UNITED STATES SECURITIES AND EXCHANGE COMMISSION ~~Washington, D.C. 20549~~

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2002~~2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ~~_____________________________ to_____________________________~~ to

Commission file number 001-07155

R.H. DONNELLEY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		13-2740040
(State of Incorporation)		(I.R.S. Employer Identification No.)
One Manhattanville Road, Purchase N.Y		10577
1001 Winstead Drive, Cary, N.C.		27513
(Address of principal executive offices)		(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether registrant is an accelerated filer Yes þ No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Title of Class		Shares Outstanding at August 1, ~~2002~~2005
Common Stock, par value $1 per share			2931,~~708~~777,~~558~~775

Commission file number 333-59287

R.H. DONNELLEY INC. *

(Exact name of registrant as specified in its charter)

Delaware		36-2467635
(State of Incorporation)		(I.R.S. Employer Identification No.)
One Manhattanville Road, Purchase N.Y		10577
1001 Winstead Drive, Cary, N.C.		27513
(Address of principal executive offices)		(Zip Code)

~~Registrants~~Registrant’s telephone number, including area code (~~914~~919) ~~933~~ 297-~~6400~~1600

• * R.H. Donnelley Inc. is a wholly owned subsidiary of R.H. Donnelley Corporation. R.H. Donnelley Inc. meets the conditions set forth in General Instructions H (1)(a) and (b) of Form 10-Q and is therefore filing this report with respect to R.H. Donnelley Inc. with the reduced disclosure format. R.H. Donnelley Inc. became subject to the filing requirements of Section 15(d) on October 1, 1998 in connection with the public offer and sale of its 9 1/8% Senior Subordinated Notes, which were redeemed in full on February 6, 2004. In addition, R.H. Donnelley Inc. is the obligor of 8 7/8% Senior Notes due 2010 and 10 7/8% Senior Subordinated Notes due 2012 and is subject to the filing requirements of Section 15(d) as a result of such notes. As of August 1, ~~2002~~2005, 100 shares of R.H. Donnelley Inc. common stock, no par value, were outstanding.

TABLE OF CONTENTS

Part I. Financial Information
	Item 1. Financial Statemtments
		Consolidated Statements of Operations (Unaudited)
		Consolidated Balance Sheets (Unaudited)
		Consolidated Statements of Cash Flows (Unaudited)
		Notes to Consolidated Financial Statements (Unaudited)
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure About Market Risk
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
LIMITED LIABILITY COMPANY AGREEMENT
SALES AGENCY AGREEMENT
AGREEMENT FOR PUBLISHING SERVICES
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT FOR STEVEN M. BLONDY
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

R.H. DONNELLEY CORPORATION

INDEX TO FORM 10-Q

		PAGE	~~PAGE~~
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Consolidated Statements of Operations for the three and six months ended June 30, 2002 and 2001			3
Consolidated Balance Sheets at June 30, 2005 and December 31, 2004			3
	Consolidated Balance Sheets at June 30, 2002 and December 31, 2001			4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2005 and 2004			4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001			5
Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004			5
Notes to Consolidated Financial Statements	~~Notes to Consolidated Financial Statements~~		6	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			31	12
Item 3. Quantitative and Qualitative Disclosure About Market Risk				22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			50
PART II. OTHER INFORMATION
Item 4. Controls and Procedures			51
Item 1. Legal Proceedings				23
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders				23
Item 1. Legal Proceedings			52
Item 6. Exhibits and Reports on Form 8-K				24
Item 4. Submission of Matters to a Vote of Security Holders			58
SIGNATURES				29
Item 6. Exhibits			59
SIGNATURES			69
Ex-10.15
Ex-10.16
Ex-10.17
Ex-10.19
Ex-14
Ex-31.1
Ex-31.2
Ex-31.3
Ex-31.4
Ex-32.1
Ex-32.2

RPart I.H. ~~Donnelley~~FINANCIAL ~~Corporation and Subsidiaries~~INFORMATION ~~Consolidated Statements of Operations (Unaudited)~~

			Three months ended						Six months ended
			June 30,						June 30,
(amounts in thousands, except per share data)			2002			2001			2002			2001
Gross revenue			$	19,593		$	20,342		$	38,047		$	39,532
Less: sales allowances				(137	)		(308	)		(202	)		(659	)
		Net revenue		19,456			20,034			37,845			38,873
Expenses
	Operating expenses			13,650			14,269			24,879			25,437
	General and administrative expenses			4,502			5,013			9,547			9,160
	Depreciation and amortization			1,557			2,755			3,164			5,640
	Restructuring and special charge			218			—			218			—
		Total expenses		19,927			22,037			37,808			40,237
Partnership and joint venture income				40,864			41,211			68,012			68,235
		Operating income		40,393			39,208			68,049			66,871
Interest income				60			270			171			1,546
Interest expense				(5,977	)		(6,498	)		(12,024	)		(14,300	)
		Income before income taxes and extraordinary loss		34,476			32,980			56,196			54,117
Provision for income taxes				13,273			12,368			21,635			20,294
		Income before extraordinary loss		21,203			20,612			34,561			33,823
Extraordinary loss, net of tax				34			—			210			348
		Net income	$	21,169		$	20,612		$	34,351		$	33,475
Earnings per share before extraordinary loss
		Basic	$	0.71		$	0.68		$	1.17		$	1.10
		Diluted	$	0.70		$	0.66		$	1.14		$	1.07
Earnings per share after extraordinary loss
		Basic	$	0.71		$	0.68		$	1.16		$	1.09
		Diluted	$	0.70		$	0.66		$	1.14		$	1.06
Shares used in computing earnings per share
		Basic
		29,692			30,519			29,573			30,696
		Diluted		30,415			31,465			30,265			31,580
Comprehensive Income:
Net income			$	21,169		$	20,612		$	34,351		$	33,475
Unrealized gain (loss) on interest rate swaps, net of tax				101			152			(1,561	)		(2,291	)
Comprehensive income			$	21,270		$	20,764		$	32,790		$	31,184

Item 1. Financial Statements

R.H. Donnelley Corporation and Subsidiaries

Consolidated Balance Sheets (Unaudited)


	June 30,			December 31,
(in thousands, except share and per share data)	2005			2004

Assets
Current Assets
Cash and cash equivalents	$	5,824		$	10,755
Accounts receivable
Billed		108,536			112,107
Unbilled		371,832			376,419
Allowance for doubtful accounts and sales claims		(31,780	)		(33,093	)

Net accounts receivable		448,588			455,433
Deferred directory costs		100,354			116,517
Other current assets		33,188			40,604

Total current assets		587,954			623,309

Fixed assets and computer software, net		43,874			37,686
Other non-current assets		103,045			102,628
Intangible assets, net		2,869,151			2,905,330
Goodwill		319,014			309,969


Total Assets	$	3,923,038		$	3,978,922


Liabilities, Redeemable Convertible Preferred Stock and Shareholders’ (Deficit) Equity

Current Liabilities
Accounts payable and accrued liabilities	$	47,982		$	70,341
Accrued interest		21,030			10,021
Deferred directory revenue		452,855			381,424
Current portion of long-term debt		132,536			162,011

Total current liabilities		654,403			623,797

Long-term debt		3,090,168			2,965,331
Deferred income taxes, net		133,866			118,820
Other non-current liabilities		44,180			36,878

Total liabilities		3,922,617			3,744,826

Commitments and contingencies

Redeemable convertible preferred stock (liquidation preference of $122,186 at June 30, 2005 and $234,886 at December 31, 2004)		112,807			216,111

Shareholders’ (Deficit) Equity
Common stock, par value $1 per share, 400,000,000 shares authorized, 51,621,894 shares issued		51,622			51,622
Additional paid-in capital		9,967			107,103
Warrants outstanding		13,758			13,758
(Accumulated deficit) retained earnings		(33,228	)		3,855
Treasury stock, at cost, 19,870,130 shares at June 30, 2005 and 20,137,361 shares at December 31, 2004		(163,637	)		(163,603	)
Accumulated other comprehensive income		9,132			5,250


Total shareholders’ (deficit) equity		(112,386	)		17,985


Total Liabilities, Redeemable Convertible Preferred Stock and Shareholders’ (Deficit) Equity	$	3,923,038		$	3,978,922

The accompanying notes are an integral part of the consolidated financial statements.

R.H. Donnelley Corporation and Subsidiaries ~~Consolidated Balance Sheets (Unaudited)~~

					June 30,			December 31,
					2002			2001
(in thousands, except share and per share data)
				Assets
Current Assets
	Cash and cash equivalents				$	2,427		$	14,721
	Accounts receivable Trade					34,258			29,240
		Other				3,310			4,121
		Allowance for doubtful accounts and sales allowances				(5,899	)		(4,189	)
			Net accounts receivable			31,669			29,172
	Other current assets					846			2,275
			Total current assets			34,942			46,168
	Fixed assets and computer software – net					12,651			14,514
	Partnership and joint venture investments					203,825			208,989
	Prepaid pension					21,756			20,956
	Other non-current assets					7,718			7,504
			Total Assets		$	280,892		$	298,131
				Liabilities and Shareholders’ Deficit
Current Liabilities
	Accounts payable and accrued liabilities				$	22,220		$	22,368
	Restructuring and other related liabilities					5,547			16,357
	Accrued interest payable					3,399			5,163
	Current portion of long-term debt					2,632			2,846
			Total current liabilities			33,798			46,734
	Long-term debt					241,618			283,904
	Long-term restructuring liability					2,821			4,934
	Deferred income taxes – net					52,944			52,632
	Postretirement and postemployment benefits					7,269			7,431
	Other non-current liabilities					12,996			13,809
Commitments and contingencies
Shareholders’ Deficit
	Preferred stock, par value $1 per share, authorized –10,000,000 shares; outstanding – none					—			—
	Common stock, par value $1 per share, authorized – 400,000,000 shares; issued – 51,621,894 shares for 2002 and 2001, respectively					51,622			51,622
	Additional paid-in capital					39,131			32,043
	Unamortized restricted stock					(448	)		(336	)
	Retained earnings (deficit)					5,481			(28,870	)
	Treasury stock, at cost, 21,935,124 shares for 2002 and 22,231,910 shares for 2001					(164,779	)		(163,442	)
	Accumulated other comprehensive loss					(1,561	)		(2,330	)
			Total shareholders’ deficit			(70,554	)		(111,313	)
			Total Liabilities and Shareholders’ Deficit		$	280,892		$	298,131

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)


	Three months ended						Six months ended
	June 30,						June 30,
(in thousands, except per share data)	2005			2004			2005			2004

Net revenue	$	232,967		$	144,641		$	440,307		$	288,448
Expenses
Operating expenses		106,495			56,932			208,836			110,890
General and administrative expenses		14,831			15,429			27,982			28,046
Depreciation and amortization		20,611			14,947			42,263			29,339

Total expenses		141,937			87,308			279,081			168,275

Partnership income		—			34,803			—			58,701


Operating income		91,030			92,136			161,226			178,874

Interest expense, net		(58,206	)		(37,496	)		(115,703	)		(77,796	)


Income before income taxes		32,824			54,640			45,523			101,078

Provision for income taxes		12,801			21,583			17,754			39,926


Net income		20,023			33,057			27,769			61,152

Preferred dividend		2,919			5,392			6,238			10,678
Loss on repurchase of redeemable convertible preferred stock		—			—			133,681			—


Income (loss) available to common shareholders	$	17,104		$	27,665		$	(112,150	)	$	50,474


Earnings (loss) per share
Basic	$	0.46		$	0.68		$	(3.55	)	$	1.25

Diluted	$	0.44		$	0.65		$	(3.55	)	$	1.20


Shares used in computing earnings (loss) per share
Basic		31,699			31,204			31,621			31,132

Diluted		33,471			32,546			31,621			32,379


Comprehensive Income (Loss)
Net income	$	20,023		$	33,057		$	27,769		$	61,152
Unrealized (loss) gain on interest rate swaps, net of tax		(8,335	)		5,869			3,884			3,161

Comprehensive income	$	11,688		$	38,926		$	31,653		$	64,313

The accompanying notes are an integral part of the consolidated financial statements.

R.H. Donnelley Corporation and Subsidiaries ~~Consolidated Statements of Cash Flows (Unaudited)~~

				Six months ended
				June 30,
(amounts in thousands)				2002			2001
Cash Flows from Operating Activities
Net income				$	34,351		$	33,475
Reconciliation of net income to net cash provided by operating activities:
		Extraordinary loss, net of tax			210			348
		Depreciation and amortization			3,164			5,640
		Deferred income tax			312			(500	)
		Provision for doubtful accounts			1,467			1,599
		Other noncash charges			762			662
		Cash in excess of partnership and joint venture income			5,164			9,148
		Increase in accounts receivable			(3,964	)		(1,543	)
		(Increase) decrease in other assets			(413	)		1,599
		Decrease in accounts payable and accrued liabilities			(12,638	)		(17,204	)
		(Decrease) increase in other non-current liabilities			(207	)		1,472
			Net cash provided by operating activities		28,208			34,696
Cash Flows from Investing Activities
Additions to fixed assets and computer software					(1,300	)		(1,952	)
Investment in ChinaBig.com Limited					—			(1,550	)
			Cash used in investing activities		(1,300	)		(3,502	)
Cash Flows from Financing Activities
Repayment of debt					(42,500	)		(50,000	)
Purchase of treasury stock					—			(32,538	)
Proceeds from employee stock option exercises					3,298			3,562
			Net cash used in financing activities		(39,202	)		(78,976	)
Decrease in cash and cash equivalents					(12,294	)		(47,782	)
Cash and cash equivalents, beginning of year					14,721			55,437
Cash and cash equivalents, end of period				$	2,427		$	7,655
Supplemental Information:
Cash used to pay:
	Interest			$	12,647		$	12,292
	Income taxes			$	16,566		$	21,867

Consolidated Statements of Cash Flows (Unaudited)


	Six months ended
	June 30,
amounts in thousands	2005			2004

Cash Flows from Operating Activities
Net income	$	27,769		$	61,152
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization		42,263			29,339
Deferred income taxes		37,281			39,926
Provision for bad debts		11,505			6,491
Other non-cash charges		10,602			11,031
Changes in assets and liabilities, net of effects from acquisition:
Cash in excess of partnership income		—			1,569
Increase in accounts receivable		(4,659	)		(19,030	)
Decrease in other assets		26,203			1,863
(Decrease) increase in accounts payable and accrued liabilities		(11,735	)		2,729
Increase in deferred directory revenue		71,431			11,248
(Decrease) increase in other non-current liabilities		(15,947	)		1,142

Net cash provided by operating activities		194,713			147,460

Cash Flows from Investing Activities
Additions to fixed assets and computer software		(12,035	)		(8,857	)

Net cash used in investing activities		(12,035	)		(8,857	)

Cash Flows from Financing Activities
Proceeds from the issuance of debt, net of costs		291,516			—
Borrowings under Revolver		140,100			1,400
Revolver repayments		(161,300	)		(1,400	)
Repurchase of redeemable convertible preferred stock		(277,197	)		—
Debt repayments		(183,282	)		(149,466	)
(Decrease) increase in checks not yet presented for payment		(2,383	)		9,470
Proceeds from employee stock option exercises		4,937			4,265

Net cash used in financing activities		(187,609	)		(135,731	)

(Decrease) increase in cash and cash equivalents		(4,931	)		2,872
Cash and cash equivalents, beginning of year		10,755			7,722

Cash and cash equivalents, end of period	$	5,824		$	10,594


Supplemental Information:
Cash paid (received):
Interest	$	97,346		$	70,881

Income taxes, net	$	508		$	(12,443	)

The accompanying notes are an integral part of the consolidated financial statements.

R.H. Donnelley Corporation and ~~Subsidiary~~Subsidiaries ~~Notes to Consolidated Financial Statements (Unaudited) (amounts in thousands, except per share data)~~

1.Notes ~~Basis~~to ofConsolidated ~~Presentation~~Financial Statements (Unaudited)

~~The~~(tabular ~~interim~~amounts ~~financial statements have been prepared~~ in accordance with the instructions to Form 10-Q and should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31thousands, ~~2001.~~except ~~The~~per ~~results~~share ~~of interim periods are not necessarily indicative of results for the full year or any subsequent period. In the opinion of management, all adjustments (consisting of normal recurring accruals~~data) ~~considered necessary for a fair presentation of financial position,~~ ~~results of operations and cash flows at the dates and for the periods presented have been included. Certain prior year amounts have been reclassified to conform to the current year’s presentation.~~

21. ~~Significant~~Business ~~Accounting~~and ~~Policies~~Basis of Presentation

~~Principles of Consolidation.~~ The interim consolidated financial statements ~~include the accounts~~ of ~~the~~R.H. ~~Company~~Donnelley Corporation and its direct and indirect wholly owned subsidiaries~~. All~~ ~~intercompany~~(the ~~transactions~~“Company”, “RHD”, “we”, “us” and ~~balances~~“our”) have been ~~eliminated.~~prepared in ~~The~~accordance ~~financial~~with the instructions to Quarterly Report on Form 10-Q and should be read in conjunction with the financial statements ofand related notes included in our Annual Report on Form 10-K for the ~~DonTech~~year ~~Partnership~~ended December 31, 2004 (“~~DonTech~~2004 10-K”),. aThe ~~50/50~~results ~~perpetual partnership~~of ~~with~~interim anperiods ~~operating~~are ~~unit~~not necessarily indicative of ~~SBC~~results ~~Communications~~for ~~Inc~~the full year or any subsequent period. In the opinion of management, all adjustments (~~“SBC”~~consisting of normal recurring accruals), ~~are~~considered ~~not~~necessary for a ~~consolidated~~fair ~~with~~statement ~~our~~of financial ~~statements.~~position, ~~See~~results ~~“Partnership~~of operations and ~~Joint~~cash ~~Venture~~flows at the dates and for the ~~Accounting”~~periods ~~below~~presented have been included.

~~Revenue~~We ~~Recognition.~~are Wea ~~earn~~leading ~~revenue~~yellow inpages ~~the~~publisher ~~form~~and ofdirectional ~~commissions~~media ~~from~~company. ~~the~~Directional ~~sale~~media is where ofconsumers ~~advertising~~search onto ~~behalf~~find ofwho ~~Sprint~~sells the goods and ~~fees~~services ~~from~~they ~~our~~are ~~pre-press~~ready ~~publishing services~~to purchase. AsWe apublish Sprint®-branded ~~sales~~directories ~~agent~~in ~~for~~18 ~~Sprint~~states, wewith ~~recognize~~major ~~sales~~markets ~~commission~~including ~~revenue at~~Las ~~the~~Vegas, ~~time~~Nevada and anOrlando ~~advertising~~and ~~contract~~Lee isCounty, ~~executed~~Florida, with a ~~customer.~~total ~~Sales~~distribution of approximately 18 million serving ~~commission~~approximately ~~revenue~~160,000 islocal ~~recorded~~and ~~net~~national ofadvertisers. ~~potential~~We ~~sales~~also ~~allowances~~publish SBC®-branded directories in Illinois and Northwest Indiana, ~~which~~with ~~are~~a total distribution of approximately 10 ~~estimated~~million serving approximately 100,000 ~~based~~local onand ~~historical~~national ~~experience~~advertisers. ~~Revenue~~We ~~from~~also ~~pre-press~~offer ~~publishing~~online city ~~operations~~guides isand ~~recognized~~search asweb ~~services~~sites ~~are~~in ~~performed~~all of our Sprint markets under the Best Red Yellow Pages® brand at www.bestredyp.com and in the Chicagoland area at www.chicagolandyp.com. We ~~recognize~~also nosell ~~allowances~~local advertising in Illinois and Northwest Indiana onto www.SMARTpages.com, SBC’s ~~for~~Internet ~~pre-press~~yellow ~~publishing~~pages ~~services~~platform.

~~Partnership~~On ~~and~~September 1, ~~Joint~~2004, ~~Venture~~we ~~Accounting.~~completed ~~DonTech~~the isacquisition ~~accounted~~of ~~for~~the ~~under~~directory ~~the~~publishing business (“SBC ~~equity~~Directory ~~method~~Business”) ~~whereby~~of weSBC ~~recognize~~Communications, ~~our~~Inc. ~~50%~~(“SBC”) ~~share~~in ofIllinois ~~the~~and ~~net~~Northwest ~~income~~Indiana, including ofSBC’s interests in The DonTech as II Partnership (“DonTech”), a 50/50 general partnership between us and ~~joint~~SBC ~~venture~~(collectively, ~~income~~the “SBC Directory Acquisition”), for $1.41 billion ~~Partnership~~in cash, after working capital adjustments and ~~joint~~the ~~venture~~settlement ~~income~~of a $30 million liquidation preference owed ~~also~~to ~~includes~~us ~~revenue~~related ~~participation~~to ~~income~~DonTech. ~~from~~The ~~SBC~~acquisition was consummated pursuant to, and ~~the~~in ~~priority~~accordance with, the ~~distribution~~terms onof ~~our~~the ~~membership~~Purchase ~~interest~~Agreement, indated ~~CenDon~~as ~~LLC~~of ~~(“CenDon”)~~July 28, a2004, ~~joint venture~~as ~~with~~amended, ~~Centel~~by ~~Directory~~and among the Company, Ameritech Corporation (“~~Centel~~Ameritech”), a direct wholly owned subsidiary of ~~Sprint~~SBC, and Ameritech ~~Corporation~~Publishing, Inc. (“~~Sprint~~API”), a direct wholly owned subsidiary of Ameritech. ~~Revenue~~The ~~participation~~acquisition ~~income~~was accounted for as a purchase business combination and the ~~priority distribution~~purchase ~~are~~price ~~tied~~was allocated to ~~advertising~~the tangible ~~sales~~and identifiable intangible assets acquired and ~~recognized~~liabilities ~~when~~assumed abased ~~sales~~on ~~contract~~their isrespective ~~executed~~fair ~~with~~values aon ~~customer~~the acquisition date. ~~Partnership~~The ~~and~~results ~~joint~~of ~~venture~~the ~~investments~~SBC onDirectory ~~the~~Business are included in our consolidated ~~balance~~results ~~sheets~~from ~~include~~and ~~our~~after ~~50%~~September 1, ~~share~~2004. ofThe ~~the~~acquired ~~net~~SBC ~~assets~~Directory Business now operates as R.H. Donnelley Publishing & Advertising of ~~DonTech~~Illinois Partnership, an ~~the~~indirect ~~revenue~~wholly ~~participation~~owned ~~receivable~~subsidiary ~~and~~of the ~~priority~~Company. ~~distribution~~See ~~receivable~~Note 3, “Acquisitions” for a further description of the acquisition.

~~Trade~~On ~~Receivables.~~January 3, ~~Trade~~2003, ~~receivables~~we ~~represent~~completed ~~sales~~the ~~commissions~~acquisition ~~earned~~of ~~from~~ the ~~sale~~directory ofbusiness ~~advertising~~(the on“SPA ~~behalf~~Directory Business”) of Sprint ~~and~~Corporation ~~fees~~(“Sprint”) ~~earned~~by ~~for~~acquiring ~~pre-press publishing~~all ~~services.~~the Anoutstanding ~~allowance~~capital ~~for~~stock ~~doubtful~~of ~~accounts~~the various isentities ~~recognized~~comprising ~~based upon~~Sprint ~~historical~~Publishing ~~experience~~& ~~and~~Advertising ~~subject~~(“SPA”) to(collectively, ~~contractual~~the ~~limitations. Receivables~~“SPA Acquisition”) for ~~sales~~$2.23 billion ~~commissions~~in ~~are~~cash. ~~billed~~The toacquisition ~~the~~was ~~publisher~~accounted ~~upon~~for ~~directory~~as ~~publication~~a purchase business combination and ~~collected~~the inpurchase ~~accordance~~price ~~with~~was ~~contractual~~allocated ~~provisions,~~to ~~typically~~the intangible ~~the~~and ~~same~~identifiable intangible assets ~~month~~acquired ofand ~~publication,~~liabilities ~~but~~assumed nobased ~~later~~on ~~than~~their ~~nine~~respective ~~months~~fair ~~after~~values ~~publication~~on the acquisition date. ~~Receivables~~The ~~for~~results ~~pre-press~~of ~~publishing~~the ~~services~~SPA ~~are~~Directory ~~billed~~Business ~~and~~are ~~collected~~included in ~~accordance~~ ~~with~~our ~~the~~consolidated ~~terms~~results offrom ~~the~~and ~~applicable agreement~~after January 3, ~~generally~~2003. aThe ~~monthly~~acquired ~~pro rata~~SPA ~~amount~~Directory ~~based~~Business onnow ~~the~~operates ~~annual~~as ~~contract value~~R.H. IfDonnelley ~~actual~~Publishing ~~volumes exceed~~& ~~contracted~~Advertising, ~~volumes~~Inc., an ~~additional~~indirect ~~amount~~wholly isowned ~~billed~~subsidiary toof the ~~publisher~~Company. atSee Note 3, “Acquisitions” ~~year-end~~for a further description of the acquisition.

~~Investment Impairment~~2. WeSummary ~~have an 18% interest in ChinaBig.com (“ChinaBig”), which publishes yellow pages directories and offers Internet directory services in the People’s Republic~~ of ~~China.~~Significant WeAccounting ~~account for this investment under the~~Policies cost method and the carrying value of this investment is reflected as other non-current assets on the consolidated balance sheets. We evaluate the carrying value of this investment for impairment whenever events or changes in circumstances indicate that the carrying value may be impaired. Such events or changes in circumstance may include (i) a change in the extent or manner in which management intends to use the asset; (ii) a decrease in the market value of the asset; (iii) an independent valuation of the asset or similar type asset or (iv) a history of operating cash flow losses. If the investment is determined to be impaired, and such impairment is determined to be permanent, the carrying value would be written down to its fair value. As a quoted market price does not exist for this investment, fair value would be determined based other factors, including, but not limited to, an independent valuation, discounted cash flow analysis or a transaction in the marketplace involving a similar type investment.

~~Concentration~~Principles of ~~Credit~~Consolidation. ~~Risk~~The consolidated financial statements include the accounts of R.H. Donnelley WeCorporation ~~maintain~~and ~~significant~~its ~~receivable~~direct ~~balances~~and ~~with~~indirect wholly owned subsidiaries. All intercompany ~~SBC~~transactions and ~~Sprint~~balances ~~for~~have ~~revenue~~been eliminated.

~~participation~~Revenue Recognition. We earn revenue principally from the sale of advertising into our yellow pages directories. Revenue from the sale of such advertising is deferred when a directory is published and recognized ratably over the life of a directory, ~~priority~~which ~~distribution~~is typically 12 months (the “deferral and amortization method”). Revenue from the sale of advertising is recorded net of an allowance for sales ~~commissions~~claims, estimated based on historical experience on a directory-by-directory basis. We doincrease ~~not~~or decrease this estimate as information or circumstances indicate that the ~~currently~~estimate ~~foresee~~may no longer adequately represent the amount of claims we may incur for a ~~material~~directory ~~credit~~in the ~~risk~~future. ~~associated~~Before ~~with~~the ~~these~~SBC ~~receivables~~Directory Acquisition, we also earned revenue from providing pre-press ~~although~~publishing ~~there~~services ~~can~~to beSBC nofor ~~assurance~~those ~~that~~directories ~~full~~in ~~payment~~the ~~will~~DonTech bemarkets. ~~received~~Revenue onfrom athese ~~timely~~pre-press ~~basis~~publishing services was recognized as services were performed.

~~Income~~Deferred ~~Taxes~~Directory Costs. WeCosts ~~recognize~~directly ~~deferred~~related ~~tax~~to ~~assets~~the ~~for~~selling ~~items~~and ~~that~~production ~~will~~of ~~give~~our ~~rise~~directories toare ~~future~~initially ~~tax~~deferred ~~deductions.~~when Aincurred ~~valuation~~and ~~allowance~~recognized ratably over the life of a directory, which is typically ~~established~~12 months. ~~where~~These ~~expected~~costs include sales commissions and print, paper and initial ~~future~~distribution ~~taxable~~costs. ~~income~~Such ~~does~~costs ~~not~~that ~~support~~are ~~the~~paid ~~full~~prior ~~realization~~to ofdirectory ~~deferred~~publication ~~tax~~are classified as other current assets.

3Equity Method Accounting. ~~Partnership~~Before the SBC Directory Acquisition, DonTech was a 50/50 perpetual partnership in which we and ~~Joint~~a ~~Venture~~subsidiary ~~Income~~of SBC were the partners. DonTech was a separate legal entity that provided its services with its own employees and a stand-alone management team. Subject to the oversight of the board of directors, the employees of DonTech had the right, authority and power to do any act to accomplish, and enter into any contract incidental to attain the purposes of the partnership. No employees of either RHD or SBC were involved in the day-to-day operations of DonTech and, because the partners shared equally in the net profits and each had one voting member on the DonTech board of directors, neither partner had the unilateral ability to control or influence the operations of DonTech. Accordingly, through September 1, 2004, we accounted for DonTech under the equity method and did not consolidate the DonTech results in our financial statements.

~~Partnership~~Before ~~and~~the ~~joint~~SBC ~~venture~~Directory Acquisition, we recognized our 50% share of DonTech net income ~~for~~as partnership income in our consolidated statement of operations. DonTech reported commission revenue based on the ~~three~~annual value of a sales contract in the period the contract was executed (calendar sales) and ~~six~~reported ~~months~~expenses ~~ended~~as ~~June~~incurred. Partnership income also included revenue participation ~~30,~~income ~~2002~~from SBC. Revenue participation income was based on DonTech advertising sales and ~~2001~~was reported ~~consisted~~when a sales contract was executed with a customer. Our investment in DonTech and the revenue participation receivable from SBC had been reported as partnership investment on the consolidated balance sheet prior to the SBC Directory Acquisition. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits from DonTech and we eliminated our DonTech partnership investment. Consequently, partnership income was no longer reported commencing on September 1, 2004. Rather, following: the SBC Directory Acquisition, the revenues, expenses and income of the acquired SBC Directory Business are directly recorded in our statement of operations.

		Three months ended				Six months ended
		June 30,				June 30,
		2002		2001		2002		2001
Revenue participation income		$	29,882	$	29,992	$	49,300	$	50,165
50% share of DonTech net income			6,745		7,093		9,232		8,919
	Total DonTech income		36,627		37,085		58,532		59,084
Priority distribution income			4,237		4,126		9,480		9,151
Partnership and joint venture income		$	40,864	$	41,211	$	68,012	$	68,235

Cash and Cash Equivalents. Cash equivalents include liquid investments with a maturity of less than three months at their time of purchase. We place our investments with high quality financial institutions. At times, such investments may be in excess of federally insured limits.

~~Summarized~~Accounts ~~combined~~Receivable. ~~financial~~Accounts ~~information~~receivable consist of ~~DonTech~~balances isowed ~~shown~~to inus by our advertising customers. Advertisers typically enter into a 12-month contract for their advertising. Most local advertisers are billed a pro rata amount of their contract value on a monthly basis. On behalf of national advertisers, Certified Marketing Representatives (“CMRs”) pay to the ~~table~~Company the total ~~below~~contract value of their advertising, net of their commission, within 60 days after the publication month. Billed receivables represent the amount that has been billed to advertisers. Unbilled receivables represent contractually owed amounts for published directories that have yet to be billed to advertisers. Billed and unbilled receivables are recorded net of an allowance for doubtful accounts and sales claims, estimated based on historical experience on a directory-by-directory basis. We increase or decrease this estimate as information or circumstances indicate that the estimate may no longer accurately represent the amount of bad debts and sales claims we may incur.

	Three months ended				Six months ended
	June 30,				June 30,
	2002		2001		2002		2001
Net revenue	$	31,645	$	31,673	$	52,284	$	52,778
Operating income		13,468		14,093		18,597		17,654
Net income		13,489		14,185		18,464		17,838

Total assets of DonTech were $127,740 and $133,566 at June 30, 2002 and 2001, respectively.

4. Long-term Debt

Long-term debt at June 30, 2002 consisted of $94,250 outstanding under the Senior Secured Term Facilities (“Term Facilities”) and $150,000 Senior Subordinated 91/8% Notes. We also have a Senior Revolving Credit Facility (the “Revolver”), which allows us to borrow up to $100,000. There are no outstanding borrowings under the Revolver as of June 30, 2002. During the six month period ended June 30, 2002, we prepaid $42,500 of Term Facilities. In connection with the prepayments, we recorded an after-tax extraordinary loss of $210 relating to the write-off of related deferred financing costs.

5. Restructuring and Special Charge

In 2001, we recorded a restructuring and special charge of $18,556 in connection with executive management transition arrangements and restructuring actions, including the relocation and consolidation of real estate facilities and the elimination of approximately 100 positions associated with the expiration of a pre-press publishing contract during 2002. Activity in the restructuring and other related liability account through June 30, 2002 is presented in the table below. There were no layoffs related to the restructuring plan through June 30, 2002.

