R.H. Donnelley Reports Fourth Quarter and Full Year 2008 Results
Thursday March 12, 7:30 am ET
- Achieves Guidance for EBITDA and Free Cash Flow
- Retains Financial Advisor to Evaluate Capital Structure
CARY, N.C., March 12 /PRNewswire-FirstCall/ -- R.H. Donnelley Corporation, one of the nation's leading Yellow Pages and online local commercial search companies, today reported full year 2008 net revenues of $2,617 million, representing a 2 percent decline from the prior year. Adjusted EBITDA(1) in the year was $1,417 million, down $26 million or 2 percent from 2007. 2008 adjusted free cash flow was $510 million - based on cash flow from operations of $549 million, capital expenditures of $71 million and $32 million of other adjustments - down from $617 million in the prior year. Full year advertising sales were $2,518 million, down 8 percent from pro forma advertising sales for the prior year. Operating loss was $3,006 million in 2008. Excluding $3,870 million of impairment charges, operating income would have been $865 million in the year. Operating income in 2007 was $905 million. Net debt during 2008 decreased by $621 million, resulting in year-end net debt outstanding of $9,405 million, excluding the purchase accounting fair value adjustment.
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In the fourth quarter of 2008, net revenue declined 7 percent from the fourth quarter of the prior year to $630 million. Adjusted EBITDA(1) was $360 million, an increase of $8 million or 2 percent compared to fourth quarter 2007. Adjusted free cash flow during the quarter was $151 million compared to $208 million in the prior year period.
"During 2008, we took significant initiatives to address the challenging selling environment and advanced our strategic priorities," said David C. Swanson, chairman and CEO of R.H. Donnelley. "We dramatically improved our efficiency and eliminated non-essential operating costs, reducing headcount by 20% and achieving $100 million of cost savings. At the same time, we broadened and improved our Dex branded interactive local search solutions. We also completed a major, company-wide systems integration and upgrade project and reduced net debt by more than $600 million. These initiatives helped us to continue building a foundation for sustainable growth once the economy recovers."
Swanson continued, "Advertising sales declined 8 percent for the full year and 12 percent in the fourth quarter as trends weakened during the second half of the year. These disappointing results were primarily due to the impact that the recession had on small and medium sized businesses, including lower consumer spending, reduced liquidity and higher business failure rates. We continued to diversify advertisers into our online and mobile platforms in addition to our core print solutions, but could not overcome the extremely difficult economic conditions. Despite the challenging environment, our mission remains unchanged - to help local businesses grow. R.H. Donnelley continues to generate large volumes of ready-to-buy leads at an accessible price and attractive ROI for local advertisers. Our services will generate even more value as the market becomes more complex and fragmented."
During the fourth quarter, R.H. Donnelley recognized a $744 million non-cash, pre-tax impairment charge associated with its intangible assets that in large part reflects the decline in the market value of the Company's debt and equity securities and the impact that the overall economy has had on its operating results. Earlier in the year, the Company recorded $3.1 billion of non-cash, pre-tax charges associated with goodwill impairment to reflect the decline in the market value of the Company's debt and equity securities.
Further important information regarding operating results and related reconciliations of non-GAAP financial measures to the most comparable GAAP measures can be found in the schedules and related footnotes of this press release, which should be thoroughly reviewed. Advertising sales is a statistical measure and consists of sales of advertising in print directories distributed during the period and Internet-based products and services with respect to which such advertising first appeared publicly during the period. It is important to distinguish advertising sales from net revenues, which is recognized under the deferral and amortization method.
R.H. Donnelley is presently in the process of finalizing its 2008 year end income tax accounts, particularly as it relates to deferred income tax and net operating loss carryforwards. KPMG, the Company's independent registered public accounting firm, remains involved in finalizing its audit with respect to those income tax accounts. Because this analysis is not yet complete, the financial results provided in this release do not include tax related items and items affected by tax. The Company may need to file a Form 12b-25 with the SEC for an extension of the filing deadline with respect to its Form 10-K that the Company expects to file as soon as practicable and in any event by March 31, 2009.
Capital Structure
R.H. Donnelley has engaged Lazard as its financial advisor to assist in the evaluation of its capital structure, including various balance sheet restructuring alternatives.
"Our goal is to better position R.H. Donnelley for the future by establishing a more sustainable capital structure," said Steven M. Blondy, executive vice president and CFO. "We have significant debt maturities commencing in 2010 that we are working to address. Though we intended to refinance this debt prior to maturity, it may no longer be possible to do so given the current state of the capital markets. In the meantime, the company continues to generate robust EBITDA and has significant liquidity to meet all our financial and business obligations."
Blondy continued, "We plan to initiate discussions with our banks and bondholders about amending, refinancing or restructuring our debt obligations. Whichever path we choose to strengthen our balance sheet, R.H. Donnelley will continue to provide outstanding service and support to our customers, while also remaining committed to our employees and business partners. Our print and digital solutions continue to be the best way for local businesses to connect with ready-to-buy consumers, which should position R.H. Donnelley for healthy growth once the economy stabilizes."
As previously reported, R.H. Donnelley borrowed $361 million from the revolving credit facilities of three of its operating subsidiaries on February 17, 2009. The Company borrowed the cash in order to increase liquidity and financial flexibility given the continuing uncertainty in the global credit markets. As of February 28, 2009, the company had more than $500 million of cash and cash equivalents on hand.
Fourth Quarter and Full Year Conference Call
R.H. Donnelley will host a conference call to provide additional context regarding its performance in the fourth quarter and full year today at 10:00 a.m. (ET). Individuals within the United States can access the call by dialing 888-387-9606 - others should dial 517-645-6055. The pass code for the call is "RHD". Please dial into the call by 9:50 a.m. (ET) to ensure a prompt start time. The call will also be available through a Web cast, which can be accessed by visiting our Web site at www.rhd.com, clicking on "Investor Relations" and following the instructions provided. Those unable to participate at the scheduled time may access a recorded replay by dialing 866-382-4784, or for those outside of the United States, 203-369-0363. There is no pass code for the replay, which will be available through March 26, 2009. In addition, an archived version of the Web cast will be available on RHD's Web site for up to one year from the date of the call.
About R.H. Donnelley
R.H. Donnelley (OTC: RHDC - News) connects businesses and consumers through its portfolio of print and interactive marketing solutions. Small- and medium-sized businesses look to R.H. Donnelley's experienced team of marketing consultants to help them grow their companies and drive sales leads. Consumers depend on the Company's reliable, local business content to deliver the most relevant search results when they are seeking local goods and services. For more information, visit www.rhd.com and dexknows.com.
Helping Local Small and Medium Sized Businesses Reach More Customers
R.H. Donnelley's interactive offerings are essential to its Triple Play(TM) solution suite -- an integrated set of products and services that efficiently and effectively extend the marketing reach of local businesses. Spanning multiple media platforms -- print Yellow Pages directories, dexknows.com® search site and the major search engines (e.g., Yahoo!® and Google®) via the Company's Dex Search Network(TM) -- Triple Play delivers the advertisements of local businesses to a wider set of ready-to-buy consumers.
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