners ........         (121,688)         (104,912)         (226,600)
                                          ---------         ---------         ---------

Balance, December 31, 1997 .......           82,263            56,334           138,597
Payment of contribution receivable           13,500            13,500            27,000
Contributions, per agreement .....           11,000            11,000            22,000
Net income .......................           86,430            66,012           152,442
Distributions to partners ........          (98,407)          (82,635)         (181,042)
                                          ---------         ---------         ---------

Balance, December 31, 1998 .......        $  94,786         $  64,211         $ 158,997
                                          =========         =========         =========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                       42
<PAGE>   45
                                     DONTECH

                     NOTES TO COMBINED FINANCIAL STATEMENTS

(AMOUNTS IN THOUSANDS)

1.   FORM OF ORGANIZATION AND NATURE OF BUSINESS

AM-DON d.b.a. DonTech ("DonTech I") is a general partnership between R.H.
Donnelley Inc. (formerly known as The Reuben H. Donnelley Corporation) ("R.H.
Donnelley"), a Delaware corporation, and Ameritech Publishing of Illinois, Inc.
("API/IL"), an Illinois corporation, doing business as Ameritech Advertising
Services ("Aas"). Under a new structure as defined in the "Master Agreement"
dated August 19, 1997, the existing partnership is defined as "DonTech I."
Concurrently, API/IL and R. H. Donnelley formed a new partnership defined as
"DonTech II."

DonTech I participated in a Directory Agreement with R. H. Donnelley, Illinois
Bell Telephone Company ("IBT"), doing business as Ameritech Illinois, API/IL and
Aas. DonTech I also participated in a Subcontracting Agreement with Ameritech
Publishing, Inc. ("API") to perform certain of API's obligations under the
Publishing Services Contract between API and Indiana Bell Telephone Company,
Incorporated ("Indiana Bell"), doing business as Ameritech Indiana. DonTech I
published various directories, as identified in the Directory Agreements,
solicited advertising, its primary source of revenues, and manufactured and
delivered such directories. DonTech I's net income is allocated to each partner
based on a predefined percentage as set forth in the amended partnership
agreement.

In accordance with the Second Amended and Restated AM-Don Partnership Agreement,
effective August 19, 1997, the DonTech I partnership ceased publishing
directories as of January 1, 1998. The partnership will recognize the deferred
revenue and expenses recorded as of December 31, 1997 over the remaining life of
those directories published prior to January 1, 1998. Upon completion of the
earning process, the partnership will thereafter wind up in accordance with the
agreement.

In August, 1997 R.H. Donnelley and API/IL reached an agreement regarding a
revised partnership structure through which a new DonTech partnership became the
exclusive sales agent in perpetuity for the yellow pages directories to be
published by API for Illinois and northwest Indiana. The new partnership, known
as "DonTech II," receives a 27% commission on sales net of provisions (capped at
6.1%). DonTech II's cost structure includes principally sales, sales operations,
office services, finance, facilities and related overhead. DonTech II profits
are shared equally between the partners.

A Board of Directors (the "Board") was appointed to administer the activities of
each partnership. From time to time during the term of the partnership, the
Board may call for additional capital contributions in equal amounts from each
of the partners if, in the opinion of the Board, additional capital is required
for the operation of the partnership.

The accompanying financial statements of DonTech I and DonTech II are shown on a
combined basis. As DonTech II was formed in August 1997, the combined statements
of operations for the three years in the period ended December 31, 1998 only
include the results of operations of DonTech II for the period from August 1997
through December 1998. All significant affiliated accounts and transactions have
been eliminated in preparation of the combined financial statements.

2.   SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents. Cash and cash equivalents include all highly liquid
investments with an initial maturity date of three months or less. The carrying
value of cash equivalents approximates fair value due to the short-term nature.

Revenue Recognition. Substantially all DonTech I sales made to customers in the
cities covered by the directories are recorded as deferred sales revenue and
accounts receivable in the month of publication. Revenue related to these sales
is recognized over the lives of the directories, generally twelve months. Sales
made to customers outside the cities covered by the directories are recognized
each quarter. Sales for national accounts are recognized in full in the month of
publication. For DonTech II, revenue is comprised of sales commissions and is
recognized upon execution of contracts for the sale of advertising.