	Executive									Asset
	Management			Other			Facilities			Write-offs
	Transition			Severance			Related			and Other			Total
Restructuring and special charge	$	9,937		$	3,252		$	4,380		$	987		$	18,556
Reclass of related liabilities		2,735												2,735
Balance at January 1, 2002		12,672			3,252			4,380			987			21,291
2002 activity
Payments		(12,961	)		(79	)		(12	)		(89	)		(13,141	)
Current period expense (income)(1)		289									(71	)		218
Balance at June 30, 2002	$	—		$	3,173		$	4,368		$	827		$	8,368
Short-term	$	—		$	2,849		$	1,932		$	766		$	5,547
Long-term					324			2,436			61			2,821
Total	$	—		$	3,173		$	4,368		$	827		$	8,368

In connection with the SBC Directory Acquisition, we entered into a transition services agreement with SBC whereby SBC billed and collected from our advertising customers in the Illinois and Northwest Indiana directories and remitted collections (net of specified holdback) to us through early 2005. On a monthly basis commencing September 1, 2004, SBC provided an advance to us related to those billings, and as such, we recorded an advance from SBC that was decreased as SBC collected from our advertisers, thus satisfying that liability. In the first quarter of 2005, we assumed all responsibility for billing and collections from our advertising customers in the Illinois and Northwest Indiana directories.

(1)		Represents amounts paid in excess of (lower than) the amounts originally provided for in the 2001 restructuring and special charge.
6.		Earnings Per Share

Deferred Financing Costs. Certain costs associated with the issuance of debt instruments are capitalized and included in other non-current assets on the consolidated balance sheet. These costs are amortized to interest expense over the terms of the respective debt agreements. The “bond outstanding” method is used to amortize deferred financing costs relating to debt instruments with respect to which we make accelerated principal payments. Other deferred financing costs are amortized using the straight-line method. Amortization of deferred financing costs included in interest expense was $4.0 million and $3.7 million for the three months ended June 30, 2005 and 2004, respectively, and $8.1 million and $7.1 million for the six months ended June 30, 2005 and 2004, respectively.

~~The~~Advertising ~~computation~~Expense. ofWe ~~basic~~recognize ~~and~~advertising ~~diluted~~expenses ~~earnings~~as ~~per~~incurred. ~~share~~These ~~before~~expenses ~~extraordinary~~include public ~~loss~~relations, media, on-line advertising and ~~from~~other ~~net~~promotional ~~income~~and sponsorship costs. Total advertising expense was $4.6 million and $3.7 million for the ~~quarter~~three months ended June 30, 2005 and 2004, respectively, and $8.9 million and $5.6 million for the six months ended June 30, ~~2002~~2005 and ~~2001~~2004, ~~was as follows:~~respectively.

			Three months ended						Six months ended
			June 30,						June 30,
			2002			2001			2002			2001
Income before extraordinary loss			$	21,203		$	20,612		$	34,561		$	33,823
Extraordinary loss, net of taxes				34			—			210			348
Net income			$	21,169		$	20,612		$	34,351		$	33,475
Weighted average shares of common stock outstanding
		Basic shares		29,692			30,519			29,573			30,696
		Dilutive effect of stock options		723			946			692			884
		Diluted shares		30,415			31,465			30,265			31,580
Earnings per share
	Basic
		Income before extraordinary loss	$	0.71		$	0.68		$	1.17		$	1.10
		Extraordinary loss, net of taxes		(0.00	)		(0.00	)		(0.01	)		(0.01	)
		Net income	$	0.71		$	0.68		$	1.16		$	1.09
	Diluted
		Income before extraordinary loss	$	0.70		$	0.66		$	1.14		$	1.07
		Extraordinary loss, net of taxes		(0.00	)		(0.00	)		(0.00	)		(0.01	)
		Net income	$	0.70		$	0.66		$	1.14		$	1.06

Concentration of Credit Risk. Approximately 85% of our directory advertising revenue is derived from the sale of advertising to local small- and medium-sized businesses. These advertisers typically enter into 12-month advertising sales contracts and make monthly payments over the term of the contract. Some advertisers prepay the full amount or a portion of the contract value. Most new advertisers and advertisers desiring to expand their advertising programs are subject to a credit review. If the advertisers qualify, we may extend credit to them for their advertising purchase. Small- and medium-sized businesses tend to have fewer financial resources and higher failure rates than large businesses. In addition, full collection of delinquent accounts can take an extended period of time and involve significant costs. While we do not believe that extending credit to our local advertisers will have a material adverse effect on our results of operations or financial condition, no assurances can be given. We do not require collateral from our advertisers, although we do charge late fees to advertisers that do not pay by specified due dates.

7The remaining approximately 15% of our directory advertising revenue is derived from the sale of advertising to national or large regional chains, such as rental car companies, automobile repair shops and pizza delivery businesses. ~~Business~~Substantially ~~Segments~~all of the revenue derived through national accounts is serviced through CMRs with which we contract. CMRs are independent third parties that act as agents for national advertisers. The CMRs are responsible for billing the national customers for their advertising. We receive payment for the value of advertising placed in our directory, net of the CMR’s commission, directly from the CMR. While we are still exposed to credit risk, the amount of losses from these accounts historically has been less than the local accounts as the advertisers, and in some cases the CMRs, tend to be larger companies with greater financial resources than local advertisers.

~~Our~~At ~~reportable~~June 30, ~~operating~~2005, ~~segments~~we ~~are~~had ~~DonTech~~interest ~~and~~rate ~~Directory~~swap ~~Advertising~~agreements with major financial institutions with a ~~Services~~notional ~~(“DAS”)~~value of $1,355 million. We ~~evaluate~~are exposed to credit risk in the ~~performance~~event ofthat ~~DonTech~~one ~~and~~or ~~DAS~~more ~~primarily~~of ~~based~~the oncounterparties ~~operating~~to ~~income~~the ~~contribution.~~agreements ~~The~~does ~~DonTech~~not, ~~segment~~or ~~includes~~cannot, ~~revenue participation~~meet ~~income~~their ~~and~~obligation. ~~our~~The ~~50%~~notional amount ~~interest~~is inused ~~the~~to ~~net~~measure ~~profits~~interest ofto ~~DonTech~~be ~~(see Note~~paid ~~3),~~or ~~but~~received and does not ~~include~~represent anthe ~~allocation~~amount of exposure ~~certain~~to ~~expenses~~credit ~~incurred~~loss. The loss would be limited to the amount that would have been received, if ~~support~~any, ~~this~~over ~~business.~~the ~~Our~~remaining ~~DAS~~life ~~segment~~of ~~includes~~the ~~revenue~~swap ~~and~~agreement. ~~income~~The ~~from~~counterparties ~~our sales~~to ~~agency~~the ~~and~~swap ~~joint~~agreements ~~venture~~are major ~~relationships~~financial institutions with ~~affiliates~~credit ratings of ~~Sprint,~~A ~~our pre-press~~or ~~publishing~~higher. ~~services~~We ~~operation~~do ~~and~~not ~~our~~currently ~~information~~foresee ~~technology~~a ~~function,~~material ascredit ~~well~~risk asassociated anwith ~~allocation~~these ofswap ~~certain~~agreements; ~~shared~~however, ~~expenses~~no ~~based~~assurances oncan be given. ~~estimated~~

Derivative Financial Instruments. We do not use derivative financial instruments for trading or speculative purposes. Our derivative financial instruments are limited to interest rate swap agreements used to manage exposure to fluctuations in interest rates on variable rate debt. These agreements effectively convert $1,355 million of our variable rate debt to fixed rate debt, mitigating our exposure to increases in interest rates. Under the terms of the swap agreements, we receive variable interest based on the three-month LIBOR and pay a weighted average fixed rate of 3.19%. The swaps mature at varying dates beginning October 2005 through September 2009. The weighted average rate received was 3.08% and 2.86% during the three and six months ended June 30, 2005, respectively. These periodic payments and receipts are recorded as interest expense.

~~business~~The ~~usage.~~interest ~~General~~rate &swaps ~~Corporate~~have ~~represents~~been ~~overhead~~designated ~~and~~as ~~administrative costs~~cash ~~not~~flow ~~allocated~~hedges to ~~the~~hedge ~~DAS~~three-month ~~business~~LIBOR-based interest ~~units.~~payments ~~Interest~~on ~~expense~~$1,355 million ~~interest~~of bank debt. To the extent the swaps provide an effective ~~income~~hedge, ~~income~~changes ~~tax~~in ~~expense~~the ~~and~~fair ~~other~~value ~~non-operating~~of ~~items~~the swaps are ~~not~~recorded ~~allocated~~in ~~to the~~other ~~operating~~comprehensive ~~segments~~income. ~~Segment~~Any ineffectiveness ~~information~~is ~~for~~recorded ~~the~~through ~~quarter~~earnings. ~~and~~As ~~six~~of ~~months ended~~ June 30, ~~2002~~2005, our interest rate swaps provided an effective hedge of the three-month LIBOR-based interest payments on $1,355 million of bank debt, and ~~2001~~no isineffectiveness aswas ~~follows:~~included in earnings.

			Directory
	DonTech		Advertising		General &						Consolidated
	Partnership		Services		Corporate			Other(1)			Totals
Three Months Ended June 30, 2002
Net revenue		—	$	19,456		—			—		$	19,456
Operating income (loss)	$	36,627		7,810	$	(3,826	)	$	(218	)		40,393
Depreciation and amortization		—		1,486		71			—			1,557
EBITDA(2)		36,627		9,296		(3,755	)		(218	)		41,950
Total assets		187,783		42,141		50,968			—			280,892
Three Months Ended June 30, 2001
Net revenue		—	$	20,034		—			—		$	20,034
Operating income (loss)	$	37,085		6,069	$	(3,946	)		—			39,208
Depreciation and amortization		—		2,592		163			—			2,755
EBITDA(2)		37,085		8,661		(3,783	)		—			41,963
Total assets		194,790		42,940		78,318			—			316,048
Six Months Ended June 30, 2002
Net revenue		—	$	37,845		—			—		$	37,845
Operating income (loss)	$	58,532		17,585	$	(7,850	)	$	(218	)		68,049
Depreciation and amortization		—		3,017		147			—			3,164
EBITDA(2)		58,532		20,602		(7,703	)		(218	)		71,213
Six Months Ended June 30, 2001
Net revenue		—	$	38,873		—			—		$	38,873
Operating income (loss)	$	59,084		15,536	$	(7,749	)		—			66,871
Depreciation and amortization		—		5,246		394			—			5,640
EBITDA(2)		59,084		20,782		(7,355	)		—			72,511

Earnings per Share. We account for earnings per share in accordance with Emerging Issues Task Force Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement 128 (“EITF 03-6”), which established standards regarding the computation of earnings per share (“EPS”) by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company. EITF 03-6 requires earnings available to common shareholders for the period, after deduction of preferred stock dividends, to be allocated between the common and preferred shareholders based on their respective rights to receive dividends. Basic EPS is then calculated by dividing income (loss) allocable to common shareholders by the weighted average number of shares outstanding. EITF 03-6 does not require the presentation of basic and diluted EPS for securities other than common stock. Therefore, the following EPS amounts only pertain to our common stock.

(1)		Represents expenses incurred in connection with the 2001 restructuring and special charge. These expenses were not originally anticipated and are therefore treated as a current period expense (see also Note 5).
(2)		EBITDA represents earnings before interest, taxes and depreciation and amortization. EBITDA is not a measurement of operating performance computed in accordance with generally accepted accounting principles and should not be considered as a substitute for operating income or net income prepared in conformity with generally accepted accounting principles. In addition, EBITDA may not be comparable to similarly titled measures of other companies.

Under the guidance of EITF 03-6, diluted EPS is calculated by dividing income (loss) allocable to common shareholders by the weighted average common shares outstanding plus dilutive potential common stock. Potential common stock includes stock options, stock appreciation rights and warrants, the dilutive effect of which is calculated using the treasury stock method, and our 8% redeemable convertible cumulative preferred stock (“Preferred Stock”), the dilutive effect of which is calculated using the “if-converted” method. The calculation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2005 and 2004 is presented below.

We also evaluate DonTech and DAS based on advertising sales because, while these sales do not appear on our financial statements or the financial statements of DonTech, they are a critical measure of performance reviewed by management and play an important role in management’s decision in allocating financial resources. For a discussion of advertising sales, see “Management’s Discussion and Analysis – Results of Operations.”


	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
Basic EPS–Two–Class Method
Income (loss) available to common shareholders	$	17,104		$	27,665		$	(112,150	)	$	50,474
Amount allocable to common shareholders ⁽¹⁾		86	%		77	%		100	%		77	%

Income (loss) allocable to common shareholders		14,709			21,302			(112,150	)		38,865
Weighted average common shares outstanding		31,699			31,204			31,621			31,132

Basic earnings (loss) per share, Two–Class Method	$	0.46		$	0.68		$	($3.55	)	$	1.25


Diluted EPS
Income (loss) available to common shareholders	$	17,104		$	27,665		$	(112,150	)	$	50,474
Amount allocable to common shareholders ⁽¹⁾ ⁽¹⁾		86	%		77	%		100	%		77	%

Income (loss) allocable to common shareholders		14,709			21,302			(112,150	)		38,865
Weighted average common shares outstanding		31,699			31,204			31,621			31,132
Dilutive effect of stock awards ⁽²⁾ ⁽²⁾		1,772			1,342			—			1,247
Dilutive effect of Preferred Stock assuming conversion⁽²⁾		—			—			—			—

Weighted average diluted shares outstanding		33,471			32,546			31,621			32,379

Diluted earnings (loss) per share	$	0.44		$	0.65		$	(3.55	)	$	1.20

8. Litigation


(1)		31,699 / (31,699 + 5,081) and 31,204 / (31,204 + 9,387) for the three months ended June 30, 2005 and 2004, respectively, and 31,132 / (31,132 + 9,295) for the six months ended June 30, 2004. In computing EPS using the two-class method, we have not allocated the net loss for the six months ended June 30, 2005 between common and preferred shareholders since preferred shareholders do not have a contractual obligation to share in the net loss.

(2)		The effect of stock awards for the six months ended June 30, 2005 and the assumed conversion of the Preferred Stock in the three and six months ended June 30, 2005 and 2004 were anti-dilutive and therefore are not included in the calculation of diluted EPS.

Rockland Yellow Pages. In 1999, Sandy Goldberg, Dellwood Publishing, Inc. and Rockland Yellow Pages (as “plaintiffs”) initiated a lawsuit against the Company and Bell Atlantic Corporation (as “defendants”) in the United States District Court for the Southern District of New York. The Rockland Yellow Pages is a proprietary directory that competes against a Bell Atlantic directory in the same region, for which we served as Bell Atlantic’s advertising sales agent through June 30, 2000. The complaint alleged that the defendants disseminated false information concerning the Rockland Yellow Pages, which resulted in damages to the Rockland Yellow Pages. In May 2001, the District Court dismissed substantially all of plaintiffs’ claims, and in August 2001, the remaining claims were either withdrawn by the plaintiffs or dismissed by the District Court. The plaintiffs then filed a complaint against the same defendants in New York State Supreme Court, in Rockland County, alleging virtually the same state law tort claim previously dismissed by the District Court and seeking unspecified damages. In October 2001, defendants filed a motion to dismiss this complaint. On May 5, 2002, the Court granted defendants’ motion to dismiss the complaint. Plaintiffs have filed an appeal of this dismissal. Nonetheless, we presently do not believe that the final outcome of this matter will have a material adverse effect on our results of operations or financial condition.

Information Resources. In 1996, Information Resources, Inc. (“IRI”) filed a complaint in the United States District Court for the Southern District of New York, naming The Dun & Bradstreet Corporation (“D&B”), ACNielsen Company and IMS International Inc., at the time of the filing, all wholly owned subsidiaries of D&B, as defendants

~~(the~~Employee ~~“IRI~~Stock ~~Action”)~~Awards. ~~IRI~~In ~~alleges,~~accordance ~~among~~with ~~other~~Statement ~~things,~~of ~~various~~Financial ~~violations~~Accounting ofStandards ~~the~~(SFAS) ~~antitrust laws~~No. 123, ~~including~~Accounting ~~alleged~~for ~~violations~~Stock ofBased ~~Sections 1~~Compensation, ~~and 2 of~~ the ~~Sherman Act.~~Company ~~The~~accounts ~~complaint~~for ~~also~~its ~~alleges~~employee ~~a claim of tortuous interference with a~~stock ~~contract~~compensation ~~and~~plans ausing ~~claim~~the ofintrinsic ~~tortuous~~value-based ~~interference~~method ~~with~~prescribed aby ~~prospective~~Accounting ~~business~~Principles Board ~~relationship~~Opinion No. 25, ~~These~~Accounting ~~claims~~for ~~relate~~Stock Issued to ~~the~~Employees ~~acquisition by defendants of Survey Research Group Limited~~ (“~~SRG~~APB 25”). ~~IRI~~and ~~alleges~~related ~~SRG violated an alleged agreement~~interpretations. ~~with~~Compensation ~~IRI~~expense ~~when~~related ~~it agreed~~ to ~~be acquired by~~ the ~~defendants~~issuance ~~and~~of ~~that~~stock ~~the defendants~~options ~~induced SRG~~ to ~~breach~~employees ~~that~~or ~~agreement.~~non-employee directors ~~IRI~~ is ~~seeking~~only ~~damages~~recognized ~~in excess~~if ofthe ~~$350,000,~~exercise ~~which~~price ~~amount~~of ~~IRI~~the ~~seeks~~stock tooption ~~treble under antitrust laws. IRI~~ is ~~also~~less ~~seeking~~than ~~punitive~~the ~~damages~~fair market value of anthe ~~unspecified~~underlying ~~amount.~~stock ~~Under~~at the ~~definitive~~ ~~agreement~~measurement ~~entered~~date. ~~into~~Compensation inexpense ~~connection~~related ~~with~~to ~~our separation from D&B in~~stock ~~1998~~appreciation ~~(the~~rights (“~~Distribution Agreement~~SARs”), ~~D&B~~is ~~assumed~~recognized at the ~~defense~~end ~~and~~of ~~agreed~~each ~~to indemnify~~period usin ~~against~~the ~~any~~amount ~~payments that we may be required to make, including related legal fees. As required~~ by ~~the Distribution Agreement, Moody’s Corporation,~~ which ~~subsequently separated from D&B, agreed to be jointly and~~the ~~severally~~quoted ~~liable~~market ~~with~~value ~~D&B~~of ~~for~~ the ~~indemnity~~underlying ~~obligation~~shares tocovered ~~us.~~by ~~At this stage in~~ the ~~proceedings,~~grant weexceeds ~~are unable to predict~~ the ~~outcome~~grant ~~of this matter. While no~~price ~~assurances~~recognized ~~can~~over bethe ~~provided,~~vesting ~~we currently believe that D&B and Moody’s have sufficient financial resources and borrowing capacity to reimburse us for any payments we make and related costs we incur~~term.

~~Tax~~The ~~Matters.~~Company ~~Certain~~grants ~~tax~~stock ~~planning~~awards ~~strategies~~to ~~entered~~eligible ~~into~~employees bythat ~~D&B~~ are ~~currently~~ subject to ~~review~~specific ~~by tax authorities~~vesting conditions. AsThese astock ~~result~~awards ofhave ~~the~~an ~~form~~accelerated ofvesting ~~our separation~~feature ~~from~~associated ~~D&B~~with employee retirement, weallowing ~~are~~for the ~~corporate~~immediate ~~successor~~exercise of, ~~and~~stock ~~technically~~awards ~~the taxpayer~~without ~~referred~~providing toany ~~below as D&B~~future service. ~~However,~~For ~~under~~pro ~~the~~forma ~~terms~~reporting ofpurposes the ~~Distribution~~ ~~Agreement~~Company ~~and~~follows the ~~Tax~~nominal ~~Allocation~~vesting ~~Agreement~~period ~~with D&B~~approach, ~~D&B agreed to~~ ~~assume~~which requires the ~~defense~~recognition ~~and~~of tocompensation ~~indemnify~~expense usover ~~for~~the ~~any~~vesting ~~tax~~period ~~liability~~and, ~~that~~if ~~may~~an beemployee ~~assessed~~terminates ~~and~~by ~~any~~reason ~~related~~of ~~costs~~retirement ~~and~~before ~~expenses~~the weend ~~incur.~~of ~~Also,~~the asvesting ~~required~~period, byany ~~the~~remaining unrecognized ~~Distribution~~compensation ~~Agreement,~~cost ~~Moody’s~~is ~~Corporation~~recognized isat ~~jointly~~the ~~and~~date ~~severally~~of ~~liable with~~retirement. ~~D&B~~SFAS ~~for~~No. 123(R), ~~the~~Share-Based ~~indemnity~~Payment, specifies ~~obligation~~that toan ~~us.~~award ~~Under~~is ~~the~~vested ~~terms~~when ofthe aemployee’s ~~series~~retention of ~~agreements~~ ~~between~~the ~~D&B,~~award ~~IMS~~is ~~Health~~no ~~Incorporated~~longer contingent ~~(“IMS”)~~on ~~and~~providing ~~Nielsen~~subsequent ~~Media Research,~~service ~~Inc.~~ (the “~~NMR”)~~non-substantive ~~(both~~vesting ~~former~~period ~~subsidiaries of D&B~~approach”),. ~~D&B~~This would isbe ~~required~~the ~~to pay~~case ~~the~~for ~~first~~awards ~~$137,000~~that ofvest ~~any~~when ~~tax~~employees ~~liability~~retire and ~~accrued~~for ~~interest~~awards ~~assessed~~that ~~by the~~are ~~tax~~granted ~~authorities~~to retirement ~~with~~eligible ~~respect~~employees. toAccordingly, ~~certain~~related ~~tax~~compensation ~~matters~~cost ~~(including~~must ~~those~~be recognized ~~discussed~~immediately infor ~~detail~~awards ~~below),~~granted asto ~~well~~retirement aseligible ~~other~~employees ~~tax~~or ~~liabilities.~~over ~~Any~~the ~~amount~~period infrom the grant ~~excess~~date ofto ~~$137,000~~the ~~will~~date beretirement ~~paid~~eligibility ~~50%~~is byachieved, ~~IMS~~if ~~and~~that ~~NMR~~is ~~jointly~~expected ~~and~~to ~~severally~~occur ~~and~~during the ~~50%~~nominal byvesting ~~D&B~~period.

InWe ~~2000,~~will ~~D&B~~continue ~~filed an amended tax return with respect~~ to follow the ~~utilization~~nominal ~~of capital~~vesting ~~losses~~period inapproach ~~1989~~for ~~and~~(1) any ~~1990~~new instock ~~response~~awards granted prior to aadopting ~~formal~~SFAS ~~IRS assessment~~No. 123(R) ~~The amended~~and ~~tax~~(2) the ~~return~~remaining ~~reflected~~portion ~~an additional $561,600~~ of ~~tax~~unvested ~~and~~outstanding ~~interest due.~~awards Inafter ~~2000,~~adopting ~~D&B~~SFAS ~~paid the IRS $349,300 while IMS~~ No. 123(onR). ~~behalf~~Upon adoption of ~~itself~~SFAS ~~and NMR~~No. 123(R) ~~paid approximately $212~~,~~300.~~ Wewe ~~understand~~will ~~that~~apply ~~this~~the ~~payment was made under dispute~~non-substantive investing ~~order~~period approach to ~~stop~~new ~~additional~~grants ~~interest~~that ~~from~~have ~~accruing~~retirement ~~and~~eligibility ~~that~~provisions. ~~D&B~~The isCompany ~~contesting~~is ~~the~~currently ~~IRS’s~~assessing ~~formal assessment and would also contest~~ the ~~assessment~~impact of ~~amounts, if~~this ~~any,~~change in ~~excess of the amounts paid, and that D&B has filed a petition for a refund in the United States District Court~~approach.

InGrants ~~connection~~were ~~with~~made ~~that~~in ~~IRS~~October 2002 ~~assessment~~of ~~and~~1.5 million ~~amended~~options ~~tax~~(“Founders ~~return,~~Grant”) ~~IMS~~to ~~has~~certain ~~filed an~~employees, ~~arbitration~~including ~~proceeding~~senior ~~against~~management, ~~NMR~~in ~~claiming~~connection ~~that~~with ~~NMR subsequently underpaid to IMS its proper allocation of~~ the ~~above-referenced~~SPA ~~tax~~Acquisition. ~~liability~~These ~~under~~options ~~the~~were granted ~~agreements~~with ~~between~~an ~~NMR~~exercise ~~and~~price ~~IMS,~~equal to ~~which~~the ~~neither~~fair ~~D&B~~market ~~nor~~value weof ~~are~~the ~~party.~~Company’s ~~IMS~~common ~~has included~~stock uson ~~as a respondent in~~ the ~~arbitration proceeding so that if NMR~~grant ~~prevails~~date. inHowever, ~~its~~the ~~interpretation~~award of ~~the~~these ~~allocation~~options ~~computation,~~was ~~then~~contingent ~~IMS~~upon ~~could apply~~the ~~that~~successful ~~same~~closing ~~interpretation~~ of the ~~allocation computation against us under~~SPA ~~its~~Acquisition. ~~agreement~~Therefore, ~~with~~these usoptions ~~(as~~were ~~successor~~subject to ~~D&B).~~forfeiture ~~The~~until ~~arbitration~~January 3, ~~panel~~2003, ~~has~~by ~~ruled~~which ~~that~~time ~~we are a proper party to~~ the ~~arbitration.~~fair Asmarket ~~required~~value byof the ~~Distribution Agreement and Tax Allocation Agreement, D&B and Moody~~Company’s ~~are~~common ~~defending~~stock usexceeded ~~in this~~the ~~arbitration~~exercise ~~proceeding at their cost and expense~~price. ~~If NMR prevails in the~~Accordingly, ~~arbitration~~these ~~against~~options ~~IMS~~are ~~and~~accounted infor ~~turn~~as ~~IMS~~compensatory ~~prevails against us~~options, and we ~~believe~~are ~~that~~recognizing non-cash ~~our~~compensation ~~additional~~expense ~~liability~~over ~~under~~the ~~this~~vesting ~~alternative~~period ~~interpretation~~ of the ~~allocation~~ ~~computation~~options. ~~would~~We berecognized ~~approximately~~non-cash ~~$15,000~~compensation expense (arelated ~~$60,000~~to ~~gross~~these ~~claim offset~~stock byoptions ~~approximately~~of $~~45,000~~0.2 million ofand ~~tax benefit)~~$0.3 million ~~While~~for wethe ~~believe~~three-month ~~that the~~periods ~~original~~ended ~~interpretation~~June 30, of2005 ~~the allocation computation is correct~~ and ~~the~~2004, ~~claims of IMS are without merit~~respectively, ifand ~~NMR~~$0.5 million ~~prevails against IMS~~ and in$0.6 million ~~turn~~for ~~IMS~~the ~~prevails~~six-month ~~against~~periods usended ~~in this arbitration proceeding~~June 30, ~~D&B~~2005 and ~~Moody’s~~2004, ~~would be jointly and severally obligated to indemnify us against any such liability~~respectively.

WeOn ~~believe~~July 28, ~~that~~2004, the ~~fact~~Company ~~that~~granted ~~D&B~~0.9 million ~~and~~SARs ~~IMS~~to ~~have~~certain ~~already~~employees, ~~paid~~including senior management, in connection with the ~~IRS~~SBC aDirectory Acquisition. On February 24, 2005, the Company ~~substantial~~granted ~~amount~~0.5 million ofSARs ~~additional~~to ~~taxes~~certain employees under the Company’s 2001 Stock Award and Incentive Plan. The SARs were granted with ~~respect~~an exercise price equal to the ~~contested~~fair ~~tax~~market value of the Company’s ~~planning~~common ~~strategies~~stock ~~significantly~~on ~~mitigates~~the ~~our~~grant ~~risk~~date. ~~While~~The nomaximum ~~assurances~~appreciation ~~can~~of each SAR is 100% of the initial beexercise ~~given~~price. In accordance with APB 25 and FIN 28, weAccounting ~~currently~~for ~~believe~~Stock ~~that~~Appreciation ~~D&B~~Rights and Other ~~Moody’s~~Variable ~~have~~Stock ~~sufficient~~Option ~~financial~~or Award Plans, we recognize non-cash compensation at the end of each ~~resources~~period ~~and~~in ~~borrowing~~the ~~capacity~~amount toby ~~reimburse~~which usthe ~~for~~quoted ~~any~~market ~~payments~~value weof ~~make~~the ~~and~~underlying shares covered by the grant exceeds the grant price over the vesting term. We recognized non-cash compensation related ~~costs~~to these weSARs ~~incur~~of $1.6 million and $2.2 million during the three and six months ended June 30, 2005, respectively.

During the second quarter of 2002, D&B received a Notice of Proposed Adjustment from the IRS with respect to a transaction entered into in 1993. In this Notice, the IRS proposed to disallow certain royalty expense deductions claimed by D&B on its 1994, 1995 and 1996 tax returns. The IRS previously concluded an audit of this transaction for

~~taxable~~The ~~years~~following ~~1993~~table ~~and~~reflects ~~1994~~the ~~and~~pro ~~did~~forma ~~not~~net ~~disallow~~income ~~any~~(loss) and ~~similarly~~earnings ~~claimed deductions.~~(loss) per Weshare ~~understand~~for ~~that D&B disagrees with~~ the ~~position taken by the~~ ~~IRS~~three ~~in its Notice~~ and ~~has~~six ~~filed~~months aended ~~responsive~~June 30, ~~brief~~2005 toand ~~this~~2004, ~~effect~~respectively, ~~with~~assuming ~~the~~we ~~IRS. If~~applied the ~~IRS~~fair ~~were to issue a formal assessment consistent with the Notice, then~~value amethod ~~payment~~ of ~~the~~SFAS ~~disputed amounts would be required~~No. 123, ifAccounting ~~D&B~~for ~~opted~~Stock-Based ~~to challenge the assessment in U~~Compensation.S. ~~District~~The ~~Court~~pro ~~rather~~forma ~~than~~disclosures inshown are ~~U.S.~~not ~~Tax~~necessarily ~~Court.~~representative ~~In the event~~ of ~~such challenge by D&B,~~ the ~~required~~effects ~~payment~~on bynet ~~D&B~~income ~~to the IRS would be up to $42,000~~ (~~$48,000 offset by $6,000 tax benefit~~loss)~~. Again, as required by the Distribution Agreement~~ and ~~Tax~~earnings ~~Allocation Agreement, D&B and~~(loss) per ~~Moody’s~~share ~~are~~in ~~required~~future ~~to joint and severally indemnify us against any such liability~~years.

No material amounts have been accrued in the consolidated financial statements for any of these matters.


	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004

Net income, as reported	$	20,023		$	33,057		$	27,769		$	61,152

Add: Stock-based compensation expense included in reported net income, net of related tax effects		1,098			238			1,643			553

Less: Stock-based compensation expense that would have been included in the determination of net income if the fair value method had been applied to all awards, net of related tax effects		(2,030	)		(1,618	)		(3,706	)		(2,933	)


Pro forma net income		19,091			31,677			25,706			58,772
Loss on repurchase of preferred stock		—			—			133,681			—
Preferred dividend		2,919			5,392			6,238			10,678

Pro forma income (loss) available to common shareholders	$	16,172		$	26,285		$	(114,213	)	$	48,094


Basic earnings (loss) per share
As reported	$	0.46		$	0.68		$	(3.55	)	$	1.25
Pro forma	$	0.44		$	0.65		$	(3.61	)	$	1.19

Diluted earnings (loss) per share
As reported	$	0.44		$	0.65		$	(3.55	)	$	1.20
Pro forma	$	0.42		$	0.62		$	(3.61	)	$	1.14

~~Other~~The ~~matters.~~pro Weforma ~~are~~information ~~also~~was ~~involved~~determined inbased ~~other~~on ~~legal proceedings, claims and litigation arising in~~ the ~~ordinary~~fair ~~conduct~~value of ~~our~~stock ~~business.~~awards ~~Although~~calculated ~~there can~~using bethe noBlack-Scholes ~~assurances,~~option-pricing wemodel ~~currently~~with ~~believe that~~ the ~~outcome~~following ofweighted ~~such~~average ~~legal~~assumptions: ~~proceedings will not have a material adverse effect on our results of operations or financial condition.~~

9. New Accounting Pronouncements


	2005			2004

Dividend yield		0	%		0	%
Expected volatility		30	%		29	%
Risk-free interest rate		3.9	%		2.2	%
Expected holding period	5.0 years			4.0 years

InEstimates. ~~April~~The ~~2002,~~preparation ~~the Financial Accounting Standards Board (“FASB”) issued FAS 145, “Rescission~~ of ~~FASB~~financial ~~Statements~~statements ~~No. 4,~~in ~~44,~~conformity ~~and~~with ~~64,~~generally ~~Amendment of FASB~~accepted ~~Statement~~accounting ~~No. 13,~~principles ~~and~~requires ~~Technical~~management ~~Corrections.”~~to ~~This~~make ~~statement,~~estimates ~~among other things, changes the way gains~~ and ~~losses~~assumptions ~~from~~that ~~the~~affect ~~extinguishment of debt are~~the reported. ~~Previously,~~amounts ~~all gains and losses from the extinguishment~~ of ~~debt were required to be reported as an extraordinary item~~assets, ~~net of related tax effect. Under FAS 145~~liabilities, ~~gains~~revenue and ~~losses~~certain ~~from~~expenses ~~the~~and ~~extinguishment of debt should be reported as part of on-going operations, unless~~ the ~~extinguishment~~disclosure of ~~debt~~ iscontingent ~~both~~assets ~~an unusual~~ and ~~infrequent event for the entity~~liabilities. ~~Previously~~Actual ~~reported extraordinary~~results ~~gains~~could ~~and~~differ ~~losses~~materially from ~~the~~those ~~extinguishment~~estimates ~~of debt that are not~~and ~~unusual or infrequent should be reclassified~~assumptions. ~~This~~Estimates ~~Statement is effective for 2003. Upon adoption of this Statement, we will reclassify amounts previously reported as extraordinary losses to interest expense~~ and ~~tax~~assumptions ~~expense.~~are ~~The adoption~~used ofin ~~this Statement will not impact our previously reported net income. Had we decided to adopt this Statement during~~ the ~~second~~determination ~~quarter~~ of ~~2002~~sales allowances, ~~reported~~allowances ~~interest expense~~ for ~~the~~doubtful ~~six months ended June 30~~accounts, ~~2002~~depreciation and ~~2001~~amortization, ~~would have~~employee ~~been~~benefit ~~$0.3 million~~plans and ~~$0.5 million higher, respectively. Additionally,~~ ~~reported~~restructuring ~~provision for income taxes for the six months ended June 30~~reserves, ~~2002~~among ~~and 2001 would have been $0~~others.~~1 million and $0.2 million lower, respectively.~~

In June 2002, the FASB issued FAS 146, “Accounting for Costs Associated with Exit or Disposal Activities.” FAS 146 addresses the accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This Statement is effective for 2003 and is to be applied prospectively.

