SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- -----------------
Commission file number 001-07155
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Profit Participation Plan of R.H. Donnelley
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
R.H. Donnelley Corporation, One Manhattanville Road, Purchase, NY 10577.
REQUIRED INFORMATION
The required financial statements are attached to this report.
<PAGE>
PROFIT PARTICIPATION PLAN OF
R.H. DONNELLEY
INDEX TO FORM 11-K
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants 3
Statement of Changes in Net Assets Available for
Benefits, With Fund Information for the period from
July 1, 1998 (Inception of the Plan) to December 31, 1998 4
Statement of Net Assets Available for Benefits
With Fund Information as of December 31, 1998 5
Notes to Financial Statements 6-12
Signatures 13
Exhibit 23 - Consent of the Independent Accountants 14
</TABLE>
<PAGE>
-------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Employee Benefits Committee of The Board of Directors of R.H.
DONNELLEY CORPORATION:
In our opinion, the accompanying statement of net assets available for
benefits and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available
for benefits of the Profit Participation Plan of R.H. Donnelley (the
'Plan') as of December 31, 1998 and the changes in net assets available for
benefits for the period from July 1, 1998 (inception of Plan) to December 31,
1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Plan's management; our
responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit 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 audit provides a
reasonable basis for our opinion.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statement
of net assets available for benefits and the statement of changes in net
assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for plan benefits of each fund. The fund
information has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
New York, New York
May 28, 1999
<PAGE>
R.H. DONNELLEY
PROFIT PARTICIPATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
FROM JULY 1, 1998 (INCEPTION OF THE PLAN) TO DECEMBER 31, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
BGI
R.H. The BGI Mid & BGI
BGI Donnelley D&B Special BGI Small Int'l Par-
Equity Common Common Fixed Balanced Cap Equity tic-
Total Index Stock Stock Income Index Index Index ipant
Plan Fund Fund Fund Fund Fund Fund Fund Loans
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allocated
income in
Master
Trust $ 2,815 $ 2,499 $ 233 $ (742) $ 558 $ 163 $ 21 $ 90 $(7)
Accrued
interest
receivable
from
loans 16 6 2 - 5 1 1 1 -
Contributions
received
from
employer 809 352 100 - 193 40 81 43 -
partici-
pants: 2,485 1,093 304 - 574 123 251 140 -
Participant
loan
repayments (82) 214 71 - 183 7 22 19 (598)
Distributions
to
partici-
pants (2,114) (868) (24) (131) (844) (47) (114) (86) -
Loans to
participant (2) (187) (22) (57) (246) (15) (25) (12) 562
Administrative
fees (24) (12) (2) - (7) (1) (1) (1) -
Interfund
transfers - (619) 3,829 (5,301) 1,087 1,304 (318) 18 -
-------------------------------------------------------------------
Net increase/
(decrease) 3,903 2,478 4,491 (6,231) 1,503 1,575 (82) 212 (43)
Net assets
available
for benefits
as of
July 1, 59,467 27,165 661 6,231 15,910 1,920 3,437 1,880 2,263
1998
--------------------------------------------------------------------
Net assets
available
for benefits
as of
December 31,
1998 $63,370 $29,643 $5,152 $ - $17,413 $3,495 $3,355 $2,092 $2,220
=====================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements
</FN>
<PAGE>
R.H. DONNELLEY
PROFIT PARTICIPATION PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
AS OF DECEMBER 31, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
BGI
R.H. The BGI Mid & BGI
BGI Donnelley D&B Special BGI Small Int'l Par-
Equity Common Common Fixed Balanced Cap Equity tic-
Total Index Stock Stock Income Index Index Index ipant
Plan Fund Fund Fund Fund Fund Fund Fund Loans
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investement
in Master
Trust $63,042 $29,478 $5,133 $(34) $17,320 $3,470 $3,318 $2,070 $2,287
Accrued
interest
receivable
from loans 16 6 2 - 5 1 1 1 -
Interfund
receivable/
(payable) - - (34) 34 - - - - -
Contributions
receivable
from:
participants 259 137 44 - 78 20 29 18 (67)
employer 77 34 9 - 17 5 8 4 -
Other
accrued
dis-
bursements (24) (12) (2) - (7) (1) (1) (1) -
---------------------------------------------------------------------
Net Assets
available
for
benefits
as of
December
31, 1998 $63,370 $29,643 $5,152 $ - $17,413 $3,495 $3,355 $2,092 $2,220
======================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these financial statements
</FN>
<PAGE>
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - Plan Description
Overview
--------
Prior to July 1, 1998, R.H. Donnelley Corporation (the 'Company' or 'RHD')
operated as part of The Dun & Bradstreet Corporation ('D&B'). On July 1,
1998, the Company separated from D&B and operates as an independent entity.