Fixed Assets. Fixed assets are recorded at cost and are depreciated on a
straight-line basis over the estimated useful lives of the assets. Upon asset
retirement or other disposition, cost and the related accumulated depreciation
are removed from the


                                       43
<PAGE>   46
accounts, and gain or loss is included in the statement of operations. Amounts
incurred for repairs and maintenance are charged to operations.

Deferred Expenses. The printing, manufacturing, compilation, sales, delivery and
administrative costs of DonTech I publications are deferred and recognized in
proportion to revenue.

Postretirement Benefits Other Than Pensions. The partnership is obligated to
provide postretirement benefits consisting mainly of life and health insurance
to substantially all employees and their dependents. The accrual method of
accounting is utilized for postretirement health care and life insurance
benefits.

Income Taxes. No provision for income taxes is made as the proportional share of
each partnership's income is the responsibility of the individual partners.

Reclassifications. Certain reclassifications have been made to the 1997
financial statements to conform with the 1998 presentation. These
reclassifications had no impact on previously reported net income or partners'
capital

3.   DEFERRED EXPENSES

Deferred expenses consist of the following at December 31:
<TABLE>
<CAPTION>

                                        1998             1997
                                      -------          -------
<S>                                   <C>              <C>
Printing and manufacturing .          $    14          $13,932
Selling ....................               --           20,331
Compilation ................               --            3,310
Delivery ...................                2            1,089
Directory operating services               --              750
Other ......................               --            2,101
                                      -------          -------
                                      $    16          $41,513
                                      =======          =======
</TABLE>

4.   FIXED ASSETS

Fixed assets consist of the following at December 31:
<TABLE>
<CAPTION>

                                                         1998             1997
                                                        -------          -------
<S>                                                     <C>              <C>
Equipment ....................................          $21,003          $18,816
Furniture and fixtures .......................            7,034            3,727
Leasehold improvements .......................            2,159              995
                                                        -------          -------
                                                         30,196           23,538
Less accumulated depreciation and amortization           21,728           18,640
                                                        -------          -------
                                                        $ 8,468          $ 4,898
                                                        =======          =======
</TABLE>

5.   RELATED PARTY TRANSACTIONS

DonTech I

Under the Directory Agreement, DonTech I was obligated to pay Illinois Bell
Telephone (IBT) a minimum of $75,000 per year in exchange for billing and
collection services performed by IBT. The base fee for these services was
$75,000 for each calendar year until the Directory Agreement is terminated.
Under the terms of the revised partnership agreement, the responsibility for
payment of these fees was transferred to Ameritech effective January 1, 1998.

In addition to the base fee, DonTech I agreed to pay IBT an amount equal to 7
1/2% of the increase in total revenue received from certain sources identified
in the Directory Agreement over such revenues received in the immediately
preceding calendar year. The additional fee due to IBT was $1,800 and $1,100 in
1997 and 1996, respectively. IBT also provided directory operations services
(white page compilation) to DonTech I. DonTech I paid approximately $2,000 to
IBT in 1997 and 1996 for these services. However, effective January 1, 1998
under the terms of the revised partnership agreement the cost of these services
became the responsibility of Ameritech.

                                       44
<PAGE>   47
During 1997 and 1996, R. H. Donnelley provided compilation, photocomposition,
and data processing services to DonTech I. In addition, the Dun & Bradstreet
Corporation (of which R.H. Donnelley was a wholly owned subsidiary) provided
employee benefits and administrative services, and certain business insurance
coverages for each partnership. The amount paid for these services was
determined at the beginning of each year based upon estimated activity and
adjusted to actual at the end of each year. The total amount paid for these
services was approximately $20,500 and $22,000 in 1997 and 1996, respectively.
The amount paid for employee benefits includes the administration of each
partnership's Profit Sharing and 401(k) Plans as well as its health care, long
and short term disability, dental and pension plans. Effective June 1, 1997,
DonTech I became self-insured for health care, long and short term disability
and dental plans at which time it terminated its coverages for these plans
through Dun & Bradstreet.

DonTech I also entered into subcontracting agreements for the publishing of
certain Indiana Bell directories. For the first four months of 1997, under a
Directory Fulfillment Memorandum of Understanding, DonTech I was obligated to
perform certain directory fulfillment services for Aas. The obligation for these
services was transferred to an outside vendor effective May 1, 1997.