~~Item~~New Accounting Pronouncements. On December 216, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 ~~Management’s~~(Revised ~~Discussion~~2004), ~~and~~or ~~Analysis~~Statement 123(R), Share-Based Payment, which is a revision of ~~Financial~~Statement ~~Condition~~No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The approach in Statement 123(R) is similar to the approach described in Statement 123; however, Statement 123(R) requires companies to calculate the fair value of all share-based payments to employees, including grants of employee stock options, and amortize that amount over the vesting period as an expense through the ~~Results~~statement of ~~Operations~~operations. Pro forma disclosure, as allowed under Statement No. 123, will no longer be a permitted alternative. Statement 123(R) offers a choice of transition methods including Modified Prospective and Modified Retrospective (to all prior periods or interim periods in year of adoption).

~~Forward~~On April 14, 2005, the Securities and Exchange Commission (“SEC”) announced the adoption of a new rule that amends the compliance dates for Statement 123(R). The SEC’s new rule allows companies to implement Statement No. 123(R) at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. The Company currently intends to adopt Statement 123(R) in the third quarter of 2005 using the Modified Retrospective application method, electing to restate the quarterly results of operations for the first and second quarters of 2005. The Company presently estimates that it will recognize a pre-~~Looking~~tax ~~Information~~charge of approximately $11.0 million for the year ending December 31, 2005 as a result of adopting this Statement. Actual results could differ materially from this estimate upon finalization of certain assumptions and implementation matters underlying the new Statement, including, but not limited to, the forfeiture rate assumption, option exercise patterns and related expected option term and deferred tax accounting.

~~Certain statements contained in this Form 10-Q regarding R~~3.H. ~~Donnelley’s~~Acquisitions future operating results, performance, business plans or 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, words such as “believe,” “expect,” “anticipate,” “should,” “will,” “would,” “planned,” “estimated,” “potential,” “goal,” “outlook,” “could,” and similar expressions, are used to identify such forward-looking statements. All forward-looking statements reflect only our current beliefs and assumptions with respect to our future results, business plans, and prospects, and are based solely on information currently available to us. Accordingly, these statements are subject to significant risks and uncertainties and our actual results, business plans and prospects could differ significantly from those expressed in, or implied by, these statements. We caution readers not to place undue reliance on, and we undertake no obligation to update any forward-looking statements. Such risks and uncertainties include, without limitation, the following:

(On September 1~~) Dependence~~, on2004, awe ~~Limited~~completed ~~Number~~the ofSBC ~~Relationships Our~~Directory ~~business~~Acquisition ~~consists~~for ~~primarily~~$1.41 billion ofin ~~two~~cash, ~~relationships;~~after working acapital ~~perpetual~~adjustments ~~partnership with~~and ~~SBC~~the ~~Communications~~settlement ~~Inc.~~of ~~(“SBC”)~~a ~~called~~$30 million ~~DonTech;~~liquidation ~~and~~preference ~~two~~owed ~~sales~~to ~~agency~~us ~~arrangements~~related ~~with~~to ~~Sprint~~DonTech. ~~Corporation~~As ~~(“Sprint”),~~a ~~which~~result ~~expire~~of inthe ~~2004~~acquisition, ~~and~~we ~~2010. Due~~became to the ~~limited~~publisher ~~number~~ of ~~relationships,~~SBC-branded ~~our~~yellow pages ~~business~~directories ~~portfolio~~in isIllinois ~~not highly diversified~~ and aNorthwest ~~material~~Indiana. ~~decline~~The ~~in the~~ results of ~~one~~the ~~relationship, especially our relationship with~~ SBC, ~~would~~Directory ~~likely~~Business ~~have a material adverse~~are ~~effect~~included onin our ~~overall~~consolidated ~~operating~~ results. Nofrom ~~assurance~~and ~~can~~after beSeptember 1, ~~given~~2004. ~~that~~The ~~we will~~acquired beSBC ~~able to renew our existing Sprint sales agency or various pre-press~~Directory ~~publishing~~Business ~~agreements~~now asoperates ~~they expire or that we will be able to secure additional business to replace these contracts~~ as ~~they expire~~R.H. ~~Any~~Donnelley ~~such failure~~Publishing to& ~~renew~~Advertising orof ~~replace~~Illinois ~~these~~Partnership, ~~contracts would likely have a material~~an ~~adverse~~indirect ~~effect~~wholly onowned ~~our~~subsidiary ~~financial condition and results~~ of ~~operations~~the Company.

~~(2) Dependence~~On onJanuary 3, ~~our~~2003, ~~Business~~we ~~Partners DonTech~~completed is the ~~exclusive~~SPA ~~sales~~Acquisition ~~agent~~ for ~~SBC’s~~$2.23 billion ~~yellow pages directories~~ in ~~certain~~ ~~markets~~cash and webecame ~~are~~ the publisher ~~exclusive~~of ~~sales agent for~~ Sprint’s-branded yellow pages directories in ~~certain~~18 ~~markets~~states. ~~SBC~~The ~~and~~results ~~Sprint are the publishers~~ of ~~these directories. As~~ the ~~exclusive sales agent, DonTech and we are responsible for~~SPA ~~the~~Directory ~~management~~Business of our respective sales forces, including compensation, recruiting, training and other sales related matters. As the publisher, SBC and Sprint have responsibility for and control over all other matters, including without limitation, product development, pricing, scheduling, marketing, distribution, billing, collections, credit and customer service. While we believe that DonTech’s and our economic interests are ~~generally aligned~~included ~~with those of SBC and Sprint with respect to their yellow pages directory operations, SBC or Sprint could implement policies or decisions (~~in ~~which~~ ~~DonTech~~our orconsolidated weresults ~~would~~from ~~likely have little or no participation or influence),~~ and~~/or~~ ~~perform~~after ~~their obligations in a manner that could have a material adverse effect on our results of operations or financial condition and~~January 3, ~~potentially, on our relationship with our business partners~~2003. ~~DonTech and we are afforded~~The ~~certain~~acquired ~~protections~~SPA ~~under~~Directory ~~the~~Business ~~respective~~now ~~agreements,~~operates ~~which~~as ~~we believe could mitigate to a significant degree the adverse effects of such policy changes or decisions on us~~R.H. ~~However,~~Donnelley wePublishing ~~cannot~~& ~~give any assurances that such policy changes or decisions would not have a material adverse effect on our results of operations~~Advertising, ~~financial condition or our relationship with our business partners~~Inc. ~~Lastly~~, ~~we maintain large receivable balances from SBC and Sprint, and any~~an ~~liquidity~~indirect ~~difficulties~~wholly ~~that~~owned ~~they~~subsidiary ~~may experience could materially impact our results~~ of ~~operations,~~the ~~financial condition and liquidity~~Company.

~~(3) Uncertainty~~The ~~Regarding~~primary ~~Changes~~purpose inof ~~the~~each ~~Industry Our~~acquisition ~~ability~~was to ~~diversify~~facilitate ~~our~~the ~~business~~Company’s ~~portfolio~~transformation byfrom ~~providing~~a sales ~~agency,~~ agent and pre-press ~~publishing~~vendor orfor ~~other~~yellow ~~services~~pages advertising to ~~SBC~~a orleading ~~Sprint~~publisher inof ~~other~~yellow ~~markets or to~~pages ~~other~~directories ~~publishers~~with incontrol ~~the~~over ~~industry~~its ~~may~~business beand ~~impacted~~thereby byincrease ~~uncertainties~~shareholder ~~caused~~value. byThe acquisitions ~~consolidation~~were ~~within~~accounted ~~the~~for ~~telecommunications~~as ~~and~~purchase ~~independent~~business ~~yellow~~combinations ~~pages publishing~~in ~~industries~~accordance orwith ~~other~~SFAS ~~changes. Also~~141, ~~most~~Business Combinations. ~~yellow~~Each ~~pages~~purchase ~~directory publishers~~price ~~provide~~was ~~all~~allocated ~~sales~~to ~~and~~the ~~publishing~~related ~~functions~~tangible ~~internally,~~and ~~which~~identifiable ~~could~~intangible ~~impact~~assets ~~our~~acquired ~~ability~~and toliabilities ~~renew~~assumed orbased ~~obtain~~on ~~additional~~their ~~outsourcing~~respective ~~business~~estimated ~~from~~fair ~~our~~values on the ~~current~~acquisition ~~publishers~~dates. orCertain ~~offer~~long-term ~~our~~intangible ~~services~~assets towere ~~other~~identified ~~yellow~~and ~~pages~~recorded ~~directory~~at their ~~publishers.~~estimated ~~Our~~fair ~~inability~~value. toIdentifiable ~~diversify~~intangible ~~our~~assets ~~business~~acquired ~~portfolio~~include ordirectory ~~expand~~services agreements between the ~~services~~ weCompany ~~provide~~and ~~could~~Sprint ~~negatively~~and ~~impact~~the ~~our~~Company ~~ability~~and toSBC, ~~grow~~customer ~~revenues~~relationships and ~~income~~acquired trademarks and~~/or~~ ~~have~~trade anames. ~~material~~In ~~adverse~~accordance ~~effect~~with onSFAS ~~our~~142, ~~financial~~Goodwill ~~condition~~ and ~~results~~ ofOther ~~operations. In addition~~Intangible Assets, the ~~effects~~fair values of the ~~Telecommunications~~identifiable ~~Act of~~intangible ~~1996~~assets are ~~still~~being ~~developing~~amortized ~~and~~over ~~the~~their estimated ~~ultimate~~useful ~~impact~~lives ofin ~~those~~a ~~changes~~manner isthat ~~still uncertain.~~best ~~The~~reflects ~~introduction~~the ofeconomic ~~new~~benefits ~~products~~derived orfrom ~~technologies (including~~such ~~electronic~~assets. ~~delivery~~Goodwill ofis ~~directory~~not ~~information)~~amortized bybut ~~other~~is ~~companies~~subject ~~and/or~~to ~~pricing~~impairment testing on an annual basis. See ~~pressures~~Note ~~from~~4, ~~competitors~~Intangible orAssets ~~customers~~and ~~could~~Goodwill, ~~also~~for ~~adversely~~a ~~affect~~further ~~our~~description ~~results~~ of ~~operations~~our ~~and~~intangible ~~financial~~assets ~~condition~~and goodwill.

Under purchase accounting rules, we did not assume or record the deferred revenue balance associated with SBC Directory Business of $204.1 million at September 1, 2004 or the deferred revenue balance of the SPA Directory Business of $315.9 million at January 3, 2003. These amounts represented revenue that would have been recognized subsequent to each acquisition under the deferral and amortization method in the absence of purchase accounting. Accordingly, we did not and will not record revenue associated with directories that were published prior to each acquisition, as well as directories that were published in the month each acquisition was completed. Although the deferred revenue balances were eliminated, we retained all the rights associated with the collection of amounts due under and contractual obligations under the advertising contracts executed prior to the acquisitions. As a result, the billed and unbilled accounts receivable balances acquired in both acquisitions became assets of the Company. Also

~~Sprint~~under ~~has~~purchase ~~publicly~~accounting ~~announced~~rules, ~~that~~we itdid ~~is considering divesting its directory publishing operations. We do~~ not ~~believe~~assume ~~that any sale~~ or ~~change~~record ~~in control of~~ the ~~Sprint~~deferred directory ~~operations~~costs ~~would have a material adverse effect on our~~related ~~results~~to ofthose ~~operations~~directories orthat ~~financial~~were ~~condition~~published ~~because~~prior weto ~~believe~~each ~~all~~acquisition ofas ~~our contractual~~well ~~rights related to serving~~ as ~~sales~~directories ~~agent~~that published in the ~~Central~~month ~~Florida~~each ~~and CenDon~~acquisition ~~markets~~was ~~would~~completed, ~~survive~~totaling ~~any such sale or change in control~~$175.8 million Infor ~~addition,~~SBC-branded ~~our~~directories ~~CenDon~~and ~~agreements~~$63.3 million ~~specifically~~for ~~obligate~~ Sprint-branded ~~(and~~directories, ~~any~~respectively. ~~successor)~~These tocosts ~~indemnify~~represented usoperating ~~against~~expenses ~~any~~that ~~material~~would ~~damages~~have webeen ~~suffer~~recognized assubsequent ato ~~result~~the ofacquisitions ~~any changes~~under inthe ~~policies,~~deferral ~~practices~~ and ~~procedures~~amortization ~~from~~method ~~those~~ in ~~existence at~~ the ~~time~~absence of ~~the~~ ~~restructuring~~purchase ~~of the CenDon relationship (June 30, 2000)~~accounting.

(4) General Economic Factors Our business results could be adversely affected by the reversal or slow down of the modest economic recovery presently being experienced in the United States, especially with respect to the markets in which we operate. ~~In addition,~~Intangible ~~any~~Assets ~~residual economic effects of,~~ and ~~uncertainties regarding (i) the~~Goodwill terrorist attacks that occurred on September 11, 2001, (ii) the general possibility or express threat of similar terrorist or other related disruptive events, or (iii) the future occurrence of similar terrorist or other related disruptive events, especially with respect to the major markets in which we operate that depend heavily upon travel and tourism, could also adversely affect our business.

~~(5) Use~~As ofa ~~Cash~~result ~~Flow Our free cash flow may be used for some or all~~ of the ~~following:~~SBC ~~repay~~Directory ~~debt, repurchase~~Acquisition ~~outstanding common stock~~ and~~/or~~ ~~pursue~~the ~~growth~~SPA ~~initiatives~~Acquisition, ~~within~~certain ~~our~~long-term intangible ~~line~~assets ofwere ~~business~~identified and ~~core~~recorded ~~competencies,~~at ~~whether~~their ~~through~~estimated ~~acquisitions,~~fair ~~joint ventures, outsourcing opportunities or otherwise~~value. ~~Any~~Amortization ~~share~~expense ~~repurchases~~was ~~would~~$18.1 bemillion ~~subject to market conditions~~ and ~~compliance with legal restrictions, as well as restrictions under our debt covenants~~$12.4 million ~~Growth~~for ~~initiatives,~~the ifthree ~~pursued, would~~months beended ~~subject to implementation~~June 30, ~~integration~~2005 and ~~other~~2004, ~~related~~respectively, ~~risks~~and $36.2 million ~~Any significant growth initiative would likely require the issuance of additional indebtedness~~ and ~~could~~$24.9 million ~~involve~~for the ~~public~~six ormonths ~~private~~ended ~~sale~~June 30, of2005 ~~our equity securities~~ and no2004, ~~assurance can be given that any proposed transaction would be accretive to earnings~~respectively. ~~We did not repurchase any common stock in the first~~The ~~half~~acquired oflong-term ~~2002.~~intangible Weassets ~~currently~~and ~~intend~~their torespective ~~apply~~book ~~excess~~values ~~cash~~at toJune 30, ~~repay~~2005 ~~debt,~~are ~~while~~shown wein ~~evaluate~~the ~~certain~~table ~~growth opportunities within our line of business~~below.

The Company


	Directory
	Services			Local Customer			National CMR
	Agreements			Relationships			Relationships			Trade names			Total

Initial fair value:
SBC	$	952,500		$	90,000		$	55,000		$	—		$	1,097,500
Sprint		1,625,000			200,000			60,000			30,000			1,915,000

Total		2,577,500			290,000			115,000			30,000			3,012,500
Accumulated amortization		(97,499	)		(33,334	)		(7,516	)		(5,000	)		(143,349	)

Net intangible assets	$	2,480,001		$	256,666		$	107,484		$	25,000		$	2,869,151

~~R.H.~~Directory ~~Donnelley~~services ~~Corporation~~agreements isbetween SBC and the Company include a ~~leading~~directory ~~independent~~services ~~marketer~~license agreement, a non-competition agreement, a SMARTpages reseller agreement and a directory publishing listing agreement (collectively, “SBC Directory Services Agreements”) with certain affiliates of SBC. The directory services license agreement designates us as the official and exclusive provider of yellow pages ~~advertising~~ directory services ~~tailored~~ for ~~small~~SBC (and ~~medium-sized~~its ~~businesses.~~successors) ~~Our~~in Illinois and Northwest Indiana ~~business~~(the is“Territory”), ~~organized~~grants ~~into~~us ~~two~~the ~~reportable~~exclusive ~~operating~~license ~~segments~~(and obligation as ofspecified ~~January 1,~~in the agreement) ~~2002~~to produce, publish and distribute white pages directories in the ~~DonTech~~Territory ~~Partnership~~as SBC’s agent and grants us the exclusive license (~~“DonTech”~~and obligation as specified in the agreement) ~~and~~to ~~Directory~~use ~~Advertising~~the ~~Services~~SBC brand and logo on print directories in the Territory. The non-competition agreement prohibits SBC (~~“DAS”~~and its affiliates and successors)., ~~Unless~~with ~~otherwise~~certain ~~indicated~~limited exceptions, ~~the~~from ~~terms~~(1) producing, ~~“Company~~publishing and distributing yellow and white pages print directories in the Territory,” ~~“we~~(2) soliciting or selling local or national yellow or white pages advertising for inclusion in such directories,” “and (3) soliciting or selling local Internet yellow pages advertising for certain Internet yellow pages directories in the Territory or licensing SBC marks to any third party for that purpose. The SMARTpages reseller agreement gives us” the exclusive right to sell local Internet yellow pages advertising and ~~“our”~~the non-exclusive right to sell Internet yellow pages advertising with respect to ~~refer~~geographies outside the Territory to Rany advertiser (excluding national advertisers) located inside the Territory onto SBC’s SMARTpages.Hcom platform (and any successor products as specified in the agreement). ~~Donnelley~~The ~~Corporation~~directory publishing listing license agreement gives us the right to purchase and use ~~its~~basic ~~direct~~SBC subscriber listing information and ~~indirect~~updates ~~wholly~~for ~~owned~~the purpose of publishing directories. ~~subsidiaries~~The SBC Directory Services Agreements (other than the SMARTpages reseller agreement) have initial terms of 50 years, subject to automatic renewal and early termination under specified circumstances. ~~All~~The ~~tabular~~SMARTpages ~~amounts~~reseller ~~are~~agreement ~~presented~~has ina ~~millions~~term of ~~dollars~~5 years. The fair value assigned to the SBC Directory Services Agreements and the SMARTpages reseller agreement of $950.0 million and $2.5 million, respectively, was based on the present value of estimated future cash flows and is being amortized under the straight-line method over the indicated terms.

~~DonTech DonTech~~Directory isservices aagreements ~~50/50~~between ~~perpetual~~Sprint ~~partnership~~and ~~in which~~ the Company ~~and~~include ana ~~operating unit~~directory ofservices ~~SBC are the partners. DonTech acts as the exclusive sales agent for~~license ~~yellow~~agreement, ~~pages~~a ~~directories~~trademark ~~published~~license byagreement ~~SBC~~and ina ~~Illinois~~non-competition ~~and~~agreement ~~northwest~~(collectively ~~Indiana.~~“SPA ~~DonTech~~Directory ~~sells~~Services ~~advertising~~Agreements”) inwith ~~SBC~~certain ~~directories~~affiliates ~~on behalf~~ of ~~SBC and receives a commission from SBC~~Sprint. ~~Our~~The ~~income~~directory ~~associated~~services ~~with DonTech is comprised of two~~license ~~components,~~agreement ~~our~~grants ~~50%~~us ~~interest in~~ the ~~net~~exclusive ~~income~~license ~~of DonTech~~ (and ~~revenue participation~~obligation ~~income~~as ~~received~~specified ~~directly~~in ~~from~~the ~~SBC~~agreement) to produce, ~~which~~publish isand ~~based~~distribute onyellow aand ~~percentage of~~white ~~DonTech~~pages ~~advertising~~directories ~~sales.~~for ~~Income~~Sprint ~~from~~(and ~~DonTech~~its ~~accounts for a significant~~successors) ~~portion~~in of18 ~~our~~states ~~operating~~where ~~income~~Sprint ~~and~~provided alocal ~~material~~telephone ~~decline~~service inat the ~~advertising~~time ~~sales~~ of ~~DonTech~~the ~~would~~agreement. ~~likely have a material adverse effect on our results of~~The ~~operations~~trademark ~~and~~license ~~financial~~agreement ~~condition.~~grants Weus ~~also~~the ~~provide~~exclusive ~~certain~~license ~~pre-press publishing~~ (and ~~billing~~obligation ~~services for SBC directories,~~ as ~~well~~specified asin ~~provide sales~~the ~~related~~agreement) ~~computer~~to ~~applications~~use tocertain ~~DonTech.~~specified ~~The~~Sprint ~~fees~~trademarks, ~~received~~including ~~for~~the ~~these~~Sprint ~~services are~~diamond ~~included~~logo, in ~~our~~those markets, ~~Directory~~and ~~Advertising~~the ~~Services (“DAS”) segment.~~non-competition

Directory Advertising Services Within our DAS segment, we sell yellow pages advertising in Sprint directories on behalf of affiliated entities of Sprint, perform pre-press publishing and related services for yellow pages directories and include all information technology costs. We are the exclusive sales agent in the greater Orlando, Florida market (“Central Florida”) for a subsidiary of Sprint and the exclusive sales agent in certain Nevada, Florida, Virginia and North Carolina markets for CenDon LLC (“CenDon”), a joint venture with Centel Directory Company (“Centel”), another subsidiary of Sprint. Other Sprint affiliates sell yellow pages advertising in other markets in these states. We receive sales commissions on all advertising we sell for Sprint and CenDon and a priority distribution on our membership interest in CenDon (“priority

~~distribution”),~~agreement ~~which~~prohibits isSprint ~~based~~(and onits aaffiliates ~~percentage~~and ofsuccessors) ~~CenDon~~in ~~advertising~~those ~~sales.~~markets ~~A material~~from ~~decline~~selling inlocal directory ~~the~~ advertising, ~~sales~~with ofcertain ~~our~~limited ~~Sprint~~exceptions, ~~operation~~or ~~could~~producing, ~~have~~publishing aand distributing ~~material~~print ~~adverse~~directories. ~~effect~~The onSPA ~~our~~Directory ~~results~~Services Agreements have initial terms of ~~operations~~50 years, subject to automatic renewal and ~~financial~~early ~~condition~~termination under specified circumstances. The fair value of these ~~Our~~agreements ~~Central~~was ~~Florida~~determined ~~sales~~based ~~agency~~on ~~relationship~~the ~~extends~~present ~~through~~value ~~2004~~of estimated future cash flows and ~~our~~is being ~~CenDon~~amortized ~~sales~~under ~~agency~~the ~~relationship~~straight-line ~~extends~~method ~~through~~over ~~2010~~50 years.

InThe ~~2000,~~fair wevalues ~~extended~~of ~~our~~local ~~agreements~~and ~~with~~national ~~CenDon~~customer ~~until~~relationships ~~2010. They~~ were ~~originally~~ ~~set~~determined tobased ~~expire~~on inthe ~~2004. The priority distribution was designed to~~present ~~allow~~value usof toestimated ~~maintain~~future ~~the~~cash ~~same~~flows ~~level~~and ofare ~~profitability~~being ~~that~~amortized ~~we would have earned~~ under the ~~predecessor~~“income ~~CenDon~~forecast” ~~Partnership through its scheduled expiration date~~method inthat ~~2004.~~assumes ~~Under~~ the ~~new~~value ~~agreements,~~derived ~~total payments we receive~~ from ~~CenDon (sales~~customer ~~commission~~relationships ~~plus~~is ~~priority~~greater ~~distribution)~~in ~~are~~the ~~expected~~earlier toyears ~~average~~and ~~approximately~~steadily ~~37%~~declines ofover ~~CenDon advertising sales through 2004~~time. ~~Starting~~The ~~with sales~~weighted ~~into~~average ~~2005~~useful ~~directories,~~life ~~we will not receive a priority distribution. However, as part~~ of ~~the~~these ~~restructured~~relationships ~~arrangement, we will receive a~~is ~~supplemental sales commission for sales into 2005 through 2007 directories. Total payments from CenDon (sales commission plus supplemental sales commission) in 2005 are expected to be~~ approximately ~~35% of CenDon advertising sales and are expected to decline 4~~20 ~~percentage points per year through 2007~~years. ~~For sales into 2008 – 2010 publications, we will receive our base 23% commission on CenDon advertising sales.~~

WeThe ~~also~~fair ~~provide~~value ~~pre-press publishing services under separately negotiated contracts for the yellow pages directories~~ of ~~Sprint~~acquired ~~(through~~trade ~~2003)~~names ~~and~~was ~~SBC (through~~determined ~~2008)~~based ~~for~~on ~~which~~the we“relief ~~and~~from ~~DonTech~~royalty” ~~sell advertising~~method, ~~as well as for an~~ ~~unaffiliated~~which ~~third~~values ~~party~~the ~~publisher~~trade ~~(through~~names ~~2002).~~based Aton the ~~end~~estimated ofamount ~~2002,~~that ~~the pre-press publishing agreement with this unaffiliated publisher will expire. As~~ a ~~result~~company ofwould ~~the~~have ~~restructuring~~to ~~actions~~pay ~~announced~~ in ~~2001, the expiration of~~an ~~this~~arms ~~contract~~length ~~will~~transaction ~~not~~to ~~have~~use athese ~~material~~trade ~~adverse effect on our results of operations or financial condition in the future~~names. WeThese ~~intend~~assets toare ~~pursue negotiations~~being ~~with~~amortized ~~Sprint~~under ~~to extend~~ the ~~current pre~~ straight-~~press~~line ~~publishing~~method ~~agreement set~~over ~~to expire in 2003, although no assurance can be given that we will be able to extend this contract~~15 years.

~~Our~~The ~~ability~~excess topurchase ~~provide~~price ~~sales~~for ~~agency,~~the ~~pre-press publishing or other services to~~ SBC orDirectory ~~Sprint~~Acquisition inand ~~other~~the ~~markets~~SPA orAcquisition toover ~~other publishers in~~ the ~~industry may be~~net ~~impacted~~tangible byand ~~uncertainties~~identifiable ~~caused~~intangible byassets ~~consolidation~~acquired ~~within~~of ~~the~~$222.0 million ~~telecommunications~~ and ~~independent yellow pages publishing industries or other changes~~$97. ~~Also~~0 million, ~~most~~respectively, ~~yellow~~was ~~pages~~recorded ~~directory~~as ~~publishers~~goodwill. ~~provide~~During ~~all~~the ~~sales~~first ~~and~~quarter ~~publishing functions~~of ~~internally~~2005, ~~which~~we ~~could~~recorded ~~impact our ability to renew or obtain~~an ~~additional~~adjustment ~~outsourcing~~increasing ~~business~~goodwill from ~~our~~the ~~current~~SBC ~~publishers~~Directory orAcquisition ~~offer~~by ~~our services~~approximately ~~to other yellow pages directory publishers~~$9. ~~Our inability to expand~~0 million ~~the~~relating ~~services we provide could negatively impact our ability~~ to ~~grow revenues and income and/or have~~ a ~~material~~restructuring ~~adverse~~plan ~~effect~~associated onwith ~~our~~SBC ~~financial~~Directory ~~condition and results of operations~~Acquisition. ~~In addition, the effects of the Telecommunications Act of 1996 are still developing and the ultimate impact of those changes is still uncertain.~~ See ~~also~~Note 8, “Restructuring ~~– Forward Looking Information – Dependence on a Limited Number of Relationships and – Uncertainty Regarding Changes in the Industry~~Charges.” ~~above.~~

~~Critical~~While ~~Accounting~~we ~~Policies~~do not anticipate significant changes to the fair value of net assets acquired, additional information could come to our attention that may require us to revise the purchase price allocation in connection with the SBC Directory Acquisition. In accordance with SFAS 142, Goodwill and Other Intangible Assets, goodwill is not amortized, but is subject to periodic impairment testing. No impairment losses were recorded during this period.

