<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
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>
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<S> <C>
Title of Class Shares Outstanding at October 31, 2000
-------------- --------------------------------------
Common Stock, par value $1 per share 31,739,752
</TABLE>
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. R.H. Donnelley Inc. became subject to the filing requirements of
Section 15(d) on October 1, 1998 in connection with the public offer and sale of
its 9 1/8% Senior Subordinated Notes. As of October 31, 2000, there were 100
shares of R.H. Donnelley Inc. common stock, no par value, outstanding.
<PAGE> 2
R.H. DONNELLEY CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
------------------------------- ----
Item 1. Financial Statements
Consolidated Statements of Operations for the three and nine months ended
September 30, 2000 and 1999 ...................................................................... 3
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999 .......................... 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 ...................................................................... 5
Notes to Consolidated Financial Statements ....................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .............. 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk .......................................... 19
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings .................................................................................. 20
Item 6. Exhibits and Reports on Form 8-K ................................................................... 21
SIGNATURES ................................................................................................... 25
</TABLE>
2
<PAGE> 3
R.H. DONNELLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------
(amounts in thousands, except per share data) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross revenues................................................... $ 23,202 $ 58,541 $ 130,903 $ 140,750
Less: sales allowances........................................... (424) -- (6,576) (2,005)
-------- -------- --------- ---------
Net revenues..................................................... 22,778 58,541 124,327 138,745
Expenses:
Operating expenses............................................ 13,490 44,301 82,336 102,642
General and administrative expenses........................... 4,888 8,520 19,776 23,534
Provision for bad debts....................................... 1,056 2,112 3,700 3,637
Depreciation and amortization................................. 3,281 4,392 12,054 13,817
-------- -------- --------- ---------
Total expenses........................................... 22,715 59,325 117,866 143,630
Income from partnerships and related fees........................ 45,578 47,940 116,962 113,394
-------- -------- --------- ---------
Operating income......................................... 45,641 47,156 123,423 108,509
Interest income.................................................. 2,164 122 2,605 277
Interest expense................................................. (8,591) (9,184) (27,411) (28,205)
Gain on disposition of businesses................................ -- -- 89,435 --
-------- -------- --------- ---------
Income before income taxes
and extraordinary loss............................... 39,214 38,094 188,052 80,581
Provision for income taxes....................................... 15,097 15,736 72,400 32,875
-------- -------- --------- ---------
Income before extraordinary loss......................... 24,117 22,358 115,652 47,706
Extraordinary loss (net of taxes of $440) 704 -- 704 --
-------- -------- --------- ---------
Net income............................................... $ 23,413 $ 22,358 $ 114,948 $ 47,706
======== ======== ========= =========
Earnings per share before extraordinary loss:
Basic.................................................... $ 0.76 $ 0.66 $ 3.60 $ 1.41
Diluted.................................................. $ 0.74 $ 0.65 $ 3.53 $ 1.39
Earnings per share after extraordinary loss:
Basic.................................................... $ 0.74 $ 0.66 $ 3.58 $ 1.41
Diluted.................................................. $ 0.72 $ 0.65 $ 3.51 $ 1.39
Shares used in computing earnings per share:
Basic.................................................... 31,743 33,632 32,134 33,806
Diluted.................................................. 32,547 34,201 32,749 34,276
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
R.H. DONNELLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
(amounts in thousands, except share and per share data) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................. $ 91,129 $ 2,390
Accounts receivable
Billed................................................................. 830 8,478
Unbilled............................................................... 48,916 68,213
Other.................................................................. 8,765 10,011
Allowance for doubtful accounts........................................ (6,287) (7,992)
--------- ---------
Total accounts receivable, net.................................... 52,224 78,710
Deferred contract costs................................................... 520 9,728
Income tax refund......................................................... -- 6,000
Other current assets...................................................... 4,997 5,448
--------- ---------
Total current assets.............................................. 148,870 102,276
Property and equipment, net............................................... 11,212 17,626
Computer software, net.................................................... 12,665 24,225
Partnership investments and related receivables........................... 204,305 230,205
Investment in ChinaBig.com Limited........................................ 13,432 --
Other non-current assets.................................................. 25,345 21,074
--------- ---------
TOTAL ASSETS...................................................... $ 415,829 $ 395,406
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................................. $ 74,508 $ 45,582
Accrued interest payable.................................................. 11,461 9,253
Investment obligation to ChinaBig.com Limited............................. 2,550 3,978
Current portion of long-term debt......................................... -- 9,750
--------- ---------
Total current liabilities......................................... 88,519 68,563
Long-term debt............................................................ 351,750 435,000
Deferred income taxes..................................................... 61,479 63,024
Postretirement and postemployment benefits................................ 8,283 9,380
Other liabilities ........................................................ 9,700 12,250
Commitments and contingencies.............................................
SHAREHOLDERS' 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 shares for 2000 and 1999................... 51,622 51,622
Additional paid in capital................................................ 12,143 5,172
Unearned compensation..................................................... (105) (86)
Retained deficit.......................................................... (88,495) (203,443)
Treasury stock, at cost, 19,888,906 shares for 2000 and
18,578,996 shares for 1999............................................. (79,067) (46,076)
--------- ---------
Total shareholders' deficit....................................... (103,902) (192,811)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT....................... $ 415,829 $ 395,406
--======= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
R.H. DONNELLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
(amounts in thousands) 2000 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 114,948 $ 47,706
Reconciliation of net income to net cash provided by operating activities:
Gain on disposition of businesses (net of taxes of $34,433)................... (55,002) --
Extraordinary loss (net of taxes of $440)..................................... 704 --
Depreciation and amortization................................................. 12,054 13,817
Deferred income taxes......................................................... (1,545) (1,507)
Other noncash charges......................................................... 1,628 1,021
Provision for bad debts....................................................... 3,700 3,637
Cash received in excess of (less than) income from
partnerships and related receivables....................................... 11,782 (12,286)
Decrease (increase) in accounts receivable.................................... 19,977 (9,990)
Decrease in deferred contract costs........................................... 1,033 1,361
Decrease (increase) in other assets........................................... 5,509 (749)
(Decrease) increase in accounts payable, accrued and
other current liabilities.................................................. (18,441) 8,978
Increase (decrease) in other liabilities...................................... 1,337 (1,081)
---------- ---------
Net cash provided by operating activities.............................. 97,684 50,907
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of businesses............................................ 122,009 --
Additions to property and equipment................................................ (3,684) (1,571)
Additions to computer software..................................................... (2,630) (2,479)
Investment in ChinaBig.com Limited................................................. (3,938) (8,000)
---------- ---------
Net cash provided by (used in) investing activities.................... 111,757 (12,050)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt ................................................................. (93,000) (22,375)
Purchase of treasury stock......................................................... (32,953) (19,319)
Proceeds from exercise of stock options............................................ 5,251 4,050
---------- ---------
Net cash used in financing activities.................................. (120,702) (37,644)
Increase in cash and cash equivalents.............................................. 88,739 1,213
Cash and cash equivalents, beginning of year....................................... 2,390 2,302
---------- ---------
Cash and cash equivalents, end of period........................................... $ 91,129 $ 3,515
========== =========
Supplemental cash flow information:
Interest paid...................................................................... $ 20,639 $ 28,587
========== =========
Income taxes paid.................................................................. $ 47,249 $ 28,240
========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
R.H. DONNELLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(amounts in thousands)
1. BACKGROUND AND BASIS OF PRESENTATION
Prior to July 1, 1998, R.H. Donnelley Corporation (the "Company") operated as
part of The Dun & Bradstreet Corporation (in the context of specifically
describing the Distribution, referred to as "Old D&B," otherwise "D&B"). In
December 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 and Old D&B changed its name to R.H.
Donnelley Corporation.
The interim financial statements have been prepared in accordance with the
instructions to Form 10-Q and should be read in conjunction with the financial
statements and related notes included in the Company's Form 10-K for the year
ended December 31, 1999. The results of interim periods are not necessarily
indicative of results for the full year or any subsequent period. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of financial position, results of
operations and cash flows at the dates and for the periods presented have been
included. Certain 1999 amounts have been restated to conform to the 2000
presentation.