Amended Partnership Allocation

The partners negotiated settlement agreements regarding excessive bad debt
write-offs incurred by DonTech I during the year ended December 31, 1998 and
1997. The agreements provided for special allocations of the excessive bad debts
between the partners based upon a negotiated ratio. The effect of these
settlement agreements has been included in the allocation of net income as
presented in the statement of partners' capital at December 31, 1998 and 1997.

During 1997, the DonTech I partnership incurred certain expenses on behalf of
the DonTech II partnership related to advertising sales activities. These
expenses have been charged to the DonTech II partnership for the years ended
December 31, 1997. For the year ended December 31, 1998, DonTech II assumed
responsibility for such sales related expenses.

DonTech II

Under the provisions of the "Revenue Participation Agreement" dated August 19,
1997, in exchange for exclusive publishing rights, APIL Partners Partnership
agrees to pay R.H. Donnelley revenue participation interests. The revenue
participation interests are based upon gross revenues of the DonTech II
partnership net of provisions (capped a 6.1% per annum) and sales commissions
paid by DonTech II. The revenue participation interest is as follows:

                           1998.................34.8%
                           1999.................35.9%

6.   CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject each partnership to a
concentration of credit risk consist principally of commercial paper and
accounts receivables. The Partnership invests its excess cash in commercial
paper with an investment rating of AA or higher and has not experienced any
losses on these investments.

DonTech I's trade accounts receivable are primarily composed of amounts due from
customers whose businesses are in the state of Illinois. DonTech II commissions
receivable are due from Ameritech Advertising Services.
Collateral is generally not required from either partnership's customers.

7.   PARTNERSHIP CONTRIBUTION RECEIVABLE

For DonTech II, the respective partner capital contributions are to be made in
equal proportion according to the Initial Capital Schedule as reflected in the
DonTech II Partnership Agreement. As of December 31, 1997, the total amount of
capital required to be contributed by the partners was $27,000.

At December 31, 1997, the respective partnership capital accounts have been
credited with the amount of required capital contributions and have been offset
by a corresponding contribution receivable, as the funds had not been received.
Such contributions were funded in 1998.

8.   USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets


                                       45
<PAGE>   48
and liabilities at the date of the financial statements and the reported amounts
of revenues and expense during the reporting period. Actual results could differ
from those estimates.

9.   LEASE COMMITMENTS

DonTech I leases certain office facilities under noncancelable lease
arrangements. These leases and the related obligations were assumed by DonTech
II. Rent expense under these operating leases was approximately $2,743, $2,603,
and $2,564 for 1998, 1997 and 1996, respectively.

The future minimum lease payments required under noncancelable operating leases
that have initial or remaining lease terms in excess of one year as of December
31, 1998 are as follows:
<TABLE>

<S>                                                       <C>
1999     .............................................    $   3,458
2000     .............................................        3,290
2001     .............................................        3,088
2002     .............................................        2,773
2003     .............................................        2,654
Thereafter............................................       14,072
                                                          ---------
                                                           $ 29,335
                                                          =========
</TABLE>

10.  EMPLOYEE RETIREMENT AND PROFIT PARTICIPATION PLANS

Each partnership participates in a defined benefit pension plan covering
substantially all of its respective employees (the "Principal Plan"). The
Principal Plan's assets are invested in equity funds, fixed income funds and
real estate. Total expense for the Principal Plan was approximately $820, $1,121
and $1,181 for 1998, 1997, and 1996 respectively. The following provides a
reconciliation of benefit obligations, plan assets, and the funded status of the
Principle Plan.

Change in benefit obligation:
<TABLE>
<CAPTION>

                                                            1998               1997
                                                         --------           --------
<S>                                                      <C>                <C>
Projected benefit obligation, beginning of year          $ 17,686           $ 15,598
Service cost ..................................               929                935
Interest cost .................................             1,298              1,185
Benefits paid .................................            (1,149)              (452)
(Gain) loss ...................................             1,130               (955)
Plan amendments, other charges ................               678              1,375
                                                         --------           --------
     Projected benefit obligation, end of year           $ 20,572           $ 17,686
                                                         ========           ========
</TABLE>

Change in plan assets:
<TABLE>
<CAPTION>

                                                    1998               1997
                                                  --------           --------
<S>                                               <C>                <C>
Market value of assets, January 1 ......          $ 20,195           $ 13,863
Benefits paid ..........................            (1,149)              (452)
Contributions ..........................             2,507              3,319
Actual return on plan assets ...........             3,761              3,465
                                                  --------           --------
     Market value of assets, December 31          $ 25,314           $ 20,195
                                                  ========           ========
</TABLE>