~~Certain amounts in our financial statements require that management makes assumptions and estimates based on the best available information at that time~~5. ~~Actual~~ ~~results~~Partnership ~~could~~Income ~~vary from these estimates~~ and ~~assumptions. Those~~Investment accounting policies that involve assumptions or estimates on our part that could have a material effect on our results of operations or financial condition if the actual results differ from our assumptions or estimates are as follows:

~~Revenue~~Before ~~Recognition.~~the WeSBC ~~earn~~Directory ~~revenue~~Acquisition, inpartnership ~~the~~income ~~form~~included ofour ~~commissions~~50% ~~from~~share ~~the sale~~ of ~~advertising~~the onnet ~~behalf~~ profits of ~~Sprint~~DonTech and ~~fees from our pre-press publishing services. As a sales agent for Sprint, we recognize sales commission~~ revenue at ~~the~~participation ~~time~~income anreceived ~~advertising~~directly ~~contract~~from ~~is executed with a customer. Sales commission revenue is recorded net of potential sales allowances~~SBC, which ~~are estimated,~~was based on ~~historical experience. If an advertiser is not satisfied~~the ~~with~~value ~~its~~of ~~yellow~~advertising ~~page advertisement (i~~sales.e. ~~misspelled~~As ~~business~~a ~~name,~~result ~~incorrect business~~of ~~address~~the orSBC ~~number,~~Directory ~~etc.)~~Acquisition, ~~the~~SBC ~~publisher~~ceased ~~may,~~paying atus revenue ~~its~~participation ~~discretion~~income, ~~adjust the contract value. Since~~ we ~~earn~~now ~~commissions~~consolidate ~~based~~all onnet ~~the~~profits ~~aggregate~~from ~~value~~DonTech ~~of advertising~~and ~~contracts,~~ our ~~commissions~~DonTech partnership ~~would~~investment ~~also~~was ~~be adjusted under those circumstances~~eliminated. ~~Concurrent~~Consequently, ~~with~~partnership ~~the~~income ~~recognition~~was ofno ~~sales~~longer ~~commission revenue, we~~reported ~~also~~commencing ~~recognize a sales allowance of approximately~~ September 1~~% of sales commission revenue~~, ~~based on historical experience~~2004. ~~The~~Partnership ~~amount~~income offrom ~~sales~~DonTech ~~allowance recognized~~for ~~is subsequently adjusted based on actual results. Historically,~~ the ~~actual~~ ~~amount~~three ~~of sales allowances has been consistent with our estimates~~ and ~~significant~~ ~~adjustments~~six ~~have~~months ~~not been made. Revenue from pre-press publishing~~ended ~~operations~~June 30, is2004 ~~recognized~~consisted asof ~~services~~the ~~are performed. We recognize no allowances~~following: ~~for pre-press publishing services.~~

Trade Receivables. Trade receivables represent sales commissions earned from the sale of advertising on behalf of Sprint and fees earned for pre-press publishing services. We establish an allowance for doubtful accounts based upon historical


	Three months ended		Six months ended
	June 30, 2004		June 30, 2004

50% share of DonTech net profits	$	6,288	$	9,372
Revenue participation income		28,515		49,329

Total DonTech income	$	34,803	$	58,701

6. Long-Term Debt

Long-term debt at June 30, 2005 and December 31, 2004 consisted of the following:


	June 30, 2005		December 31, 2004

Credit Facility	$	1,997,704	$	2,202,342
8.875% Senior Notes due 2010		325,000		325,000
10.875% Senior Subordinated Notes due 2012		600,000		600,000
6.875% Senior Notes due 2013		300,000		—

Total		3,222,704		3,127,342
Less current portion		132,536		162,011

Long-term debt	$	3,090,168	$	2,965,331

~~experience~~Our ~~and~~Senior ~~subject~~Secured toCredit ~~contractual~~Facility, ~~limitations.~~as ~~Our~~amended ~~exposure~~and torestated ~~bad~~(“Credit ~~debt~~Facility”), ~~is capped~~consists ~~under~~of ~~the~~a ~~sales~~$700 million ~~agency~~Term ~~agreement~~Loan ~~with~~A-2, ~~CenDon.~~a We$200 million ~~record~~Term ~~our~~Loan ~~bad~~A-3, ~~debt allowance~~a ~~for~~$1,450 million ~~CenDon~~Term ~~sales~~Loan ~~based~~D onand ~~the~~a ~~cap~~$175 million ~~rate~~Revolving ~~since~~Credit Facility (the ~~actual~~“Revolver”) ~~rate~~for an aggregate facility of ~~bad~~$2,525 million. ~~debts~~Term ~~has~~Loans ~~exceeded~~A-2, ~~the~~A-3 ~~capped~~and ~~rate~~D ~~for~~require ~~the~~quarterly ~~last~~principal ~~three years~~payments. AnAs ~~increase~~of in June 30, 2005, the outstanding ~~actual~~balances ~~bad~~of ~~debt~~Term ~~rate~~Loans ~~will~~A-2, ~~not~~A-3 ~~have~~and ~~any~~D ~~direct~~were ~~impact~~$397.5 million, on$146.9 million ~~our~~and ~~financial~~$1,433.3 ~~condition~~million, orrespectively, ~~results~~and ~~of operations~~$20.0 million ~~Under~~was outstanding under the ~~Central~~Revolver. ~~Florida~~The ~~sales~~Revolver, ~~agency~~Term ~~agreement,~~Loans ~~our~~A-2 ~~exposure~~and toA-3 ~~bad~~mature ~~debts~~in isDecember 2009, ~~not~~and ~~capped~~Term ~~and~~Loan weD ~~estimate~~matures ~~our~~in ~~bad~~June 2011. ~~debt~~The Credit ~~allowance~~Facility ~~based~~provides onfor ~~historical~~a ~~experience.~~new ~~This~~Term ~~amount~~Loan isC ~~subject~~for potential borrowings up to ~~adjustment~~$400 million. Such proceeds, ~~based~~if onborrowed, ~~actual~~may ~~results.~~be Onused anto ~~annualized~~fund ~~basis~~acquisitions, afor 1%retirement ~~increase~~of inNotes ~~actual~~(defined ~~bad~~below) and for ~~debts~~redemption ~~with~~of ~~respect~~and topayment ~~Central~~of ~~Florida~~dividends ~~over~~on the ~~amount~~Preferred ~~originally~~Stock, ~~provided~~subject ~~for would~~to ~~increase~~certain ~~our~~limitations. Substantially ~~consolidated~~all ~~expenses~~of ~~approximately~~our ~~$0.1 million. Historically~~assets, ~~actual~~including ~~bad~~the ~~debts~~capital onstock ~~these~~of ~~receivables~~our ~~have~~subsidiaries, ~~been~~are ~~consistent~~pledged ~~with~~as collateral to secure our ~~estimates~~obligations ~~and~~under ~~significant~~the ~~adjustments~~Credit ~~have~~Facility ~~not~~and ~~been~~the ~~made~~Senior Notes (defined below).

~~Receivables~~Our ~~for~~Credit ~~sales~~Facility ~~commissions~~bears ~~are billed to the publisher upon directory publication and collected in accordance with contractual provisions~~interest, ~~typically in~~at ~~the~~our ~~same month of publication~~option, ~~but~~at ~~no later than nine months after~~either: publication. Receivables for pre-press publishing services are billed and collected in accordance with the terms of the applicable agreement, generally a monthly pro rata amount based on the annual contract value. If actual volumes exceed contracted volumes, an additional amount is billed to the publisher at year-end.

Investment Impairment. We have an 18% interest in ChinaBig.com (“ChinaBig”), which publishes yellow pages directories and offers Internet directory services in the People’s Republic of China. We account for this investment under the cost method and the carrying value of this investment is reflected as other non-current assets on the consolidated balance sheets. We evaluate the carrying value of this investment for impairment whenever events or changes in circumstances indicate that the carrying value may be impaired. Such events or changes in circumstance may include (i) a change in the extent or manner in which management intends to use the asset; (ii) a decrease in the market value of the asset; (iii) an independent valuation of the asset or similar type asset or (iv) a history of operating cash flow losses. If the investment is determined to be impaired, and such impairment is determined to be permanent, the carrying value would be written down to its fair value. As a quoted market price does not exist for this investment, fair value would be determined based other factors, including, but not limited to, an independent valuation, discounted cash flow analysis or a transaction in the marketplace involving a similar type investment. To evaluate whether the carrying value of the ChinaBig investment is recoverable, we review periodic financial statements, including cash flows, short-term and long-term operating and cash flow projections and have a seat on the Board of Directors of ChinaBig. During the six-month period ended June 30, 2002, no events or changes in circumstances occurred that would indicate possible impairment of the carrying value of the ChinaBig investment.

	•		The higher of (i) a base rate as determined by the Administrative Agent, Deutsche Bank Trust Company Americas, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; and (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; or

	•		LIBOR rate plus a 2.00% margin on the Revolver and Term Loan A-2 and a 1.75% margin on Term Loan A-3 and Term Loan D. We may elect interest periods of 1, 2, 3, 6, 9 or 12 months for LIBOR borrowings.

~~Concentration~~The ofweighted ~~Credit~~average ~~Risk.~~interest Werate ~~maintain~~of ~~significant~~outstanding ~~receivable~~debt ~~balances with~~under ~~SBC~~the ~~and~~Credit ~~Sprint~~Facility ~~for~~was ~~revenue~~5.22% ~~participation, priority distribution~~ and ~~sales~~ ~~commissions~~3.97% Weas doof ~~not~~June 30, ~~currently~~2005 ~~foresee a material credit risk associated with these receivables based on SBC~~ and ~~Sprint’s past payment history and strong cash flows from their respective directory operations. However~~2004, ~~there can be no assurance that full payment will continue to be received on a timely basis~~respectively.

~~Income~~We ~~Taxes.~~have Wealso ~~recognize~~issued ~~deferred~~$325 million ~~tax~~of ~~assets~~8.875% ~~for~~Senior ~~items~~Notes ~~that~~due ~~will~~2010 ~~give~~(“Senior ~~rise to~~Notes”) ~~future~~and ~~tax~~$600 million of ~~deductions~~10.875% ASenior ~~valuation~~Subordinated ~~allowance~~Notes isdue ~~established~~2012 ~~where~~(“Subordinated ~~expected future~~Notes”). ~~taxable~~Interest ~~income~~is ~~does~~paid ~~not~~on ~~support~~these notes ~~the~~semi-annually ~~full~~on ~~realization~~June 15 ofand ~~deferred tax assets~~December 15.

~~See~~On ~~Note~~January 14, 22005, we issued $300 million of 6.875% Senior Notes (“Holdco Notes” and collectively with the Senior Notes and the Subordinated Notes, the “Notes”), the proceeds of which were used to redeem approximately 50% of the ~~Consolidated~~then ~~Financial~~outstanding ~~Statements~~Preferred ~~for~~Stock ~~additional~~from ~~information~~certain investment onpartnerships affiliated with The Goldman Sachs Group, Inc. (collectively, “the GS Funds”), pay transaction costs and repay debt associated with our ~~accounting~~Credit ~~policies~~Facility. Interest is payable on the Holdco Notes semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 2005. The Holdco Notes are unsecured obligations of the Company and mature on January 15, 2013. In connection with the issuance of the Holdco Notes, we completed an exchange offer in June 2005.

~~New~~On ~~Accounting~~February 6, ~~Pronouncements~~2004, we redeemed the remaining aggregate principal amount of the 9.125% Senior Subordinated Notes due 2008 totaling $21.2 million at a redemption price of 104.563% of the principal amount thereof, plus accrued and unpaid interest. In the six months ended June 30, 2004, we recorded interest expense related to these notes of $1.2 million, consisting of a premium over par value paid at redemption of $1.0 million, plus the write-off of $0.2 million of unamortized deferred financing costs.

InThe ~~April~~Credit ~~2002,~~Facility and the ~~Financial~~indentures ~~Accounting~~governing ~~Standards~~the ~~Board~~Notes ~~(“FASB”)~~contain ~~issued~~usual ~~FAS 145, “Rescission of FASB Statements No. 4, 44,~~ and ~~64,~~customary ~~Amendment of FASB~~restrictive ~~Statement~~covenants ~~No. 13~~that, ~~and Technical Corrections.” This statement,~~ among other things, ~~changes~~place ~~the~~limitations ~~way~~on ~~gains~~our ~~and~~ability ~~losses~~to ~~from~~(i) incur ~~the extinguishment of debt are~~additional ~~reported. Previously~~indebtedness, ~~all~~including ~~gains~~capital leases and ~~losses~~liens; ~~from~~(ii) pay ~~the~~dividends ~~extinguishment~~and ofrepurchase ~~debt~~our capital ~~were~~stock; ~~required~~(iii) enter tointo ~~be reported as an extraordinary item~~mergers, ~~net of related tax effect. Under FAS 145~~consolidations, ~~gains and losses from the extinguishment of debt should be reported as part of on-going operations~~acquisitions, ~~unless~~asset ~~the~~dispositions ~~extinguishment of debt is both an unusual~~ and ~~infrequent event for the entity. Previously reported~~ ~~extraordinary~~sale-leaseback ~~gains~~transactions; ~~and~~(iv) make ~~losses~~capital ~~from~~expenditures; ~~the~~(v) issue ~~extinguishment~~capital ofstock ~~debt that are not unusual or infrequent should be reclassified. This Statement is effective for 2003. Upon adoption~~ of ~~this Statement, we will reclassify amounts previously~~our ~~reported~~subsidiaries; ~~as extraordinary losses to interest expense~~ and ~~tax~~(vi) engage ~~expense.~~in ~~The adoption~~transactions ofwith ~~this Statement will not impact~~ our ~~previously reported net income~~affiliates. ~~Had~~ weThe ~~decided~~Credit toFacility ~~adopt this Statement during the second quarter of 2002,~~also ~~reported~~contains ~~interest~~financial ~~expense~~covenants ~~for~~relating ~~the~~to ~~six~~maximum ~~months~~consolidated ~~ended June 30~~leverage, ~~2002~~minimum interest coverage and ~~2001~~maximum ~~would have~~senior ~~been~~secured ~~$0.3 million~~leverage ~~and~~as ~~$0.5 million~~defined ~~higher,~~therein.

~~respectively~~7. ~~Additionally,~~Redeemable ~~reported~~Convertible ~~provision~~Preferred ~~for~~Stock ~~income taxes for the six months ended June 30, 2002~~ and ~~2001 would have been $0.1 million and $0.2~~Warrants ~~million lower, respectively.~~

InWe have 10 million shares of preferred stock authorized for issuance. At June 30, ~~2002~~2005 and December 31, ~~the~~2004, ~~FASB~~we ~~issued~~had ~~FAS~~100,301 ~~146~~and 200,604 ~~“Accounting~~shares ~~for~~of ~~Costs~~Preferred ~~Associated~~Stock ~~with~~outstanding, respectively. ~~Exit~~The orPreferred ~~Disposal~~Stock, ~~Activities.”~~and ~~FAS~~any ~~146~~accrued ~~addresses~~and unpaid dividends, are convertible by the ~~accounting~~GS ~~and~~Funds ~~reporting~~into ~~for~~common ~~costs~~stock ~~associated~~at ~~with~~any ~~exit~~time orafter ~~disposal~~issuance ~~activities~~at a price of $24.05 per share and ~~nullifies~~earns ~~Emerging~~a cumulative ~~Issues~~dividend ~~Task~~of ~~Force~~8% ~~Issue~~compounded ~~94-3~~quarterly. We cannot pay cash dividends on the Preferred Stock through September 2005, ~~“Liability~~during ~~Recognition~~which ~~for~~time ~~Certain~~the ~~Employee~~dividend will accrete. After October 1, 2005, we may pay the ~~Termination~~Preferred ~~Benefits~~Stock ~~and~~dividend ~~Other~~in ~~Costs~~cash, subject to ~~Exit~~any anlimitations ~~Activity~~under ~~(including~~our ~~Certain~~Credit Facility, or allow it ~~Costs~~to ~~Incurred~~accrete, inat aour ~~Restructuring)~~option.” ~~This~~In ~~Statement~~connection iswith ~~effective~~the ~~for~~issuance ~~2003~~of ~~and~~the Preferred Stock, we also issued iswarrants to bepurchase ~~applied~~1.65 million ~~prospectively~~shares of our common stock with exercise prices ranging between $26.28 and $28.62, which are exercisable at any time during a five-year term.

~~RESULTS~~We OFmay ~~OPERATIONS~~redeem the Preferred Stock in cash at any time on or after January 3, 2006 if the market ~~Three~~price (as defined) of our common stock exceeds 200% of the conversion price for 30 of 45 consecutive trading days. The Preferred Stock is redeemable in cash by us at any time on or after January 3, 2013 and ~~six~~in ~~months~~cash, ~~ended~~common stock or a combination of both after January 3, 2018. The Preferred Stock is redeemable in cash at the option of the GS Funds in the event of a Change in Control (as defined). At June 30, ~~2002~~2005 and ~~2001~~December 31, 2004, the liquation value (including accrued and unpaid dividends) of the Preferred Stock was $122.2 million and $234.9 million, respectively, and at June 30, 2005, the Preferred Stock was convertible into approximately 5.1 million shares of common stock. Except in the case of a Change in Control (as defined), the cash redemption price of the Preferred Stock at any time is the Liquidation Preference (as defined). In the event we elect to redeem the Preferred Stock, the GS Funds can effectively preclude our redemption by converting their Preferred Stock into common stock within a prescribed period following our notice of redemption. Upon conversion, the GS Funds would continue to have the right to appoint directors (or an observer) to our Board until such time as the common stock beneficially owned by the GS Funds or their affiliates falls below certain thresholds, but would cease to have all other rights associated with the Preferred Stock, including their right to receive preferred dividends and other preferential distributions.

~~Net~~The ~~Revenue~~net proceeds received from the issuance of Preferred Stock were allocated to the Preferred Stock, warrants and the beneficial conversion feature (“BCF”) of the Preferred Stock based on their relative fair values. The fair value of the Preferred Stock was estimated using the “dividend discount” method, which determines the fair value based on the discounted cash flows of the security. The BCF is a function of the conversion price of the Preferred Stock, the fair value of the warrants and the fair market value of the underlying common stock on the date of issuance. In connection with the issuance of our Preferred Stock and each subsequent quarterly dividend date, a BCF was recorded because the fair value of the underlying common stock at the time of issuance was greater than the conversion price of the Preferred Stock. The BCF is treated as a deemed dividend because the Preferred Stock was convertible into common stock immediately after issuance. The Preferred Stock dividend for the three and six-months ended June 30, 2005 of $2.9 million and $6.2 million, respectively, consisted of the stated 8% dividend of $2.4 million and $5.1 million, respectively, and a BCF of $0.5 million and $1.1 million, respectively. The Preferred Stock dividend for the three and six-months ended June 30, 2004 of $5.4 million and $10.7 million, respectively, consisted of the stated 8% dividend of $4.4 million and $8.7 million, respectively, and a BCF of $1.0 million and $1.9 million, respectively.

~~Revenue~~On isJanuary 14, ~~derived~~2005, ~~entirely~~we ~~from~~repurchased approximately 50% of our ~~DAS~~outstanding ~~segment.~~Preferred AsStock afrom ~~sales~~the GS ~~agent~~Funds for ~~Sprint~~$277.2 million in cash. In order to fund this repurchase, on January 14, 2005, we issued $300 million of Holdco Notes. See Note 6, “Long-Term Debt,” for a further discussion of the financing associated with this transaction. In connection with the Preferred Stock repurchase, we recorded ~~earn~~a ~~commission~~reduction ~~revenue~~from ~~based~~earnings available to common shareholders on the ~~annual~~Consolidated ~~billing~~Statements of ~~value~~Operations and Comprehensive Income of ~~advertisements~~$133.7 million to reflect the loss on the repurchase of ~~sold~~these shares for ~~Sprint~~the ~~directories~~six-months inended June 30, 2005. The excess of the ~~period~~cash ~~(“Sprint~~paid ~~calendar~~to ~~sales”).~~the WeGS ~~record~~Funds ~~our~~over ~~sales~~the ~~commission~~carrying ~~revenue~~amount ~~net~~ of anthe ~~estimated~~repurchased Preferred Stock, plus the amount previously recognized for ~~our~~the ~~share~~BCF ~~of credits~~associated ~~Sprint~~with ~~may~~these ~~give~~shares ~~customers~~has ~~for~~been ~~errors~~recognized as the loss on repurchase. WeSuch ~~also~~amount represents ~~earn~~a ~~revenue~~return ~~from~~to ~~our~~the GS Funds and, therefore has been treated in a manner similar to the ~~pre-press~~treatment ~~publishing~~of ~~services~~the Preferred Stock dividend.

The amount of commission revenue we earn is directly correlated to Sprint calendar sales recorded during the period. We manage our selling process on a directory by directory basis. We organize each directory into a sales campaign. A typical sales campaign begins approximately six to eight months before a directory is published and ends approximately two months before the directory is published. Therefore, changes in directory publication dates, the beginning and ending dates of a sales campaign and the actual sales recorded at any point during the campaign can vary from one period to the next. These variations can cause sales commissions earned in the period (net revenue) to be materially different from net revenue earned in a prior comparative period.

Net revenue detail for the quarter and six months ended June 30, 2002 and 2001 was as follows:

		2002			2001			$ Change			% Change
Quarter ended June 30,
Sales commissions		$	12.3		$	12.4		$	(0.1	)		(0.8	)%
Less: sales allowances			(0.1	)		(0.3	)		0.2			66.7	%
Net sales commissions			12.2			12.1			0.1			0.8	%
Pre-press publishing			7.3			7.9			(0.6	)		(7.6	)%
	Net revenue	$	19.5		$	20.0		$	(0.5	)		(2.5	)%
Six months ended June 30,
Sales commissions		$	22.1		$	22.7		$	(0.6	)		(2.6	)%
Less: sales allowances			(0.2	)		(0.6	)		0.4			66.7	%
Net sales commissions			21.9			22.1			(0.2	)		(0.9	)%
Pre-press publishing			15.9			16.8			(0.9	)		(5.4	)%
	Net revenue	$	37.8		$	38.9		$	(1.1	)		(2.8	)%

Net revenue was $19.5 million and $37.8 million for the quarter and six months ended June 30, 2002, respectively, compared to $20.0 million and $38.9 million for the quarter and six months ended June 30, 2001. Commission revenue was slightly lower for the quarter and year-to-date 2002 periods compared to the corresponding 2001 periods as Sprint calendar sales (on which we earn commission revenue) during these periods were also lower. The decrease in Sprint calendar sales was due to poor economic conditions during the first half of the year and the timing of sales campaigns relative to 2001. During 2002, certain earlier sales campaigns were extended in order to provide an opportunity for increased sales causing the start of other campaigns to be delayed. Additionally, the economic conditions during the first half of the year resulted in advertisers reducing the level of advertising spending, deciding not to advertise or not being allowed to continue to advertise under Sprint’s credit policy due to payment delinquency. Sales allowances for the quarter and six-month period were lower than the prior year as sales allowances provided for

~~certain~~8. ~~sales~~Restructuring ~~in 2001 (and subsequently reversed in September 2001) are no~~Charges ~~longer required to be provided for.~~

~~Pre-press~~Following the SPA Acquisition, we consolidated publishing ~~revenue~~and ~~was~~technology ~~lower~~operations, ~~for~~sales ~~the~~offices and ~~quarter~~administrative personnel and ~~six-month~~relocated ~~period~~the ~~due~~headquarters functions in Overland Park, Kansas and Purchase, New York to ~~anticipated~~Cary, ~~declines~~North Carolina. Approximately 140 people were affected by the relocation of the headquarters functions in ~~volume.~~Overland AsPark, aKansas ~~result~~and Purchase, New York, of which 75 were included in the ~~pending~~restructuring ~~expiration~~reserve. The remaining 65 people relocated with the Company. In 2003, $9.5 million was charged to earnings primarily representing severance and related costs associated with the consolidation of the publishing and technology operations, sales offices and administrative personnel and the relocation of our headquarters. In the second and third ~~party~~quarters of ~~pre-press~~2004, ~~publishing~~additions ~~contract~~to inthe ~~December~~reserve ~~2002~~of $0.7 million and $0.1 million, respectively, were recorded representing adjustments to previous severance and related cost estimates. Payments for severance of $0.1 million have been made during the ~~level~~six months ended June 30, 2005. An additional reserve of ~~services~~$2.1 million ~~provided~~was isrecorded ~~winding~~during ~~down~~the second quarter of 2004, asrepresenting ~~preparatory~~the ~~services~~estimated ~~are~~fair ~~not~~value of ~~being~~the remaining lease payments, net of estimated sub-lease income, on the former headquarters ~~provided~~office ~~for~~lease ~~2003~~in ~~publications~~New York. Payments of $0.2 million and $0.4 million were made with respect to the former headquarters office lease during the three and six months ended June 30, 2005, respectively, and payments of $0.1 million were made during the three and six months ended June 30, 2004. The remaining payments will be made through 2006.

~~The~~In ~~table~~2003, ~~below~~a ~~sets~~$2.2 million ~~forth~~reserve ~~the~~was ~~sales~~recorded, ~~that~~with wean ~~sold~~offsetting oncharge ~~behalf~~to ofgoodwill, ~~Sprint and the~~representing ~~sales~~the ~~that~~closure ~~DonTech sold on behalf~~ of ~~SBC during~~ the ~~periods~~pre-press ~~noted.~~publishing ~~DonTech manages~~facility ~~its~~operated ~~selling~~by ~~process~~SPA in aBlountville, ~~similar~~Tennessee. ~~manner~~The reserve asrepresented wethe ~~manage~~remaining ~~our~~lease ~~selling process. Accordingly~~payments, ~~DonTech~~net ~~calendar~~of ~~sales~~estimated ~~(sales~~sub-lease ~~recorded~~income, ~~by DonTech~~ on ~~behalf~~ ~~of SBC during~~ the pre-press ~~period)~~facility. ~~can~~Payments ~~vary~~of ~~from~~$0.1 million ~~one~~and ~~period~~$0.2 million towere ~~the~~made ~~next~~with ~~due~~respect to ~~changes~~ ~~in directory publication dates,~~ the ~~beginning and ending dates of a~~former ~~sales~~pre-press ~~campaign~~publishing ~~and~~facility ~~the actual sales recorded at any point~~ during the ~~campaign. Our~~three ~~commission revenue~~ and ~~priority~~six ~~distribution~~months ~~income~~ended ~~(reported~~June 30, ~~as partnership~~2005, respectively, and ~~joint~~payments ~~venture income) from Sprint are directly correlated to the amount~~ of ~~Sprint~~$0.2 million ~~calendar sales recorded in the period~~ and ~~our~~$0.3 million ~~revenue participation~~were ~~income~~made ~~from~~during ~~SBC~~the ~~(reported~~three ~~as partnership~~ and ~~joint~~six ~~venture income)~~months isended ~~directly correlated to the amount of DonTech calendar sales recorded~~June in30, ~~the~~2004, ~~period~~respectively. ~~Therefore,~~The aremaining ~~material~~payments ~~change~~will inbe ~~DonTech~~made ~~calendar~~through ~~sales or Sprint calendar sales would have a material effect on our results of operations and financial condition~~2012.

		2002		2001		$ Change			% Change
Quarter ended June 30,
DonTech		$	125.2	$	125.2		—			—
DAS			53.0		53.3	$	(0.3	)		(0.6	)%
	Total	$	178.2	$	178.5	$	(0.3	)		(0.2	)%
Six months ended June 30,
DonTech		$	207.1	$	208.7	$	(1.6	)		(0.8	)%
DAS			95.6		98.2		(2.6	)		(2.6	)
	Total	$	302.7	$	306.9	$	(4.2	)		(1.4	)%

During the first quarter of 2005, we completed a restructuring relating to the integration of the SBC Directory Business. Approximately 63 employees have been affected by the restructuring; 57 were terminated during the first quarter of 2005, and 6 were relocated to our corporate headquarters in Cary, North Carolina. Additionally, we have vacated certain of our leased facilities in Chicago, Illinois. We have estimated the costs associated with the terminated employees and the abandonment of certain of our leased facilities to be approximately $8.7 million and such costs have been charged against goodwill during the first quarter of 2005. Payments of $0.9 million and $1.3 million were made with respect to leases and severance during the three and six months ended June 30, 2005. The remaining payments will be made through 2012. All other costs associated with the restructuring plan were estimated to be approximately $0.2 million and are being charged to earnings as incurred.

~~See~~The ~~above~~table ~~for an explanation for the changes in Sprint calendar sales during the applicable period and “– Partnership and Joint Venture Income”~~ below ~~for~~shows ~~an explanation of~~ the ~~changes~~activity in ~~DonTech~~our ~~calendar~~restructuring ~~sales~~reserve during the ~~applicable period.~~three ~~We followed an aggressive sales campaign schedule during last year’s third quarter which we will not follow during this year’s third quarter. As a result, we expect DonTech~~ and ~~Sprint~~six ~~calendar sales for this year’s third~~months ~~quarter~~ended ~~to be lower than last year’s third quarter and accordingly~~June 30, ~~also expect revenue and partnership and joint venture income to be lower than last year’s third quarter~~2005. ~~However, we expect that fourth quarter 2002 results will show~~ ~~corresponding increases over the fourth quarter 2001 results.~~

Management also reviews and analyzes the value of advertising sales sold on behalf of SBC and Sprint in directories that published during the period (“publication sales”). A comparison of publication sales from one period to another gives an indication of underlying sales growth in the directories for which DonTech and we sell advertising. We review publication sales for the period against publication sales for the same directories published in the prior year period (a “same store sales” type metric). Management considers this metric a lagging indicator of our sales performance. This metric also removes all the timing issues associated with a sales campaign. However, publication sales do not have a direct correlation to our reported revenue or profitability in the indicated period as most, if not all, of these sales were consummated and reported in prior periods.


	Three months
	Ended June 30, 2005
Balance at March 31, 2005	$	10,740
Payments, net		(1,058	)

Balance at June 30, 2005.	$	9,682

If the directories that published in the current period are not consistent with the directories published in the comparable prior year period, we adjust the prior year period to include those directories that published during the current year period. A DonTech directory originally scheduled to publish in February 2002 was published in December 2001. To conform to the 2002 publication schedule, publication sales for the six months ended June 30, 2001 were adjusted to remove the value of the February 2001 directory ($28.3 million). Publication sales for the three and six months ended June 30, 2002 and 2001 were as follows:


	Six months
	Ended June 30, 2005
Balance at December 31, 2004	$	3,461
Additions		8,828
Payments, net		(2,607	)

Balance at June 30, 2005	$	9,682

		2002		2001		$ Change			% Change
Quarter ended June 30,
DonTech		$	90.6	$	89.5	$	1.1			1.2	%
DAS			27.8		28.9		(1.1	)		(3.8	)
	Total	$	118.4	$	118.4		—			—
Six months ended June 30,
DonTech		$	184.7	$	194.8	$	(10.1	)		(5.2	)%
DAS			75.1		80.5		(5.4	)		(6.7	)
	Total	$	259.8	$	275.3	$	(15.5	)		(5.6	)%

The decline of $15.5 million, or 5.6% in the six months ended June 30, 2002 compared to the six months ended June 30, 2001 was primarily due to declines in SBC’s Chicago Consumer directory ($12.4 million) and Sprint’s January Las Vegas directory ($3.9 ~~million)~~. ~~The~~Benefit ~~advertisements in these directories were sold~~Plans ~~during the latter half of 2001 and were impacted by deteriorating economic conditions and increased uncertainty among advertisers.~~

~~Partnership~~Retirement Plans. We have a defined benefit pension plan covering substantially all employees with at least one year of service. The benefits to be paid to employees are based on age, years of service and ~~Joint~~a ~~Venture~~percentage ~~Income~~of total annual compensation. The percentage of compensation allocated to a retirement account ranges from 3.0% to 12.5% depending on age and years of service (“cash balance benefit”). Benefits for certain employees who were participants in the predecessor The Dun & Bradstreet Corporation (“D&B”) defined benefit pension plan are also determined based on the participant’s average compensation and years of service (“final average pay benefit”) and benefits to be paid will equal the greater of the final average pay benefit or the cash balance benefit. Pension costs are determined on an annual basis using the projected unit credit actuarial cost method. Our funding policy is to contribute an amount at least equal to the minimum legal funding requirement. We were not required to make and have not made any contributions for the three and six-month periods ended June 30, 2005. In addition, no contributions were required or made in 2004. The underlying pension plan assets are invested in diversified portfolios consisting primarily of equity and debt securities. A measurement date of December 31 is used for the majority of our plan assets.

We ~~earn~~also ahave ~~significant~~an ~~amount~~unfunded ofnon-qualified ~~our~~defined ~~operating~~benefit ~~income~~pension ~~from~~plan, ~~our DonTech operation and our CenDon relationship and recognize~~ the ~~income~~Pension ~~from these sources as~~Benefit ~~partnership~~Equalization ~~and~~Plan ~~joint venture income. Partnership and joint venture income~~ (“~~partnership income~~PBEP”), ~~from~~which ~~DonTech~~covers ~~includes~~senior ~~our~~executives ~~share of the net income of DonTech (accounted for under the equity method)~~ and ~~revenue~~certain ~~participation income~~key ~~from SBC~~employees. AsBenefits ~~a sales agent for SBC, DonTech earns commission revenue~~are based on ~~the~~years ~~annual billing value~~ of ~~advertisements~~service ~~sold~~and ~~for~~compensation ~~SBC directories in the period~~ (~~“DonTech~~including ~~calendar~~compensation ~~sales”).~~not ~~DonTech’s~~permitted ~~net income (of which we recognize 50%) is dependent on DonTech calendar sales. Additionally, our revenue participation income is directly correlated~~ to ~~the~~be ~~amount~~taken ~~of DonTech~~into ~~calendar~~account ~~sales~~under in the ~~period.~~previously ~~Partnership~~mentioned ~~income~~defined ~~from~~benefit ~~our~~pension ~~CenDon relationship consists of the priority distribution on our membership interest in CenDon LLC~~plan). ~~Partnership income for the quarter and six months ended June 30, 2002 and 2001 was as follows:~~

		2002		2001		$ Change			% Change
Quarter ended June 30,
DonTech
	Revenue participation	$	29.9	$	30.0	$	(0.1	)		(0.3	)%
	Equity income share		6.7		7.1		(0.4	)		(5.6	)
Total DonTech			36.6		37.1		(0.5	)		(1.3	)
CenDon priority distribution			4.3		4.1		0.2			4.9
	Total	$	40.9	$	41.2	$	(0.3	)		(0.7	)%
Six months ended June 30,
DonTech
	Revenue participation	$	49.3	$	50.2	$	(0.9	)		(1.8	)%
	Equity income share		9.2		8.9		0.3			3.4
Total DonTech			58.5		59.1		(0.6	)		(1.0	)
CenDon priority distribution			9.5		9.1		0.4			4.4
	Total	$	68.0	$	68.2	$	(0.2	)		(0.3	)%

Other Postretirement Benefits. We have an unfunded postretirement benefit plan that provides certain healthcare and life insurance benefits to certain full-time employees who reach retirement age while working for the Company.

