R.H. Donnelley Reports a 16.7 Percent Increase in Full-year 1999 Diluted Earnings Per Share
RHD's Results In Line with Analysts' Expectations
Tuesday February 22, 4:43 pm Eastern Time
Company Press Release
PURCHASE, N.Y.--(BUSINESS WIRE)--Feb. 22, 2000--R.H. Donnelley Corporation (NYSE:RHD - news), the nation's largest independent marketer of yellow pages advertising, today reported full-year 1999 diluted earnings per share of $1.61, up 16.7 percent compared with as-adjusted diluted earnings per share of $1.38 a year ago. Net income increased by 16.0 percent to $55.2 million, compared with as-adjusted net income of $47.6 million a year ago.
``R.H. Donnelley posted solid results for 1999,' said Frank R. Noonan, chairman and chief executive officer. ``Our full-year performance was highlighted by strong growth in operating income at Bell Atlantic and at Sprint.'
``During the year, RHD's management team successfully developed plans for our recently announced introduction of 'Get Digital Smart,(SM)`` a new initiative to deliver a comprehensive package of Internet marketing and e-commerce services to small businesses in markets not currently served by the company, starting with the Miami/Fort Lauderdale market,' added Noonan. ``Our joint venture in China successfully finished its initial sales campaign and will publish its first yellow pages directory in March. We also reduced corporate overhead by nearly 19 percent, completed the repurchase of $28 million of common stock, paid down our debt by about $24 million and added two outside directors to our board.'
Donnelley's full-year 1999 operating income increased by 7.5 percent to $129.9 million from $120.8 million in 1998.
Full-year operating income at Directory Advertising Services was up 12.1 percent to $36.0 million from $32.1 million a year ago, led by increased sales and operating margin improvements at Bell Atlantic and good growth at Sprint. Directory Advertising Services includes the company's relationships with Bell Atlantic and Sprint, RHD's independent directory business in Cincinnati, and the company's joint venture in China.
DonTech posted a 2.8 percent increase in full-year operating income, to $123.5 million from $120.1 million in 1998. DonTech's full-year results were held down by lower than expected fourth-quarter sales from the campaign for the 2000 Chicago directory, which will be published in the first quarter of 2000. The weakness was attributable to the administration of billing and collections functions, which led to short-term inefficiencies in the Chicago sales campaign. The impact of these inefficiencies is expected to diminish as 2000 unfolds. DonTech is a perpetual partnership between R.H. Donnelley and Ameritech, selling yellow pages advertising in Illinois and northwest Indiana.
Directory Publishing Services posted a $5.2 million loss in 1999, compared with a loss of $3.0 million in 1998, due to higher software maintenance expenses. The company noted that results for Directory Publishing Services are expected to improve in 2000. Directory Publishing Services consists of R.H. Donnelley's pre-press directory compilation and graphic arts design businesses.
Corporate overhead decreased in 1999 by 18.7 percent, from the prior year's as-adjusted level. Including spending of $1.3 million in 1999 related to the company's ``Get Digital Smart(SM)' Internet initiative, general and corporate expenses decreased by 14.1 percent, or $4.0 million, compared with as-adjusted expenses a year ago.
Full-year advertising sales for published directories, including results from Bell Atlantic's Buffalo, N.Y. market, a contract won by the company in May 1998, increased by 5.6 percent to $1,045.1 million from $989.3 million a year ago.
Advertising sales at Directory Advertising Services increased by 6.4 percent in 1999 to $617.5 million from $580.4 million in 1998. Excluding sales from Bell Atlantic's Buffalo market, Directory Advertising Services' 1999 ad sales were up slightly. DonTech posted a 4.6 percent increase in full-year advertising sales, to $427.6 million from $408.9 million in 1998.
Fourth-Quarter Results
Diluted earnings per share in the fourth quarter increased to 22 cents, compared with diluted earnings per share of 14 cents in the fourth quarter a year ago, up 57.1 percent. Fourth-quarter net income increased to $7.5 million from $4.9 million a year ago, up 53.1 percent.