                                       46
<PAGE>   49
Reconciliation of prepaid cost:
<TABLE>
<CAPTION>

                                           1998              1997
                                         -------           -------
<S>                                      <C>               <C>
Funded status of the plan .....          $ 4,742           $ 2,509
Unrecognized net gain .........           (2,214)           (2,093)
Unrecognized prior service cost            2,400             2,825
                                         -------           -------
     Prepaid cost .............          $ 4,928           $ 3,241
                                         =======           =======

Prepaid benefit cost ..........          $ 5,314           $ 3,568
Accrued benefit liability .....             (488)             (474)
Intangible asset ..............              102               147
                                         -------           -------
     Net amount recognized ....          $ 4,928           $ 3,241
                                         =======           =======
</TABLE>

Net periodic pension cost for the plan in 1998, 1997 and 1996 include the
following components:
<TABLE>
<CAPTION>
                                                           1998              1997             1996
                                                         -------           -------           -------
<S>                                                      <C>               <C>               <C>
Service cost ..................................          $   929           $   936           $   909
Interest cost .................................            1,298             1,185             1,020
Expected return on plan assets ................           (1,833)           (1,440)           (1,618)
Amortization of unrecognized prior service cost              426               440               870
                                                         -------           -------           -------
     Total pension cost .......................          $   820           $ 1,121           $ 1,181
                                                         =======           =======           =======
</TABLE>

Assumptions used are as follows:
<TABLE>
<CAPTION>

                                                           1998            1997             1996
                                                           ----            ----             ----
<S>                                                        <C>            <C>            <C>
Weighted average discount rate ...............             7.00%          7.50%          7.75%
Expected long-term rate of return on assets ..             9.75%          9.75%          9.75%
Weighted average rate of compensation increase             3.16%          3.16%          3.16%
</TABLE>

Additionally, each respective partnership participates in a Profit Participation
Plan (the "Profit Plan") that covers substantially all its employees. Employees
may voluntarily contribute up to 6% of their salaries to the Profit Plan and are
guaranteed a matching contribution of fifty cents per dollar contributed. Each
partnership also makes contributions to the Profit Plan based on a formula and
contingent upon the attainment of financial goals set in advance as defined in
the Plan. The contributions made to the plan were $768, $926 and $809 in 1998,
1997 and 1996, respectively. Both plans are administered by R.H. Donnelley.

11.  POSTRETIREMENT OTHER THAN PENSIONS

The partnership provides postretirement health care and life insurance benefits
to certain retired employees and their dependents. The following provides a
reconciliation of benefit obligations, plan assets and the funded status of the
health and life insurance plans.

Change in benefit obligation:
<TABLE>
<CAPTION>

                                                     1998            1997
                                                   -------           -------
<S>                                                <C>               <C>
Benefit obligation, beginning of year ...          $ 2,294           $ 1,873
Service cost ............................              127               130
Interest cost ...........................              161               142
Plan participants' contributions ........                9                15
Amendments ..............................              522                --
Actuarial (gain) loss ...................             (173)              219
Benefits paid ...........................              (30)              (85)
                                                   -------           -------
Projected benefit obligation, end of year          $ 2,910           $ 2,294
                                                   =======           =======
</TABLE>


                                       47
<PAGE>   50
Change in plan assets:
<TABLE>
<CAPTION>

                                             1998            1997
                                             ----            ----
<S>                                          <C>            <C>
Market value of assets, January 1 .          $ --           $ --
Employer contributions ............            21             70
Plan participants' contributions ..             9             15
Benefits paid .....................           (30)           (85)
                                             ----           ----
Market value of assets, December 31          $ --           $ --
                                             ====           ====
</TABLE>

Reconciliation of accrued cost:
<TABLE>
<CAPTION>

                                                     1998              1997
                                                   -------           -------
<S>                                                <C>               <C>
Funded status of the plan ...............          $ 2,910           $ 2,294
Unrecognized net gain ...................             (231)             (405)
Unrecognized prior service (benefit) cost             (399)               93
                                                   -------           -------
Accrued cost ............................          $ 2,280           $ 1,982
                                                   =======           =======
</TABLE>