~~Partnership~~In ~~income~~connection ~~was~~with ~~$40.9 million and $68.0 million for~~ the ~~quarter~~SBC ~~and~~Directory ~~six months ended June 30~~Acquisition, ~~2002,~~we ~~respectively,~~assumed ~~compared~~DonTech’s tobenefit ~~$41~~plans.~~2 million~~ ~~and $68.2~~Information ~~million~~presented below for the ~~quarter~~three and six -months ended June 30, ~~2001.~~2005 ~~Our~~includes ~~share~~combined ~~of DonTech’s~~amounts ~~net profit~~ for the Company’s ~~quarter~~benefit ~~was~~plans ~~slightly~~and ~~lower~~DonTech’s ~~than~~benefit ~~last~~plans. ~~year primarily~~Information ~~due~~presented tobelow ~~the~~for ~~timing of partnership expenses. For~~ the three and six-~~month~~months ~~period~~ended June 30, ~~partnership~~ ~~income~~2004 ~~from~~excludes ~~DonTech~~amounts ~~was~~relating ~~lower~~to ~~due~~the toDonTech abenefit ~~decline~~plans insince ~~revenue~~they ~~participation~~were ~~income~~not ~~caused~~our byobligation ~~lower~~at ~~DonTech~~that ~~calendar~~time. ~~sales~~The ~~(see~~retirement ~~“Net~~plans ~~Revenue” above~~of ~~for~~ the ~~amount~~Company ofand DonTech ~~calendar~~are ~~sales)~~similar in asnature ~~advertisers~~and ~~remain~~both ~~cautious~~ share in ~~the~~a ~~current~~Master ~~economic~~Trust. ~~environment~~In ~~and~~accordance ~~are~~with ~~buying~~Statement ~~smaller~~of ~~advertising~~Financial ~~programs~~Accounting ~~than~~Standards ~~they~~(SFAS) 132, ~~have~~Employers’ ~~typically~~Disclosures ~~purchased~~About inPensions ~~prior~~and ~~years.~~Other ~~This~~Postretirement ~~decline~~Benefits (Revised in2003), ~~revenue participation~~the ~~income~~following ~~was~~table ~~partially~~provides ~~offset~~the bycomponents ~~higher~~of ~~equity~~net ~~income~~periodic asbenefit acost ~~result~~for the ofthree ~~partnership~~and ~~expense~~six-months ~~savings~~ended inJune 30, ~~2002.~~2005 and 2004:

CenDon priority distribution income increased in the quarter and six-month period as a result of a contractual increase in the priority distribution rate for 2002 more than offsetting the negative effect of lower calendar sales (see “Net Revenue” above for a discussion of Sprint calendar sales).


	Pension Benefits
	Three months						Six months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004

Service cost	$	1,342		$	900		$	2,684		$	1,800
Interest cost		1,593			963			3,186			1,926
Expected return on plan assets		(2,090	)		(1,458	)		(4,180	)		(2,916	)
Unrecognized prior service cost		38			27			76			54
Amortization of unrecognized loss		320			138			640			276

Net periodic benefit cost	$	1,203		$	570		$	2,406		$	1,140

Expenses


	Postretirement Benefits
	Three months				Six months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004

Service cost	$	188	$	113	$	376	$	226
Interest cost		272		165		544		330
Unrecognized prior service cost		240		130		480		260
Amortization of unrecognized loss		25		32		50		64

Net periodic benefit cost	$	725	$	440	$	1,450	$	880

As previously disclosed in the 2004 Form 10-K, we expect to make contributions of approximately $0.9 million and $0.1 million to our postretirement medical plan and our PBEP, respectively, in 2005.

~~Expenses~~Savings ~~were~~Plan. asWe ~~follows:~~offer a defined contribution savings plan to substantially all employees and contribute $0.50 for each dollar contributed by a participating employee, up to a maximum of 6% of each participating employee’s salary (including bonus and commissions). Effective July 1, 2005, DonTech’s defined contribution savings plan was merged into RHD’s defined contribution savings plan.

		2002		2001		$ Change			% Change
Quarter ended June 30,
Operating expenses		$	13.6	$	14.3	$	(0.7	)		(4.9	)%
G&A expense			4.5		5.0		(0.5	)		(10.0	)
D&A expense			1.6		2.7		(1.1	)		(40.7	)
Restructuring and special charge			0.2		—		0.2			n/m
	Total	$	19.9	$	22.0	$	(2.1	)		(9.5	)%
Six months ended June 30,
Operating expenses		$	24.9	$	25.4	$	(0.5	)		(2.0	)%
G&A expense			9.5		9.2		0.3			3.3
D&A expense			3.2		5.6		(2.4	)		(42.9	)
Restructuring and special charge			0.2		—		0.2			n/m
	Total	$	37.8	$	40.2	$	(2.4	)		(6.0	)%

10. Business Segments

~~Operating~~During ~~expenses~~2004, ~~were~~we ~~$13.6 million~~revised ~~and~~our ~~$24.9 million~~historical ~~for~~segment reporting to reflect the ~~quarter~~change ~~and~~in ~~six~~our business that ~~months~~resulted ~~ended~~from ~~June 30,~~the ~~2002,~~SBC ~~respectively,~~Directory ~~compared~~Acquisition and to ~~$14.3 million~~reflect how management now reviews and ~~$25.4~~analyzes ~~million~~the ~~for~~business. ~~the~~Our ~~quarter~~business ~~and~~of ~~six~~publishing ~~months~~yellow ~~ended~~pages ~~June 30,~~directories ~~2001.~~is ~~The~~now ~~decrease~~conducted in one ~~the~~reportable ~~quarter~~operating ~~and~~segment. ~~six~~All pre-~~month~~press ~~period~~publishing ~~was~~services ~~primarily~~and ~~due~~other toancillary ~~one-time~~services previously ~~costs~~performed ~~incurred in~~on ~~2001~~behalf of $0other publishers are now performed entirely on behalf of the directories we now publish.~~7 million~~ ~~for~~As ~~our~~a ~~share~~result of ~~potential~~the ~~losses~~SBC ~~related~~Directory toAcquisition, ~~prior~~SBC ceased paying us ~~CenDon~~revenue ~~Partnership~~participation ~~receivable~~income, ~~write-offs~~we consolidate all net profits from DonTech and we eliminated our partnership investment in ~~excess~~DonTech. ofConsequently, ~~amounts~~partnership ~~provided~~income ~~for~~was byno longer reported commencing on September 1, 2004 and, accordingly, the ~~Partnership~~previously reported DonTech operating segment is no longer applicable.

~~General and administrative expenses were $4~~11.~~5 million~~ ~~and $9.5 million for the~~Litigation quarter and six months ended June 30, 2002, respectively, compared to $5.0 million and $9.2 million for the quarter and six months ended June 30, 2001. The decrease in general and administrative expenses in the quarter was principally due to lower consulting costs. The increase in general and administrative expenses for the year-to-date period was primarily due to relocation costs in connection with the executive management transition ($0.4 million) and higher payroll taxes and employee benefit costs ($0.4 million) partially offset by lower consulting costs ($0.5 million).

~~Depreciation~~We ~~and~~are ~~amortization~~involved ~~expense~~in ~~was~~various ~~$1.6 million~~legal ~~and~~proceedings ~~$3.2 million~~arising ~~for~~in the ~~quarter~~ ~~and~~ordinary ~~six~~course ~~months~~of ~~ended~~our ~~June 30~~business, ~~2002,~~as well ~~respectively,~~as ~~compared~~certain tolitigation $2and tax matters described below.~~7 million~~ We periodically assess our liabilities and ~~$5.6 million~~contingencies ~~for~~in connection with these matters based upon the ~~quarter~~latest information available to us. For those matters where it is probable that we have incurred a loss and ~~six~~the ~~months~~loss ~~ended~~or ~~June 30,~~range ~~2001.~~of ~~The~~loss ~~decrease~~can be reasonably estimated, we record reserves in ~~the~~our ~~quarter~~consolidated ~~and~~financial ~~year-to-date~~statements. ~~periods~~In other ~~was~~instances, ~~primarily~~we ~~due~~are unable to make a reasonable estimate of any liability because of the ~~original~~uncertainties ~~investment~~related into both the ~~Raleigh~~probable ~~Information~~outcome ~~Center~~and ~~being~~amount ~~fully~~or ~~depreciated~~range of loss. As additional byinformation ~~the~~becomes ~~end~~available, we adjust our assessment and estimates of ~~2001~~such liabilities accordingly.

InBased on our review of the ~~second~~latest ~~quarter~~information ~~2002~~available, ~~additional~~we ~~expenses~~believe ofour ~~$0.2 million~~ultimate ~~were~~liability ~~incurred~~ in connection with ~~our~~pending ~~executive~~legal ~~management~~proceedings, ~~transition~~including ~~and restructuring plan announced at~~ the ~~end~~litigation ofand ~~2001.~~tax ~~Certain~~matters ~~amounts included in the 2001~~described ~~restructuring~~below, ~~and~~will ~~special~~not ~~charge~~have ~~were~~a ~~estimates~~material ~~made~~adverse byeffect ~~management based~~ on ~~the best~~our ~~information~~results ~~available~~of atoperations, ~~the~~cash ~~time.~~flows ~~Actual amounts paid can differ from~~or ~~these~~financial ~~estimates~~position, ~~and these differences are recognized~~ as ~~current~~described ~~period expense or income~~below. ~~The~~No ~~$0.2 million~~material ofamounts ~~expense~~have ~~represents~~been ~~the~~accrued ~~net~~in ofour ~~$0.3 million of~~financial ~~retirement~~statements ~~benefits paid in connection~~ with ~~the~~respect ~~executive~~to ~~management~~any ~~transition over the amount originally reserved for offset by the reversal~~ of ~~$0.1 million for~~these ~~professional fees, as the actual amount of fees paid was less than the amount originally reserved~~matters.

~~Operating~~In ~~Income~~order to understand our potential exposure under the litigation and tax matters described below under the captions “Information Resources, Inc.” and “Tax Matters,” you need to understand the relationship between us and D&B, and certain of our predecessors and affiliates that, through various corporate reorganizations and contractual commitments, have assumed varying degrees of responsibility with respect to such matters.

~~Operating~~In ~~income~~November 1996, ~~for~~the ~~DonTech~~company ~~includes~~then ~~our~~known ~~50%~~as ~~interest~~The inDun ~~the~~& ~~net~~Bradstreet ~~income~~Corporation ofseparated through a ~~DonTech~~spin-off (“1996 Distribution”) into three separate public companies: The Dun and ~~revenue~~Bradstreet Corporation, ~~participation~~ACNielsen ~~income~~Corporation (“ACNielsen”), ~~but~~and ~~does~~Cognizant ~~not~~Corporation ~~include~~(“Cognizant”). anIn ~~allocation~~June 1998, ofThe Dun & Bradstreet Corporation separated through a spin-off (“1998 Distribution”) into two ~~certain~~separate ~~general~~public companies: R.H. Donnelley Corporation (formerly The Dun & Bradstreet Corporation) and ~~administrative~~a ~~expenses~~new ~~incurred~~company that changed its name to ~~support~~The ~~this~~Dun ~~business~~& Bradstreet Corporation. ~~Operating~~ ~~income~~Later ~~for~~in ~~DAS~~1998, Cognizant ~~includes~~separated ~~the~~through ~~operating~~a ~~results~~spin-off of(“Cognizant ~~each~~Distribution”) ofinto ~~the~~two ~~included~~separate public ~~business~~companies: ~~units~~IMS Health Incorporated (“IMS”), ~~less~~and anNielsen ~~allocation~~Media ofResearch, ~~certain~~Inc. ~~shared~~(“NMR”). ~~expenses~~In ~~based~~September 2000, onThe Dun & Bradstreet Corporation separated into two separate public companies: Moody’s ~~estimated~~Corporation, ~~business~~(“Moody’s”) ~~usage.~~(formerly ~~General~~The Dun & ~~Corporate~~Bradstreet ~~represents~~Corporation), ~~overhead~~ and ~~administrative~~ ~~costs~~a ~~not~~new ~~allocated~~company that changed its name to The Dun & Bradstreet Corporation. As a result of the ~~DAS~~form ~~business~~of ~~units~~R.H. ~~Operating~~Donnelley Corporation’s ~~income~~separation from The Dun & Bradstreet Corporation in 1998, we are the corporate bysuccessor ~~segment~~of ~~was~~and technically the defendant and taxpayer referred to below as ~~follows:~~D&B with respect to any matter accruing prior to June 30 1998.

		2002			2001			$ Change			% Change
Quarter ended June 30,
DonTech		$	36.6		$	37.1		$	(0.5	)		(1.3	)%
DAS			7.8			6.0			1.8			30.0
General & Corporate			(3.8	)		(3.9	)		0.1			2.6
	Segment Operating Income		40.6			39.2			1.4			3.6
Restructuring and special charge			(0.2	)		—			(0.2	)		n/m
	Total	$	40.4		$	39.2		$	1.2			3.1	%
Six months ended June 30,
DonTech		$	58.5		$	59.1		$	(0.6	)		(1.0	)%
DAS			17.6			15.5			2.1			13.5
General & Corporate			(7.8	)		(7.7	)		(0.1	)		(1.3	)
	Segment Operating Income		68.3			66.9			1.6			2.4
Restructuring and special charge			(0.2	)		—			(0.2	)		n/m
	Total	$	68.1		$	66.9		$	1.4			2.1	%

Information Resources, Inc.

~~Operating~~The ~~income~~following ~~was~~is ~~$40.4 million~~a ~~and~~description ~~$68.1 million~~of ~~for~~an ~~the~~antitrust ~~quarter~~lawsuit ~~and~~filed ~~six months~~in ~~ended~~1996 ~~June 30,~~by ~~2002,~~Information ~~respectively~~Resources, ~~compared~~Inc. (“IRI”). toVNU ~~$39~~N.~~2 million~~V., ~~and~~a ~~$66.9 million~~publicly ~~for~~traded ~~the~~Dutch ~~quarter~~company (“VNU”), and ~~six~~its ~~months~~U.S. ~~ended~~subsidiaries ~~June 30~~VNU, ~~2001~~Inc., ~~The~~AC Nielsen, ~~increase~~AC ~~in operating~~Nielsen ~~income~~(US), ~~for~~Inc. ~~the~~(“ACN ~~quarter~~(US)”), and ~~six-month~~NMR ~~periods~~(collectively, ~~was~~the ~~primarily~~“VNU ~~driven~~Parties”), byhave ~~higher~~assumed ~~DAS~~exclusive ~~operating~~joint ~~income~~and ~~partially~~several ~~offset~~liability byfor ~~lower~~any ~~operating~~judgment ~~income~~or ~~from DonTech.~~settlement ~~See~~of ~~“Partnership~~this ~~and~~antitrust lawsuit ~~Joint~~(collectively, ~~Venture~~the ~~Income~~“IRI Liabilities”). ~~above~~As ~~for~~a anresult ~~explanation~~ of the ~~decrease~~indemnity inobligation, ~~DonTech~~we ~~operating~~do ~~income.~~not have ~~For~~any ~~the~~exposure ~~quarter,~~to ~~DAS~~a ~~operating income~~judgment ~~increased~~or ~~$1.8 million~~settlement ~~primarily~~of ~~due~~this tolawsuit ~~lower~~unless ~~depreciation~~the ~~and amortization~~VNU ~~expense~~Parties ofdefault $1on their obligations.~~1 million~~ asIn the ~~investment~~event inof ~~the~~such ~~Raleigh Information~~default, ~~Center~~we ~~was~~have ~~fully~~contingent ~~depreciated~~liability byfor ~~the~~this ~~end~~matter ofas ~~2001~~a result ~~and~~of ~~the~~our ~~one-time costs~~succeeding ofto ~~$0.7 million~~D&B’s inliabilities ~~2001~~and ~~for~~obligations ~~our~~as ~~share~~part of ~~potential~~the ~~losses~~1998 ~~related~~Distribution. toIn ~~prior~~such ~~CenDon~~event, ~~Partnership~~however, ~~receivable~~under ~~write-offs~~the incontractual ~~excess~~commitments ofdescribed ~~amounts~~below, ~~provided for~~any bysuch ~~the~~amounts ~~Partnership.~~that ~~DAS~~we might ~~operating~~need ~~income~~to ~~for~~pay ~~the~~would ~~six-month~~be ~~period increased~~shared ~~$2.1 million~~equally ~~due~~(50% toeach) ~~lower~~by ~~depreciation~~D&B and ~~amortization~~Moody’s, ~~expense~~on ofa joint and several $2basis.~~2 million~~ Only if D&B and ~~the~~Moody’s ~~one-time~~were ~~costs~~unable ~~associated~~to ~~with~~bear ~~prior~~all ~~CenDon~~or ~~Partnership~~a part of the IRI Liabilities, would we ~~matters~~be liable, ~~partially~~and ~~offset~~then byonly to the ~~$0.9 million~~extent ~~decline~~that ineither ~~publishing~~of ~~revenue~~them could not satisfy their joint and ~~resulting~~several ~~from~~indemnity ~~lower~~obligations ~~volumes~~to us.

~~Interest~~On February 1, 2005, the U.S. District Court for the Southern District of New York entered a final judgment against IRI dismissing IRI’s claims with prejudice and ~~Taxes~~on the merits. IRI filed a notice of appeal to the Second Circuit Court of Appeals. The appeal has been fully briefed, but no argument date has yet been set for this appeal. Due to the dismissal of this matter and several layers of indemnity described above, our disclosure regarding this matter will be relatively brief.

~~Net~~In ~~interest~~July 1996, ~~expense~~IRI ~~was~~filed ~~$5.9 million~~a ~~and~~complaint, ~~$11.9 million~~subsequently ~~for~~amended in 1997, in the ~~quarter~~United ~~and~~States ~~six~~District ~~months~~Court ~~ended~~for ~~June 30,~~the ~~2002,~~Southern ~~respectively,~~District ~~compared~~of toNew ~~$6.2 million~~York, ~~and~~naming ~~$12.8 million~~as ~~for~~defendants ~~the~~D&B ~~quarter~~(now, ~~and~~the ~~six~~Company, ~~months~~as successor ~~ended~~of ~~June 30~~D&B), ~~2001~~A.C. ~~The~~Nielsen ~~quarter~~Company ~~and year-to-date~~(a ~~decrease~~subsidiary inof ~~2002~~ACNielsen) ~~was~~and ~~primarily~~IMS ~~due~~(then toknown ~~lower average outstanding~~as ~~debt~~Cognizant), ~~levels~~at asthe wetime ~~continue~~of tothe ~~use~~filing, ~~excess~~all ~~cash~~wholly toowned ~~prepay~~subsidiaries ~~our~~of ~~debt~~D&B.

The ~~effective~~amended ~~tax~~complaint ~~rate~~alleged, ~~for~~among ~~the~~other ~~quarter~~claims, ~~and~~various ~~six~~violations ~~months~~of ~~ended~~U.S. ~~June 30,~~antitrust ~~2002~~laws ~~was~~under ~~38.5%~~Sections 1 ~~compared~~and to2 ~~37.5%~~of ~~for~~ the ~~quarter~~Sherman ~~and~~Antitrust ~~six~~Act. ~~months~~IRI ~~ended~~sought ~~June~~damages in excess of $650.0 30million, which ~~2001~~IRI sought to treble under the antitrust laws. IRI also sought punitive damages of an ~~The~~unspecified ~~increase~~amount, inwhich ~~the~~we ~~effective~~believe ~~tax~~are ~~rate~~precluded ~~was~~as ~~due~~a toresult ~~changes~~of inthe ~~state~~prior dismissal of one of ~~apportionment~~IRI’s ~~factors~~claims.

~~Extraordinary~~In ~~Loss~~December 2004, the Court entered an order that barred IRI from arguing that defendant’s pricing practices or discounts were illegal or anti-competitive unless it could satisfy a specified burden of proof. In response to this ruling, in a press release, IRI stated, in relevant part, “without this evidence, IRI believes that little would be left of IRI’s case to take to trial.” As a result, IRI asked the Court to enter a final judgment against it so that it could take an immediate appeal to the Second Circuit. Defendants did not object to this request. As noted above, the case was dismissed by the District Court and IRI has filed an appeal. The appeal has been fully briefed, but no argument date has yet been set for this appeal.

In ~~the~~connection ~~second~~with ~~quarter~~the of1996 ~~2002~~Distribution, weCognizant ~~prepaid~~(now ~~$7.5 million~~NMR), ofACNielsen ~~debt~~ and ~~through~~D&B (now the Company) ~~first~~entered ~~six~~into ~~months~~an ofIndemnity ~~2002,~~and weJoint ~~prepaid~~Defense ~~$42~~Agreement.~~5 million~~ ofOn ~~debt.~~July 30, ~~The~~2004, ~~extraordinary loss recognized in~~ the ~~quarter~~VNU ~~and~~Parties, ~~six-month period related to~~ the ~~write-off of~~ ~~related~~Company, ~~deferred~~D&B, ~~financing~~Moody’s ~~costs.~~and ~~The~~IMS ~~extraordinary~~entered ~~loss~~into ~~had~~an noAmended ~~impact~~and ~~on diluted~~Restated ~~earnings~~Indemnity ~~per~~and ~~share~~Joint ~~for~~Defense Agreement (the ~~quarter~~“Amended ~~or year-to-date periods in 2002~~JDA”).

~~Net~~Pursuant ~~Income~~to the Amended JDA, any and ~~Earnings~~all ~~Per~~IRI ~~Share~~Liabilities incurred by us, D&B, Moody’s or IMS relating to a judgment (even if not final) or any settlement being entered into in the IRI action will be jointly and severally assumed and fully discharged exclusively by the VNU Parties. Under the Amended JDA, the VNU Parties have agreed to, jointly and severally, indemnify us, D&B, Moody’s and IMS from and against all IRI Liabilities to which we become subject.

~~Net~~Under ~~income~~the ~~for~~agreements relating to the ~~second~~1998 ~~quarter~~Distribution, ~~2002~~D&B ~~was~~assumed ~~$21.2 million,~~the ordefense ~~$0.70~~and ~~per~~agreed ~~diluted~~to ~~share~~indemnify ~~compared~~us toagainst ~~net~~any ~~income~~payments ofthat ~~$20.6 million,~~we ormay ~~$0.66~~be ~~per~~required ~~diluted~~to ~~share~~make ~~for~~ with respect to the ~~second~~IRI Liabilities ~~quarter~~and ~~2001.~~related ~~For~~legal ~~the~~fees. ~~six~~As ~~month~~required ~~period~~by ~~ended~~those ~~June 30~~agreements, ~~2002~~Moody’s Corporation, ~~net~~which ~~income~~subsequently ~~was~~separated ~~$34.4 million~~from D&B in the 2000 Distribution, orhas $1agreed to be jointly and severally liable with D&B for the indemnity obligation to us.14 ~~per~~We ~~diluted~~understand that D&B and Moody’s have agreed amongst themselves to share ~~compared~~equally (50% each) these indemnity obligations to ~~net~~us. ~~income~~Only ofif D&B and ~~$33.5 million,~~Moody’s were unable to bear all or ~~$1.06~~a ~~per~~part ~~diluted~~of their aggregate 50% share ~~for~~of the ~~six~~liability ~~months~~would ~~ended~~we ~~June 30~~be liable, and then only to the extent that either of them could not satisfy their joint and several ~~2001~~indemnity obligations to us.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity is cash flows from operations. Additionally, at June 30, 2002, we had available $100 million under our $100 million Senior Revolving Credit Facility (the “Revolver”). We believe that cash flows generated from operations and the available borrowing capacity under the Revolver will be sufficient to fund our operations and meet our obligations to our employees, vendors and creditors for at least the next 12 to 24 months. Our sources of cash flow are primarily from revenue participation, priority distribution and sales commission payments

~~received~~Because ~~from~~liability ~~SBC~~for ~~and~~violations ~~Sprint.~~of ~~These~~the ~~payments~~antitrust ~~are~~laws ~~all~~is ~~directly~~joint ~~dependent~~and onseveral and because the rights ~~value~~and ofobligations ~~advertising~~relating ~~sold~~to ~~and~~the ~~can~~Amended beJDA ~~impacted~~are ~~by,~~based ~~among~~on ~~other~~contractual ~~factors~~relationships, the failure of ~~competition~~the inVNU ~~our~~Parties ~~markets,~~to ~~general~~fulfill ~~economic~~their ~~conditions~~obligations ~~and~~under the ~~level~~Amended ofJDA ~~demand~~could result in the other ~~for~~parties ~~yellow~~bearing ~~pages~~all ~~advertising~~or a share of the IRI Liabilities. ~~Management~~Joint ~~believes~~and ~~that~~several ifliability ~~advertising~~for ~~sales~~the IRI ~~were~~Liabilities means that even where more than one defendant is determined to ~~decline~~have bybeen ~~10%~~responsible for an alleged wrongdoing, ~~cash~~the ~~flow~~plaintiff ~~from~~can ~~operations,~~collect ~~together~~all ~~with~~or part of the ~~available borrowing~~judgment ~~capacity~~from ~~under~~just one of the ~~Revolver,~~defendants. ~~would~~This ~~still~~is betrue ~~sufficient~~regardless toof ~~fund~~whatever ~~our~~contractual allocation of responsibility the ~~operations~~defendants and ~~meet~~any ~~our~~other ~~obligations~~indemnifying toparties ~~our~~may ~~employees~~have made, ~~vendors~~including ~~and~~the ~~creditors~~allocations ~~for~~described atabove ~~least~~between the ~~next~~VNU 12Parties, tothe ~~24 months.~~Company, ~~See~~D&B, ~~“Forward-Looking~~Moody’s ~~Information~~and ~~– Use of Cash Flow~~IMS.”

~~In addition~~Accordingly, and as ~~the~~a ~~publisher~~result of the ~~respective~~allocations ~~directories,~~of ~~Sprint~~liability ~~and~~described ~~SBC~~above, ~~are responsible~~in ~~for~~the ~~and~~event ~~consequently control many of~~ the ~~critical functions and~~VNU ~~decisions~~Parties ~~that~~default ~~can~~on ~~impact~~their ~~our~~obligations ~~results~~under ~~and~~ the ~~results~~Amended ofJDA, ~~DonTech.~~each ~~While~~of itD&B ~~has not~~and ~~historically~~Moody’s ~~been~~will ~~the~~be ~~case,~~jointly and ~~their~~severally ~~respective~~responsible ~~policies,~~for ~~decisions~~the ~~and performance~~payment of ~~their~~any ~~respective~~portion ~~obligations~~of inany ~~these~~judgment ~~areas,~~or insettlement ~~which we have~~ultimately ~~little~~payable orby nothe ~~participation~~Company or(which ~~influence,~~is ~~could~~the ~~have~~defendant ain ~~material~~the ~~adverse~~IRI ~~effect on~~action), ~~our~~which ~~results~~could ofbe ~~operations~~as orhigh ~~financial~~as ~~condition.~~all ~~See “Forward-Looking~~of ~~Information~~the –IRI ~~Dependence on our Business Partners~~Liabilities.”

~~Sprint~~While, as described above, the IRI lawsuit has ~~publicly~~been ~~announced~~dismissed ~~that~~with itprejudice ison ~~considering~~the ~~divesting~~merits, ~~its~~IRI ~~directory~~has ~~publishing~~filed ~~operations~~an appeal. WeAccordingly, dowe ~~not~~are ~~believe~~unable ~~that~~to ~~any~~predict ~~sale~~the outcome of the IRI litigation or ~~change~~the financial incondition ~~control~~of any of the ~~Sprint~~VNU ~~directory~~Parties ~~operations~~or ~~would~~the ~~have~~other adefendants ~~material~~at ~~adverse~~the ~~effect~~time onof ~~our~~any such ~~results~~outcome of(and ~~operations~~hence orwe ~~financial~~cannot ~~condition~~estimate ~~because~~their weability ~~believe~~to ~~all~~pay ofthe ~~our contractual~~IRI ~~rights~~Liabilities ~~related~~pursuant to ~~serving~~the Amended asJDA ~~sales~~or ~~agent~~the judgment or settlement in the ~~Central~~IRI ~~Florida~~action). ~~and~~Nonetheless, while we cannot assure ~~CenDon~~you ~~markets~~as ~~would~~to ~~survive~~the ~~any~~outcome ~~such~~of ~~sale~~this ormatter, ~~change~~management inpresently ~~control.~~believes Inthat ~~addition, our~~the ~~CenDon~~VNU ~~agreements~~Parties ~~specifically~~have sufficient ~~obligate~~financial ~~Sprint~~resources (and ~~any~~borrowing ~~successor)~~capacity to satisfy their obligations under the ~~indemnify~~Amended usJDA ~~against~~and, ~~any~~if ~~material~~they ~~damages~~default, weD&B ~~suffer~~and asMoody’s ahave ~~result~~sufficient offinancial ~~any~~resources ~~changes~~and borrowing incapacity ~~policies,~~to ~~practices~~reimburse ~~and~~us ~~procedures~~for ~~from~~any ~~those~~payments inwe ~~existence~~may atbe ~~the~~required ~~time~~to ~~of the~~make ~~restructuring~~and ofrelated ~~the~~costs ~~CenDon~~we ~~relationship~~may ~~(June 30,~~incur in ~~2000)~~connection with this matter. WeTherefore, ~~believe~~management presently believes that the ultimate ~~this~~resolution ~~indemnity~~of ~~significantly~~this ~~protects~~matter uswould ~~against~~not ~~any~~have ~~potential~~a material adverse ~~effects~~ ~~from~~effect ~~any~~on ~~such~~the ~~sale~~Company’s results of operations, cash flows or ~~change~~financial incondition. ~~control~~Accordingly, ~~with~~no amount in respect toof ~~the~~this ~~CenDon~~matter has ~~markets~~been accrued in our consolidated financial statements.

~~During~~Tax ~~the first six months of 2002, we generated $28.2 million of cash flow~~Matters from operations compared to $34.7 million during the first six months of 2001. The decrease of $6.5 million was primarily due to the net effect of payments of $13.1 million related to the restructuring and special charge recorded in 2001 (see Note 5 in Item 1 “Financial Statements”) and $4.0 million less in cash received from partnerships and joint ventures. Cash received from partnerships and joint ventures in 2001 included $6.3 million from the CenDon Partnership as the partnership continued to collect its receivables and distribute cash to the partners. There were no cash distributions from the CenDon Partnership received in 2002. These decreases were partially offset by lower tax payments of $5.3 million due to timing and payments of $5.2 million in 2001 for severance and other costs related to the disposition of the Bell Atlantic, Cincinnati and Get Digital Smart businesses in 2000. We expect cash outflows related to our 2001 restructuring and special charge to be approximately $1.0 million to $1.5 million for the remainder of the year, mainly relating to the idle leased space in the Raleigh facility and severance. The majority of the announced layoffs related to the expiration of the pre-press publishing contract will occur in the fourth quarter. There are no payments remaining for the executive management transition.

~~Cash~~D&B ~~used~~entered ininto ~~investing~~global ~~activities~~tax-planning ~~for~~initiatives in the ~~first~~normal ~~half~~course of ~~2002~~its ~~was $1.3 million~~business, primarily ~~which~~through ~~consisted~~tax-free restructurings of ~~fixed~~both ~~assets~~its foreign and ~~computer~~domestic ~~software~~operations ~~purchases.~~(collectively, ~~Cash used in~~“Legacy ~~investing~~Tax ~~activities~~Matters”). ~~for~~The ~~the~~IRS ~~prior~~is ~~year~~currently ~~period~~disputing ~~was~~certain ~~$3.5 million,~~tax ~~which~~positions ~~included a~~taken ~~$1.6 million~~with ~~investment~~respect into ~~ChinaBig~~the Legacy inTax ~~accordance~~Matters. ~~with~~The ~~our~~status ~~contractual obligations.~~of ~~This~~these ~~payment~~Legacy ~~represented~~Tax ~~our~~Matters ~~final~~is ~~required~~summarized ~~investment~~below, inincluding the ~~ChinaBig.~~settlement Weof ~~currently~~the ~~have~~matter nodescribed ~~material~~below ~~commitments~~under ~~for~~“Royalty ~~investment~~Expense ~~spending~~Deductions ~~or capital~~– ~~expenditures~~1993-1997.”

~~Net~~Pursuant ~~cash~~to ~~used~~a inseries ~~financing~~of ~~activities~~tax ~~was~~sharing ~~$39.2 million~~and ~~for~~other ~~the~~agreements ~~first~~(collectively, ~~half~~“Tax ofSharing Agreements”) ~~2002~~relating ~~compared~~ to ~~$79.0 million in~~ the ~~first~~spin-offs ~~half~~and ofseparations ~~2001.~~referred ~~The~~to ~~decrease~~above, inIMS ~~cash used~~and ~~for~~NMR ~~financing~~are ~~activities~~jointly isand ~~primarily~~severally liable ~~due~~for, toand ~~the~~must ~~repurchase~~pay ofone-half ~~$32.5 million~~ of, ~~our~~and ~~common~~D&B ~~stock~~and ~~during~~Moody’s ~~the~~are ~~first~~jointly ~~half~~and ofseverally ~~2001~~liable ~~compared~~for, ~~to no~~and ~~repurchases~~must ofpay ~~our common stock during~~ the ~~first~~other half of, ~~2002.~~any Asamounts ~~previously reported,~~resulting ~~certain~~from ~~telecommunications~~the ~~companies~~Legacy ~~have~~Tax ~~publicly~~Matters ~~announced~~summarized ~~their~~below ~~intent~~under to“Royalty ~~consider~~Expense orDeductions ~~explore~~1993-1997” ~~divesting~~and ~~their~~D&B ~~respective~~and ~~directory~~Moody’s ~~publishing operations.~~are Wejointly ~~intend~~and toseverally ~~carefully evaluate these potential growth~~liable ~~opportunities~~for ~~within~~all ~~our~~amounts ~~line~~resulting offrom ~~business.~~the ~~During~~Legacy ~~our~~Tax ~~evaluation~~Matters ofsummarized ~~these opportunities,~~below weunder ~~have~~“Amortization ~~suspended our share repurchase programs~~ and ~~currently~~ ~~intend~~Royalty toExpense ~~apply~~Deductions/Royalty ~~excess~~Income ~~cash flow to repay debt. See “Forward Looking Information~~ — ~~Use of Cash Flow~~1997-2005.”