2. DISPOSITION OF BUSINESSES AND CORPORATE REORGANIZATION
On June 30, 2000, R.H. Donnelley Inc. ("Donnelley"), a wholly-owned subsidiary
of the Company, entered into an agreement ("Agreement") with an affiliate of
Bell Atlantic Corporation ("Bell Atlantic") for the early termination of the
directory services agreements between Donnelley and Bell Atlantic dated
September 5, 1985 and May 5, 1998, as amended (the "Agency Agreements").
Pursuant to the Agency Agreements, Donnelley had served as exclusive advertising
sales agent for Bell Atlantic directories covering substantially all of New York
State. The Agency Agreements had been scheduled to expire in 2005 and 2003,
respectively. The transactions contemplated by the Agreement were also
consummated on June 30, 2000.
Under the terms of the Agreement, Donnelley received cash proceeds of $114,009,
less approximately $3,000 of operational liabilities assumed by Bell Atlantic
related to the pre-closing period. These net proceeds were subject to
post-closing adjustment under certain circumstances, but the adjustment period
has lapsed and no adjustments were made. Donnelley also received estimated
commissions for sales which occurred prior to the closing, but which were not
yet payable under the terms of the Agency Agreements. These commissions totaled
approximately $42,000, net of certain adjustments, and were subject to
post-closing adjustments under certain circumstances, but the adjustment period
has lapsed and no adjustments were made. The Company also received commissions
of approximately $15,000 in connection with its sales for certain directories
that published in the pre-closing period.
On April 27, 2000, the Company sold its Cincinnati proprietary directory
business to Yellow Book USA, Inc. for $8,000.
In connection with the above actions, the Company also implemented cost-cutting
measures, including headcount reductions, at its Raleigh, NC facility and
corporate headquarters consistent with its new streamlined operating structure.
The Company recognized a pretax gain from the above transactions of $89,435
($55,002 after taxes).
6
<PAGE> 7
3. RECONCILIATION OF SHARES USED IN COMPUTING EARNINGS PER SHARE
The table below provides a reconciliation of basic weighted average shares
outstanding to diluted weighted average shares outstanding for each period
presented. The conversion of dilutive shares has no impact on operating results.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average shares outstanding - basic................ 31,743 33,632 32,134 33,806
Potentially dilutive shares................................ 804 569 615 470
------ ------ ------ ------
Weighted average shares outstanding - diluted.............. 32,547 34,201 32,749 34,276
====== ====== ====== ======
</TABLE>
4. LONG-TERM DEBT
Long-term debt at September 30, 2000 and December 31, 1999 consisted of the
following:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Senior Subordinated 9.125% Notes................................. $ 150,000 $ 150,000
Senior Secured Term Facilities................................... 201,750 294,750
Senior Revolving Credit Facility................................. -- --
--------- ---------
Total..................................................... 351,750 444,750
Less current portion............................................. -- 9,750
--------- ---------
Net long-term debt........................................ $ 351,750 $ 435,000
========= =========
</TABLE>
The Senior Subordinated Notes (the "Notes") pay interest semi-annually and
mature in June 2008. The Notes Indenture contains covenants that, among other
things, restrict the ability of the Company and its subsidiaries 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," and together with the Term Facilities, the
"Credit Agreement"). 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
Company's obligations under the Credit Agreement are secured by security
interests granted to the lenders in substantially all of the Company's assets,
including capital stock of its existing and newly formed subsidiaries. The
Credit Agreement contains covenants that, among other things, require the
Company to maintain certain financial ratios and restrict the ability of the
Company and its subsidiaries to engage in mergers, consolidations and asset
sales, incur additional indebtedness or create liens.
In the quarter, the Company repaid $90,000 of Term Facilities prior to the
scheduled maturity date. In connection with the prepayment of debt, the Company
recorded an after-tax extraordinary loss of $704 relating to the write-off of a
portion of the associated deferred financing costs.
5. TREASURY STOCK ACTIVITY
During the nine months ended September 30, 2000, the Company repurchased 1,845
shares at a cost of $32,953.
6. LITIGATION
In April 1999, Sandy Goldberg, Dellwood Publishing, Inc. and Rockland Yellow
Pages initiated a lawsuit against Donnelley and Bell Atlantic Corporation ("Bell
Atlantic") in the United States District Court of the Southern District of New
York. The Rockland Yellow Pages is a proprietary directory that competes against
a Bell Atlantic directory
7
<PAGE> 8
in the same region, for which Donnelley served as Bell Atlantic's sales agent
through June 30, 2000. The complaint alleged that the defendants disseminated
false information concerning the Rockland Yellow Pages, which has resulted in
damages to the Rockland Yellow Pages. The plaintiffs alleged a variety of claims
including RICO violations, antitrust violations and Lanham Act violations. They
sought damages in excess of $30,000, which amount plaintiffs sought to have
trebled under the antitrust laws. In addition, the plaintiffs also sought
punitive damages in an unspecified amount. In February 2000, Yellow Book USA,
Inc., one of the Company's primary competitors, acquired Dellwood Publishing,
Inc., but this matter was not part of the assets acquired by Yellow Book.
In June 1999, the defendants filed a motion to dismiss this complaint. In
September 1999, the plaintiffs filed papers in opposition to defendants' motion
to dismiss and in November 1999, the defendants answered these opposition papers
and again moved to dismiss the complaint. On September 29, 2000, the Court
dismissed the complaint in its entirety, but gave plaintiffs 30 days leave to
amend the complaint to replead any claims, other than the RICO claims. On
October 25, 2000, plaintiffs filed an amended complaint alleging substantially
the same facts, claims and damages as set forth in the original complaint, other
than the RICO claims. The Company is still in the process of analyzing the
amended complaint along with its counsel and counsel for Bell Atlantic (now
Verizon), but while at this preliminary stage in the proceedings management is
unable to predict the outcome of this matter, it presently believes that the
resolution of the action will not have a material adverse effect on the
Company's financial position or results of operations.
In July 1996, Information Resources, Inc. ("IRI") filed a complaint in the
United States District Court for the Southern District of New York, naming as
defendants the Company (as successor of Old D&B), ACNielsen Company and IMS
International Inc., each former subsidiaries of D&B ("IRI Action"). The
complaint alleges, among other things, various violations of the antitrust laws
and seeks damages in excess of $350,000, which IRI is seeking to have trebled
under the antitrust laws. IRI also seeks punitive damages of an unspecified
amount. Under the definitive agreement entered into in connection with the
Distribution (the "Distribution Agreement"), New D&B has assumed the defense and
will 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 entered into in connection with the Distribution or otherwise,
including any ongoing legal fees and expenses related thereto. Management
presently believes that New D&B has sufficient financial resources and/or
borrowing capacity to satisfy all such liabilities and to reimburse the Company
for all costs and expenses incurred. Management does not believe that the recent
separation of Moody's from New D&B will have a material adverse impact on these
indemnity rights of the Company because, as required by the Distribution
Agreement, Moody's has agreed to be jointly and severally liable with New D&B
for those indemnity obligations to the Company.
Certain tax planning strategies entered into by Old D&B are currently subject to
review by tax authorities. Pursuant to a series of agreements, IMS Health
Incorporated ("IMS") and Nielsen Media Research, Inc. ("NMR") (both of which are
former subsidiaries of 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 $137,000 of tax liability. As explained
above, as a result of the form of the Distribution, the Company is the corporate
successor of, and the taxpayer referred to herein as, Old D&B. However, pursuant
to the terms of the Distribution Agreement and the Tax Allocation Agreement
executed in connection with the Distribution, New D&B has assumed the defense
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
and expenses related thereto. On May 9, 2000, the Internal Revenue Service (the
"IRS") issued a summary report with respect to these tax-planning strategies. In
connection with the summary report, New D&B filed an amended tax return for 1989
and 1990, which reflected $561,600 of tax and interest due. On May 12, 2000, New
D&B paid the IRS approximately $349,300 of this amount and IMS paid
approximately $212,300. These payments were funded with short-term borrowings
and the Company understands were paid under dispute in order to stop additional
interest from accruing. Management presently believes that New D&B, IMS and NMR
have sufficient financial resources and/or borrowing capacity to satisfy all
such liabilities and to reimburse the Company for all costs and expenses
relating thereto. Management does not believe that the recent separation of
Moody's from New D&B will have a material adverse impact on these indemnity
rights of the Company because, as required by the Distribution Agreement,
Moody's has agreed to be jointly and severally liable with New D&B for those
indemnity obligations to the Company.