Net periodic post retirement benefit costs for 1998, 1997 and 1996 included the
following components:
<TABLE>
<CAPTION>
                                  1998          1997           1996
                                  ----          ----           ----
<S>                                <C>           <C>           <C>
Service cost ............          $157          $101          $104
Interest cost ...........           161           142           128
                                   ----          ----          ----
Net periodic benefit cost          $318          $243          $232
                                   ====          ====          ====
</TABLE>

The discount rate used in determining the APBO as of December 31, 1998 and 1997
was 6.75% and 7.86%, respectively. The assumed health care cost trend rate used
in measuring the APBO as of December 31, 1998 and 1997 varies by the age of the
participant and the retirement date and ranges from 6.5% to 8.0%, respectively.
The rates are assumed to decrease gradually to 5.0% for 2021 and remain at that
level thereafter.

Increasing the health care cost trend rates by one percentage point would not
have had a material effect on the December 31, 1998 APBO or the net periodic
postretirement expense.

12.  VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
                                                                            ADDITIONS
                                                         BALANCE AT        CHARGED                            BALANCE
                                                          BEGINNING          TO                                 AT
                                                             OF           COSTS AND                           END OF
         DESCRIPTION                                       PERIOD         EXPENSES        DEDUCTIONS(a)       PERIOD
         -----------                                       ------         --------        -------------       ------
                                          ALLOWANCE FOR DOUBTFUL ACCOUNTS
<S>                                                      <C>              <C>               <C>            <C>
  For year ended December 31, 1998.....................    $35,581          28,487            61,881         $  2,187
  For year ended December 31, 1997.....................    $13,908          40,230            18,557          $35,581
  For year ended December 31, 1996.....................    $23,106          50,202            59,400          $13,908
</TABLE>

(a) Includes accounts written off and other allowances made.

                                       48
<PAGE>   51
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

There have been no changes in the Company's independent auditors, or the
independent auditors of DonTech for the three year period ended December 31,
1998.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information in response to this Item is incorporated herein by reference to the
section entitled "Board of Directors" in the Company's Proxy Statement dated
March 22, 1999 filed with the Securities and Exchange Commission, except that
"Executive Officers of the Registrant" on Pages 4 and 5 of this report responds
to Item 401(b) and (e) of Regulation S-K.

ITEM 11.  EXECUTIVE COMPENSATION

Information in response to this Item is incorporated herein by reference to the
section entitled "Compensation of Executive Officers and Directors" in the
Company's Proxy Statement dated March 22, 1999 filed with the Securities and
Exchange Commission.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information in response to this Item is incorporated herein by reference to the
section entitled "Security Ownership of Management and Others" in the Company's
Proxy Statement dated March 22, 1999 filed with the Securities and Exchange
Commission.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information in response to this Item is incorporated herein by reference to the
section entitled "Board of Directors" in the Company's Proxy Statement dated
March 22, 1999 filed with the Securities and Exchange Commission.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (A)(1) AND (2) - LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
         SCHEDULES

The following consolidated financial statements of the Company are included
under Item 8:

         Consolidated Statements of Operations for the three years ended
         December 31, 1998

         Consolidated Balance Sheets at December 31, 1998 and 1997

         Consolidated Statements of Cash Flows for the three years ended
         December 31, 1998

         Consolidated Statement of Changes in Shareholders' Equity (Deficit) for
         the three years ended December 31, 1998

         Notes to the Consolidated Financial Statements

The following combined financial statements for DonTech are included under Item
8:

         Combined Statement of Operations for the three years ended December 31,
         1998

         Combined Balance Sheets at December 31, 1998 and 1997

         Combined Statements of Cash Flows for the three years ended December
         31, 1998


         Combined Statements of Partners' Capital for the three years ended
         December 31, 1998

The following financial statement schedule for the Company is included under
Item 8:

         Schedule II - Valuation and qualifying accounts

                                       49
<PAGE>   52
     (B) REPORTS ON FORM 8-K

         A report on Form 8-K was filed November 2, 1998 under Item 5-Other
         Events to report on the Company's decision to adopt a stockholder
         rights plan that will succeed the Company's prior rights plan which
         expired on November 5, 1998.