Under the terms of the 1998 Distribution, D&B agreed to assume the defense and to indemnify us against any tax liability that may be assessed against us and any related costs and expenses that we may incur in connection with any of these Legacy Tax Matters. Also, as required by those agreements, Moody’s has agreed to be jointly and severally liable with D&B for the indemnity obligation to us. Under the terms of certain of the other spin-offs and separations, D&B and Moody’s have, between each other, agreed to be financially responsible for 50% of any potential liabilities that may arise to the extent such potential liabilities are not directly attributable to each party’s respective business operations. Only if D&B and Moody’s were unable to bear all or a part of these liabilities, would we be liable, and then only to the extent that both of them could not satisfy their joint and several indemnity obligations to us.

~~Item 3.~~While ~~Quantitative~~we cannot assure you as to the outcome of these Legacy Tax Matters (other than the settled portion of the Royalty Expense Matter), management presently believes that D&B and ~~Qualitative~~Moody’s ~~Disclosure~~have sufficient ~~About~~financial ~~Market~~resources, ~~Risk~~borrowing capacity and, where applicable, indemnity rights against IMS and NMR (who succeeded to Cognizant’s indemnity obligations under the Cognizant Distribution) and IMS and NMR in turn have sufficient financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, so as to reimburse us for any payments we may be required to make and related costs we may incur in connection with these Legacy Tax Matters. Therefore, management presently believes that the ultimate resolution of these Legacy Tax Matters would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

~~Risk~~Royalty ~~Management~~Expense Deductions – 1993 – 1997

WeBeginning ~~borrow~~in ~~funds~~the ~~under~~second ~~our~~quarter ~~Senior~~of ~~Secured~~2003, ~~Term~~D&B ~~Facilities~~received (~~“Term~~on ~~Facilities”~~our behalf) ~~and~~ ~~Revolver~~a atseries ~~prevailing~~of ~~short-term~~communications from ~~rates.~~the ToIRS ~~mitigate~~proposing ~~our~~adjustments ~~exposure~~with respect to ~~fluctuating~~ ~~short-term~~a ~~interest~~partnership ~~rates,~~transaction weentered ~~have~~into anin ~~outstanding interest rate~~1993. ~~swap~~Specifically, ~~with~~the aIRS ~~notional~~proposed ~~value~~to ofdisallow ~~$75 million~~certain ~~whereby~~royalty weexpense ~~pay~~deductions aclaimed ~~fixed~~by ~~rate~~D&B ~~and~~on its ~~receive~~1993 athrough ~~variable~~1997 ~~rate~~tax ~~based~~returns. onThe ~~3-month~~IRS ~~LIBOR.~~also Inseparately ~~June~~challenged ~~2002,~~the antax ~~interest~~treatment ~~rate~~of certain ~~swap~~royalty ~~with~~payments areceived ~~notional~~by ~~value~~that ofpartnership ~~$50 million expired~~ and ~~due~~proposed toreallocating ~~the~~certain ~~reduced~~partnership ~~level~~income ofto ~~indebtedness,~~D&B. weThese ~~did~~matters ~~not,~~are ~~nor~~collectively doreferred ~~we presently intend~~ to ~~replace~~herein as the ~~interest rate~~Royalty ~~swap~~Expense Matter.

~~The~~We ~~outstanding~~understand ~~interest~~that ~~rate~~D&B ~~swap~~estimates ~~exposes~~that usthe todisallowance ~~credit~~of ~~risk~~the in1993 ~~the~~and ~~event~~1994 ~~that~~royalty expense wedeductions ~~are~~would result in a ~~net~~loss ~~gain~~to ~~position~~it ~~and~~of ~~the~~approximately ~~counterparty~~$5.0 million toin ~~the~~pending ~~agreement~~tax ~~does~~refunds ~~not,~~and orthat ~~can~~the ~~not~~additional ~~meet~~tax ~~their~~liability ~~obligation.~~to ~~The~~it ~~notional~~with ~~amount~~respect ~~is used~~ to ~~measure interest~~(a) the todisallowance beof ~~paid~~the or1995 ~~received~~ and ~~does~~1996 royalty ~~not~~expense ~~represent~~deductions ~~the~~could ~~amount~~be ofup ~~exposure~~ to ~~credit~~approximately ~~loss~~$47.4 million ~~The~~(tax, ~~loss~~interest ~~would~~and bepenalties, net ~~limited~~of totax ~~the~~benefits) ~~amount~~and ~~that~~(b) its ~~would~~share ~~have~~of ~~been received,~~the ifreallocated ~~any,~~partnership ~~over~~income ~~the~~could ~~remaining~~be ~~life~~up ofto approximately ~~the~~$23.6 million ~~swap~~(tax, ~~agreement.~~interest Atand ~~June 30~~penalties, ~~2002,~~ wenet ~~were~~of intax abenefits). ~~net~~We ~~loss~~understand ~~position~~that D&B ~~(see~~believes ~~“Market~~that ~~Risk~~the ~~Sensitive~~position ~~Instruments” below),~~of ~~and~~the ~~therefore,~~IRS ~~were~~regarding ~~not~~the ~~exposed~~partnership toincome ~~credit~~is ~~risk.~~inconsistent ~~The~~with ~~counterparty~~its position with respect to the ~~swap~~same isroyalty aexpense ~~major~~deductions ~~financial~~described ~~institution~~above and, ~~had~~therefore, wethe IRS ~~been~~would inbe aunlikely ~~net~~to ~~gain position,~~prevail weon ~~would~~both ~~expect~~positions. ~~this~~We ~~counterparty~~understand tothat beD&B ~~able~~has tofiled ~~perform~~a ~~its~~protest ~~obligations~~with ~~under~~respect to the ~~swap.~~1993 Weand ~~use~~1994 ~~derivative~~tax ~~financial~~refunds, ~~instruments~~and ~~for hedging~~intends ~~purposes~~to ~~only~~attempt ~~and~~to ~~not~~resolve ~~for~~this ~~trading~~matter orwith the ~~speculative~~IRS ~~purposes~~before proceeding to litigation, if necessary.

~~Market~~In ~~Risk~~July 2005, ~~Sensitive~~we ~~Instruments~~(as the taxpayer of record) entered into a settlement agreement with the IRS resolving the disallowance of the 1995 and 1996 royalty expense deductions portion of the Royalty Expense Matter. Under the terms of the settlement, the aggregate tax liability will be approximately $56.0 million (including interest and penalties) for 1995 and $86.0 million (including interest and penalties) for 1996, subject to final bill(s) from the IRS, which we expect to be consistent with prior computations it has provided to D&B.

~~The~~While ~~interest~~this ~~rate~~matter ~~swap~~ has now been ~~designated~~settled ~~as a cash flow hedge. In accordance~~ with ~~FAS~~the ~~133~~IRS, ~~the~~each ~~fair value~~ of the ~~swap~~relevant isparties ~~recognized~~have inconsented ~~other comprehensive~~to ~~income, a component of shareholders’ equity. The fair value of~~ the ~~swap~~settlement ~~was based~~without onprejudice ~~quoted~~to ~~market~~certain ~~prices.~~claims Atthey ~~June 30,~~may ~~2002,~~have ~~the~~against ~~unrealized~~each ~~fair~~other ~~value, which~~based isupon the ~~difference between what we would have to pay to terminate the~~ ~~swap,~~prior ~~and~~tender ~~the book value~~ of the ~~swap,~~initial ~~was~~settlement aagreement ~~loss~~by ofus ~~$2.5 million~~and ~~($1.6 million, after~~D&B ~~tax).~~and ~~This loss was recognized in~~ the ~~consolidated~~refusal ~~balance~~to ~~sheet~~consent asthereto ~~other~~by ~~non-current~~IMS ~~liabilities~~ and ~~accumulated~~NMR ~~other~~during ~~comprehensive loss~~2004, ~~a component~~as ofdisclosed ~~shareholders’~~in ~~deficit~~prior periodic reports.

IMS has alleged various breaches of our and D&B’s obligations under the Tax Sharing Agreements related to D&B’s management and attempted settlement of this matter with the IRS. In addition to “reserving its rights” against us and D&B, IMS has urged NMR (which is in direct contractual privity with us) to assert breaches of contract and to terminate the indemnity obligations of IMS and NMR under the Tax Sharing Agreements generally.

We and our legal counsel, and we understand D&B and their legal counsel, believe that neither NMR nor IMS have any right or the legal basis to terminate their indemnity obligations under the Tax Sharing Agreements, and that any attempt by them to do so will be found to be without merit, although we cannot assure you with respect to the ultimate outcome of that issue or with respect to the timing of its resolution.

The 1993, 1994, and 1997 royalty expense deduction portions of the Royalty Expense Matter remain pending before the IRS.

~~PART~~Amortization ~~II.~~and ~~OTHER~~Royalty ~~INFORMATION~~Expense Deductions/Royalty Income – 1997 – 2005

~~Item 1~~In the fourth quarter of 2003, D&B received (on our behalf) IRS notices of proposed adjustment with respect to a partnership transaction entered into in 1997. ~~Legal~~The ~~Proceedings~~IRS asserted that certain amortization expense deductions claimed by D&B on its 1997 and 1998 tax returns should be disallowed.

~~Reference~~In isApril 2004, ~~made~~D&B toreceived ~~the~~(on ~~discussion~~our ofbehalf) ~~legal~~proposed ~~proceedings~~notices ~~under~~of ~~Item 3~~deficiency offrom ~~Part~~the IIRS, proposing inadjustments ~~our~~with ~~Annual~~respect ~~Report~~to onthe ~~Form 10-K~~same ~~for~~1997 ~~the~~partnership ~~year~~transaction ~~ended~~consistent ~~December 31,~~with ~~2001~~the notices of ~~(“10-K”)~~proposed adjustment. AsWe ofunderstand ~~June 30,~~that ~~2002,~~D&B ~~there~~filed ~~have~~protests ~~been~~relating noto ~~material~~this ~~changes~~matter infor the 1997 and ~~information~~1998 tax years with ~~respect~~the toIRS ~~legal~~Office ~~proceedings~~of ~~from~~Appeals. ~~that~~During ~~set~~the ~~forth~~third inquarter ~~the~~of ~~10-K.~~2004, D&B was informed ~~See~~by ~~also~~the ~~Note~~IRS 8Office of Appeals that the ~~Notes~~1997 toand ~~the~~1998 ~~Consolidated~~tax ~~Financial~~years ~~Statements~~were inbeing ~~Item 1~~returned to the Examination Division of ~~Part~~the IIRS offor ~~this~~further ~~Quarterly~~development ~~Report~~of onthe ~~Form 10-Q~~issues.

WeIn ~~are~~the ~~also~~second ~~involved~~quarter inof ~~certain~~2005, ~~legal~~D&B ~~proceedings~~received ~~incidental~~(on our behalf) IRS notices of proposed adjustment for 1999 through 2002, with respect to the ~~normal conduct~~same of1997 ~~our~~partnership ~~business~~transaction referred to above. ~~Although~~The ~~there~~IRS again ~~can~~asserted bethat nocertain ~~assurances,~~amortization weexpense ~~presently~~deductions claimed by D&B on its 1999 through 2002 ~~believe~~tax returns should be disallowed. We understand that D&B anticipates that the ~~outcome~~IRS will issue proposed notices of ~~such~~deficiency ~~legal~~for ~~proceedings~~1999 ~~will~~through ~~not~~2002, ~~have~~reflecting athe ~~material~~adjustments proposed in the ~~adverse~~notices ~~effect~~of onproposed ~~our~~adjustment ~~results~~received ofduring ~~operations~~the orsecond ~~financial~~quarter ~~condition~~of 2005.

~~Item 4~~In addition, the IRS has asserted that royalty expense deductions, claimed by D&B on its tax returns for 1997 through 2002 for royalties paid to the partnership should be disallowed. ~~Submission~~The IRS also has asserted that the receipt of ~~Matters~~these same royalties by the partnership should be reallocated to aand ~~Vote~~reported as royalty income by D&B, including the portions of ~~Security~~the ~~Holders~~royalties that were allocated to third party partners in the partnership, and, thus, included in their taxable income. We understand that D&B believes that the IRS’ stated positions with respect to the treatment of the royalty expense and royalty income are mutually inconsistent, making it unlikely that the IRS will prevail on both of the positions. We also understand that D&B nonetheless believes that the IRS may seek to issue notices with respect to both of these inconsistent positions.

~~Our~~In ~~Annual~~addition ~~Meeting~~to ofthe ~~Stockholders~~foregoing, ~~(“Meeting”)~~and ~~was held~~ in ~~White~~connection ~~Plains,~~with ~~N.Y. on~~the ~~May 1,~~notices ~~2002.~~received Atduring the ~~Meeting~~second quarter of 2005, the ~~Company’s~~IRS ~~stockholders~~has ~~elected~~asserted ~~the~~that ~~two Class III~~certain ~~Directors~~business ~~nominated~~expenses ~~for~~incurred ~~election~~ by ~~the~~D&B ~~Board~~during of1999 ~~Directors~~through 2002 toshould ~~serve three~~be capitalized and amortized over a 15-year ~~terms~~period, asif, ~~follows:~~but only if, the proposed adjustments described above are not sustained.

			Votes
Name	Votes For		Withheld
Peter J. McDonald		26,435,287		296,095
Frank R. Noonan		26,556,024		175,358

As a result, we understand that D&B estimates that after taking into account certain other tax benefits resulting from the IRS’ position on the partnership it is unlikely that there will be any additional cash tax payments due in addition to the amounts noted above related to the amortization expense deduction.

~~William~~We G.understand ~~Jacobi~~that ~~did~~D&B ~~not~~estimates ~~stand~~that ~~for~~its ~~re-election~~additional ~~and~~tax ~~therefore~~liability ~~the~~as ~~Board~~a result of the disallowance ~~Directors~~of ~~now~~the ~~comprises~~1997 ~~seven~~through ~~members.~~2002 ~~The~~amortization ~~other~~deductions ~~members~~and the disallowance of ~~our~~such ~~Board~~deductions ofclaimed ~~Directors~~from ~~(Kenneth~~2003 Gto date could be up to $64.4 million ~~Campbell~~(tax, ~~Robert~~interest ~~Kamerschen~~and penalties, ~~Carol~~net Jof tax benefits). This ~~Parry~~transaction is scheduled to expire in 2012 and, ~~David~~unless C.earlier terminated, based on current ~~Swanson~~interest rates and ~~Barry~~tax ~~Lawson~~rates, ~~Williams)~~additional ~~were~~tax ~~not~~exposure ~~subject~~would toincrease ~~re-election~~at bya rate of approximately ~~stockholders~~$2.1 million ~~this~~per ~~year~~quarter ~~and~~(including ~~continue~~potential inpenalties) ~~office~~as future amortization expenses are deducted.

AtIn the ~~Meeting~~event the IRS were to prevail on both positions with respect to the royalty expense and royalty income, which D&B believes unlikely, D&B estimates that the ~~Company’s~~additional ~~stockholders~~tax ~~also~~liability ~~ratified~~to it as a result of the ~~appointment~~disallowance of the 1997 through 2002 royalty expense deductions, the ~~PricewaterhouseCoopers~~disallowance ~~LLP~~of such deductions claimed from 2003 to date and the inclusion of the reallocated royalty income for all relevant years could be up to $143.3 million (~~“PwC”~~tax, interest and penalties, net of tax benefits), which would be in addition to ~~serve~~the as$64.4 million ~~our~~noted ~~independent~~above ~~accountants~~related ~~for~~to the ~~2002~~amortization asexpense ~~follows:~~deduction.

		Votes For				Votes Against				Abstentions
Ratification of the appointment of PwC			26,053,915				660,394				17,073

We understand that D&B is attempting to resolve these matters with the IRS before proceeding to litigation, if necessary. If D&B were to challenge, at any time, any of these IRS positions for years 1997 through 2002 in U.S. District Court or the U.S. Court of Federal Claims, rather than in U.S. Tax Court, the disputed amounts for each applicable year would need to be paid in advance for the Court to have jurisdiction over the case.

~~Item 6. Exhibits and Reports on Form 8-K~~Conclusion

(As a result of our assessment of our exposure in these matters relating to our prior relationship with D&B and its former affiliates, especially in light of our indemnity arrangements with D&B and Moody’s (and the VNU Parties with respect to the IRI matter), ~~Exhibits:~~and their respective financial resources, borrowing capacity and, in the case of certain Legacy Tax Matters, indemnity rights against IMS and NMR, and in turn IMS and NMR’s respective financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, no material amounts have been accrued in our consolidated financial statements for any of these D&B-related litigation and tax matters.

Exhibit No.		Document
3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the three months ended March 31, 1999, Commission File No. 001-07155)
3.2		By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the three months ended March 31, 1999, Commission File No. 001-07155)
3.3		Certificate of Incorporation of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)
3.4		By-laws of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287)
4.1		Indenture dated as of June 5, 1998 between R.H. Donnelley Inc., as Issuer, the Company, as Guarantor, and the Bank of New York, as Trustee, with respect to the 91/8% Senior Subordinated Notes due 2008 (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287)
4.2		Form of the 91/8% Senior Subordinated Notes due 2008 (included in Exhibit 4.1)
4.3		Company Guarantee (included in Exhibit 4.1)
4.4		Rights Agreement, dated as of October 27, 1998 between R.H. Donnelley Corporation and First Chicago Trust Company (incorporated by reference to Exhibit 4 to the Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on November 5, 1998, Registration No. 001-07155)
4.5		Amendment No. 1 to Rights Agreement dated as of February 26, 2001 by and among R.H. Donnelley Corporation, First Chicago Trust Company of New York (as initial Rights Agent) and The Bank of New York (as successor Rights Agent) (incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.1		Form of Distribution Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.2 to the Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed on June 30, 1998, Commission File No. 001-07155)
10.2		Form of Tax Allocation Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.3 to the Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed on June 30, 1998, Commission File No. 001-07155)

Other Matters

The Company is exposed to potential defamation and breach of privacy claims arising from our publication of directories and our methods of collecting, processing and using advertiser and telephone subscriber data. If such data was determined to be inaccurate or if data stored by us was improperly accessed and disseminated by us or by unauthorized persons, the subjects of our data and users of that data we collect and publish could submit claims against the Company. Although to date we have not experienced any material claims relating to defamation or breach of privacy, we may be party to such proceedings in the future that could have a material adverse effect on our business.

We are also involved in other legal proceedings, claims and litigation arising in the ordinary conduct of our business. Although we cannot assure you of any outcome, management presently believes that the outcome of such legal proceedings will not have a material adverse effect on our results of operations or financial condition and no material amounts have been accrued in our consolidated financial statements with respect to these matters.

Exhibit No.		Document
10.3		Form of Employee Benefits Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.4 to the Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed on June 30, 1998, Commission File No. 001-07155)
10.4		Form of Intellectual Property Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.5 to the Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed on June 30, 1998, Commission File No. 001-07155)
10.5		Form of Amended and Restated Transition Services Agreement between the Company (f/k/a The Dun & Bradstreet Corporation), The New Dun & Bradstreet Corporation, Cognizant Corporation, IMS Health Incorporated, ACNielsen Corporation and Gartner Group, Inc. (incorporated by reference to Exhibit 99.9 to the Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed on June 30, 1998, Commission File No. 001-07155)
10.6		Credit Agreement among the Company, R.H. Donnelley Inc., The Chase Manhattan Bank, as Administrative Agent and the Lenders party thereto (incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287)
10.7		First Amendment to Credit Agreement, dated as of March 4, 1999, among the Company, R.H. Donnelley Inc., The Chase Manhattan Bank, as Administrative Agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the three months ended March 31, 1999, Commission File No. 001-07155)
10.8		DonTech II Partnership Agreement, effective August 19, 1997, by and between R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) and Ameritech Publishing of Illinois, Inc. (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)
10.9		Revenue Participation Agreement, dated as of August 19, 1997, by and between APIL Partners Partnership and R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)
10.10		Master Agreement, executed August 19, 1997, by and among R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation), the Company (f/k/a The Dun & Bradstreet Corporation), The Am-Don Partnership a/k/a DonTech, DonTech II, Ameritech Publishing, Inc., Ameritech Publishing of Illinois, Inc., Ameritech Corporation, DonTech I Publishing Company LLC and the APIL Partners Partnership (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)
10.11		Exclusive Sales Agency Agreement, effective August 19, 1997, between APIL Partners Partnership and DonTech II (incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)

12. Guarantees

R.H. Donnelley Inc. is a direct wholly owned subsidiary of the Company and the issuer of the Senior Notes and Subordinated Notes. The Company and the direct and indirect 100% owned subsidiaries of R.H. Donnelley Inc. jointly and severally, fully and unconditionally, guarantee these debt instruments. The Holdco Notes were issued as of January 14, 2005 and are not guaranteed by any of the Company’s subsidiaries. At June 30, 2005 and December 31, 2004, R.H. Donnelley Inc.’s direct wholly owned subsidiaries were R.H. Donnelley Publishing & Advertising, Inc., R.H. Donnelley APIL, Inc., DonTech Holdings, LLC, The DonTech II Partnership, R.H. Donnelley Publishing & Advertising of Illinois Holdings, LLC, R.H. Donnelley Publishing & Advertising of Illinois Partnership and Get Digital Smart.com Inc.

As of June 30, 2005, R.H. Donnelley Corporation had issued and outstanding 100,301 shares of its Preferred Stock. See Note 7, “Redeemable Convertible Preferred Stock and Warrants,” for a further description of the terms of the Preferred Stock and the related dividend requirements. See Note 11, “Litigation,” for a description of various legal proceedings in which the Company is involved and related contingencies.

R.H. Donnelley Corporation receives dividends from R.H. Donnelley Inc. for the payment of income taxes and certain other public company matters. Dividends in these periods were not material.

In general, substantially all of the net assets of the Company and its subsidiaries are restricted from being paid as dividends to any third party, and our subsidiaries are restricted from paying dividends, loans or advances to R.H. Donnelley Corporation with very limited exceptions, under the terms of our Credit Facility. See Note 6, “Long-Term Debt,” for a further description of our debt instruments.

Exhibit No.		Document
10.12		Second Amended and Restated Partnership Agreement, effective as of August 19, 1997, by and between R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) and Ameritech Publishing of Illinois (incorporated by reference to Exhibit 10.14 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)
10.13		Agreement for Publishing Services, dated as of January 1, 2002 between Ameritech Publishing Inc. and R.H. Donnelley Inc. (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2002, Commission File No. 001-07155) (certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to an Application for an Order Granting Confidential Treatment)
10.14*		Limited Liability Company Agreement of CenDon, L.L.C. dated April 27, 2000 between R.H. Donnelley Inc. and Centel Directory Company (certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to an Application for an Order Granting Confidential Treatment)
10.15*		Sales Agency Agreement dated April 27, 2000 among R.H. Donnelley Inc., Centel Directory Company and CenDon, L.L.C.
10.16*		Agreement for Publishing Services dated April 27, 2000 between R.H. Donnelley and CenDon, L.L.C. (certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to an Application for an Order Granting Confidential Treatment)
10.17^		Key Employees’ Performance Unit Plan, as amended and restated (incorporated by reference to Exhibit 10.15 to Amendment No. 3 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 28, 1998, Registration No. 333-59287)
10.18^		1991 Key Employees’ Stock Option Plan, as amended and restated through April 25, 2000 (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2000, Commission File No. 001-07155)
10.19^		Amended and Restated 1998 Directors’ Stock Plan (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, Commission File No. 001-07155)
10.20^		Pension Benefit Equalization Plan (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 001-07155)
10.21^		2001 Stock Award and Incentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 001-07155)
10.22^		2001 Partner Share Plan (incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-8, filed with the Securities and Exchange Commission on April 30, 2001, Registration No. 333-59790)

R.H. Donnelley Corporation

Consolidating Condensed Balance Sheet
June 30, 2005


	R.H. Donnelley			R.H.							Consolidated
	Corp.			Donnelley Inc.		Guarantor					R.H. Donnelley
	(Parent)			(Issuer)		Subsidiaries		Eliminations			Corporation
Assets

Cash and cash equivalents	$	6		$	1,021	$	4,797	$	—		$	5,824
Accounts receivable, net		—			2		448,586		—			448,588
Intercompany receivables		35,878			—		261,537		(297,415	)		—
Deferred directory costs		—			—		100,354		—			100,354
Other current assets		—			125,951		19,915		(112,678	)		33,188

Total current assets		35,884			126,974		835,189		(410,093	)		587,954
Investment in subsidiaries		264,725			1,502,344		—		(1,767,069	)		—
Fixed assets, net		—			37,805		6,069		—			43,874
Other assets		9,772			95,639		32,194		(34,560	)		103,045
Intercompany notes & other receivables		—			1,845,356		—		(1,845,356	)		—
Intangible assets, net		—			—		2,869,151		—			2,869,151
Goodwill		—			—		319,014		—			319,014

Total assets	$	310,381		$	3,608,118	$	4,061,617	$	(4,057,078	)	$	3,923,038


Liabilities, Preferred Stock and Shareholders’ (Deficit) Equity

Accounts payable & accrued liabilities	$	9,960		$	28,314	$	31,628	$	(890	)	$	69,012
Deferred directory revenue		—			—		452,855		—			452,855
Intercompany payables		—			297,415		—		(297,415	)		—
Current portion LTD		—			132,536		111,840		(111,840	)		132,536

Total current liabilities		9,960			458,265		596,323		(410,145	)		654,403

Long-term debt		300,000			2,790,168		—		—			3,090,168
Intercompany notes & other payables		—			—		1,845,356		(1,845,356	)		—
Deferred income taxes, net		—			64,706		103,668		(34,508	)		133,866
Other long-term liabilities		—			30,254		13,926		—			44,180

Redeemable convertible preferred stock		112,807			—		—		—			112,807

Shareholders’ (deficit) equity		(112,386	)		264,725		1,502,344		(1,767,069	)		(112,386	)


Total liabilities, preferred stock and shareholders’ (deficit) equity	$	310,381		$	3,608,118	$	4,061,617	$	(4,057,078	)	$	3,923,038

Exhibit No.		Document
10.23^		Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 99.02 to Registration Statement on Form S-8, filed with the Securities and Exchange Commission on July, 25, 2001, Registration No. 333-65822)
10.24^		Form of Annual Incentive Program Award (incorporated by reference to Exhibit 99.03 to Registration Statement on Form S-8, filed with the Securities and Exchange Commission on July, 25, 2001, Registration No. 333-65822)
10.25^		Form of Performance Unit Program Award (incorporated by reference to Exhibit 99.04 to Registration Statement on Form S-8, filed with the Securities and Exchange Commission on July, 25, 2001, Registration No. 333-65822)
10.26^		Deferred Compensation Plan (incorporated by reference to Exhibit 4.01 to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on November 24, 1999, Registration No. 333-91613)
10.27^		Amended and Restated Employment Agreement dated as of December 27, 2001 between the Company and Frank R. Noonan (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 001-07155)
10.28^		Amended and Restated Employment Agreement dated as of December 27, 2001 between the Company and Philip C. Danford (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 001-07155)
10.29^*		Employment Agreement effective as of May 1, 2002 between the Company and David C. Swanson
10.30^*		Employment Agreement effective March 1, 2002 between the Company and Steven M. Blondy
10.31^		Employment Agreement dated as of September 28, 1998 between the Company and Frank M. Colarusso (incorporated by reference to Exhibit 10.32 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.32^		Amendment No. 1 to Employment Agreement dated as of July 27, 2000 between the Company and Frank M. Colarusso (incorporated by reference to Exhibit 10.33 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.33^		Amendment No. 2 to Employment Agreement dated as of February 27, 2001 between the Company and Frank M. Colarusso (incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.34^		Employment Agreement dated as of September 26, 2000 between the Company and William C. Drexler (incorporated by reference to Exhibit 10.35 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)

R.H. Donnelley Corporation

Consolidating Condensed Balance Sheet
December 31, 2004


	R.H.
	Donnelley		R.H.							Consolidated
	Corp.		Donnelley Inc.		Guarantor					R.H. Donnelley
	(Parent)		(Issuer)		Subsidiaries		Eliminations			Corporation
Assets
Cash and cash equivalents	$	—	$	6,008	$	4,747	$	—		$	10,755
Accounts receivable, net		—		—		455,433		—			455,433
Deferred directory costs		—		—		155,959		(39,442	)		116,517
Other current assets		—		18,456		693,933		(671,785	)		40,604

Total current assets		—		24,464		1,310,072		(711,227	)		623,309

Investment in subsidiaries		234,096		1,895,478		—		(2,129,574	)		—
Fixed assets, net		—		31,125		6,562		(1	)		37,686
Other assets		—		101,061		1,567		—			102,628
Notes receivable		—		2,124,745		—		(2,124,745	)		—
Intangible assets, net		—		—		2,905,026		304			2,905,330
Goodwill		—		—		309,969		—			309,969


Total assets	$	234,096	$	4,176,873	$	4,533,196	$	(4,965,243	)	$	3,978,922


Liabilities, Preferred Stock and Shareholders’ Equity

Accounts payable and accrued liabilities	$	—	$	366,086	$	45,091	$	(330,815	)	$	80,362
Deferred directory revenue		—		—		381,424		—			381,424
Current portion LTD		—		162,011		111,840		(111,840	)		162,011

Total current liabilities		—		528,097		538,355		(442,655	)		623,797

Long-term debt		—		3,314,522		2,012,905		(2,362,096	)		2,965,331
Deferred income taxes, net		—		70,612		53,366		(5,158	)		118,820
Other long-term liabilities		—		29,546		33,092		(25,760	)		36,878

Redeemable convertible preferred stock		216,111		—		—		—			216,111

Shareholders’ equity		17,985		234,096		1,895,478		(2,129,574	)		17,985

Total liabilities, preferred stock and shareholders’ equity	$	234,096	$	4,176,873	$	4,533,196	$	(4,965,243	)	$	3,978,922

Exhibit No.		Document
10.35^		Amendment No. 1 to Employment Agreement dated as of February 27, 2001 between the Company and William C. Drexler (incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.36^		Employment Agreement dated as of January 1, 2001 between the Company and Robert J. Bush (incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.37^		Amendment No. 1 to Employment Agreement dated as of February 27, 2001 between the Company and Robert J. Bush (incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
10.38^		Separation Agreement and Release dated as of March 15, 2001 between the Company and Judith A. Norton (incorporated by reference to Exhibit 10.29 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
21		Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 001-07155)
99.1*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2002 by David C. Swanson, Chief Executive Officer
99.2*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2002 by Steven M. Blondy, Senior Vice President and Chief Financial Officer

R.H. Donnelley Corporation

*Consolidating ~~Filed~~Condensed ~~herewith~~Statement ^of ~~Management~~Operations For ~~contract~~the orThree ~~compensatory~~Months ~~plan~~Ended June 30, 2005

(b) Reports on Form 8-K: None


	R.H.												Consolidated
	Donnelley			R.H.									R.H.
	Corp.			Donnelley Inc.			Guarantor						Donnelley
	(Parent)			(Issuer)			Subsidiaries			Eliminations			Corporation
Net revenue	$	—		$	4,601		$	232,912		$	(4,546	)	$	232,967
Expenses		39			756			145,738			(4,596	)		141,937

Operating income		(39	)		3,845			87,174			50			91,030

Equity earnings in Subsidiaries		23,381			22,995			—			(46,376	)		—
Interest expense, net		(5,354	)		(7,038	)		(45,814	)		—			(58,206	)

Pre-tax income		17,988			19,802			41,360			(46,326	)		32,824
Income tax (benefit) expense		(2,035	)		(3,579	)		18,365			50			12,801

Net income		20,023			23,381			22,995			(46,376	)		20,023
Preferred dividend		(2,919	)		—			—			—			(2,919	)

Income available to common shareholders	$	17,104		$	23,381		$	22,995		$	(46,376	)	$	17,104

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Three Months Ended June 30, 2004


	R.H.			R.H.								Consolidated
	Donnelley			Donnelley								R.H.
	Corp.			Inc.			Guarantor					Donnelley
	(Parent)			(Issuer)			Subsidiaries		Eliminations			Corporation

Net revenue	$	—		$	4,656		$	139,985	$	—		$	144,641
Expenses		—			24,179			63,129		—			87,308
Partnership income		32,674			106,488			28,515		(132,874	)		34,803

Operating income		32,674			86,965			105,371		(132,874	)		92,136
Interest expense, net		—			(37,496	)		—		—			(37,496	)

Pre-tax income		32,674			49,469			105,371		(132,874	)		54,640
Income tax expense		(383	)		16,795			5,171		—			21,583

Net income		33,057			32,674			100,200		(132,874	)		33,057
Preferred dividend		(5,392	)		—			—		—			(5,392	)