Other than the matters described above, the Company and Donnelley are involved
in legal proceedings, claims and
8
<PAGE> 9
litigation arising in the ordinary conduct of its business. Although there can
be no assurances, management presently 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.
7. PARTNERSHIP AND JOINT VENTURE INVESTMENTS
DONTECH
The Company has a 50/50 partnership ("DonTech") with an operating unit of SBC
Communications Inc. ("SBC"), which acts as the exclusive sales agent for yellow
pages directories published by SBC in Illinois and northwest Indiana. In
addition to its 50% interest in the profits of DonTech, the Company also
receives revenue participation income, which is tied to advertising sales, from
an operating unit of SBC. The following is summarized financial information of
the DonTech Partnership (revenue participation income is not shown in the table
below):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue................................. $ 32,660 $ 33,019 $ 83,054 $ 83,577
Income from operations...................... 15,455 17,592 33,653 37,732
Net income.................................. 15,474 17,834 34,317 38,761
Total assets................................ 136,962 171,423 136,962 171,423
</TABLE>
Income and related fees from DonTech was $39,057 and $41,082 for the three
months ended September 30, 2000 and 1999, respectively, and $96,492 and $98,569
for the nine months ended September 30, 2000 and 1999, respectively. These
amounts include revenue participation income of $31,320 and $31,776 for the
three months ended September 30, 2000 and 1999, respectively, and $79,334 and
$79,413 for the nine months ended September 30, 2000 and 1999, respectively.
CENDON
The Company had been the exclusive sales agent for the CenDon partnership, a
50/50 partnership between the Company and Centel Directory Company ("Centel"), a
subsidiary of Sprint that was formed to publish directories in Florida, Nevada,
Virginia and North Carolina. Effective for directories that published from and
after July 1, 2000, the Company and Centel entered into a series of agreements
that effectively restructured the partnership as a limited liability company
("LLC") and extended the sales agency arrangement through 2010. Both the
partnership agreement and sales agency agreement were set to expire in 2004. The
new arrangement focuses the Company's responsibilities on sales and certain
pre-press publishing services (the latter through 2003) and establishes the
Company as the exclusive sales agent for Centel's print and electronic /
Internet directory products in the markets previously covered by the partnership
agreement. Centel has assumed responsibility for the publishing and delivery of
print directories and related support services such as marketing, customer
service and collections. The Company receives sales commissions on all
advertising sold and also receives a priority distribution on its membership
interest in the LLC based on the value of advertising sold. Sales commissions
are recognized as revenue and the priority distribution on its membership
interest is recognized as partnership income and related fees.
As a result of this modified arrangement, revenue and related cost are
recognized at the time of sale, rather than at the time of directory publication
as has historically been the case for CenDon. The year-to-date results include a
one-time operating income benefit of $15,771 relating to advertising sales made
and related costs incurred prior to the effective date of the agreement for
directories that published subsequent to the effective date of the agreement.
This one-time operating income benefit is comprised of sales commission revenue
of $20,956 (from calendar advertising sales of $95,818), priority distributions
of $13,268, less related expenses of $10,607 and a charge of $7,846 for the
Company's share of the write-off of deferred costs by the partnership resulting
from the change in the CenDon relationship.
The net amount of the priority distribution and write-off of partnership
deferred costs was $5,422 and is recorded as income from partnerships and
related fees in the income statement. Income and related fees from CenDon were
$6,521 and $21,548 for the three and nine months ended September 30, 2000 and
$7,259 and $15,476 for the three and nine months ended September 30, 1999.
9
<PAGE> 10
CHINABIG.COM LIMITED
The Company holds an equity interest (18.75% through June 15, 2000 and 18%
thereafter) in ChinaBig.com Limited (previously named Unicom Media Limited,
"ChinaBig") which publishes yellow pages directories and offers Internet
directory services in the People's Republic of China. Through June 15, 2000, the
Company was a joint venture partner actively involved in the daily operations of
ChinaBig and accordingly, accounted for its investment under the equity method.
During the second quarter, ChinaBig decided to focus more of its time and
resources on the Internet aspect of its business plan, known as ChinaBiG.com,
and to seek additional investors to build ChinaBiG.com into a well-known portal
for the Chinese community around the world. In that regard, on June 15, 2000,
ChinaBig received its first minority investment from an independent third party
investor. Concurrently, in order to facilitate the raising of additional capital
and provide greater flexibility, ChinaBig and each existing investor (including
the Company), restructured the existing joint venture agreement of ChinaBig to,
among other things, significantly reduce the Company's ability to influence the
daily operations of ChinaBig.
Under the restructured agreement, the Company is now a passive investor and
accounts for this investment under the cost method. Accordingly, the Company no
longer recognizes its share of the operating income or losses of ChinaBig
subsequent to June 15, 2000. The Company recorded a loss of $1,078 from the
ChinaBig investment through June 15, 2000. The three and nine month periods
ended September 30, 1999 include a loss from the ChinaBig investment of $250.
On September 28, 2000, an affiliate of Pacific Century Cyber Works Limited
("PCCW"), a global telecommunications and Internet company listed on the Hong
Kong Stock Exchange entered into an agreement with three of the investors in
ChinaBig to acquire approximately 40% of the outstanding equity of ChinaBig. In
connection with that acquisition, the parties have negotiated new shareholders
and registration rights agreements that will be entered into if and when the
PCCW acquisition is completed. The Company's rights under the newly negotiated
agreements are not materially different than that under the existing,
restructured agreements. The Company presently expects that the PCCW acquisition
will be completed on November 14, 2000.
8. BUSINESS SEGMENTS
The Company's reportable operating segments are DonTech Partnership ("DonTech"),
Directory Advertising Services ("DAS") and Get Digital Smart(SM) ("GDS").
Despite the similarities in services provided by DAS, DonTech is viewed as a
separate reportable operating segment since, among other factors, the employees
of DonTech, including officers and managers, are not employees of the Company.
GDS is the Company's Internet initiative designed to deliver a comprehensive
package of Internet marketing and e-commerce capabilities to small and
medium-sized businesses.
The Company evaluates the performance of its operating segments and allocates
resources to them based on operating income and other factors. Expenses for
purposes of computing operating income for the reportable segments (except
DonTech) include 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. Other represents expenses and assets not
allocated to the operating segments. Interest expense, income tax expense and
non-operating income and expenses are not allocated to the operating segments.
Effective June 30, 2000, as a result of the transactions discussed in Note 2 -
Disposition of Businesses and Corporate Reorganization, management restructured
its reportable operating segments to better reflect the Company's new
streamlined operating structure and the way management views the businesses. DAS
now includes the Company's pre-press publishing operations formerly reported
separately as Directory Publishing Services and all information technology
costs, a portion of which were previously allocated to and included under Other.
DAS also includes results from Bell Atlantic up to the early termination of the
Agency Agreements, the Company's proprietary operations in Cincinnati up to the
date of sale and the Company's investment in ChinaBig up until it was
restructured. All prior period amounts have been restated to be comparable to
the new presentation.
Selected financial results for the three and nine months ended September 30,
2000 and 1999 and total assets at September 30, 2000 and 1999 are presented in
the tables below. As discussed in Note 6 - Partnership and Joint Venture
Investments, DAS calendar sales, net revenues, income from partnerships and
related fees and operating income amounts for the nine months ended September
30, 2000 include one-time benefits from the restructuring of the CenDon
relationship.