(C)      EXHIBITS:

         EXHIBIT NO.           DOCUMENT

               3.1            Certificate of Incorporation of the Company
                              (incorporated by reference to Exhibit 3.1 to
                              Amendment No. 1 to the Registration Statement on
                              Form S-4, filed with the Securities and Exchange
                              Commission on August 7, 1998, Registration No.
                              333-59287)

               3.2            By-laws of the Company (incorporated by reference
                              to Exhibit 3.2 to the Registration Statement on
                              Form S-4, filed with the Securities and Exchange
                              Commission on July 17, 1998, Registration No.
                              333-59287)

               3.3            Certificate of Incorporation of Donnelley
                              (incorporated by reference to Exhibit 3.3 to
                              Amendment No. 1 to the Registration Statement on
                              Form S-4, filed with the Securities and Exchange
                              Commission on August 7, 1998, Registration No.
                              333-59287)

               3.4            By-laws of Donnelley (incorporated by reference to
                              Exhibit 3.4 to the Registration Statement on Form
                              S-4, filed with the Securities and Exchange
                              Commission on July 17, 1998, Registration No.
                              333-59287)

               4.1            Indenture dated as of June 5, 1998 between
                              Donnelley, as Issuer, the Company, as Guarantor,
                              and the Bank of New York, as Trustee, with respect
                              to the 9 1/8% Senior Subordinated Notes due 2008
                              (incorporated by reference to Exhibit 4.1 to the
                              Registration Statement on Form S-4, filed with the
                              Securities and Exchange Commission on July 17,
                              1998, Registration No. 333-59287)

               4.2            Form of the 9 1/8% Senior Subordinated Notes due
                              2008 (included in Exhibit 4.1)

               4.3            Company Guarantee (included in Exhibit 4.1)

               4.4            Exchange and Registration Rights Agreement dated
                              as of June 5, 1998, among the Company, Donnelley,
                              and Goldman, Sachs & Co. and Chase Securities
                              Inc., as Initial Purchasers (incorporated by
                              reference to Exhibit 4.4 to the Registration
                              Statement on Form S-4, filed with the Securities
                              and Exchange Commission on July 17, 1998,
                              Registration No. 333-59287)

               4.5            Rights Agreement, dated as of October 27, 1998
                              between R.H. Donnelley Corporation and First
                              Chicago Trust Company (incorporated by reference
                              to Exhibit 4 to the Registration Statement on Form
                              8-A, filed with the Securities and Exchange
                              Commission on November 5, 1998, Registration No.
                              001-07155)

               10.1           Form of Distribution Agreement between The Dun &
                              Bradstreet Corporation and The New Dun &
                              Bradstreet Corporation (incorporated by reference
                              to Exhibit 99.2 to the Form 8-K of The Dun &
                              Bradstreet Corporation, filed on June 30, 1998)

               10.2           Form of Tax Allocation Agreement between The Dun &
                              Bradstreet Corporation and The New Dun &
                              Bradstreet Corporation (incorporated by reference
                              to Exhibit 99.3 to the Form 8-K of The Dun &
                              Bradstreet Corporation, filed on June 30, 1998)

                                       50
<PAGE>   53
               10.3           Form of Employee Benefits Agreement between The
                              Dun & Bradstreet Corporation and The New Dun &
                              Bradstreet Corporation (incorporated by reference
                              to Exhibit 99.4 to the Form 8-K of The Dun &
                              Bradstreet Corporation, filed on June 30, 1998)

               10.4           Form of Intellectual Property Agreement between
                              The Dun & Bradstreet Corporation and The New Dun &
                              Bradstreet Corporation (incorporated by reference
                              to Exhibit 99.5 to the Form 8-K of The Dun &
                              Bradstreet Corporation, filed on June 30, 1998)

               10.5           Form of Shared Transaction Services Agreement
                              between The Dun & Bradstreet Corporation and The
                              New Dun & Bradstreet Corporation (incorporated by
                              reference to Exhibit 99.6 to the Form 8-K of The
                              Dun & Bradstreet Corporation, filed on June 30,
                              1998)

               10.6           Form of Data Services Agreement between The Dun &
                              Bradstreet Corporation and The New Dun &
                              Bradstreet Corporation (incorporated by reference
                              to Exhibit 99.7 to the Form 8-K of The Dun &
                              Bradstreet Corporation, filed on June 30, 1998)

               10.7           Form of Transition Services Agreement between The
                              Dun & Bradstreet Corporation and The New Dun &
                              Bradstreet Corporation (incorporated by reference
                              to Exhibit 99.8 to the Form 8-K of The Dun &
                              Bradstreet Corporation, filed on June 30, 1998)