Income available to common shareholders	$	27,665		$	32,674		$	100,200	$	(132,874	)	$	27,665

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Six Months Ended June 30, 2005


	R.H.												Consolidated
	Donnelley			R.H.									R.H.
	Corp.			Donnelley Inc.			Guarantor						Donnelley
	(Parent)			(Issuer)			Subsidiaries			Eliminations			Corporation
Net revenue	$	—		$	5,978		$	440,251		$	(5,922	)	$	440,307
Expenses		39			7,778			277,236			(5,972	)		279,081

Operating income		(39	)		(1,800	)		163,015			50			161,226

Equity earnings in Subsidiaries		33,972			41,613			—			(75,585	)		—
Interest expense, net		(9,917	)		(14,030	)		(91,756	)		—			(115,703	)

Pre-tax income		24,016			25,783			71,259			(75,535	)		45,523
Income tax (benefit) expense		(3,753	)		(8,189	)		29,646			50			17,754

Net income		27,769			33,972			41,613			(75,585	)		27,769
Preferred dividend		(6,238	)		—			—			—			(6,238	)

Loss on repurchase of preferred stock		(133,681	)		—			—			—			(133,681	)

(Loss) income available to common shareholders	$	(112,150	)	$	33,972		$	41,613		$	(75,585	)	$	(112,150	)

R.H. Donnelley Corporation

Consolidating Condensed Statement of Operations
For the Six Months Ended June 30, 2004


												Consolidated
	R.H. Donnelley			R.H.								R.H.
	Corp.			Donnelley Inc.			Guarantor					Donnelley
	(Parent)			(Issuer)			Subsidiaries		Eliminations			Corporation
Net revenue	$	—		$	9,866		$	278,582	$	—		$	288,448
Expenses		—			45,767			122,508		—			168,275
Partnership income		61,152			172,699			49,329		(224,479	)		58,701

Operating income		61,152			136,798			205,403		(224,479	)		178,874
Interest expense, net		—			(77,796	)		—		—			(77,796	)

Pre-tax income		61,152			59,002			205,403		(224,479	)		101,078
Income tax (benefit) expense		—			(2,150	)		42,076		—			39,926

Net income		61,152			61,152			163,327		(224,479	)		61,152
Preferred dividend		(10,678	)		—			—		—			(10,678	)

Income available to common shareholders	$	50,474		$	61,152		$	163,327	$	(224,479	)	$	50,474

R.H. Donnelley Corporation

Consolidating Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2005


	R.H.			R.H.
	Donnelley			Donnelley									Consolidated
	Corp.			Inc.			Guarantor						R.H. Donnelley
	(Parent)			(Issuer)			Subsidiaries			Eliminations			Corporation
Cash flow from operating activities	$	(14,313	)	$	207,721		$	1,514		$	(209	)	$	194,713
Cash flow from investing activities		—			(11,995	)		(249	)		209			(12,035	)
Cash flow from financing activities:
Proceeds from issuance of debt, net of costs		291,516			—			—			—			291,516
Borrowings under revolver		—			140,100			—			—			140,100
Repurchase of preferred stock		(277,197	)		—			—			—			(277,197	)
Debt repayments		—			(183,282	)		—			—			(183,282	)
Revolver repayments		—			(161,300	)		—			—			(161,300	)
Other		—			3,769			(1,215	)		—			2,554

Net cash flow from financing activities		14,319			(200,713	)		(1,215	)		—			(187,609	)

Change in cash		6			(4,987	)		50			—			(4,931	)
Cash at beginning of year		—			6,008			4,747			—			10,755

Cash at end of period	$	6		$	1,021		$	4,797		$	—		$	5,824

R.H. Donnelley Corporation

Consolidating Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2004


	R.H.		R.H.
	Donnelley		Donnelley									Consolidated
	Corp.		Inc.			Guarantor						R.H. Donnelley
	(Parent)		(Issuer)			Subsidiaries			Eliminations			Corporation
Cash flow from operating activities	$	—	$	(81,513	)	$	223,739		$	5,234		$	147,460
Cash flow from investing activities		—		(7,893	)		(964	)		—			(8,857	)
Cash flow from financing activities:
Debt repayments		—		(149,466	)		—			—			(149,466	)
Revolver repayments		—		(1,400	)		—			—			(1,400	)
Intercompany transfers		—		237,798			(232,564	)		(5,234	)		—
Other		—		4,268			10,867			—			15,135

Net cash flow from financing activities		—		91,200			(221,697	)		(5,234	)		(135,731	)

Change in cash		—		1,794			1,078			—			2,872
Cash at beginning of year		—		6,900			822			—			7,722

Cash at end of period	$	—	$	8,694		$	1,900		$	—		$	10,594

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

Certain statements contained in this Form 10-Q regarding our future operating results, performance, business plans or 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, words such as “believe”, “expect”, “anticipate”, “should”, “will”, “would”, “planned”, “estimated”, “potential”, “goal”, “outlook”, “could”, and similar expressions, are used to identify such forward-looking statements. All forward-looking statements reflect only our current beliefs and assumptions with respect to our future results, business plans, and prospects, and are based solely on information currently available to us. Accordingly, these statements are subject to significant risks and uncertainties and our actual results, business plans and prospects could differ significantly from those expressed in, or implied by, these statements. We caution readers not to place undue reliance on, and we undertake no obligation to update, other than imposed by law, any forward-looking statements. Such risks and uncertainties are described in detail in our Annual Report on Form 10-K for the year ended December 31, 2004 (“Form 10-K”). Unless otherwise indicated, the terms “Company”, “we”, “us” and “our” refer to R.H. Donnelley Corporation and its direct and indirect wholly owned subsidiaries.

Corporate Overview

We are a leading yellow pages publisher and directional media company. Directional media is where consumers search to find who sells the goods and services they are ready to purchase. We publish Sprint-branded directories in 18 states, with major markets including Las Vegas, Nevada and Orlando and Lee County, Florida, with a total distribution of approximately 18 million serving approximately 160,000 local and national advertisers. We also publish SBC-branded directories in Illinois and Northwest Indiana, with a total distribution of approximately 10 million serving approximately 100,000 local and national advertisers. We also offer online city guides and search web sites in all our Sprint markets under the Best Red Yellow Pages brand at www.bestredyp.com and in the Chicagoland area at www.chicagolandyp.com. We also sell local advertising in Illinois and Northwest Indiana onto www.SMARTpages.com, SBC’s Internet yellow pages platform.

On September 1, 2004, we completed the acquisition of the directory publishing business (“SBC Directory Business”) of SBC Communications, Inc. (“SBC”) in Illinois and Northwest Indiana, including SBC’s interests in The DonTech II Partnership (“DonTech”), a 50/50 general partnership between us and SBC (collectively, the “SBC Directory Acquisition”), for $1.41 billion in cash, after working capital adjustments and the settlement of a $30 million liquidation preference owed to us related to DonTech. The acquisition was consummated pursuant to, and in accordance with, the terms of the Purchase Agreement, dated as of July 28, 2004, as amended, by and among the Company, Ameritech Corporation (“Ameritech”), a direct wholly owned subsidiary of SBC, and Ameritech Publishing, Inc. (“API”), a direct wholly owned subsidiary of Ameritech. The acquisition was accounted for as a purchase business combination and the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The results of the SBC Directory Business are included in our consolidated results from and after September 1, 2004. The acquired SBC Directory Business now operates as R.H. Donnelley Publishing & Advertising of Illinois Partnership, an indirect wholly owned subsidiary of the Company.

On January 3, 2003, we completed the acquisition of the directory business (the “SPA Directory Business”) of Sprint Corporation (“Sprint”) by acquiring all the outstanding capital stock of the various entities comprising Sprint Publishing & Advertising (“SPA”) (collectively, the “SPA Acquisition”) for $2.23 billion in cash. The acquisition was accounted for as a purchase business combination and the purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values on the acquisition date. The results of the SPA Directory Business are included in our consolidated results from and after January 3, 2003. The acquired SPA Directory Business now operates as R.H. Donnelley Publishing & Advertising, Inc., an indirect wholly owned subsidiary of the Company.

Recent Developments

On January 14, 2005, we repurchased approximately 50% of our outstanding 8% redeemable convertible cumulative preferred stock (“Preferred Stock”) from certain investment partnerships affiliated with The Goldman Sachs Group, Inc. (collectively, “the GS Funds”), for $277.2 million in cash. In order to fund this repurchase, on January 14, 2005, we issued $300 million of 6.875% Senior Notes (“Holdco Notes”). See “Liquidity and Capital Resources” below for a further discussion of the financing associated with this transaction. In connection with the Preferred Stock repurchase, we recorded a reduction in earnings available to common shareholders of $133.7 million to reflect the loss on the repurchase of these shares. The excess of the cash paid to the GS Funds over the carrying amount of the repurchased Preferred Stock, plus the amount previously recognized for the beneficial conversion feature (“BCF”) associated with these shares has been recognized as the loss on repurchase. In connection with the issuance of the Holdco Notes, we completed an exchange offer in June 2005.

Segment Reporting

During 2004, we revised our historical segment reporting to reflect the change in our business that resulted from the SBC Directory Acquisition and to reflect how management now reviews and analyzes the business. Our business of publishing yellow pages directories is now conducted in one reportable operating segment. All pre-press publishing services and other ancillary services previously performed on behalf of other publishers are now performed entirely on behalf of the directories we now publish. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits from DonTech and we eliminated our partnership investment in DonTech. Consequently, partnership income was no longer reported commencing on September 1, 2004 and, accordingly, the previously reported DonTech operating segment is no longer applicable.

Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles (“GAAP”) requires management to estimate the effect of various matters that are inherently uncertain as of the date of the financial statements. Each of these estimates varies in regard to the level of judgment involved and its potential impact on the Company’s reported financial results. Estimates are deemed critical when a different estimate could have reasonably been used or when changes in the estimate are reasonably likely to occur from period to period, and could materially impact the Company’s financial condition, changes in financial condition or results of operations. The Company’s significant accounting polices are discussed in Note 2 of the consolidated financial statements included in Item 1 of this Quarterly Report. The critical estimates inherent in these accounting polices are discussed below. Management believes the current assumptions and other considerations used to estimate these amounts in the Company’s consolidated financial statements are appropriate.

Allowance for Doubtful Accounts and Sales Claims

We record our revenue net of an allowance for sales claims. Additionally, we record a provision for bad debts. The provision for bad debts and allowance for sales claims are estimated for each directory based on historical experience. We also evaluate the current condition of our customer balances, bankruptcy filings, any change in credit policy, historical charge-off patterns, recovery rates and other data when determining our allowance for doubtful accounts. We review these estimates periodically to assess whether any additional adjustment is needed based on economic events or other circumstances, including actual experience at the end of the billing and collection cycle with respect to each directory. We believe the allowance for doubtful accounts and sales claims is adequate to cover anticipated losses under current conditions. However, significant deterioration in any of the factors noted above or in the overall economy could materially change these expectations. The provisions for sales claims and doubtful accounts are estimated based on a percentage of revenue.

Pension Benefits

Our pension plan obligations and related assets of the Company’s defined benefit retirement plans and those related to the DonTech employees of the SBC Directory Business are presented in Note 9 of the consolidated financial statements included in Item 1 of this Quarterly Report and Note 10 of the consolidated financial statements included in Item 8 of our Form 10-K. Plan assets consist primarily of marketable equity and debt instruments and are valued using market quotations. Plan obligations and annual pension expense are determined by independent actuaries and through the use of a number of assumptions. Key assumptions in measuring the plan obligations include the discount rate, the rate of future salary increases and the long-term expected return on plan assets. In determining the discount rate, we consider yields on high-quality, fixed-income investments with maturities corresponding to the anticipated timing of the benefit payments. Salary increase assumptions are based upon historical experience and anticipated future management actions. Asset returns are based upon the anticipated average rate of earnings expected on invested funds of the plan over the long-term.

Intangible Assets and Goodwill Valuation and Amortization

Our intangible assets consist of directory services agreements between the Company and each of Sprint and SBC, respectively, established customer relationships and trademarks and trade names, all resulting from the SPA Acquisition and the SBC Directory Acquisition. The intangible assets are being amortized over the period the assets are expected to contribute to the cash flow of the Company, which reflect the expected pattern of benefit. Our recorded goodwill resulted from the SPA Acquisition and the SBC Directory Acquisition and is not subject to amortization but is subject to periodic impairment testing.

The intangible assets are subject to an impairment test in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets (“SFAS 144”), and the goodwill is subject to periodic impairment testing in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The Company reviews the carrying value of its intangible assets for impairment at least annually or more frequently whenever events or circumstances indicate that their carrying amounts may not be recoverable. The impairment test for the intangible assets is performed by comparing the carrying amount of the intangible assets to the sum of the undiscounted expected future cash flows. In accordance with SFAS 144, impairment exists if the sum of the future undiscounted cash flows is less than the carrying amount of the intangible asset, or to its related group of assets. Impairment would result in a write-down of the intangible asset to its estimated fair value based on the discounted future cash flows. Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to which it was assigned to the estimated fair value of the reporting unit. In accordance with SFAS 142, impairment exists if the carrying amount of the reporting unit is less than its estimated fair value. Impairment would result in a write-down equal to the difference between the carrying amount and the estimated fair value of the reporting unit.

We used certain estimates and assumptions in our impairment evaluation, including, but not limited to, projected future cash flows, revenue growth, customer attrition levels, and estimated write-offs. As of June 30, 2005, management believes that there was no impairment to the intangible assets or goodwill. However, significant deterioration in our business, the assumptions underlying the impairment evaluations, or in the overall economy, could result in impairment charges in future reporting periods.

Additionally, management must assess whether the remaining useful lives of the intangible assets represent the period that the intangible assets are expected to contribute to our cash flow. In our assessment process, we used certain estimates and assumptions, including projected future cash flows, customer attrition levels and industry and economic conditions. In accordance with SFAS 142, we evaluate the remaining useful lives annually to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimated remaining useful lives change, the remaining carrying amount of the intangible asset would be amortized prospectively over that revised remaining useful life.

New Accounting Pronouncements

New Accounting Pronouncements. On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (Revised 2004), or Statement 123(R), Share-Based Payment, which is a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. The approach in Statement 123(R) is similar to the approach described in Statement 123; however, Statement 123(R) requires companies to calculate the fair value of all share-based payments to employees, including grants of employee stock options, and amortize that amount over the vesting period as an expense through the statement of operations. Pro forma disclosure, as allowed under Statement No. 123, will no longer be a permitted alternative. Statement 123(R) offers a choice of transition methods including Modified Prospective and Modified Retrospective (to all prior periods or interim periods in year of adoption).

On April 14, 2005, the Securities and Exchange Commission (“SEC”) announced the adoption of a new rule that amends the compliance dates for Statement 123(R). The SEC’s new rule allows companies to implement Statement No. 123(R) at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. The Company currently intends to adopt Statement 123(R) in the third quarter of 2005 using the Modified Retrospective application method, electing to restate the quarterly results of operations for the first and second quarters of 2005. The Company presently estimates that it will recognize a pre-tax charge of $11.0 million for the year ended December 31, 2005 as a result of adopting this Statement. Actual results could differ materially from this estimate upon finalization of certain assumptions and implementation matters underlying the new Statement, including, but not limited to, the forfeiture rate assumption, option exercise patterns and related expected option term and deferred tax accounting.

RESULTS OF OPERATIONS

Three and six months ended June 30, 2005 and 2004

Factors Affecting Comparability

Acquisitions

As a result of the SBC Directory Acquisition and the SPA Acquisition, the related financings and associated purchase accounting, our 2005 reported GAAP results are not comparable to our 2004 reported GAAP results. Under the deferral and amortization method of revenue recognition, the billable value of directories published is recognized as revenue in subsequent reporting periods. However, purchase accounting precluded us from recognizing directory revenue and certain expenses associated with directories that published prior to each acquisition, including all directories published in the month each acquisition was completed. Thus, our reported 2005 and 2004 GAAP results are not indicative of our underlying operating and financial performance. Accordingly, management is presenting adjusted and adjusted pro forma information that, among other things, eliminates the purchase accounting impact on revenue and certain expenses for each acquisition and assumes the SBC Directory Acquisition and related financing occurred at the beginning of 2004. Management believes that the presentation of this adjusted and adjusted pro forma information will help financial statement users better and more easily compare current period underlying operating results against what the combined company performance would more likely have been in the comparable prior period. All of the adjusted and adjusted pro forma amounts disclosed under the caption “Adjusted and Adjusted Pro Forma Amounts and Other Non-GAAP Measures” or elsewhere are non-GAAP measures and are reconciled to the most comparable GAAP measures under that caption below. While we believe the adjusted and adjusted pro forma results reasonably represent results as if the businesses had been combined for the three and six month periods ended June 30, 2005 and 2004, respectively, because of differences in the application of accounting policies and practices between the Company and the acquired entities, management does not believe these adjusted and adjusted pro forma amounts are strictly comparable, nor are they necessarily indicative of results for future periods.

Before the SBC Directory Acquisition, we reported our 50% share of DonTech net income as partnership income in our consolidated statement of operations. Partnership income also included revenue participation income from SBC. Revenue participation income was based on DonTech advertising sales and was recognized when a sales contract was executed with a customer. Upon the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we consolidate all net profits of DonTech and we eliminated our partnership investment. Consequently, commencing on September 1, 2004, we no longer report partnership income. During 2004 until the SBC Directory Acquisition, we earned revenue from pre-press publishing and other ancillary services related to the SBC Directory Business and we continued to report partnership income from our investment in DonTech.

GAAP Reported Results

Net Revenue

The components of our net revenue in the three and six months ended June 30, 2005 and 2004 were as follows:


	Three months Ended June 30,									Six months Ended June 30,
(amounts in millions)	2005			2004			$ Change			2005			2004			$ Change

Gross directory advertising revenue	$	232.3		$	140.3		$	92.0		$	439.2		$	279.2		$	160.0
Sales allowances		(2.2	)		(1.5	)		(0.7	)		(4.3	)		(3.2	)		(1.1	)

Net directory advertising revenue		230.1			138.8			91.3			434.9			276.0			158.9
Pre-press publishing fees		—			4.2			(4.2	)		—			9.0			(9.0	)
Other revenue		2.9			1.6			1.3			5.4			3.4			2.0

Total	$	233.0		$	144.6		$	88.4		$	440.3		$	288.4		$	151.9

Following the SBC Directory Acquisition, substantially all of our revenue is derived from our directory publishing business. Before the SBC Directory Acquisition, DonTech was accounted for under the equity method and we did not recognize revenue with respect to the SBC Directory Business. Our directory advertising revenue is earned primarily from the sale of advertising in yellow pages directories we publish, net of sales allowances. Revenue from directory advertising sales is recognized under the deferral and amortization method, whereby revenue from advertising sales is initially deferred when the directory is published and recognized ratably over the directory’s life, which is typically 12 months. Before the SBC Directory Acquisition, we also earned pre-press publishing and other related fees with respect to services we rendered on behalf of SBC for the SBC-branded directories we now publish. These fees were and other revenue was and is recognized when earned.

Total net revenue in the three and six months ended June 30, 2005 was $233.0 million and $440.3 million, respectively, compared to $144.6 million and $288.4 million, respectively, for the same periods in the prior year. The increase in total net revenue is primarily a result of the SBC Directory Acquisition. Gross directory advertising revenue for the three and six months of 2005 includes $86.5 million and $149.5 million, respectively, in revenues from SBC-branded directories with no comparable revenues for the same periods in 2004. Due to purchase accounting, directory revenue for the three and six months ended June 30, 2005 excluded the amortization of publication sales for SBC-branded directories published before October 2004 under the deferral and amortization method totaling $70.9 million and $116.3 million, respectively, that would have been reported absent purchase accounting. Purchase accounting resulting from the SBC Directory Acquisition will continue to adversely impact reported net revenue during 2005. Purchase accounting resulting from the Sprint Acquisition negatively impacted net revenue for the six months ended June 30, 2004 by $1.1 million due to the exclusion of amortized directory revenue from certain directories in the first quarter of 2004.

Revenue from pre-press publishing and other related services was $4.2 million and $9.0 million for the three and six months ended June 30, 2004, respectively, with no comparable revenue for the three and six months ended June 30, 2005. The decrease in pre-press publishing fees is a result of the Company no longer providing such services to SBC following the SBC Directory Acquisition. We now support internally the SBC-branded directories we publish.

Other revenue includes late fees paid on outstanding customer balances, commissions earned on sales contracts with respect to advertising placed into other publishers’ directories, sales of directories and certain other products and fees from telephone companies for publishing their information pages. Other revenue for the three and six months ended June 30, 2004 included $0.4 million for sales-related computer application services rendered to DonTech on behalf of SBC, which we ceased providing as of the SBC Directory Acquisition.

Expenses

The components of our total expenses for the three and six months ended June 30, 2005 and 2004 were as follows:


	Three months Ended June 30,							Six months Ended June 30,
(amounts in millions)	2005		2004		$ Change			2005		2004		$ Change

Operating expenses	$	106.5	$	56.9	$	49.6		$	208.8	$	110.9	$	97.9
G&A expenses		14.8		15.4		(0.6	)		28.0		28.0		—
D&A expenses		20.6		15.0		5.6			42.3		29.4		12.9

Total	$	141.9	$	87.3	$	54.6		$	279.1	$	168.3	$	110.8

Substantially all expenses are derived from our directory publishing business. Before the SBC Directory Acquisition, DonTech was accounted for under the equity method. We began recognizing expenses related to the SBC Directory Business on September 1, 2004. Certain costs directly related to the selling and production of directories are initially deferred and recognized ratably over the life of the directory. These costs include sales commissions and print, paper and initial distribution costs. All other expenses are recognized as incurred.

Operating Expenses

Total operating expenses for the three and six months ended June 30, 2005 were $106.5 million and $208.8 million, respectively, compared to $56.9 million and $110.9 million, respectively, in the corresponding periods in the prior year. The primary components of the $49.6 million and $97.9 million increase in operating expenses for the three and six-month periods, respectively, are shown below:


	Three Months			Six Months
	Ended June 30,			Ended June 30,
	2005			2005
(amounts in millions)	Change			Change

Expenses recorded in 2005 resulting from the SBC Directory Acquisition	$	27.6		$	56.5
Cost uplift from the SBC transaction		18.7			35.8
Increased digital initiative costs		3.9			6.3
Increased commission and sales costs		1.9			4.5
Cost uplift from the SPA Acquisition recorded in 2004		(0.8	)		(3.5	)
All other		(1.7	)		(1.7	)


Total 2005 increase in operating expenses, compared to 2004	$	49.6		$	97.9

Operating expenses for the three and six months ended June 30, 2005 increased $49.6 million and $97.9 million, respectively, compared to the same period in 2004 primarily as a result of the SBC Directory Acquisition. Expenses of $27.6 million and $56.5 million were incurred to support the SBC business for the three and six months ended June 30, 2005, respectively, including bad debt, commissions, salesperson expenses, printing, distribution, marketing, advertising and other operating expenses. There were no comparable expenses for the three and six months ended June 30, 2004. Similar to the deferral and amortization method of revenue recognition, certain costs directly related to the selling and production of our directories are initially deferred when incurred and recognized ratably over the life of a directory. Due to the elimination of SBC’s deferred costs for all pre-acquisition (including September 2004) directories as required by purchase accounting, our reported operating expenses for the three and six months of 2005 did not include certain expenses associated with those directories totaling approximately $13.8 million and $21.8 million, respectively. Due to these adjustments, directory expenses for the three and six months ended June 30, 2005 include only the amortization of deferred directory costs relating to directories published beginning in October 2004.

As a result of purchase accounting required by GAAP, we recorded the deferred directory costs related to directories that were scheduled to publish subsequent to the SBC Directory Acquisition and SPA Acquisition at their fair value, determined as the estimated billable value of the published directory less (a) the expected costs to complete the directories, and (b) a normal profit margin. We refer to this purchase accounting entry as “cost uplift.” The fair value of these costs was determined to be $81.3 million and $14.8 million for the SBC Directory Acquisition and the SPA Acquisition, respectively. These costs are amortized as operating expenses over the terms of the applicable directories and such amortization totaled $18.7 million and $35.8 million for the three and six months ended June 30, 2005, respectively, relating to the SBC Directory Acquisition (with no comparable expense in 2004), and $0.8 million and $3.5 million for the three and six months ended June 30, 2004, respectively, relating to the SPA Acquisition (with no comparable expense in 2005).

Digital initiative costs were $3.9 million and $6.3 million higher for the three and six months ended June 30, 2005, respectively, compared to the same period in 2004, which reflects increased investment in our internet products, and due to additional internet costs for the newly acquired SBC Directory Business. Commission and sales costs during the three and six months ended June 30, 2005 were $1.9 million and $4.5 million higher, respectively, compared to the corresponding period in 2004, due to favorable sales performance, particularly in certain Sprint markets, and increased support in our SBC markets.

Purchase accounting from the SBC Directory Acquisition will continue to impact reported expenses in 2005. We expect operating expenses in 2005 to be significantly higher than 2004 due to a full year of results from the SBC Directory Business.

General and Administrative Expenses

General and administrative (“G&A”) expenses for the three and six months ended June 30, 2005 were $14.8 million and $28.0 million, respectively, as compared to $15.4 million and $28.0 million, respectively, for the corresponding periods in the prior year. The decrease in general and administrative expenses for the three months ended June 30, 2005 from the prior corresponding period is due to corporate headquarters relocation and related severance costs of $4.8 million that were recorded in 2004 and for which there were no comparable expenses in 2005, and reduced general insurance and other costs of $1.3 million. These decreases were offset by increased billing, credit and collection expenses of $3.9 million resulting from the SBC Directory Acquisition, plus compensation expense related to stock appreciation rights (“SARs”) of $1.6 million, for which there was no comparable expense in 2004. Although general and administrative expenses for the six months ended June 30, 2005 remained relatively unchanged as compared to the prior corresponding year to date period, results included a decrease due to corporate headquarters relocation and related severance costs of $7.4 million that were recorded in 2004 and for which there were no comparable expenses in 2005, and reduced general insurance and other costs of $2.3 million. These decreases were offset by increased billing, credit and collection expenses of $7.5 million resulting from the SBC Directory Acquisition, plus compensation expense related to SARs of $2.2 million, for which there is no comparable expense in 2004.

Depreciation and Amortization

Depreciation and amortization (“D&A”) expenses for the three and six months ended June 30, 2005 were $20.6 million and $42.3 million, respectively, compared to $15.0 million and $29.4 million, respectively, for the corresponding periods in the prior year. Amortization of intangible assets was $18.1 million and $36.2 million for the three and six months ended June 30, 2005, respectively, compared to $12.5 million and $24.9 million, respectively, for the corresponding periods in the prior year. The increase in amortization expense is due to the increase in intangible assets resulting from the SBC Directory Acquisition. On an annual basis, we expect amortization expense in 2005 to be significantly higher than 2004 due to a full year impact related to the intangible assets acquired in connection with the SBC Directory Acquisition. Depreciation of fixed assets and amortization of computer software was $2.5 million and $6.1 million for the three and six months ended June 30, 2005, respectively, and $2.5 million and $4.5 million, respectively, for the corresponding periods in the prior year. The increase in depreciation expense for the six months ended June 30, 2005 was due to higher depreciation of certain computer software.

Partnership Income

Partnership income for the three and six months ended June 30, 2004 was $34.8 million and $58.7 million, respectively, with no corresponding amount for the three and six months ended June 30, 2005. During the three and six months ended June 30, 2004, partnership income related to our 50% share of the net income of DonTech (accounted for under the equity method) plus revenue participation income from SBC. As a sales agent for SBC, DonTech earned commission revenue based on the annual value of local sales contracts executed during the period (“calendar sales”). We also earned revenue participation income from SBC based on the amount of DonTech calendar sales during the period. As a result of the SBC Directory Acquisition, SBC ceased paying us revenue participation income, we now consolidate all net profits in DonTech and we eliminated our DonTech partnership investment. Accordingly, commencing on September 1, 2004, we no longer report partnership income.

Operating Income

Operating income for the three and six months ended June 30, 2005 and 2004 was as follows:


	Three months Ended June 30,							Six months Ended June 30,
(amounts in millions)	2005		2004		$ Change			2005		2004		$ Change

Total	$	91.0	$	92.1	$	(1.1	)	$	161.2	$	178.9	$	(17.7	)

Operating income for the three months ended June 30, 2005 of $91.0 million decreased by $1.1 million from operating income of $92.1 million in the same period in the prior year. Reported operating income for the six months ended June 30, 2005 of $161.2 million decreased by $17.7 million from operating income of $178.9 million in the same period last year. The decrease in operating income during the three and six months ended June 30, 2005 as compared to the prior corresponding periods was primarily a result of the SBC Directory Acquisition and the related purchase accounting impact on our revenues and expenses, as described above. While net revenue increased for the three and six month periods ended June 30, 2005 by $88.4 million and $151.9 million, respectively, over net revenue in the same periods in 2004, primarily resulting from the SBC Directory Acquisition, offsetting that increase in net revenue was an increase in total operating expenses in 2005 of $49.6 million and $97.9 million for the three and six month periods, respectively, also primarily as a result of the SBC Directory Acquisition. The primary reason that our costs relating to the SBC Directory Business increased more than our revenues in the three and six months ended June 30, 2005 as compared to the prior corresponding periods is because while all directory advertising revenue is deferred under our deferral and amortization method, only a portion of total costs related to publication of the directories are deferred under the deferral and amortization method. Therefore, under purchase accounting, when the entire balance of deferred revenue and deferred directory costs were eliminated at the time of the SBC Directory Acquisition, the elimination had a disproportionately higher impact on revenues than it did on expenses. Accordingly, after the adjustments required by purchase accounting, operating expenses for the three and six months ended June 30, 2005 were disproportionately higher than the related revenue. If the effects of purchase accounting were eliminated, adjusted operating income in 2005 would have been substantially higher (and relatively proportional to the increase in net revenues) compared to GAAP operating income in 2004. See “Adjusted and Pro Forma Amounts and Other Non-GAAP Measures” below.

Purchase accounting from the SBC Directory Acquisition will continue to impact reported results during 2005. On a full year basis, we expect operating income to be higher in 2005 than in 2004 due to a full year of results from the acquired SBC Directory Business.

Interest Expense, Net

Net interest expense for the three and six months ended June 30, 2005 was $58.2 million and $115.7 million, respectively, compared to $37.5 million and $77.8 million, respectively, for the same periods in 2004. The increase in net interest expense of $20.7 million and $37.9 million, respectively, for those periods, is a result of higher outstanding debt balances associated with the SBC Directory Acquisition, combined with higher interest rates, compared to the prior year. Additionally, interest expense in 2005 includes interest costs associated with the $300 million Holdco Notes issued on January 14, 2005. Interest expense for the six months ended June 30, 2004 includes a $1.2 million charge resulting from the redemption in 2004 of the remaining 9.125% Senior Subordinated Notes due 2008. See “Liquidity and Capital Resources” for a further description of our debt obligations and the provisions of the related debt instruments. Net interest expense for the three months ended June 30, 2005 and 2004 includes $4.0 million and $3.7 million, respectively, of non-cash amortization of deferred financing costs. Net interest expense for the six months ended June 30, 2005 and 2004 includes $8.1 million and $7.1 million, respectively, of non-cash amortization of deferred financing costs.

Income Taxes

The effective tax rate on income before income taxes of 39.0% for the three and six months ended June 30, 2005 compares to 39.5% on income before income taxes for the corresponding periods in the prior year. The year-to-date effective rate as of June 30, 2005 reflects a decrease in the state and local tax rate as a result of the integration of the SBC Directory Acquisition and the SPA Acquisition.

Net Income (loss) and Earnings (loss) Per Share

Net income for the three and six months ended June 30, 2005 was $20.0 million and $27.8 million, respectively, as compared to $33.1 million and $61.2 million, respectively, for the corresponding periods in the prior year. The results for 2005 were adversely affected by purchase accounting that precluded us from recognizing deferred revenue and certain expenses associated with those directories published prior to the SBC Directory Acquisition, including all September 2004 published directories. Purchase accounting from the SBC Directory Acquisition will continue to impact reported results during 2005.

The 8% dividend on our Preferred Stock reduces net income or increases the net loss, resulting in income (loss) available to common shareholders from which earnings (loss) per share amounts are calculated. The amount of the Preferred Stock dividend includes the stated 8% dividend, plus a deemed dividend for a BCF. The BCF is a function of the conversion price of the Preferred Stock, the fair value of the related warrants issued with the Preferred Stock and the fair market value of the underlying common stock on the date of issuance of the Preferred Stock. In connection with the issuance of our Preferred Stock and each subsequent quarterly accrued dividend, a BCF has been recorded because the fair value of the underlying common stock at the time of issuance of the Preferred Stock was greater than the conversion price of the Preferred Stock. The full amount of the BCF is treated as a deemed dividend because the Preferred Stock was convertible by the GS Funds into common stock immediately after issuance in January 2003. The Preferred Stock dividend for the three and six months ended June 30, 2005 of $2.9 million and $6.2 million, respectively, consisted of the stated 8% dividend of $2.4 million and $5.1 million, respectively, and a BCF of $0.5 million and $1.1 million, respectively. The Preferred Stock dividend for the three and six months ended June 30, 2004 of $5.4 million and $10.7 million, respectively, consisted of the stated 8% dividend of $4.4 million and $8.7 million, respectively, and a BCF of $1.0 million and $1.9 million, respectively.