Fourth-quarter operating income increased by 18.9 percent to $21.4 million from $18.0 million a year ago, reflecting good growth at Directory Advertising Services and lower general and corporate expenses. Operating income at DonTech was down slightly in the fourth quarter, due to the factors described above. Directory Publishing Services posted a loss of $2.2 million, compared with a loss of $1.8 million a year ago.
Advertising sales for published directories in the fourth quarter of 1999 increased by 8.4 percent to $325.0 million from $299.9 million a year ago. Advertising sales at Directory Advertising Services increased by 11.4 percent, to $182.3 million from $163.7 million a year ago. DonTech's advertising sales in the fourth quarter rose by 4.8 percent to $142.7 million from $136.2 million in the year-ago period.
Outlook for R.H. Donnelley
Consistent with the company's long-term growth expectations, R.H. Donnelley anticipates low-double-digit growth in earnings per share in 2000, driven by mid-single-digit growth in operating income and slightly lower interest expense. Growth in operating income before spending for ``Get Digital Smart(SM)' is expected to be about 10 percent.
Financial Position
For the full year, operating cash flow, which is cash flow before capital expenditures and capitalized software spending, was $62.6 million. Capital expenditures and capitalized software spending for the full year were $7.4 million. The company repurchased $28.0 million of stock in 1999 and received $4.8 million of proceeds from the exercise of stock options. During 1999, the company invested $8.0 million in its joint venture in China. Debt decreased by $23.8 million to $444.8 million at year end, and cash remained unchanged.
In the fourth quarter, operating cash flow was $11.7 million. Capital expenditures and capitalized software spending in the fourth quarter were $3.4 million. The company also repurchased $8.6 million of stock in the quarter and received $0.7 million of proceeds from the exercise of stock options. Debt decreased by $1.5 million in the quarter, and cash decreased by $1.1 million in the period.
As-Adjusted Results
R.H. Donnelley separated from The Dun & Bradstreet Corporation (D&B) and became an independent public company on July 1, 1998. The company's 1998 results have been adjusted to include estimated corporate overhead, interest expense and income taxes as if RHD had been an independent company prior to July 1, 1998.
Reported Results
R.H. Donnelley's reported results for 1998 include the company's performance as a unit of D&B up to the separation of the company from D&B on July 1, 1998, and the company's actual results since the separation. For the full year, RHD reported net income of $55.2 million, or $1.61 per diluted share, compared with net income of $61.3 million, or $1.77 per diluted share, in 1998. For the period prior to the separation, reported results include actual overhead, which was lower compared with the post-separation period. Reported results include a stand-alone tax rate for RHD for the period prior to the separation.
R.H. Donnelley, headquartered in Purchase, N.Y., is the largest independent marketer of yellow pages advertising in the U.S. RHD sells approximately $1 billion in yellow pages advertising a year and is the publisher or sales agent for nearly 300 directories with a total circulation of more than 36 million copies. RHD operates in a number of major markets, including New York, Chicago, Las Vegas, Orlando and Miami/Fort Lauderdale. More information about R.H. Donnelley and ``Get Digital Smart(SM)' can be found at www.rhd.com and at www.getdigitalsmart.com.
Safe Harbor Provision
Certain statements contained in this press release regarding R.H. Donnelley's future operating results or performance or business prospects and any other statements not constituting historical fact are ``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 R.H. Donnelley or its management, have been used to identify such forward-looking statements. Without limiting the generality of the foregoing, the projections set forth in ``Outlook for R.H. Donnelley' are forward-looking statements. Regardless of any identifying phrases, these statements and all other forward-looking statements reflect only R.H. Donnelley's current beliefs and specific assumptions with respect to future business decisions and results, and are based on information currently available to R.H. Donnelley. Accordingly, the statements are subject to significant risks, uncertainties and contingencies which could cause R.H. Donnelley's actual operating results, performance or business prospects (both in general and with respect to the Get Digital SmartSM initiative described herein) 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 to be offered by Get Digital Smart(SM); (4) complexity and uncertainty regarding the development and/or deployment of new high technology products, including the Internet services to be offered by Get Digital SmartSM; (5) difficulty or inability to successfully integrate the variety of products, technologies and services contemplated for Get Digital Smart(SM) 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; and (8) a sustained economic downturn in the United States. |