               10.8           Form of Amended and Restated Transition Services
                              Agreement between The Dun & Bradstreet
                              Corporation, The New Dun & Bradstreet Corporation,
                              Cognizant Corporation, IMS Health Incorporated,
                              ACNielsen Corporation and Gartner Group, Inc.
                              (incorporated by reference to Exhibit 99.9 to the
                              Form 8-K of The Dun & Bradstreet Corporation,
                              filed on June 30, 1998)

               10.9           Credit Agreement among the Company, Donnelley, The
                              Chase Manhattan Bank, as Administrative Agent and
                              the Lenders party thereto (incorporated by
                              reference to Exhibit 10.9 to the Registration
                              Statement on Form S-4, filed with the Securities
                              and Exchange Commission on July 17, 1998,
                              Registration No. 333-59287)

               10.10          DonTech II Partnership Agreement, effective August
                              19, 1997, by and between The Reuben H. Donnelley
                              Corporation and Ameritech Publishing of Illinois,
                              Inc. (incorporated by reference to Exhibit 10.10
                              to Amendment No. 1 to the Registration Statement
                              on Form S-4, filed with the Securities and
                              Exchange Commission on August 7, 1998,
                              Registration No. 333-59287)

              10.11            Revenue Participation Agreement, dated as of
                               August 19, 1997, by and between APIL Partners
                               Partnership and The Reuben H. Donnelley
                               Corporation (incorporated by reference to Exhibit
                               10.11 to Amendment No. 1 to the Registration
                               Statement on Form S-4, filed with the Securities
                               and Exchange Commission on August 7, 1998,
                               Registration No. 333-59287)

              10.12            Master Agreement, executed August 19, 1997, by
                               and among The Reuben H. Donnelley Corporation,
                               The Dun & Bradstreet Corporation, The Am-Don
                               Partnership a/k/a DonTech, DonTech II, Ameritech
                               Publishing, Inc., Ameritech Publishing of
                               Illinois, Inc., Ameritech Corporation, DonTech I
                               Publishing Company LLC and the APIL Partnerships
                               Partnership (incorporated by reference to Exhibit
                               10.12 to Amendment No. 1 to the Registration
                               Statement on Form S-4, filed with the Securities
                               and Exchange Commission on August 7, 1998,
                               Registration No.
                               333-59287)

              10.13            Exclusive Sales Agency Agreement, effective
                               August 19, 1997, between APIL Partners
                               Partnership and DonTech II (incorporated by
                               reference to Exhibit 10.13 to Amendment No. 1 to
                               the Registration Statement on Form S-4, filed
                               with the Securities and Exchange Commission on
                               August 7, 1998, Registration No.
                               333-59287)

                                       51
<PAGE>   54
              10.14            Second Amended and Restated Partnership
                               Agreement, effective as of August 19, 1997, by
                               and between The Reuben H. Donnelley Corporation
                               and Ameritech Publishing of Illinois
                               (incorporated by reference to Exhibit 10.14 to
                               Amendment No. 1 to the Registration Statement on
                               Form S-4, filed with the Securities and Exchange
                               Commission on August 7, 1998, Registration No.
                               333-59287)

               10.15          1991 Key Employees' Performance Unit Plan, as
                              amended and restated (incorporated by reference to
                              Exhibit 10.15 to Amendment No. 3 to the
                              Registration Statement on Form S-4, filed with the
                              Securities and Exchange Commission on September
                              28, 1998, Registration No. 333-59287)

               10.16          1991 Key Employees' Stock Option Plan, as amended
                              and restated (incorporated by reference to Exhibit
                              10.16 to Amendment No. 3 to the Registration
                              Statement on Form S-4, filed with the Securities
                              and Exchange Commission on September 28, 1998,
                              Registration No. 333-59287)

               10.17          1998 Directors' Stock Plan (incorporated by
                              reference to Exhibit 10.17 to Amendment No. 3 to
                              the Registration Statement on Form S-4, filed with
                              the Securities and Exchange Commission on
                              September 28, 1998, Registration No. 333-59287)

               10.18          Annual Incentive Plan, as amended and restated
                              (incorporated by reference to Exhibit 10.18 to
                              Amendment No. 3 to the Registration Statement on
                              Form S-4, filed with the Securities and Exchange
                              Commission on September 28, 1998, Registration No.
                              333-59287)