On the same date, the Company established the Profit Participation Plan of
R.H. Donnelley (the 'Plan') for the benefit of its eligible employees.
The Plan is a defined contribution plan and is subject to the provisions of
the Employee Retirement Income Security Act of 1974, as amended ('ERISA').
The Plan was established to provide a convenient way for eligible employees
to save on a regular and long-term basis. The following summary provides an
overview of major Plan provisions in effect from the date of inception
through December 31, 1998 and is provided for general information purposes.
Employees that contribute to the Plan ('Participants') or former employees
who have assets in the plan should refer to the Plan document for more
complete information and full description of the Plan provisions and
qualifications.
Eligibility and Contributions
-----------------------------
Full-time employees of the Company are immediately eligible to participate in
the Plan on their date of hire. Employees, who were Participants in the
Profit Participation Plan of the Dun & Bradstreet Corporation (the 'D&B
Plan') immediately prior to July 1, 1998, could elect to continue
participation in the D&B Plan or to become Participants of the Plan as of
July 1, 1998. Part-time associates who work at least one thousand hours
during the consecutive twelve-month period following employment or in any
calendar year thereafter are eligible to participate in the Plan on the
first day of the following January.
Participants of the Plan authorize direct payroll deductions of between 1%
and 6%, in whole percent increments, of their included compensation, as
defined by the Plan Document ('Basic Contributions'). The Company makes
contributions ('Matching Contributions') equal to 50% of aggregate Basic
Contributions.
Participants may make additional contributions ('Investment Contributions')
up to a maximum of 10% of included compensation. Investment Contributions
are not eligible for Matching Contributions. All contributions are subject
to Internal Revenue Code ('IRC') and ERISA limitations.
Participants' Basic Contributions and Investment Contributions may be made
from before-tax earnings, which has the effect of reducing current taxable
earnings for federal income tax purposes, and/or after-tax earnings. A
Participant may contribute in any plan year up to a maximum of 16% of their
included compensation (up to 6% in Basic Contributions and 10% in Investment
Contributions) or the maximum before-tax contributions allowed by the IRC,
whichever is less. For plan year 1998, the IRC limit on before-tax
contributions was $10,000.
To comply with certain provisions of the Tax Reform Act of 1986, as amended
(the 'Act'), the Plan limits covered compensation for purposes of
determining Basic, Investment and Matching Contributions
(collectively, 'Contributions') to $160,000 for calendar year ended
December 31, 1998.
<PAGE>
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
Vesting and Investment Options
------------------------------
Basic and Investment Contributions are fully vested when made. Matching
Contributions are fully vested when the Participant has completed three years
of service with the Company. In addition, a Participant becomes fully vested
in Matching Contributions immediately upon attaining age 65 or in the event
of death or disablement. When RHD separated from D&B, all Mathcing
Contributions became fully vested. Subsequent Matching Contributions are
subject to normal vesting provisions.
The Plan allows Participants to allocate their Contributions to various
investment options available under the Plan. These elections must be made in
10% increments and are subject to certain restrictions as described in the
Plan document. Participants are not permitted to invest more than 50% of
their account balance or contributions in the R.H. Donnelley Corporation
Common Stock Fund. Participants are able to reallocate their entire
account balances in multiples of 10% among the Plan's investment options,
subject to the 50% maximum in the R.H. Donnelley Corporation Common Stock
Fund.
Upon termination of service with the Company, Participants become eligible
for a lump sum distribution of the vested portion of their account. Retired
and terminated Participants who have an account balance in excess of $5,000
may elect various forms of deferred distribution.
Amounts forfeited by non-vested or partially vested Participants who
terminated during the six-month period ended December 31, 1998 totaled
$3,000. Forfeited amounts reduce future Company contributions.
