R.H. Donnelley uses cash flow, refinancing transactions to reduce debt by $230 million in second quarter

By Jennifer Lanning Drey

Portland, Ore., July 30 - R.H. Donnelley Corp.'s debt declined by $230 million during the second quarter, reflecting strong cash flow and the impact of refinancing transactions completed during the period, Steve Blondy, chief financial officer of R.H. Donnelley, said Wednesday during the company's second-quarter earnings call.

The debt balance was $9.72 billion at June 30.

Through the completion of more than $3 billion of debt transactions during the quarter, R.H. Donnelley reduced its mandatory debt repayments over the next six quarters by $740 million, extended the maturity of its Dex West bank debt and eliminated $170 million of debt through a bond exchange.

"We're very pleased with these results, especially given the challenging credit market environment," Blondy said during the call.

"Our continuing strong free cash flow generation and extended debt maturities ensure ample liquidity for the foreseeable future."

The company's $365 million of revolver capacity remains undrawn, Blondy reported.

Second-quarter adjusted cash flow was $159 million, based on cash flow from operations of $176 million, capital expenditures of $20 million and $3 million of other adjustments.

R.H. Donnelley's priorities for the remainder of the year include debt reduction with a focus on finding additional opportunities to reduce near-term mandatory debt repayments and further enhance operating flexibility, David C. Swanson, the company's chief executive officer, said during the call.

The company's next maturities are now in 2010.

"We expect to be opportunistic as market windows open, and now we have an extended runway to work with," Blondy said.

Other financial priorities include controlling the company's cost structure and advancing critical growth initiatives.

Flat results, ad sales down

R.H. Donelley's second-quarter results were roughly flat compared to the 2007 second quarter, with adjusted EBITDA reported at $366 million for the current-year period.

The net loss for the second quarter was $339 million, reflecting a goodwill impairment charge of $660 million.

Swanson said that while the company's second-quarter net revenues of $664 million were in line with last year's numbers, advertising sales - a leading indicator of future revenue - were down 8.6%.

Due to the lower advertising sales figure, combined with R.H. Donnelley's outlook for the remainder of the year, the company now expects ad sales to be down between 7% and 8% for the full year. The company had previously guidance toward ad sales being down in the mid-single digits.

The revision reflects the company's expectation that its third-quarter and fourth-quarter numbers will be similar to the current quarter, Swanson said.

R.H. Donnelley expects to report full-year adjusted free cash flow between $475 million and $525 million and operating cash flow of between $495 million and $545 million.

The company estimates its year-end debt balance will be about $9.5 billion.

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

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