               10.19          Supplemental Executive Benefit Plan (incorporated
                              by reference to Exhibit 10.19 to Amendment No. 3
                              to the Registration Statement on Form S-4, filed
                              with the Securities and Exchange Commission on
                              September 28, 1998, Registration No. 333-59287)

               10.20          Employment Agreement dated as of September 28,
                              1998 between the Company and Frank R. Noonan
                              (incorporated by reference to Exhibit 10.1 to the
                              Company's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1998)

               10.21          Employment Agreement dated as of September 28,
                              1998 between the Company and Philip C. Danford
                              (incorporated by reference to Exhibit 10.2 to the
                              Company's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1998)

               10.22          Employment Agreement dated as of September 28,
                              1998 between the Company and Alexander R. Marasco
                              (incorporated by reference to Exhibit 10.3 to the
                              Company's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1998)

               10.23          Employment Agreement dated as of September 28,
                              1998 between the Company and David C. Swanson
                              (incorporated by reference to Exhibit 10.4 to the
                              Company's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1998)

               10.24          Employment Agreement dated as of September 28,
                              1998 between the Company and Frederick J. Groser
                              (incorporated by reference to Exhibit 10.5 to the
                              Company's Quarterly Report on Form 10-Q for the
                              quarter ended September 30, 1998)

               *21            Subsidiary of the Company

               *23            Consent of Independent Accountants

               *27.1          Amended Financial Data Schedule of the Company /
                              For 1998

               *27.2          Amended Financial Data Schedule of the Company /
                              For 1997

                                       52
<PAGE>   55
               *27.3          Amended Financial Data Schedule of the Company /
                              For 12 Mos. Ended 12/31/96

               *27.4          Amended Financial Data Schedule of Donnelley / For
                              1998

               *27.5          Amended Financial Data Schedule of Donnelley / For
                              1997

               *27.6          Amended Financial Data Schedule of Donnelley / For
                              12 Mos. Ended 12/31/96

-------------------
         *Filed herewith


                                       53
<PAGE>   56
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 11th day of
August, 1999.


                                       R.H. Donnelley Corporation

                                       By: /s/ Frank R. Noonan
                                          ----------------------------------
                                          Frank R. Noonan,
                                          Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been duly signed by the following persons in the capacities and
on the date indicated.

<TABLE>
<S>                                         <C>                                <C>
   /s/ Frank R. Noonan                      Chairman of the Board and           August 11, 1999
-------------------------------             Chief Executive Officer
 (Frank R. Noonan)

   /s/ Philip C. Danford                    Senior Vice President and           August 11, 1999
-------------------------------             Chief Financial Officer
 (Philip C. Danford)

   /s/ William C. Drexler                   Vice President and Controller       August 11, 1999
-------------------------------
 (William C. Drexler)

   /s/ Diane P. Baker                       Director                            August 11, 1999
-------------------------------
 (Diane P. Baker)

   /s/ William G. Jacobi                    Director                            August 11, 1999
-------------------------------
 (William G. Jacobi)

   /s/ Robert Kamerschen                    Director                            August 11, 1999
-------------------------------
 (Robert Kamerschen)

   /s/ Carol J. Parry                       Director                            August 11, 1999
-------------------------------
 (Carol J. Parry)

   /s/ Barry Lawson Williams                Director                            August 11, 1999
-------------------------------
 (Barry Lawson Williams)
</TABLE>


                                       54
<PAGE>   57
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 11th day of
August, 1999.

                                    R.H. Donnelley Inc.

                                    By: /s/ Frank R. Noonan
                                       -----------------------------
                                       Frank R. Noonan,
                                       President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been duly signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<S>                                         <C>                                <C>
   /s/ Frank R. Noonan                      Director, President and             August 11, 1999
-------------------------------             Chief Executive Officer
 (Frank R. Noonan)

   /s/ Philip C. Danford                    Director, Senior Vice President     August 11, 1999
-------------------------------             and Chief Financial Officer
 (Philip C. Danford)

   /s/ William C. Drexler                   Vice President and Controller       August 11, 1999
-------------------------------
 (William C. Drexler)

   /s/ Stephen B. Wiznitzer                 Director, Senior Vice President     August 11, 1999
-------------------------------             and General Counsel
 (Stephen B. Wiznitzer)
</TABLE>


                                       55