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<TABLE>
<CAPTION>
Directory
DonTech Advertising Get Digital Consolidated
Partnership Services Smart Other Totals
----------- --------- ----- ----- ------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
SEPTEMBER 30, 2000
Advertising sales (1)
Calendar cycle......................... $ 128,895 $ 62,256 -- -- $ 191,151
Publication cycle...................... 64,393 53,553 -- -- 117,946
Net revenues............................. -- 22,714 $ 64 -- 22,778
Income from partnerships and
related fees........................ 39,057 6,521 -- -- 45,578
EBITDA (2)............................... 39,057 14,647 (2,170) $ (2,612) 48,922
Depreciation and amortization............ -- 2,906 18 357 3,281
Operating income (loss).................. 39,057 11,741 (2,188) (2,969) 45,641
Total assets............................. 202,862 73,188 273 139,506 415,829
THREE MONTHS ENDED
SEPTEMBER 30, 1999
Advertising sales (1)
Calendar cycle......................... $ 130,491 $ 188,539 -- -- $ 319,030
Publication cycle...................... 64,394 121,717 -- -- 186,111
Net revenues............................. -- 58,541 -- -- 58,541
Income from partnerships and
related fees........................ 41,082 6,858 -- -- 47,940
EBITDA (2)............................... 41,082 15,002 $ (312) $ (4,224) 51,548
Depreciation and amortization............ -- 3,956 -- 436 4,392
Operating income (loss).................. 41,082 11,046 (312) (4,660) 47,156
Total assets............................. 202,677 167,287 -- 37,631 407,595
NINE MONTHS ENDED
SEPTEMBER 30, 2000
Advertising sales (1)
Calendar cycle......................... $ 328,210 $ 430,620 -- -- $ 758,830
Publication cycle...................... 283,443 366,724 -- -- 650,167
Net revenues............................. -- 124,239 $ 88 -- 124,327
Income from partnerships and
related fees........................ 96,492 20,470 -- -- 116,962
EBITDA (2)............................... 96,492 55,959 (6,536) $ (10,438) 135,477
Depreciation and amortization............ -- 10,831 42 1,181 12,054
Operating income (loss).................. 96,492 45,128 (6,578) (11,619) 123,423
NINE MONTHS ENDED
SEPTEMBER 30, 1999
Advertising sales (1)
Calendar cycle......................... $ 328,878 $ 471,910 -- -- $ 800,788
Publication cycle...................... 284,911 435,160 -- -- 720,071
Net revenues............................. -- 138,745 -- -- 138,745
Income from partnerships and
related fees........................ 98,569 14,825 -- -- 113,394
EBITDA (2)............................... 98,569 36,565 $ (312) $ (12,496) 122,326
Depreciation and amortization............ -- 12,038 -- 1,779 13,817
Operating income (loss).................. 98,569 24,527 (312) (14,275) 108,509
</TABLE>
(1) Advertising sales represent the billing value of advertisements sold for an
annual directory by the Company and DonTech. Management reviews the
performance of the 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 for an annual directory 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 or DonTech acts as a
sales agent and when a directory was published where the Company acted as
the publisher). Management believes that an additional useful measurement
of sales performance is the publication cycle basis. This method measures
sales based on the value of an annual directory according to its
publication date regardless of the Company's role and the recognition of
revenue in the consolidated financial statements. 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 order to conform the prior year publication cycle sales
to the 2000 publication dates, DonTech sales for the third quarter 1999
have been decreased by $3,546 for an annual directory that published in the
second quarter of 2000 versus the third quarter of 1999.
(2) EBITDA represents earnings before interest, taxes and depreciation and
amortization. EBITDA is not a measurement of operating performance computed
in accordance with generally accepted accounting principles and should not
be considered as a substitute for operating income or net income prepared
in conformity with generally accepted accounting principles. In addition,
EBITDA may not be comparable to similarly titled measures of other
companies.
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<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The matters discussed in this Form 10-Q of R.H. Donnelley Corporation and its
subsidiaries (the "Company") 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 or its management, have been used to identify such
forward-looking statements. Regardless of any identifying phrases, these
statements and all other forward-looking statements reflect only the Company's
current beliefs and specific assumptions with respect to future business
decisions and results, and are based on information currently available to the
Company. Accordingly, the statements are subject to significant risks,
uncertainties and contingencies that could cause the Company'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,
including those similar to the Internet services offered by Get Digital Smart;
(4) complexity and uncertainty regarding the development and/or deployment of
new high technology products, including the Internet services offered by Get
Digital Smart; (5) difficulty or inability to successfully integrate the variety
of products, technologies and services contemplated for Get Digital Smart into
one comprehensive offering, and uncertainty regarding the acceptance rate of
such an offering by the small business community; (6) pricing pressures from
competitors and/or customers; (7) changes in the yellow pages industries and
markets; (8) a sustained economic downturn in the United States; and (9) the
amount and timing of stock repurchases will be subject to market conditions and
compliance with the company's debt covenants.
THE COMPANY
Except where otherwise indicated, the terms "Company," "we" and "our" refer to
R.H. Donnelley Corporation and its wholly owned subsidiaries.
Effective June 30, 2000, as a result of the transactions described below under "
- Recent Developments", we restructured our reportable operating segments to
better reflect the Company's new streamlined operating structure and the way we
view the businesses. Directory Advertising Services now includes our pre-press
publishing operations formerly reported separately as Directory Publishing
Services and all information technology costs, a portion of which were
previously allocated to and included under Other. All prior period amounts have
been restated to be comparable to the new presentation.
The business is organized into three operating segments: DonTech Partnership
("DonTech"), Directory Advertising Services ("DAS") and Get Digital Smart
("GDS"). DonTech is a 50/50 partnership with an operating unit of SBC
Communications Inc. ("SBC"), which acts as the exclusive sales agent for yellow
pages directories published by SBC in Illinois and northwest Indiana. In
addition to our 50% interest in the profits of DonTech, we receive direct fees
("Revenue Participation") from an operating unit of SBC, which are tied to
advertising sales. While DonTech provides advertising sales of yellow pages and
other directory products similar to our DAS segment, the partnership is
considered a separate operating segment since, among other things, the employees
of DonTech, including officers and managers, are not our employees.
Within our DAS segment, we provide advertising sales and marketing services for
yellow pages and other directory products and pre-press publishing services for
yellow pages directories. On an on-going basis, we are the exclusive sales agent
in Florida for an operating unit of Sprint Corporation ("Sprint") and the
exclusive sales agent in Nevada, Virginia and North Carolina for CenDon LLC
("CenDon"), a joint venture with Centel Directory Company ("Centel"), a
subsidiary of Sprint originally formed to publish directories in Florida,
Nevada, Virginia and North Carolina. DAS also includes all information
technology costs and pre-press publishing services for yellow pages directories
provided to publishers for whom we serve as sales agent as well as for an
otherwise unaffiliated yellow pages publisher under separately negotiated
contracts. For the nine months ended September 30, 2000, the results of our DAS
segment also include the operating results of our Bell Atlantic (through June
30, 2000) and Cincinnati (through April 27, 2000) businesses, which were
divested during the second quarter, and our investment in ChinaBig.com Limited
(previously named Unicom Media Limited, "ChinaBig") (through June 15, 2000). The
ChinaBig investment was restructured during the second quarter (see "- Recent
Developments" below).
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<PAGE> 13
Where we are a sales agent (Sprint, Bell Atlantic (through June 30, 2000),
CenDon (for directories that publish after June 30, 2000)), sales commission
revenue is recognized when an advertising contract is signed with a customer.
Where we were the publisher (Cincinnati (through April 27, 2000) and CenDon (for
directories that published before June 30, 2000)), revenue was recognized when a
directory was published. Revenue from our pre-press publishing services is
recognized on a straight-line basis throughout the year as the services are
performed.
In the GDS segment, we offer a variety of products and services designed to
deliver a comprehensive package of Internet marketing and e-commerce
capabilities to small and medium-sized local businesses. Through a number of
agreements with leading providers of Internet technology and services, GDS
offers Web-site design and hosting, e-commerce capabilities, and other products
and services that help our clients use the Internet to reach and influence
potential customers and drive traffic and exposure to their Web-sites. This
business is initially being marketed in the Miami/Fort Lauderdale, Florida area.
RECENT DEVELOPMENTS
DISPOSITION OF BUSINESSES
On June 30, 2000, we entered into an agreement ("Agreement") with an affiliate
of Bell Atlantic Corporation ("Bell Atlantic") for the early termination of the
directory services agreements between Donnelley and Bell Atlantic dated
September 5, 1985 and May 5, 1998, as amended (the "Agency Agreements").
Pursuant to the Agency Agreements, Donnelley had served as exclusive sales agent
for Bell Atlantic directories covering substantially all of New York State. The
Agency Agreements had been scheduled to expire in 2005 and 2003, respectively.
