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R.H. Donnelley Reshapes Company.

Business Editors

PURCHASE, N.Y.--(BUSINESS WIRE)--April 27, 2000

Bell Atlantic to Buy Out Contract from Donnelley;

Relationship with Sprint Extended through 2010;

Cincinnati Proprietary Directory Sold to Yellow Book

Other Planned Actions Include Overhead Cost Reductions and

Significant Share Repurchase Increase

R.H. Donnelley Corporation (NYSE:RHD), the nation's largest independent marketer of yellow pages advertising, today announced a comprehensive set of strategic actions that will fundamentally reshape the company to focus on its DonTech and Sprint businesses, improve its earnings base, create a more efficient cost structure, and provide a strong financial springboard for growth.

Central among these strategic actions, Donnelley and Bell Atlantic have agreed to a buy out of the New York State sales agency contracts. Donnelley has also extended its relationship with Sprint and sold its Cincinnati Proprietary Directory to Yellow Book.

The company estimates that the buy out of the Bell Atlantic contract and the other actions will result in a one-time cash inflow of approximately $125 million consisting of the buy out and sale proceeds and recovery of working capital, net of severance costs, transaction and other related costs, and taxes. The company also expects to recognize a one-time accounting gain of approximately $60 million after taxes and a one-time operating income benefit of approximately $25 million as a result of different revenue recognition associated with the new Sprint arrangement, both to be recorded in the second quarter.

Excluding the one-time impacts of these actions, which include the net gain and the additional operating income mentioned above, the company anticipates achieving EPS slightly in excess of $1.80 for the year. Looking beyond 2000, the company expects these actions to be significantly accretive to earnings.

The after-tax net proceeds from these transactions, combined with expected free cash flow from ongoing operations, will be applied to drive shareholder value and fund growth. Specifically, the company intends to spend up to $100 million on share repurchases over the next 18 to 24 months. In addition, the company intends to continue at current level of funding for its high potential growth initiative, Get Digital SmartSM. The remaining proceeds will be used to reduce debt.

Commenting on this announcement, Frank R. Noonan, Chairman and CEO said, "The actions we are announcing today strengthen R. H. Donnelley and position us for continued growth. We are now solidly focused on our long-term yellow pages businesses, which include our perpetual joint venture with DonTech and our extended relationship with Sprint. We are cutting costs which, when fully implemented, will essentially offset the lost income from Bell Atlantic. And finally, we will have a stronger financial position with $125 million in cash which we will use to buy back our stock, fund growth and repay debt."

Specifics of the strategic actions include:

-- Donnelley has signed a letter of intent with Bell Atlantic to mutually terminate the New York State sales agency contracts with Bell Atlantic Directory Group. The contract was to extend to 2005. In connection with this termination, certain Donnelley employees together with leased real estate facilities and related assets will be transferred to Bell Atlantic. The transaction is expected to close by the end of May 2000.

Mr. Noonan commented on the transaction, "While we have enjoyed an excellent relationship with Bell Atlantic over the years, our company and the markets we serve have changed dramatically since the last negotiation of our contract. As we assessed our core strengths and our most promising market opportunities, we concluded that this strategic change would strengthen our company. Making this transition now facilitates a seamless transition both for our customers and for those Donnelley employees who will become employees of Bell Atlantic."

-- Donnelley has extended its business relationship with Sprint Corporation through the year 2010. The extended arrangement between Donnelley and Centel Directory Company, a subsidiary of Sprint, modifies a partnership and replaces an existing sales agency agreement that were both set to expire in 2004. The new arrangement focuses Donnelley's responsibilities on sales and publishing services and establishes Donnelley as the exclusive sales agent for electronic / Internet directory products for Centel as well as print directories. The arrangement covers all markets currently served jointly by Donnelley and Sprint with the exception of Orlando, Florida, which is covered by a separate agreement. As a result of the new agreement, revenue is recognized at the time of sale, rather than at directory publication. This will result in a one-time operating income benefit of $25 million. In 2001, operating income is expected to return to normal run rates.

-- Donnelley has entered into a definitive agreement to sell its only remaining proprietary directory operation, the Cincinnati One Book Yellow Pages(TM), to Yellow Book USA. Under the agreement, 47 Donnelley employees in Cincinnati will become employees of Yellow Book USA.

-- Donnelley is also continuing to take actions to improve its corporate cost structure. These actions include productivity enhancements and cost-cutting measures at its Raleigh, NC operation and reductions in corporate overhead consistent with the streamlined operating structure. The company will incur severance and other costs associated with implementing the above actions.