Participant Loans
-----------------
Participants may obtain loans from the Plan, which are secured by the vested
balance in their accounts. The Plan limits the total number and amount of
loans outstanding at any time for each Participant. Interest rates
applicable to Plan loans are commensurate with prevailing rates of interest
charged on similar commercial loans determined in the marketplace plus 2%.
The total number of Participants with outstanding loans at December 31, 1998
was 353.
Note 2 - Summary of Significant Accounting Policies
Master Trust
------------
On July 1, 1998, RHD established with The Northern Trust Company (the
'Trustee'), the R.H. Donnelley Corporation Defined Contribution Plan Master
Trust (the 'Master Trust'). Upon the separation of RHD from D&B,
Participants had the option to transfer their account balances to the Plan
or to keep their balances in the D&B Plan. In connection with the
reorganization, assets relating to the Participants who elected to transfer
their account balances to the Plan in 1998 totaled $59,468,000.
Participant balances were transferred from The D&B Plan to the Master Trust.
As of December 31, 1998, assets of the Plan are commingled with the assets of
The DonTech Profit Participation Plan. DonTech is a general partnership
between RHD and an indirect, wholly owned subsidiary of Ameritech
Corporation. The Plan's investment in the Master Trust is based on its
relative interest in the fair value of the assets held in the Master Trust.
Investment income, gains and losses on sales of investments and net
appreciation/ depreciation in the fair value of investments are allocated to
the Plan based upon the relative investment balances at fair value during
the valuation period. Fair value is determined based on quoted market prices
of investment securities or contract value for investment contracts.
<PAGE>
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
Contributions and Benefit Payments
----------------------------------
Participant contributions are recorded in the period payroll deductions
are made. Company contributions are based upon amounts required under
the provisions of the Plan. Benefits are recorded when paid.
Expenses and Administrative Costs
---------------------------------
Transaction, investment manager and annual audit fees related to the Plan are
charged against Plan assets. Trustee fees and other miscellaneous expenses
of administering the Plan are borne by the Company.
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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties
-----------------------
The Plan provides for various investment options in a number of funds
invested in stocks, bonds, fixed income securities, mutual funds, and other
investment securities. Certain investment securities are exposed to risks
such as changes in interest rates, fluctuations in market conditions and
credit risk. The level of risk associated with certain investment
securities and uncertainty related to changes in the value of these
securities could materially affect Participant account balances and amounts
reported in the financial statements and accompanying notes.
Plan Termination
----------------
While the Company has not expressed any intent to do so, it may discontinue
its contributions or terminate the Plan at any time, subject to the
provisions of ERISA and the IRC. These provisions state that in such an
event, all Participants of the Plan shall be fully vested in the current
market value of amounts credited to their accounts as of the date of
termination.
Note 3. Investment Funds
Participants of the Plan through December 31, 1998, could have elected
to have the Basic, Investment and Matching Contributions (collectively
'Contributions') credited to their Plan accounts invested in one or more of
following investment funds. The percentage indicated represents the
percentage of the total Master Trust investments dedicated to Participants.
Remaining amounts are dedicated to participants in the DonTech Profit
Participation Plan.
<TABLE>
<S> <C>
BGI Equity Index Fund The BGI Equity Index Fund
invests in common stock of
companies included in the
Standard & Poor's 500 Stock
Index (S&P 500). Vested and
non-vested Participant
balances in this fund
represented 61% of the total
Master Trust investment in
this option as of
December 31, 1998.
</TABLE>
<PAGE>
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
<TABLE>
<S> <C>
R.H. Donnelley Corporation Common Stock Fund The R.H. Donnelley Corporation
Common Stock Fund invests in
the common stock of R.H.
Donnelley Corporation. Vested
and non-vested Participant
balances in this fund
represented 66% of the total
Master Trust investment in
this option as of
December 31, 1998.
The Dun & Bradstreet Corporation The Dun & Bradstreet
Common Stock Fund Corporation Common
Stock Fund invests in the
common stock of The Dun &
Bradstreet Corporation. As of
December 31, 1998, The Dun &
Bradstreet Corporation Common
Stock Fund was terminated.
Unless otherwise instructed by
the Participant, all remaining
balances were transferred to
the R.H. Donnelley Corporation
Common Stock Fund.