The transactions contemplated by the Agreement were also consummated on June 30,
2000. Bell Atlantic accounted for approximately 54% of consolidated revenue and
approximately 10% of consolidated operating income for the full year 1999.
Under the terms of the Agreement, we received cash proceeds of $114 million,
less approximately $3 million of operational liabilities assumed by Bell
Atlantic related to the pre-closing period. These net proceeds were subject to
post-closing adjustment under certain circumstances, but the adjustment period
has lapsed and no adjustments were made. We also received estimated commissions
for sales which occurred prior to the closing, but which were not yet payable
under the terms of the Agency Agreements. These commissions totaled
approximately $42 million, net of certain adjustments, and subject to
post-closing adjustments under certain circumstances, but the adjustment period
has lapsed and no adjustments were made. The Company also received commissions
of approximately $15 million in connection with its sales for certain
directories that published in the pre-closing period.
On April 27, 2000, we sold our Cincinnati proprietary directory business to
Yellow Book USA, Inc. for $8 million.
In connection with the above actions, we also implemented cost-cutting measures,
including headcount reductions, at our Raleigh, NC facility and corporate
headquarters consistent with our new streamlined operating structure. A pretax
gain from the above transactions of approximately $89 million ($55 million after
taxes) was recognized.
CENDON PARTNERSHIP RESTRUCTURING
Effective for directories that published from and after July 1, 2000, the
Company and Centel entered into a series of agreements that effectively
restructured the existing CenDon partnership as a limited liability company
("LLC") and extended the sales agency arrangement through 2010. Both the
partnership agreement and sales agency agreement were set to expire in 2004. The
new arrangement focuses our responsibilities on sales and certain pre-press
publishing services (the latter through 2003) and establishes us as the
exclusive sales agent for Centel's print and electronic / Internet directory
products in the markets previously covered by the partnership agreement. Centel
assumed responsibility for the publishing and delivery of print directories and
related support services such as marketing, customer service and collections. We
receive sales commissions on all advertising sold and receive a priority
distribution on our membership interest in the LLC based on the value of
advertising sold. Sales commissions are recorded as revenue and the priority
distribution is recorded as partnership income and related fees. As a result of
this modified arrangement, revenue and related cost are recognized at the time
of sale, rather than at the time of directory publication as has historically
been the case for CenDon. Accordingly, the year-to-date results include a
one-time operating income benefit of $15.8 million relating to advertising sales
made and related costs incurred prior to the effective date of the agreement for
directories that published subsequent to the effective date of the agreement.
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<PAGE> 14
CHINABIG INVESTMENT
ChinaBig publishes yellow pages directories and offers Internet directory
services in the People's Republic of China. During the second quarter, ChinaBig
made a decision to focus more of its time and resources on the Internet aspect
of its business plan, known as ChinaBiG.com, and to seek additional investors to
build ChinaBiG.com into a well-known portal for the Chinese community around the
world. In that regard, on June 15, 2000, ChinaBig received its first minority
investment from an independent third party investor. Concurrently, in order to
facilitate the raising of additional capital and provide greater flexibility,
ChinaBig and each existing investor (including the Company), restructured the
existing joint venture agreement of ChinaBig to, among other things,
significantly reduce our ability to influence the daily operations of ChinaBig.
As a result of this additional equity investor and the restructured agreement,
we are a passive investor and account for this investment under the cost method.
Accordingly, we no longer recognize our share of the operating income or loss of
ChinaBig.
On September 28, 2000, an affiliate of Pacific Century Cyber Works Limited
("PCCW"), a global telecommunications and Internet company listed on the Hong
Kong Stock Exchange entered into an agreement with three of the investors in
ChinaBig to acquire approximately 40% of the outstanding equity of ChinaBig. In
connection with that acquisition, the parties have negotiated new shareholders
and registration rights agreements that will be entered into if and when the
PCCW acquisition is completed. The Company's rights under the newly negotiated
agreements are not materially different than that under the existing,
restructured agreements. The Company presently expects that the PCCW acquisition
will be completed on November 14, 2000.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
ADVERTISING SALES
Calendar Cycle Basis
Calendar cycle advertising sales represent the billing value of advertisements
sold for an annual directory by the Company and DonTech in a given calendar
year. These sales are recognized on the same basis on which revenues are
recognized (that is, when a sales contract is signed where we are a sales agent
or when the directory was published where we were the publisher of the
directory). The selling of advertising for a specific directory is managed as a
sales campaign. The typical sales campaign begins approximately six to eight
months prior to the scheduled publication date. As a result, the amount of
calendar sales can fluctuate from the prior year due to various factors,
including changes in the actual commencement date of the sales campaign and the
timing of sales during the sales campaign.
Calendar cycle advertising sales in the third quarter of 2000 were $191.2
million compared to $319.0 million in the third quarter of 1999. DonTech
calendar sales were $128.9 million in the third quarter of 2000 compared to
$130.5 million in the third quarter of 1999. The decrease of $1.6 million, or
1.2% is due to the residual adverse impact of the previously disclosed systems
problems related to the administration of the billing and collection functions
that resulted in a loss of customers who were significantly delinquent.
DAS calendar cycle advertising sales were $62.3 million in the third quarter of
2000 compared to $188.5 million for the third quarter of 1999. However, sales
for the third quarter of 1999 included calendar cycle sales for Bell Atlantic
and Cincinnati of $124.9 million. As previously mentioned, these businesses were
divested in the second quarter of 2000, and therefore, no sales activity
occurred in the third quarter of 2000. Excluding the 1999 sales for Bell
Atlantic and Cincinnati, DAS calendar cycle sales were $63.6 million for the
third quarter of 1999. The decrease of $1.3 million, or 2.0% in third quarter
2000 DAS calendar cycle advertising sales is mainly attributable to timing.
Calendar cycle advertising sales for the nine months ended September 30, 2000
were $758.8 million compared to $800.8 million for the nine months ended
September 30, 1999. DonTech calendar sales for the nine months ended September
30, 2000 of $328.2 million where essentially unchanged from sales of $328.9
million for the nine months ended September 30, 1999. The absence of growth is
due to the residual adverse effects of the systems problems related to the
administration of the billing and collection functions that resulted in a loss
of customers (and a 3.0% sales decline in the Chicago directory, which published
in February). While we are still experiencing some residual effects from these
problems, some DonTech directories that published later in the year experienced
mid-single digit
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<PAGE> 15
growth and we expect the DonTech business as a whole should return to normal
growth rates in 2001.
DAS sales for the nine months ended September 30, 2000 were $430.6 million
compared to $471.9 million for the nine months ended September 30, 1999. DAS
sales for 2000 include a one-time sales benefit of $95.8 million from the
restructuring of the CenDon relationship and $182.0 million from the Bell
Atlantic and Cincinnati businesses and sales for 1999 included calendar sales
from Bell Atlantic and Cincinnati of $322.3 million. Adjusting for these items,
DAS calendar sales for the nine months ended September 30, 2000 were $152.8
million compared to $149.6 million for the nine months ended September 30, 1999.
The increase of $3.2 million, or 2.1% is attributable to growth in the Sprint
markets, especially Las Vegas and Central Florida.
Publication Cycle Basis
Management also measures sales performance based on the publication cycle basis.
This method measures sales based on the value of an annual 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. DonTech sales for the third quarter 1999 have been
reduced by $3.5 million (and second quarter 1999 sales were previously
increased) for a directory that published in May 2000 versus July 1999.
Publication cycle advertising sales in the third quarter of 2000 were $117.9
million compared to $186.1 million in the third quarter 1999. DonTech
publication cycle sales were $64.4 million for the third quarter 2000 and 1999.
The absence of growth is affected by the previously discussed factors. DAS
publication cycle advertising sales were $53.6 million in the third quarter of
2000 compared to $121.7 million for the third quarter of 1999. Excluding the
1999 sales for Bell Atlantic and Cincinnati of $72.0 million, publication cycle
sales were $49.7 million for the third quarter of 1999. The increase of $3.9
million, or 7.8% is primarily due to growth in Sprint's Las Vegas directory,
which published in July 2000.
Publication cycle advertising sales for the nine months ended September 30, 2000
were $650.2 million compared to $720.1 million for the nine months ended
September 30, 1999. DonTech publication cycle sales were $283.4 million through
September 30, 2000 compared to $284.9 million through September 30, 1999. The
slight decrease is primarily due to the sales decline in the Chicago directory
compared to last year due to the factors previously discussed, partially offset
by mid-single digit growth in other large directories.