-- In connection with the additional income and cash flow realized from these one-time actions, Donnelley intends to implement a new share repurchase plan of up to $100 million. Shares will be purchased on an opportunistic basis over the next 18 to 24 months. The repurchase will begin after the closing of the Bell Atlantic transaction and will be executed in accordance with our debt covenants. The new plan will replace the $25 million authorization approved last December, of which $17 million has been spent to date.

Mr. Noonan commented further, "At the same time that we have been working on these strategic actions, we have kept a steady eye on the future by pushing ahead with our Internet initiative, Get Digital Smart. For more than a century, R.H. Donnelley has prospered by helping our customers grow their businesses. We are positioning Get Digital Smart to become the provider of choice for linking local businesses to targeted Internet services that can help them reach customers and improve profits. As the business world goes digital, we are presented with new opportunities to leverage our core strength and expand our services by unlocking the potential of the Internet for our customers."

Mr. Noonan concluded, "The actions we have announced today are designed to build a company capable of creating and sustaining superior value for shareholders. We have significantly strengthened our company and our financial profile. We can now turn our management attention and resources toward delivering the greatest value for shareholders by aggressively pursuing opportunities to enhance the value we deliver to customers."

In order to help investors understand R. H. Donnelley's financial profile including the announced actions, the company is providing projected income statements for the full year 2000 for three projected scenarios: "Run Rate ", "Reported Excluding One-time Income Items", and, "Reported". Please see Exhibit 1, attached.

R.H. Donnelley, headquartered in Purchase, N.Y., is the largest independent marketer of yellow pages advertising in the U.S. More information about R.H. Donnelley and Get Digital SmartSM can be found at and at

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 financial information set forth in "Exhibit 1" constitute 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 SmartSM; (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 SmartSM 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; (8) a sustained economic downturn in the United States; and (9) The amount and timing of stock repurchases will be subject to market conditions and compliance with the company's debt covenants.


 Exhibit 1


 Amounts in millions, except earnings per share

 -------------2000 Projected---------------
 Excluding One-Time 1999
 Run-Rate (a) Income Items (b) Reported Actual

 (new) (c) $ 25 $ 27 $ 52 (e) $ 24.7
 Partnership 128 128 128 123.5
Get Digital
 Smart (7) (7) (7) (1.3)
 & corporate
 (new) (d) (12) (16) (16) (17.0)
 income $ 134 $ 132 $ 157 $ 129.9
Interest &
 expense - net (28) (34) (f) (34) (f) (36.7)
Gain from
 - net - - 100 (g) -
Pre-tax income $ 106 $ 98 $ 223 $ 93.2
Tax (41) (38) (88) (38.0)
Net income $ 65 $ 60 $ 135 $ 55.2
Earnings per
 share (EPS): $ 1.98 $ 1.83 $ 4.12 $ 1.61
Shares used
 in computing
 diluted EPS: 32.8 (h) 32.8 (h) 32.8 (h) 34.2


a. The "Run-Rate" column is a projection of earnings as if the announced transactions (Bell Atlantic, Sprint & Cincinnati) and cost-cutting actions had occurred as of January 1, 2000. Interest expense assumes estimated total proceeds of $125 million were applied to debt reduction as of that date.

b. The "Excluding One-Time Income Items" column includes partial year operating results from Bell Atlantic and Cincinnati up to their respective closing dates and full-year operating results from Sprint, Publishing Services, China and technology costs. This view excludes the net gain from the buy-out of the Bell Atlantic contract, the sale of Cincinnati One Book, severance, transaction, other related costs and the estimated $25 million one-time operating income benefit relating to different revenue recognition associated with the new Sprint arrangement.

c. Directory Advertising Services (new) includes Sprint, Publishing Services, China and technology costs for the "Run-Rate" column. For all other columns, Bell Atlantic and Cincinnati results are included up to their respective closing dates in 2000 and for full-year 1999.

d. General and corporate (new) excludes previously allocated technology costs which are now included in Directory Advertising Services (new) for 1999 and 2000. In 1999, the amount of allocated technology costs previously included in general and corporate was $6.1 million.

e. Includes full-year operating results from Sprint, Publishing Services, China and technology costs, as well as the partial year operating results from Bell Atlantic and Cincinnati up to their respective closing dates. Also includes the estimated $25 million one-time operating income benefit relating to different revenue recognition associated with the new Sprint arrangement.

f. Assumes estimated total proceeds of $125 million applied to debt reduction during the second half of 2000.

g. Includes net gain from the buy-out of Bell Atlantic contract, sale of Cincinnati One Book, severance, transaction and other related costs.

h. Assumes completion of previously authorized $25 million stock

buy back program by the end of second quarter 2000 (first

quarter spending of $17 million).
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Geographic Code:1USA
Date:Apr 27, 2000
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