R.H. Donnelley says cash will go toward debt repayment, not dividend, until market conditions improve

By Jennifer Lanning Drey

Portland, Ore., Feb. 28 - R.H. Donnelley Corp.'s board of directors has decided not to begin a dividend in order to apply all cash flow toward debt repayment, David Swanson, R.H. Donnelley's chief executive officer, said Thursday during a conference call held to discuss the company's fourth-quarter earnings.

"We believe that given the near-term economic outlook and our current level of debt, it's more prudent to direct excess cash flow to debt repayment until we see a more positive selling environment," Swanson said.

The company ended 2007 with net debt of $10.13 billion.

R.H. Donnelley had announced in October that it would begin a dividend related to its common stock beginning in the first quarter.

During Thursday's call, Swanson said R.H. Donnelley now expects to face much stronger headwinds in 2008 than it had previously expected. Accordingly, the company also lowered its EBITDA and cash flow guidance for the year.

R.H. Donnelley expects to generate adjusted EBITDA of between $1.35 billion and $1.40 billion before FAS 123 expense and other compensation expense related to its acquisition of Business.com. Adjusted free cash flow in 2008 is being estimated between $525 million and $575 million. The company expects to end 2008 with net debt between $9.5 billion and $9.6 billion.

"While we're disappointed that the weaker economy precludes us from confirming original '08 guidance, we remain well-positioned to capitalize on our significant investments in brands, products and training," said Steven M. Blondy, R.H. Donnelley's chief financial officer, during the call.

Swanson said the company is facing a more difficult selling environment, particularly in Florida and Nevada, where problems are worsening.

For full-year 2007, R.H. Donnelley reported adjusted free cash flow of about $617 million based on cash flow from operations of $692 million, capital expenditures of $77 million, and $2 million of adjustments related to Business.com.

EBITDA for the full year was $1.37 billion.

R.H. Donnelley is a Yellow Pages and online local commercial search company based in Cary, N.C.

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