DAS sales for the nine months ended September 30, 2000 were $366.7 million
compared to $435.2 million for the nine months ended September 30, 1999. These
amounts include sales for Bell Atlantic and Cincinnati in 2000 and 1999 of
$238.1 million and $313.7 million, respectively. Excluding these Bell Atlantic
and Cincinnati sales, DAS publication cycle sales were $128.6 million through
September 30, 2000 compared to $121.5 million through September 30, 1999. The
increase of $7.1 million, or 5.8% is due to growth in Sprint directories.
REVENUES
Net revenues were $22.8 million for the third quarter 2000 compared to $58.5
million for the third quarter 1999. Revenues for the third quarter 1999 included
revenues from Bell Atlantic and Cincinnati of $34.7 million. Excluding these
revenues from divested businesses, net revenues for the third quarter 1999 were
$23.8 million. The decrease of $1.0 million, or 4.2% in the third quarter of
2000 is due to lower revenues from Sprint of $0.4 million due to the
restructuring of the CenDon relationship which resulted in a change in the
timing of revenue recognition. Revenues from our YPTV business were lower by
$0.6 million due to a reduction in the number of SBC markets in which we offered
the product from seven in 1999 to four in 2000. Revenues from GDS in the quarter
were $0.1 million.
For the nine months ended September 30, 2000, net revenues were $124.3 million
compared to $138.7 million for the nine months ended September 30, 1999.
Revenues for 2000 include a one-time benefit of $21.0 million from the
restructuring of the CenDon relationship and revenues of $42.9 million from Bell
Atlantic and Cincinnati and 1999 revenues included revenues from Bell Atlantic
and Cincinnati of $78.6 million. Adjusting for these items, revenues through
September 30, 2000 were $60.4 million compared to $60.1 million through
September 30, 1999. Revenues from Sprint increased $1.1 million due to sales
growth and the change in the timing of revenue recognition due to the
restructuring of the CenDon relationship and pre-press publishing services
revenue increased $0.6 million. These increases were partially offset by lower
revenues from our YPTV operations of $1.4 million due to the reduction in
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<PAGE> 16
the number of SBC markets where we offered the product.
EXPENSES
Operating expenses for the third quarter 2000 were $13.5 million compared to
$44.3 million in the prior year third quarter. Operating expenses for the third
quarter 1999 included expenses directly related to the Bell Atlantic and
Cincinnati businesses of approximately $26.1 million. Excluding these expenses,
operating expenses for the third quarter 1999 were $18.2 million. The decrease
of $4.7 million, or 25.8% is primarily due to cost savings of approximately $1.8
million in our pre-press publishing operations due to cost saving initiatives
implemented last year and reduced spending for information technology which
resulted in cost savings of approximately $2.0 million. Costs also decreased
$2.0 million due to the new streamlined operating structure, primarily due to
reductions in marketing, training and other support costs. Sprint operating
expenses were $1.0 million lower primarily due to the transition of marketing
and other support services to the publisher and a change in the timing of
expense recognition, each as a result of the restructuring of the CenDon
relationship. Partially offsetting these decreases was spending on GDS for the
quarter of $2.2 million. GDS incurred only start-up costs in the prior period.
Operating expenses for the nine months ended September 30, 2000 were $82.3
million compared to $102.6 million. Operating expenses for 2000 include one-time
expenses of $9.4 million resulting from the restructuring of the CenDon
relationship and expenses directly related to Bell Atlantic and Cincinnati of
$26.4 million and operating expenses for 1999 included $52.4 million of expenses
directly related to Bell Atlantic and Cincinnati. Adjusting for these amounts,
operating expenses were $46.5 million through September 30, 2000 compared to
$50.2 million through September 30, 1999. The decrease of $3.7 million, or 7.4%
is due to reduced costs in our pre-press publishing operations of approximately
$2.7 million and savings in information technology spending of approximately
$2.8 million. Costs also decreased $3.0 million due to the new streamlined
operating structure, primarily due to reductions in marketing, training and
other support costs. Sprint operating expenses were $1.5 million lower primarily
due to the transition of marketing and other support services to the publisher
and a change in the timing of expense recognition, each as a result of the
restructuring of the CenDon relationship. Partially offsetting these cost
reductions was spending on GDS of $6.6 million through September 30, 2000. GDS
incurred only start-up costs in the prior period.
General and administrative expenses for the third quarter were $4.9 million
compared to $8.5 million in the third quarter of 1999. For the nine months ended
September 30, 2000, general and administrative expenses were $19.8 million
compared to $23.5 million for the nine months ended September 30, 1999. The
decrease in the quarter and nine-month periods is primarily due to lower human
resources, finance, corporate development, employee benefits and occupancy costs
as a result of cost saving initiatives implemented last year and the new
streamlined operating structure.
Provision for bad debts for the third quarter 2000 was $1.1 million, below the
prior year third quarter amount of $2.1 million. The decrease of $1.0 million is
due to the absence of provision expense for Bell Atlantic and Cincinnati, which
was $1.1 million in the third quarter 1999. Provision for bad debts for the nine
months ended September 30, 2000 was $3.7 million compared to $3.6 million for
the nine months ended September 30, 1999. The 2000 amount includes a one-time
expense of $1.2 million relating to the restructuring of the CenDon relationship
(for the additional one-time sales recognized) and the 1999 amount included $1.2
million relating to the Bell Atlantic and Cincinnati businesses. Adjusting for
these amounts, provision expense was $2.5 million for the nine months ended
September 30, 2000 and $2.4 million for the comparable 1999 period.
Depreciation and amortization expense for the third quarter 2000 was $3.3
million compared to $4.4 million for the third quarter 1999 and $12.1 million
for the nine months ended September 30, 2000 compared to $13.8 million for the
nine months ended September 30, 1999. The decrease in the 2000 amounts is mainly
due to the sale and write-off of assets related to the Bell Atlantic and
Cincinnati businesses and write-off of assets in connection with the
streamlining of corporate headquarters staffing and operations.
PARTNERSHIP INCOME
Income from partnerships and related fees for the third quarter of 2000 was
$45.6 million compared to $47.9 million in the third quarter of 1999. Income
from DonTech was $39.1 million in the third quarter of 2000 compared to $41.1
million in the third quarter of 1999. The decrease of $2.0 million is mainly due
to lower sales as a result of the factors described above.
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Income from partnerships and related fees for the nine months ended September
30, 2000 was $117.0 million compared to $113.4 million for the nine months ended
September 30, 1999. The 2000 amount includes a net one-time benefit of $5.4
million from the restructuring of the CenDon relationship and a loss of $1.1
million related to ChinaBig and the 1999 amount included a loss of $0.7 million
related to ChinaBig. Excluding these amounts, partnership income and related
fees through September 30, 2000 was $112.7 million compared to $114.1 million
through September 30, 1999. The decrease of $1.4 million is due to lower DonTech
income of $2.1 million for the reasons stated above partially offset by higher
income from CenDon of $0.7 million due to growth in the Sprint markets,
especially Las Vegas.
OPERATING INCOME
Operating income for the reportable segments (except DonTech) includes those
costs directly incurred by each business unit (including depreciation and
amortization) plus an allocation of certain shared operating and general and
administrative expenses based on estimated business usage. Total operating
income for the third quarter of 2000 was $45.6 million compared to $47.2 million
in the third quarter of 1999 and $123.4 million for the nine months ended
September 30, 2000 compared to $108.5 million for the comparable 1999 period.
Operating income from DonTech was $39.1 million in the third quarter of 2000
compared to $41.1 million in the third quarter of 1999 and $96.5 million for the
nine months ended September 30, 2000 compared to $98.6 million for the
comparable 1999 period. See Partnership Income above for a discussion of the
decrease in DonTech operating income. The systems problems that have adversely
impacted DonTech results over the past several quarters have taken longer to
correct than we originally anticipated; however, based on actions taken by SBC
to correct the problems, we believe that the DonTech business should return to
mid-single digit operating income growth in 2001.
