R.H. Donnelley Announces 10.8 Percent Growth in Third Quarter Earnings Per Share

Business Wire, Oct 25, 2000

Business Editors

PURCHASE, N.Y.--(BUSINESS WIRE)--Oct. 25, 2000

Company Meets EPS Expectations for the Quarter;

Expects to Meet Full Year EPS Target

R.H. Donnelley Corporation (NYSE:RHD), a leading marketer of yellow pages and other advertising and marketing services for small and medium-sized businesses, today announced diluted earnings per share of 72 cents for the quarter ended September 30, 2000, after a 2 cent per share extraordinary loss related to the pre-payment of a portion of Donnelley's long-term debt. The diluted 72 cents is an improvement of 10.8 percent over 65 cents reported a year ago. Diluted earnings per share for the first nine months of 2000, excluding one-time items resulting from previously announced strategic actions that were completed in the second quarter, were $1.53, up 10.1 percent from $1.39 reported a year ago.

Donnelley's results for the quarter were affected by actions taken in the second quarter. These actions included the buyout by Bell Atlantic of Donnelley's New York State sales agency contracts; a new extended relationship with Sprint; the sale of the company's Cincinnati operations to Yellow Book USA; reductions in headcount; operating improvements at the company's Raleigh, N.C., pre-press publishing facility; and the restructuring of its relationship with ChinaBig, Ltd.

Frank R. Noonan, Chairman and Chief Executive Officer, commented, "Third quarter results were driven by strong sales performance at Sprint and the continuing impact of actions taken in the second quarter to reduce costs and improve efficiency throughout our operations."

He continued, "Although we were very pleased with results from our Sprint business, especially Las Vegas, and the positive impact of our more efficient operations, we experienced lower than expected operating income from DonTech. This was caused by the residual effects of issues reported earlier this year related to the administration of billing and collection functions at Ameritech. SBC has implemented administrative improvements and is also expected to complete the implementation of its billing and collection systems in the DonTech territory early in the first quarter 2001. While we are disappointed that this situation has persisted longer than originally anticipated, we are very pleased with the level of intensity that SBC has devoted to solving the problem. We are confident that the actions taken to resolve this problem will result in DonTech showing profit growth in the fourth quarter. Furthermore, SBC's focus on growth should enable DonTech to return to mid-single digit long-term growth in 2001."

Mr. Noonan concluded, "For the year, we expect Donnelley to deliver earnings per share consistent with the previously announced estimate of $1.85. This result will be driven by the strength of our Sprint business together with the operating improvements at publishing and cost reductions at both corporate and publishing. In addition, the EPS result is helped by our share repurchase programs and debt reduction as we apply our cash flow to delivering value for shareholders."

Third Quarter Results

Third quarter diluted earnings per share were 72 cents, an improvement of 10.8 percent over 65 cents reported a year ago. Operating income decreased to $45.6 million from $47.1 million in 1999. Excluding spending for Donnelley's Internet initiative, Get Digital Smart(SM), and excluding results from the operations impacted by the second quarter actions, third quarter operating income improved 3.9 percent.

DonTech reported third quarter operating income of $39.1 million, down from $41.1 million reported a year ago due to the residual effects of the issues related to the administration of billing and collection functions previously mentioned. DonTech is expected to return to a mid-single digit long-term growth rate in early 2001. DonTech is a perpetual partnership between R.H. Donnelley and SBC selling yellow pages advertising in Illinois and northwest Indiana.

Directory Advertising Services' third quarter operating income was $11.7 million, up 6.4 percent from $11.0 million reported a year ago. Excluding the operations impacted by the second quarter strategic actions, third quarter operating income was up 21.6 percent over the same quarter last year. This strong performance was driven by excellent results from the Sprint business and by operational improvements that enabled publishing services to report an operating profit for the quarter. Directory Advertising Services includes the Sprint relationship and the company's publishing and information technology operations.

Get Digital Smart, which was launched in February 2000, reported a third quarter operating loss of $2.2 million, in line with the company's expectations. The company continues to evaluate performance, adjust product offerings, and pursue development of an appropriate strategic partnership arrangement and structure for this venture.

Corporate overhead in the third quarter was $3.0 million, a 36.2 percent improvement over $4.7 million reported a year ago. This improvement was the result of actions taken by the company to reduce costs and improve operating efficiencies.