Legacy Common Stock Fund The Legacy Common Stock Fund
consists of Common Stock of
D&B, ACNielsen Corporation and
Cognizant Corporation. On May
31, 1998, the Legacy Common
Stock Fund was terminated.
Unless otherwise instructed by
the Participant, all remaining
balances were transferred
to The Dun & Bradstreet
Corporation Common Stock Fund.
BGI Special Fixed Income Fund The BGI Special Fixed Income
Fund invests in group
insurance contracts ('GICs')
with one or more insurance
companies and/or financial
institutions selected by the
Company. The insurance
companies and/or financial
institutions contract to repay
both principle and a specific
rate of return, depending on
market conditions when the
contract is negotiated, and
the length of the contract.
Vested and non-vested
Participant balances in
this fund represented 53%
of the total Master Trust
investment in this option
as of December 31, 1998.
BGI Balanced Index Fund The BGI Balanced Fund
invests in the common stock of
companies included in the S&P
500 and long-term,
investment grade bonds. Vested
and non-vested Participant
balances in this fund
represented 66% of the total
Master Trust investment in
this option as of
December 31, 1998.
BGI Mid & Small Cap Equity Index Fund The BGI Mid & Small Cap Equity
Index Fund invests in common
stocks in the U.S. equity
market that are not included
in the S&P 500. Vested and
non-vested Participant
balances in this fund
represented 86% of the total
Master Trust investment in
this option as of
December 31, 1998.
BGI International Equity Index Fund The BGI International Equity
Index Fund invests in a
portfolio of securities traded
outside the U.S. Investment
selections are based on the
Europe, Australia and Far East
Index. Vested and non-vested
Participant balances in this
fund represented 77% of the
total Master Trust investment
in this option as of December
31, 1998.
</TABLE>
Contributions received from Participants and the Company are temporarily
invested in the Northern Trust Company Collective Short-Term Investment Fund
pending investment into the funds. Investments of the Collective Short-Term
Investment Fund consist of high quality money market instruments with short
maturities.
<PAGE>
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
Note 4. Tax Status
The IRS determined and informed D&B by a letter dated July 7, 1995, that the
D&B Plan and related trust were designed in accordance with applicable
sections of the IRC. During June 1998, the Company filed documents with the
IRS indicating that Participant assets were transferred to the Plan.
Provisions of the Plan are substantially similar to the D&B Plan. The Plan
administrator and the Plan's counsel believe that the Plan is designed and is
currently being operated in compliance with the applicable requirements of
the IRC.
Note 5. Investment in Master Trust
The investment in the Master Trust reflected in the Statement of Net Assets
Available for Benefits represents the Plan's share of total assets in the
Master Trust. Investments of the Plan comprise 56% of total Master Trust
assets as of December 31, 1998.
Assets at fair value in the Master Trust are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
December 31, 1998
-----------------
<S> <C>
BGI Equity Index Fund $ 47,994*
R.H. Donnelley Corporation Common Stock Fund 7,726*
Ameritech Corporation Common Stock Fund 10,047*
BGI Special Fixed Income Fund 32,417*
BGI Balanced Index Fund 5,300
BGI Mid & Small Cap Equity Index Fund 3,846
BGI International Equity Index Fund 2,710
Loan Account 3,214
-------
Total Investments 113,254
Accrued Contributions, Income and Expenses 54
-------
Total Assets in Master Trust $ 113,308
=======
</TABLE>
[FN]
* These assets represent 5% or more of Plan assets.
</FN>
<PAGE>
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
The Master Trust investments had the following income and expense during
the six month period ending December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
Income/(Expense)
July 1, 1998-
Net Appreciation/(Depreciation) December 31, 1998
------------------------------- -----------------
<S> <C>
BGI Equity Index Fund $ 4,077
R.H. Donnelley Corporation Common Stock Fund 306
Ameritech Corporation Common Stock Fund 2,606
The Dun & Bradstreet Corporation Common Stock Fund (1,036)
BGI Balanced Index Fund 262
BGI Mid & Small Cap Equity Index Fund 5
BGI International Equity Index Fund 91
-----
Total Net Appreciation 6,311
Investment Income
-----------------
Interest 1,162
Dividends 208
Fees and Expenses (61)
-----
Total Investment Income 1,309
-----
Master Trust Income $ 7,620
=====
</TABLE>
The Plan's allocated income in the Master Trust represents its participating
share for the six month period from inception of the plan to December 31,
1998. The Master Trust investments are recorded at fair value based on the
applicable December 31, 1998 closing sales prices as quoted in published
financial sources. Fair value for investments in the BGI Balanced
Index Fund, the BGI Mid & Small Cap Equity Index Fund and the BGI
International Equity Index Fund are determined by using the applicable
December 31, 1998 redemption prices reported by the managers of the funds.