Operating income for DAS in the third quarter 2000 was $11.7 million compared to
$11.0 million in the third quarter of 1999. Excluding operating income in the
third quarter of 1999 from divested businesses and ChinaBig of $1.4 million,
operating income increased $2.1 million primarily due to cost savings in our
pre-press publishing operations. Operating income for DAS for the nine month
period ended September 30, 2000 was $45.1 million compared to $24.5 million for
the nine months ended September 30, 1999. Operating income for the nine months
ended September 30, 2000 includes a one-time benefit of $15.8 million from the
restructuring of the CenDon relationship and $4.6 million from divested
businesses and ChinaBig and operating income through September 30, 1999 includes
$6.1 million from divested businesses and ChinaBig. Excluding these amounts,
operating income was $24.7 million for the nine months ended September 30, 2000
compared to $18.4 million for the nine months ended September 30, 1999. The
increase of $6.3 million, or 34.2% is due to an increase of $3.5 million in
Sprint operating income due to sales growth and the change in the timing of
revenue and expense recognition and an increase in income from our pre-press
publishing operations of $3.9 million.
Operating loss for GDS was $2.2 million for the quarter ended September 30, 2000
compared to $0.3 million for the quarter ended September 30, 1999 and $6.6
million for the nine months ended September 30, 2000 compared to $0.3 million
for the comparable 1999 period. GDS incurred only early start-up expenses in the
1999 periods.
Other operating loss represents general and corporate overhead costs that are
not allocated to the business segments. Other operating loss was $3.0 million
for the third quarter 2000 compared to $4.7 million for the third quarter 1999.
For the nine months ended September 30, 2000, Other operating loss was $11.6
million compared to $14.3 million for the comparable 1999 period. The
improvement in the quarter and nine-month periods is primarily due to lower
human resources, finance, corporate development, employee benefits, occupancy
and other corporate support costs as a result of cost saving initiatives
implemented last year and the new streamlined operating structure.
INTEREST AND TAXES
Interest income for the third quarter 2000 was $2.2 million compared to $0.1
million for the third quarter 1999 and $2.6 million for the first nine months of
2000 compared to $0.3 million for the comparable 1999 period. The substantial
increase is mainly due to interest income earned on the proceeds from the Bell
Atlantic and Cincinnati transactions. Interest expense for the third quarter
2000 was $8.6 million compared to $9.2 million for the third quarter 1999 and
$27.4 million for the first nine months of 2000 compared to $28.2 million for
the comparable 1999 period. The decrease is due to lower outstanding borrowings
due to the prepayment of $90 million of long-term debt
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<PAGE> 18
during the third quarter of 2000.
The effective tax rate for the quarter and year-to-date periods ended September
30, 2000 decreased to 38.5% compared to 41.3% in the third quarter of 1999 and
40.8% in the first nine months of 1999. The decrease in the effective tax rate
is due to various actions taken during the second quarter of 2000.
EXTRAORDINARY LOSS
During the quarter, we recognized an extraordinary loss of $0.7 million (after
taxes of $0.4 million) relating to the prepayment of debt and the write-off of
related deferred financing costs. The extraordinary loss had the effect of
reducing diluted earnings per share by $0.02.
NET INCOME AND EARNINGS PER SHARE
Net income and earnings per share (after extraordinary loss) for the third
quarter 2000 was $23.4 million, or $0.72 per diluted share compared to $22.4
million, or $0.65 per diluted share in the third quarter 1999. Net income and
earnings per share (after extraordinary loss) for the nine months ended
September 30, 2000 was $114.9 million, or $3.51 per diluted share compared to
$47.7 million, or $1.39 per diluted share in the nine months ended September 30,
1999. Net income and earnings per share for the nine months ended September 30,
2000 includes a gain from the Bell Atlantic and Cincinnati transactions ($55.0
million after-tax) and the one-time benefit from the restructuring of the CenDon
relationship ($9.7 million after-tax). Excluding these one-time items, net
income and earnings per share for the nine months ended September 30, 2000 was
$50.2 million, or $1.53 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
In June 1998, we borrowed $300 million under our Senior Secured Term Facilities
("Term Facilities") and issued $150 million of Senior Subordinated Notes (the
"Notes"). We also borrowed $50 million against our $100 million Senior Revolving
Credit Facility (the "Revolver," and together with the Term Facilities, the
"Credit Agreement"). Our obligations under the Credit Agreement are secured by
security interests granted to the lenders in substantially all of our assets,
including capital stock in our existing and newly formed subsidiaries. The Term
Facilities mature between June 2004 and December 2006, and require quarterly
principal repayments through 2006. The Revolver matures in June 2004. The Notes
pay interest semi-annually at the annual rate of 9.125%, and are due in June
2008. The Credit Agreement and the Indenture governing the Notes each contain
various financial and other restrictive covenants, including restrictions on
mergers, asset dispositions and similar transactions, indebtedness, capital
expenditures and commitments.
Net cash provided by operations was $97.7 million through September 30, 2000
compared to $50.9 million through September 30, 1999. Collections of accounts
receivable were higher than last year primarily due to the receipt from Bell
Atlantic of $57 million in payment of commissions in connection with the early
termination of the Agency Agreements as described above. Also contributing to
the increase was higher cash distributions from our partnerships, mainly due to
the restructuring of the CenDon relationship and receipt of priority
distributions from CenDon LLC, and the receipt of an income tax refund of $6.0
million. Partially offsetting these increases were payments of accrued and other
liabilities as a result of the sale of the Bell Atlantic and Cincinnati
businesses. We believe that cash from operations and available debt capacity
under the Revolver will be sufficient to fund our operations and meet our
anticipated investment, capital expenditures and debt service requirements for
the foreseeable future.
Net cash provided by investing activities through September 30, 2000 was $111.8
million and included proceeds of $122.0 million from the early termination of
the Agency Agreements with Bell Atlantic ($114 million) and the sale of our
Cincinnati business ($8 million). We also spent $6.3 million for capital
expenditures, primarily computer equipment and software. During the first nine
months of 2000, capitalized computer software decreased $11.6 million as
amortization of $7.7 million and the write-off of approximately $6.5 million
related to the Bell Atlantic and Cincinnati transactions offset additions of
$2.6 million. We made additional investments in ChinaBig of $3.9 million in
accordance with the terms of the joint venture agreement and have agreed to make
our final investment of $2.5 million by year-end. Also, with respect to GDS, we
anticipate that we will invest approximately $8.5 to $9.0 million for the full
year 2000. Other than the additional investment to be made in ChinaBig and the
anticipated funding of GDS for the remainder of 2000, we currently have no
material commitments for investment spending or
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<PAGE> 19
capital expenditures.
Net cash used in financing activities of $120.7 million was primarily for the
repayment of debt and the repurchase of company stock. We prepaid $90 million of
borrowings under the Term Facilities with the proceeds received from the early
termination of the Agency Agreements. The debt was repaid at par and there was
no penalty for early repayment. In connection with the repayment, approximately
$1.1 million of deferred financing costs were written-off and an extraordinary
loss of $0.7 million (after taxes of $0.4 million) was recognized. Through
September 30, 2000, we spent $33.0 million to repurchase 1,845,200 shares of
common stock under both our Systematic Share Repurchase Plan and our Open Market
Share Repurchase Plan (collectively, "Share Repurchase Plans"), which
represented 5.6% of the outstanding shares at the beginning of the year.
At September 30, 2000, total cash on hand was $91.1 million and we had available
borrowing capacity of $100 million under the Revolver. The large amount of cash
on hand is due to the remaining proceeds from the Bell Atlantic and Cincinnati
transactions. While the proceeds from these transactions were received in the
second quarter, most of the associated costs will be paid in future periods. We
anticipate making income tax payments of approximately $22 million, severance
and other related payments of approximately $4 million and payments for other
transaction related costs of approximately $9 million during the fourth quarter
and first half of 2001.
MARKET RISK SENSITIVE INSTRUMENTS
We are exposed to interest rate risk through our Credit Agreement where we
borrow at prevailing short-term variable rates. In order to manage our exposure
to fluctuations in interest rates, we have entered into interest rate swap
agreements which allow us to raise funds at floating rates and effectively swap
them into fixed rates that are lower than those available if fixed rate
borrowings were made directly. These derivative financial instruments are viewed
as risk management tools and are entered into for hedging purposes only. We do
not use derivative financial instruments for trading or speculative purposes.
