R.H. Donnelley 1998 Annual Report

R.H. Donnelley is the largest independent marketer of yellow pages advertising in the United States. Donnelley sells nearly $1 billion in advertising a year to more than 500,000 small and medium-sized businesses.

We operate in strong markets, including Chicago, New York, Las Vegas, Orlando, Cincinnati and, in the near future, key cities in China.

We help growing businesses by providing proven, trusted and cost-effective advertising that helps buyers - who are ready to buy - find sellers.

We are committed to the continuing development of multiple media, including print yellow pages, cable television and Internet advertising, that offer exciting new solutions for bringing buyers and sellers together.

Financial Highlights

(1) Advertising sales are on a publication cycle basis and represent the billing value of advertisements sold for all directories published in a year. Amounts exclude sales from the Company's Proprietary-East ("P-East") business, which was sold in 1997, and 1998 sales from the Company's independent Cincinnati business and 1997 sales related to the Company's sales contract with Cincinnati Bell, which expired in 1997. The comparable advertising sales amounts on a calendar cycle basis were $985.9 million and $943.4 million for 1998 and 1997, respectively.

(2) Operating income has been adjusted to exclude the results of P-East and includes additional estimated general and administrative expenses as if RHD were a stand-alone entity for all periods.

(3) Net income and earnings per diluted share have been adjusted to give effect to the items noted in (2) above and to include an estimate of interest expense that would have been incurred assuming debt was outstanding for the entire period prior to July 1,1998.

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