The Trust has entered into benefit responsive investment contracts with
various insurance companies ('Insurers'). The fair value of these contracts
are recorded in the BGI Special Fixed Income Fund. The Insurers maintain
the contributions in a pooled account, which is credited with earnings on
the underlying assets and charged for Participant withdrawals and
administrative expenses. The contracts are included in the financial
statements at contract value and there are no reserves against contract
value for credit risk of the contract insurer or other risks. Fair value of
the contracts was $24,844,000 as of December 31, 1998. The average interest
rate was approximately 6.6% for the period from July 1, 1998 to December 31,
1998.
Dividend income is recorded on the ex-dividend date. Interest earned on
investments is recorded on the accrual basis. Purchases and sales of
securities are recorded on the trade date. The net appreciation in the
fair value of the Master Trust's investments consists of realized and
unrealized gains and losses for the specified period.
Note 6. Subsequent Events
As of January 1, 1999 the Company engaged Fidelity Investments for
maintenance of Participant data, trustee and investment management functions
associated with the Plan. Prior to January 1, 1999, record keeping and
Participant data services were provided by Towers Perrin and trustee
services by The Northern Trust Company. In addition, the following change
in fund investment options were made:
The BGI Equity Index Fund, BGI Balanced Index Fund, BGI Mid & Small
Cap Equity Index Fund and BGI International Equity Index Fund were removed
as investment options of the Plan. The Fidelity Puritan Fund, Fidelity
Equity Income Fund, Spartan US Equity Index Fund, Spartan Extended Market
Index Fund, Fidelity Blue Chip Growth Fund, Franklin Small Cap Growth Fund I
and Fidelity Diversified International Fund were added as investment options
of the Plan. Investment objectives of the new investment options are:
<TABLE>
<S> <C>
Fidelity Puritan Fund The Fidelity Puritan Fund invests
primarily in high yielding US and
foreign securities with an emphasis on
capital preservation.
Fidelity Equity Income Fund The Fidelity Equity Income Fund
invests Primarily in income
producing common and preferred stocks
and may invest in bonds.
Spartan US Equity Index Fund The Spartan US Equity Index Fund
invests in companies contained in the
S&P 500 index. The fund strategy is
to duplicate the composition and
performance of the index, as opposed
to selectively investing in individual
stocks.
Spartan Extended Market Index Fund The Spartan Extended Market Index Fund
invests in small to mid-sized
companies that are included in the
Wilshire 4500 index. The fund
strategy is to duplicate the
composition and performance of the
index, as opposed to selectively
investing in individual stocks.
Fidelity Blue Chip Growth Fund The Fidelity Blue Chip Growth Fund
invests in equity securities of large,
well known and established companies.
Franklin Small Cap Growth Fund I The Franklin Small Cap Growth Fund I
invests in foreign and domestic equity
securities issued by companies with
market capitalization of less than
$1.5 billion.
Fidelity Diversified The Fidelity Diversified
International Fund International Fund invests in
companies located outside the U.S.
The fund focuses on larger companies
that are undervalued compared to
existing norms in a particular
market.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Employee Benefits Committee of R.H. Donnelley Corporation has duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
PROFIT PARTICIPATION PLAN OF R.H. DONNELLEY
(Name of Plan)
By:
----------------------------------
Philip C. Danford
Senior Vice President & Chief Financial Officer
Date: June 29, 1999
<PAGE>
Exhibit 23
CONSENT OF THE INDEPENDENT ACCOUNTANTS
We hereby concent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 33-27144) of R.H. Donnelley Corporation of our
report dated May 28, 1999, which appears in this annual report on Form 11-K.
/s/PricewaterhouseCoopers LLP
New York, New York
June 29, 1999