There has been no change in the $175 million outstanding notional amount of
interest rate swaps since December 31, 1999. The unrealized fair value of the
swaps was a gain of $2.5 million at September 30, 2000.
We are exposed to foreign exchange risk through our investment in ChinaBig. Our
remaining required investment of $2.5 million is subject to adjustment if the
exchange rate of the People's Republic of China currency (RMB) on the date of
payment is more than 10% higher or lower than the specified exchange rate of
RMB8.2778. There has been no material change in our foreign exchange risk from
year-end.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The requirements of this Item are discussed in Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations.
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<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the discussion of legal proceedings in Footnote 6 under
Item 1 of Part I in the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2000 ("Second Quarter 10-Q"). Except as described below, there
has been no material change in the information with respect to legal proceedings
from that set forth in the Second Quarter 10-Q. See also Footnote 6 under Item 1
of Part I in this Form 10-Q.
Dellwood Publishing Matter
On September 29, 2000, the Court dismissed the complaint in its entirety, but
gave plaintiffs 30 days leave to amend the complaint to replead any claims,
other than the RICO claims. On October 25, 2000, plaintiffs filed an amended
complaint alleging substantially the same facts, claims and damages as set forth
in the original complaint, other than the RICO claims. The Company is still in
the process of analyzing the amended complaint along with its counsel and
counsel for Bell Atlantic (now Verizon), but while at this preliminary stage in
the proceedings management is unable to predict the outcome of this matter, it
presently believes that the resolution of the action will not have a material
adverse effect on the Company's financial position or results of operations.
IRI Litigation and D&B Tax Matters
On September 30, 2000, Moody's Corporation separated from New D&B and each
became independent, publicly traded companies. Management does not believe that
the recent separation of Moody's from New D&B will have a material adverse
impact on the indemnity rights of the Company because, as required by the
Distribution Agreement, Moody's has agreed to be jointly and severally liable
with New D&B for those indemnity obligations to the Company.
The Company is also involved in certain legal proceedings incidental to the
normal conduct of its business. Although there can be no assurances, 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.
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<PAGE> 21
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Document
3.1 Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the
Quarterly Report on Form 10-Q for the three months
ended March 31, 1999, Commission File No. 001-07155)
3.2 By-laws of the Company (incorporated by reference to
Exhibit 3.2 to the Quarterly Report on Form 10-Q for
the three months ended March 31, 1999, Commission
File No. 001-07155)
3.3 Certificate of Incorporation of R.H. Donnelley Inc.
(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 R.H. Donnelley Inc. (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 R.H.
Donnelley Inc., as Issuer, the Company, as Guarantor,
and the Bank of New York, as Trustee, with respect to
the 91/8% 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 91/8% 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, R.H. Donnelley
Inc., 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 Company
(f/k/a The Dun & Bradstreet Corporation) and The New
Dun & Bradstreet Corporation (incorporated by
reference to Exhibit 99.2 to the Form 8-K of the
Company (f/k/a The Dun & Bradstreet Corporation),
filed on June 30, 1998)
10.2 Form of Tax Allocation Agreement between the Company
(f/k/a The Dun & Bradstreet Corporation) and The New
Dun & Bradstreet Corporation (incorporated by
reference to Exhibit 99.3 to the Form 8-K of the
Company (f/k/a The Dun & Bradstreet Corporation),
filed on June 30, 1998)
10.3 Form of Employee Benefits Agreement between the
Company (f/k/a The Dun &
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<PAGE> 22
Bradstreet Corporation) and The New Dun & Bradstreet
Corporation (incorporated by reference to Exhibit
99.4 to the Form 8-K of the Company (f/k/a The Dun &
Bradstreet Corporation), filed on June 30, 1998)
10.4 Form of Intellectual Property Agreement between the
Company (f/k/a The Dun & Bradstreet Corporation) and
The New Dun & Bradstreet Corporation (incorporated by
reference to Exhibit 99.5 to the Form 8-K of the
Company (f/k/a The Dun & Bradstreet Corporation),
filed on June 30, 1998)
10.5 Form of Shared Transaction Services Agreement between
the Company (f/k/a The Dun & Bradstreet Corporation)
and The New Dun & Bradstreet Corporation
(incorporated by reference to Exhibit 99.6 to the
Form 8-K of the Company (f/k/a/ The Dun & Bradstreet
Corporation), filed on June 30, 1998)
10.6 Form of Data Services Agreement between the Company
(f/k/a The Dun & Bradstreet Corporation) and The New
Dun & Bradstreet Corporation (incorporated by
reference to Exhibit 99.7 to the Form 8-K of the
Company (f/k/a The Dun & Bradstreet Corporation),
filed on June 30, 1998)
10.7 Form of Transition Services Agreement between the
Company (f/k/a The Dun & Bradstreet Corporation) and
The New Dun & Bradstreet Corporation (incorporated by
reference to Exhibit 99.8 to the Form 8-K of the
Company (f/k/a The Dun & Bradstreet Corporation),
filed on June 30, 1998)
10.8 Form of Amended and Restated Transition Services
Agreement between the Company (f/k/a 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 Company (f/k/a The Dun &
Bradstreet Corporation), filed on June 30, 1998)
10.9 Credit Agreement among the Company, R.H. Donnelley
Inc., 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 First Amendment to Credit Agreement, dated as of
March 4, 1999, among the Company, R.H. Donnelley
Inc., The Chase Manhattan Bank, as Administrative
Agent, and the Lenders party thereto (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the three months ended March 31, 1999,
Commission File No. 001-07155)
10.11 DonTech II Partnership Agreement, effective August
19, 1997, by and between R.H. Donnelley Inc. (f/k/a
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)
10.12 Revenue Participation Agreement, dated as of August
19, 1997, by and between APIL Partners Partnership
and R.H. Donnelley Inc. (f/k/a 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)
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<PAGE> 23
10.13 Master Agreement, executed August 19, 1997, by and
among R.H. Donnelley Inc. (f/k/a The Reuben H.
Donnelley Corporation), the Company (f/k/a 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 Partners 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)
10.14 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)
10.15 Second Amended and Restated Partnership Agreement,
effective as of August 19, 1997, by and between R.H.
Donnelley Inc. (f/k/a The Reuben H. Donnelley
Corporation) and Ameritech Publishing of Illinois,
Inc. (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)
10.16 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)
10.17(*) Amended and Restated 1991 Key Employees' Stock Option
Plan (effective as of April 25, 2000)
10.18 Amended and Restated 1998 Directors' Stock Plan
(effective as of September 21, 1999) (incorporated by
reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1999)
10.19 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)
10.20 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)
10.21(*) Amendment No. 1 to Supplemental Executive Benefit
Plan effective as of September 26, 2000
10.22 Deferred Compensation Plan (incorporated by reference
to Exhibit 4.01 to the Company's Registration
Statement on Form S-8, filed with the Securities and
Exchange Commission on November 24, 1999,
Registration No. 333-91613)
10.23 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)
10.24 Employment Agreement dated as of September 28, 1998
between the Company and
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<PAGE> 24
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)
10.25 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)
10.26 Employment Agreement dated as of September 28, 1998
between the Company and Judith A. Norton
(incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1999)
10.27 Employment Agreement dated as of September 28, 1998
between the Company and Stephen B. Wiznitzer
(incorporated by reference to Exhibit 10.26 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1999)
27.1(*) Financial Data Schedule of the Company
27.2(*) Financial Data Schedule of R.H. Donnelley Inc.
----------
(*) Filed herewith
(b) Reports on Form 8-K:
None
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<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R.H. DONNELLEY CORPORATION
Date: November 13, 2000 By: /s/ Philip C. Danford
---------------------------------------
Philip C. Danford
Senior Vice President and Chief
Financial Officer
Date: November 13, 2000 By: /s/ William C. Drexler
---------------------------------------
William C. Drexler
Vice President and Controller
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R.H. DONNELLEY CORPORATION
Date: November 13, 2000 By: /s/ Philip C. Danford
---------------------------------------
Philip C. Danford
Senior Vice President and Chief
Financial Officer
Date: November 13, 2000 By: /s/ William C. Drexler
---------------------------------------
William C. Drexler
Vice President and Controller
26