On January 14, 2005, we repurchased approximately 50% of our outstanding Preferred Stock from the GS Funds for $277.2 million in cash. In connection with the Preferred Stock repurchase, we recorded a reduction in earnings available to common shareholders of $133.7 million to reflect the loss on the repurchase of these shares for the six months ended June 30, 2005. The excess of the cash paid to the GS Funds over the carrying amount of the repurchased Preferred Stock, plus the amount previously recognized for the BCF associated with these shares has been recognized as the loss on repurchase.

The resulting income (loss) available to common shareholders was $17.1 million and $(112.2) million for the three and six months ended June 30, 2005, respectively, as compared to $27.7 million and $50.5 million, respectively, for the corresponding periods in the prior year.

All earnings per share (“EPS”) amounts have been calculated using the two-class method. See Note 2, “Summary of Significant Accounting Policies,” in Part 1 — Item 1 of this quarterly report for further details and computations of the basic and diluted EPS amounts. For the three months ended June 30, 2005, basic and diluted EPS were $0.46 per share and $0.44 per share, respectively, compared to $0.68 per share and $0.65 per share, respectively, for the corresponding period in the prior year. For the six months ended June 30, 2005, basic and diluted EPS were ($3.55) per share as compared to basic EPS of $1.25 per share and diluted EPS of $1.20 per share, respectively, for the corresponding period in the prior year. Because there was a reported net loss available to common shareholders for the six months ended June 30, 2005, diluted EPS does not include potential common shares in the denominator of the diluted per share calculation, because by doing so, it would be antidilutive. Diluted EPS cannot be greater than basic EPS (or less of a loss). Therefore, reported diluted EPS and basic EPS for the six months ended June 30, 2005 were the same.

Adjusted and Adjusted Pro Forma Amounts and Other Non-GAAP Measures

As a result of the SBC Directory Acquisition and the SPA Acquisition, the related financings and associated purchase accounting, our 2005 reported GAAP results are not comparable to our 2004 reported GAAP results. Under the deferral and amortization method of revenue recognition, the billable value of directories published is recognized as revenue in subsequent reporting periods. However, purchase accounting precluded us from recognizing directory revenue and certain expenses associated with directories that published prior to each acquisition, including all directories published in the month each acquisition was completed. Thus, our reported 2005 and 2004 GAAP results are not indicative of our underlying operating and financial performance. Accordingly, management is presenting adjusted and adjusted pro forma information that, among other things, eliminates the purchase accounting impact on revenue and certain expenses for each acquisition and assumes the SBC Directory Acquisition and related financing occurred at the beginning of 2004. Management believes that the presentation of this adjusted and adjusted pro forma information will help financial statement users better and more easily compare current period underlying operating results against what the combined company performance would more likely have been in the comparable prior period. All of the adjusted and adjusted pro forma amounts disclosed in this section or elsewhere are non-GAAP measures and are reconciled to the most comparable GAAP measures below. While we believe the adjusted and adjusted pro forma results reasonably represent results as if the businesses had been combined for the three and six month periods ended June 30, 2005 and 2004, respectively, because of differences in the application of accounting policies and practices between the Company and the acquired entities, management

does not believe these adjusted and adjusted pro forma amounts are strictly comparable, nor are they necessarily indicative of results for future periods.


	Three months ended June 30, 2005
	Reported		SBC Directory			SPA
(amounts in millions)	GAAP		Acquisition			Acquisition		Adjusted

Net revenue	$	233.0	$	27.6	⁽¹⁾	$	—	$	260.6
Expenses, other than depreciation and amortization		121.3		(13.8	)⁽²⁾		—		107.5
Depreciation and amortization		20.6		—			—		20.6

Operating income	$	91.1	$	41.4		$	—	$	132.5


	Three months ended June 30, 2004
	Reported		SBC Directory			SPA			Adjusted
(amounts in millions)	GAAP		Acquisition			Acquisition			Pro Forma

Net revenue	$	144.6	$	113.1	⁽¹⁾	$	—		$	257.7
Expenses, other than depreciation and amortization		72.4		29.7	⁽²⁾		(0.8	)⁽⁶⁾		101.3
Depreciation and amortization.		14.9		7.1	⁽³⁾		—			22.0
Partnership income		34.8		(34.8	) ⁽⁴⁾		—			—

Operating income	$	92.1	$	41.5		$	0.8		$	134.4


	Six months ended June 30, 2005
	Reported		SBC Directory			SPA
(amounts in millions)	GAAP		Acquisition			Acquisition		Adjusted

Net revenue	$	440.3	$	79.5	⁽¹⁾	$	—	$	519.8
Expenses, other than depreciation and amortization		236.8		(21.8	)⁽²⁾		—		215.0
Depreciation and amortization		42.3		—			—		42.3

Operating income	$	161.2	$	101.3		$	—	$	262.5


	Six months ended June 30, 2004
	Reported		SBC Directory			SPA			Adjusted
(amounts in millions)	GAAP		Acquisition			Acquisition			Pro Forma

Net revenue	$	288.4	$	225.2	⁽¹⁾	$	1.1	⁽⁵⁾	$	514.7
Expenses, other than depreciation and amortization		138.9		65.8	⁽²⁾		(3.5	)⁽⁶⁾		201.2
Depreciation and amortization		29.3		14.1	⁽³⁾		—			43.4
Partnership income		58.7		(58.7	) ⁽⁴⁾		—			—

Operating income	$	178.9	$	86.6		$	4.6		$	270.1


(1)		Represents revenue for SBC-branded directories that published prior to the SBC Directory Acquisition, plus all September 2004 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.


(2)		Represents expenses for SBC-branded directories that published prior to the SBC Directory Acquisition, including September 2004 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP. The pro forma adjustments also include (a) for the three and six months ended June 30, 2004, DonTech’s selling and operational expenses prior to September 1, 2004, which were eliminated in consolidation upon the SBC Directory Acquisition, and (b) for all periods presented, certain differences in the application of accounting policies and practices between RHD and the acquired entities. Additionally, as a result of purchase accounting, we recorded the deferred directory costs related to directories that were scheduled to publish subsequent to the SBC Directory Acquisition at their fair value. The impact of such costs has also been removed.

(3)		Represents the additional depreciation and amortization expense related to the tangible and identifiable intangible assets acquired in the SBC Directory Acquisition over their estimated useful lives.

(4)		Represents the elimination of equity accounting used to account for RHD’s 50% ownership in DonTech and the revenue participation income from SBC recognized prior to the SBC Directory Acquisition.

(5)		Represents revenue for Sprint-branded directories that published prior to the SPA Acquisition including January 2003 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.

(6)		Represents expenses for Sprint-branded directories that published prior to the SPA Acquisition, including January 2003 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP. Also includes the effect of differences in the application of accounting policies and practices between legacy SPA and the Company. Additionally, as a result of purchase accounting, we recorded the fair value of deferred directory costs related to directories that were scheduled to publish subsequent to the SPA Acquisition at their fair value. The impact of such costs has also been removed.

2005 Revenue and Adjusted Revenue Compared to 2004 Revenue and Adjusted Pro Forma Revenue

The components of 2005 revenue and adjusted revenue and 2004 revenue and adjusted pro forma revenue for the three and six months ended June 30 of each year are as follows:


	Three months ended June 30, 2005
				SBC
	Reported			Directory			SPA
(amounts in millions)	GAAP			Acquisition			Acquisition		Adjusted

Gross directory advertising revenue	$	232.3		$	27.8	⁽¹⁾	$	—	$	260.1
Sales claims and allowances		(2.2	)		(0.2	)⁽¹⁾		—		(2.4	)

Net directory advertising revenue		230.1			27.6			—		257.7
Other revenue		2.9			—			—		2.9

Net revenue	$	233.0		$	27.6		$	—	$	260.6


	Three months ended June 30, 2004
				SBC
	Reported			Directory			SPA		Adjusted
(amounts in millions)	GAAP			Acquisition			Acquisition		Pro Forma

Gross directory advertising revenue	$	140.3		$	115.9	⁽¹⁾	$	—	$	256.2
Sales claims and allowances		(1.5	)		(0.2	)⁽¹⁾		—		(1.7	)

Net directory advertising revenue		138.8			115.7			—		254.5
Pre-press publishing fees		4.2			(4.2	)⁽²⁾		—		—
Other revenue		1.6			1.6	⁽³⁾		—		3.2

Net revenue	$	144.6		$	113.1		$	—	$	257.7


	Six months ended June 30, 2005
				SBC
	Reported			Directory			SPA
(amounts in millions)	GAAP			Acquisition			Acquisition		Adjusted

Gross directory advertising revenue	$	439.2		$	80.0	⁽¹⁾	$	—	$	519.2
Sales claims and allowances		(4.3	)		(0.5	)⁽¹⁾		—		(4.8	)

Net directory advertising revenue		434.9			79.5			—		514.4
Other revenue		5.4			—			—		5.4

Net revenue	$	440.3		$	79.5		$	—	$	519.8


	Six months ended June 30, 2004
				SBC
	Reported			Directory			SPA			Adjusted
(amounts in millions)	GAAP			Acquisition			Acquisition			Pro Forma

Gross directory advertising revenue	$	279.2		$	232.4	⁽¹⁾	$	1.1	⁽⁴⁾	$	512.7
Sales claims and allowances		(3.2	)		(0.4	)⁽¹⁾		—			(3.6	)

Net directory advertising revenue		276.0			232.0			1.1			509.1
Pre-press publishing fees		9.0			(9.0	)⁽²⁾		—			—
Other revenue		3.4			2.2	⁽³⁾		—			5.6

Net revenue	$	288.4		$	225.2		$	1.1		$	514.7


(1)		Represents gross revenue and sales claims and allowances for SBC-branded directories that published prior to the SBC Directory Acquisition, including September 2004 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.

(2)		Represents the elimination of pre-press publishing and related fees recognized prior to the SBC Directory Acquisition, which were eliminated in consolidation upon the SBC Directory Acquisition.

(3)		Represents other revenue associated with the SBC Directory Business, primarily consisting of other yellow pages and other product revenue recognized as earned.

(4)		Represents gross revenue and sales claims and allowances for Sprint-branded directories that published prior to the SPA Acquisition, including January 2003 published directories, which would have been recognized during the period had it not been for purchase accounting required under GAAP.

Adjusted net revenue for the three months ended June 30, 2005 was $260.6 million, representing an increase of $2.9 million or 1.1% from adjusted pro forma net revenue of $257.7 million for the three months ended June 30, 2004. Adjusted net revenue for the six months ended June 30, 2005 was $519.8 million, representing an increase of $5.1 million or 1.0 % from adjusted pro forma net revenue of $514.7 million for the six months ended June 30, 2004. The increase in adjusted net revenue for the three and six month periods is due to increased amortization of revenue primarily from our major Sprint markets due to higher directory advertising renewal rates and new business, partially offset by a decrease in amortized net revenue from our SBC markets due to a decline in the publication value of our SBC directories in Illinois and northwest Indiana during the last six months of 2004 and first six months of 2005 due to lower renewal rates partially offset by new business. Under the deferral and amortization method of revenue recognition, revenue from directory advertising sales is initially deferred when a directory is published and recognized ratably over the life of the directory, which is typically 12 months.

2005 Adjusted Expenses Compared to 2004 Adjusted Pro Forma Expenses and 2005 Adjusted Operating Income Compared to 2004 Adjusted Pro Forma Operating Income

Adjusted operating and G&A expenses for the three and six months ended June 30, 2005 of $107.5 million and $215.0 million, respectively, represents an increase of $6.2 million and $13.8 million, respectively, from adjusted pro forma operating and G&A expenses of $101.3 million and $201.2 million, respectively, for the comparable periods in the prior year. The primary components of the $6.2 million and $13.8 million increase are shown below:


	Three Months			Six Months
	Ended June			Ended June
(amounts in millions)	30, 2005			30, 2005
Increased digital initiative costs	$	3.9		$	6.3
Increased costs to support the SBC Directory Business		2.8			5.2
Increased bad debt expense		4.0			3.8
Stock appreciation rights compensation expense incurred in 2005		1.6			2.2
Increased commission and salesperson costs		1.3			2.7
Increased marketing and advertising costs		0.2			2.6
Corporate headquarters relocation and related severance costs incurred in 2004		(4.8	)		(7.4	)
Other		(2.8	)		(1.6	)

Total 2005 increase in adjusted operating and G&A expenses, compared to 2004 adjusted pro forma operating and G&A expenses	$	6.2		$	13.8

Similar to the deferral and amortization method of revenue recognition, certain costs directly related to the selling and production of our directories are initially deferred when incurred and recognized ratably over the life of a directory. Adjusted digital initiative costs were $3.9 million and $6.3 million higher for the three and six months ended June 30, 2005, respectively, compared to the same periods of 2004, which reflects increased investment in our internet products, and due to additional internet costs for the newly acquired SBC Directory Business. Increased costs to support the SBC Directory Business for the three and six month periods in 2005 as compared to 2004 include print, paper and distribution costs, market investments, increased headcount, and billing, credit, collection and administrative costs, which were higher primarily due to additional support requirements for the SBC Directory Business as compared to corporate-related amounts allocated by SBC to the SBC Directory Business in 2004. Adjusted bad debt expense was $4.0 million and $3.8 million higher for the three and six months ended June 30, 2005, respectively, compared to the prior corresponding periods primarily reflecting favorable bad debt adjustments recorded by the SBC Directory Business prior to the acquisition in 2004. Compensation costs related to stock appreciation rights of $1.6 million and $2.2 million were incurred for the three and six months ended June 30, 2005, respectively, for which there was no comparable expense in 2004. Adjusted commission and salesperson expenses were $1.3 million and $2.7 million higher for the three and six months ended June 30, 2005, respectively, compared to the same periods in 2004, due to favorable sales performances in certain Sprint markets and increased sales headcount. Marketing and advertising costs for the three months ended June 30, 2005 were comparable to the same period in 2004, however these costs were $2.6 million higher for the six months ended June 30, 2005 as compared to the same period in 2004 due to increased competitive responses and increased market investment, particularly in our SBC markets. These increases were offset by $4.8 million and $7.4 million of expenses for the three and six months of 2004, respectively, associated with the relocation of our corporate

headquarters to Cary, North Carolina and related severance costs, with no comparable expense in 2005. Adjusted expenses for information technology and certain other expenses were $2.8 million and $1.6 million lower for the three and six months ended June 30, 2005, respectively, primarily from operational efficiencies.

Depreciation and amortization (“D&A”) for the three and six months ended June 30, 2005 was $20.6 million and $42.3 million, respectively, compared to adjusted pro forma D&A for the three and six months ended June 30, 2004 of $22.0 million and $43.4 million, respectively.

Adjusted operating income for the three and six months ended June 30, 2005 was $132.5 million and $262.5 million, respectively, representing a decrease of $1.9 million and $7.6 million, respectively, from adjusted pro forma operating income for the three and six months ended June 30, 2004 of $134.4 million and $270.1 million, respectively, reflecting the variances between revenues and expenses from period to period described above.

Advertising Sales – Publication Sales

Management reviews and evaluates the value of advertising sales in directories that published during the period (“publication sales”) as its primary sales performance measure. Management believes that a comparison of publication sales for the same directories from one period to the next gives a better indication of underlying sales trends, economic conditions and business confidence than a comparison of directory revenue recognized using the deferral and amortization method. Because we recognize directory revenue ratably over the life of a directory under the deferral and amortization method, the amount of revenue recognized during a period is not directly related to the sales trends, economic conditions and business confidence during that period. Publication sales are similar to a “same-store” sales measure. If events occur during the current period that affect the comparability of publication sales to the prior year period, such as changes in directory publication dates, then prior year publication sales amounts are adjusted to conform to the current period presentation.

Sprint-branded publication sales for the three and six months ended June 30, 2005 were $146.0 million and $304.4 million, respectively, up $7.3 million and $14.6 million or 5.3% and 5.0%, respectively, from publication sales of $138.7 million and $289.8 million, respectively, for the three and six months ended June 30, 2004. SBC-branded publication sales for the three and six months ended June 30, 2005 were $107.2 million and $205.5 million, respectively, representing a decline of 2.7% from both 2004 corresponding periods of publication sales of $110.2 million and $211.2 million, respectively. The increase in Sprint-branded publication sales resulted from higher advertiser renewal rates and new business in many of our Sprint markets for directories published in the first and second quarters of 2005. The decrease in SBC-branded publication sales is attributable to lower customer renewals as a result of market and product changes we have made and tighter credit policies we have implemented. Publication sales are a non-GAAP measure for which the most comparable GAAP measure is net revenue. A reconciliation of publication sales to net revenue reported in accordance with GAAP is presented below:


	Three months						Six months
	ended June 30,						ended June 30
(amounts in millions)	2005			2004			2005			2004
Publication sales — Sprint-branded directories	$	146.0		$	138.7		$	304.4		$	289.8
Publication sales — Sprint-branded directories — percentage change over prior year		5.3	%		—			5.0	%		—
Adjustments for changes in directory publication date(s)		—			(0.9	)		—			(0.7	)

Publication sales disclosed in June 30, 2004 Form 10-Q					137.8						289.1
Publication sales — SBC-branded directories		107.2			110.2			205.5			211.2
Publication sales — SBC-branded directories – percentage change over prior year		-2.7	%		—			-2.7	%		—
Less pre-acquisition publication sales for SBC-branded directories not recognized as revenue in current period due to purchase accounting		—			(110.2	)		—			(211.2	)
Less current period publication sales for Sprint-branded directories not recognized as revenue in current period due to the deferral method of accounting		(122.6	)		(115.9	)		(236.5	)		(176.4	)
Less current period publication sales for SBC-branded directories not recognized as revenue in current period due to the deferral method of accounting		(92.4	)		—			(173.8	)		—
Plus net revenue reported in the period for publication sales from prior periods, for Sprint-branded directories		121.0			116.9			219.0			163.3
Plus net revenue reported in the period for publication sales from prior periods, for SBC-branded directories		70.9			—			116.3			—

Net directory advertising revenue		230.1			138.8			434.9			276.0
Pre-press publishing revenue		—			4.2			—			9.0
Other revenue		2.9			1.6			5.4			3.4

Net revenue – GAAP		233.0			144.6			440.3			288.4

Plus net revenue from Sprint-branded directories published prior to the acquisition that would have been recognized during the period absent purchase accounting adjustments required under GAAP		—			—			—			1.1
Plus net revenue from SBC-branded directories published prior to the acquisition that would have been recognized during the period absent purchase accounting adjustments required under GAAP had the transaction occurred on January 1, 2004		27.6			117.3			79.5			234.2
Less pre-press publishing revenue that would not have been recorded had the SBC transaction occurred on January 1, 2004		—			(4.2	)		—			(9.0	)

Net Revenue-Adjusted	$	260.6					$	519.8

Net Revenue-Adjusted pro forma				$	257.7					$	514.7

LIQUIDITY AND CAPITAL RESOURCES

Our Senior Secured Credit Facility, as amended and restated (“Credit Facility”), consists of a $700 million Term Loan A-2, a $200 million Term Loan A-3, a $1,450 million Term Loan D and a $175 million Revolving Credit Facility (the “Revolver”) for an aggregate facility of $2,525 million. Term Loans A-2, A-3 and D require quarterly principal payments. As of June 30, 2005, the outstanding balances of Term Loans A-2, A-3 and D were $397.5 million, $146.9 million and $1,433.3 million, respectively, and $20 million was outstanding under the Revolver. The Revolver, Term Loans A-2 and A-3 mature in December 2009, and Term Loan D matures in June 2011. The Credit Facility provides for a new Term Loan C for potential borrowings up to $400 million. Such proceeds, if borrowed, may be used to fund acquisitions, for retirement of Notes (defined below) and for redemption of and payment of dividends on the Preferred Stock, subject to certain limitations. Substantially all of our assets, including the capital stock of our subsidiaries, are pledged as collateral to secure our obligations under the Credit Facility and the Senior Notes (defined below).

Our Credit Facility bears interest, at our option, at either:

	•		The higher of (i) a base rate as determined by the Administrative Agent, Deutsche Bank Trust Company Americas, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; and (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, plus a 1.00% margin on the Revolver and Term Loan A-2 and a 0.75% margin on Term Loan A-3 and Term Loan D; or

	•		LIBOR rate plus a 2.00% margin on the Revolver and Term Loan A-2 and a 1.75% margin on Term Loan A-3 and Term Loan D. We may elect interest periods of 1, 2, 3, 6, 9 or 12 months for LIBOR borrowings.

The weighted average interest rate of outstanding debt under the Credit Facility was 5.22% and 3.97% as of June 30, 2005 and 2004, respectively.

We have also issued $325 million of 8.875% Senior Notes due 2010 (the “Senior Notes”) and $600 million of 10.875% Senior Subordinated Notes due 2012 (the “Subordinated Notes”). Interest is paid on these notes semi-annually on June 15 and December 15.

On January 14, 2005 we issued $300 million of 6.875% Holdco Notes (collectively with the Senior Notes and the Subordinated Notes, the “Notes”), the proceeds of which were used to redeem approximately 50% of the then outstanding Preferred Stock from the GS Funds, pay transaction costs and repay debt associated with our Credit Facility. Interest is payable on the Holdco Notes semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 2005. The Holdco Notes are unsecured obligations of the Company and mature on January 15, 2013. In connection with the issuance of the Holdco Notes, we completed an exchange offering in June 2005.

Aggregate outstanding debt as of June 30, 2005 was $3,222.7 million. During the six months ended June 30, 2005, we made scheduled principal payments of $45.6 million and prepaid an additional $115.0 million in principal under our Credit Facility. Additionally, excess proceeds of $16.8 million from the Holdco Notes after redemption of the Preferred Stock plus $6.0 million in mandatory payments were used to pay $22.8 million in aggregate principal amount outstanding under the Credit Facility.

At June 30, 2005, we had $5.8 million of cash and cash equivalents and checks not yet presented for payment of $3.4 million and available borrowings under the Revolver of $155.0 million. During the six months ended June 30, 2005, $140.1 million was borrowed under the Revolver, of which $161.3 million was repaid during the period including $41.2 million of the outstanding balance as of December 31, 2004. No borrowings have been made under Term Loan C. During 2005, we expect to periodically utilize the Revolver as a financing resource to balance the timing of our periodic and accelerated payments made under the Credit Facility with the timing of cash receipts from operations. Our present intention is to repay borrowings on the Revolver in a timely manner and keep any outstanding amounts to a minimum.

The Credit Facility and the indentures governing the Notes contain usual and customary restrictive covenants that, among other things, place limitations on our ability to (i) incur additional indebtedness, including capital leases and liens; (ii) pay dividends and repurchase our capital stock; (iii) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (iv) make capital expenditures; (v) issue capital stock of our subsidiaries; and (vi) engage in transactions with our affiliates. The Credit Facility also contains financial covenants relating to maximum consolidated leverage, minimum interest coverage and maximum senior secured leverage as defined therein.

Our primary source of liquidity will continue to be cash flows from operations as well as available borrowing capacity under the Revolver. We expect our primary liquidity requirement will be to fund operations and for principal and interest payments on our debt. Our ability to meet our debt service requirements will depend on our ability to generate cash flow in the future. Our primary sources of cash flow will consist mainly of cash receipts from the sale of advertising in our yellow pages directories and can be impacted by, among other factors, general economic conditions, competition from other yellow pages directory publishers and other alternative products, consumer confidence and the level of demand for yellow pages advertising. We believe that cash flows from operations, along with borrowing capacity under the Revolver, will be adequate to fund our operations and capital expenditures and to meet our debt service requirements for at least the next 12 to 24 months. However, we make no assurances that our business will generate sufficient cash flows from operations or that sufficient borrowing will be available under the Revolver or Term Loan C to enable us to fund our operations, capital expenditures and meet all debt service requirements, to pursue all of our strategic initiatives or for other purposes.

Cash flow provided by operating activities was $194.7 million for the six months ended June 30, 2005. Key contributors to operating cash flow included the following:

	•		$27.8 million in net income.

	•		$101.6 million of net non-cash charges reflecting a source of cash, consisting of $42.3 million of depreciation and amortization, $11.5 million in bad debt provision, $37.2 million in deferred taxes and $10.6 million in other non-cash charges.

	•		$66.7 million net source of cash from a $71.4 million increase in deferred directory revenue less an increase in accounts receivable of $4.7 million. We analyze the change in deferred revenue and accounts receivable together because when a directory is published, the annual billing value of that directory is initially deferred and unbilled accounts receivable are established. Each month thereafter, typically one-twelfth of the billing value is recognized as revenue and billed to customers. In connection with the SBC Directory Acquisition, while we did not record the deferred revenue for directories published prior to the acquisition due to purchase accounting, we did acquire the associated unbilled receivables and the rights to bill and collect these receivables, which totaled approximately $207.3 million.

	•		$26.2 million net source of cash from a decrease in other assets, reflecting a net decrease in deferred directory costs of $16.2 million, consisting of an increase in deferred directory costs of $19.6 million related to directories that have yet to publish offset by $35.8 million in amortization of deferred directory costs relating to directories that have already published; and a $10.1 million decrease in prepaid expenses, offset by a $0.1 million increase in other current assets. Deferred directory costs represent cash payments for certain costs associated with the publication of directories. Since deferred directory costs are initially deferred when incurred, the cash payments are made prior to the expense being recognized.

	•		$11.7 million net use of cash from a decrease in accounts payable and accrued liabilities, reflecting a $22.4 million decrease in accounts payable and accrued liabilities and a $0.3 million decrease in other accrued liabilities, offset by an $11.0 million increase in accrued interest payable on the Notes.

	•		$15.9 million net use of cash resulting from a decrease in other non-current liabilities comprised of a $19.5 million current tax benefit offset by a net increase in other non-current liabilities of $3.6 million, which includes a $4.7 million increase to the restructuring reserve relating to the SBC Directory Business.

Cash used in investing activities for the six months ended June 30, 2005 was $12.0 million used to purchase fixed assets, primarily computer equipment and software.

Cash used in financing activities through June 30, 2005 was $187.6 million and included the following:

	•		$291.5 million in net proceeds from the issuance of Holdco Notes for the redemption of outstanding Preferred Stock.

	•		$21.2 million reduction in the Revolver balance consisting of $161.3 million of Revolver repayments (including $41.2 million from the outstanding Revolver balance at December 31, 2004) less $140.1 million in borrowings.

	•		$277.2 million used for the redemption of Preferred Stock.

	•		$183.3 million of other debt repayments including $68.3 million in scheduled and mandatory payments and $115.0 million in pre-payments.

	•		$2.3 million in the decreased value of checks not presented for payment.

	•		$4.9 million in proceeds from the exercise of employee stock options.

Cash flow provided by operating activities was $147.5 million for the first six months ended June 30, 2004. Key contributors to operating cash flow included the following:

	•		$61.2 million in net income.

	•		$86.8 million of net non-cash charges reflecting a source of cash, primarily consisting of $29.4 million of depreciation and amortization, $6.5 million in the bad debts provision and $11.0 million in other non-cash charges and $39.9 million in deferred taxes.

	•		$2.7 million increase in accounts payable and accrued liabilities, reflected a source of cash based on the timing of invoices received as compared to invoices paid during the six months ended June 30, 2004, resulting in higher accounts payable and accrued liability at quarter end.

	•		$19.0 million increase in accounts receivable and a $11.2 million increase in deferred directory revenue. We analyze the change in deferred revenue and accounts receivable together because when a directory is published, the annual billing value of that directory is initially deferred and unbilled accounts receivable are established. Each month thereafter, typically one-twelfth of the billing value is recognized as revenue and customers are billed on a periodic basis.

	•		$1.6 million in cash received from partnerships in excess of recorded partnership income representing a source of cash. Partnership income during the six months ended June 30, 2004 consisted of our 50% interest in DonTech’s net income and the revenue participation income from SBC. We received cash from DonTech and SBC subsequent to the time we recorded the associated partnership income; therefore, in periods of declining DonTech partnership income, cash received related to prior periods exceeded the income recognized from the current period.

	•		$1.9 million decrease in other assets reflected a $2.2 million increase in deferred directory costs, offset by a decrease in prepaid insurance of $2.3 million and a decrease of $1.8 million in other current and non-current assets. Deferred directory costs represent cash payments for certain costs associated with the publication of directories. Since deferred directory costs are initially deferred when incurred, the cash payments are made prior to the expense being recognized.

Cash used in investing activities in the six months ended June 30, 2004 was $8.9 million used to purchase fixed assets, primarily computer equipment, computer software and leasehold improvements.

Cash used in financing activities through June 30, 2004 was $135.7 million and included the following:

	•		$129.7 million in principal payments on debt borrowed under the Credit Facility. Of this amount, $18.3 million represented scheduled quarterly payments, $110.0 million represented principal payments made on an accelerated basis, at our option, from excess cash flow generated from operations and $1.4 million represented principal payments on the Revolver.

	•		$21.2 million in principal payments on the remaining 9 1/8% Senior Subordinated Notes.

	•		$1.4 million in borrowings under the Revolver.

	•		$9.5 million in the increased value of checks not yet presented for payment.

	•		$4.3 million in proceeds from the exercise of employee stock options.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk and Risk Management

The Credit Facility bears interest at variable rates and, accordingly, our earnings and cash flow are affected by changes in interest rates. The Credit Facility requires that we maintain hedge agreements to provide either a fixed interest rate or interest rate protection on at least 50% of our total outstanding debt. The Company has entered into the following interest rate swaps that effectively convert variable rate debt to fixed rate debt as of June 30, 2005. Under the terms of the agreements, the Company receives variable interest based on three-month LIBOR and pays a fixed rate of interest.


	Notional
Effective Dates	Amounts			Pay rates	Maturity Dates
(amounts in millions)
April 1, 2003	$	255	⁽¹⁾	2.850%	March 31, 2007
October 9, 2003	$	150		1.959%	October 9, 2005
June 21, 2004	$	50		3.230%	June 21, 2006
June 23, 2004	$	50		3.170%	June 23, 2006
June 28, 2004	$	50		3.110%	June 28, 2006
July 2, 2004	$	50		3.200%	July 3, 2006
September 7, 2004	$	200	⁽²⁾	3.490% — 3.750%	September 8, 2008-September 7, 2009
September 15, 2004	$	250	⁽³⁾	3.200% — 3.910%	September 15, 2007-September 15, 2009
September 17, 2004	$	150	⁽¹⁾	3.210% — 3.740%	September 17, 2007-September 17, 2009
September 23, 2004	$	150	⁽¹⁾	3.160% — 3.438%	September 24, 2007-September 24, 2008

Total	$	1,355


(1)		consists of three swaps

(2)		consists of two swaps

(3)		consists of four swaps

The outstanding interest rate swaps expose us to credit risk in the event that the counterparties to the agreements do not or cannot meet their obligations. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap agreements. The counterparties to the swaps are major financial institutions, and we expect the counterparties to be able to perform their obligations under the swaps. We use derivative financial instruments for hedging purposes only and not for trading or speculative purposes.

Market Risk Sensitive Instruments

The interest rate swap agreements have been designated as cash flow hedges. In accordance with the provisions of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138, the swaps are recorded at fair value. On a quarterly basis, the fair value of the swaps are determined based on quoted market prices and, assuming effectiveness, the difference between the fair value and the book value of the swaps are recognized in other comprehensive income. Any ineffectiveness of the swaps is required to be recognized in earnings. The swaps and the hedged item (three-month LIBOR-based interest payments on $1,355 million of bank debt) have been designed so that the critical terms (interest reset dates, duration and index) coincide. Assuming the critical terms continue to coincide, the cash flows from the swaps will exactly offset the cash flows of the hedged item and no ineffectiveness will exist.

Item 4. Controls and Procedures

	(a)		Evaluation of Disclosure Controls and Procedures. Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) the principal executive officer and principal financial officer of the Company have each concluded that such disclosure controls and procedures are effective and sufficient to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms and that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

			The Company provided a report in its Annual Report on Form 10-K for the year ended December 31, 2004 that included, among other things, management’s assessment of the effectiveness of the Company’s internal controls over financial reporting. In addition, the Company provided in its Form 10-K a written opinion prepared by its independent registered public accounting firm in connection with management’s assessment.

			Management excluded from its assessment of the Company’s internal control over financial reporting as of December 31, 2004 certain elements of the internal control over financial reporting of the directory publishing business of SBC Communications, Inc. in Illinois and Northwest Indiana that the Company acquired in September 2004 because this acquisition represented a material purchase business combination. Subsequent to the acquisition, certain elements of the acquired business’ internal control over financial reporting and related functions, processes and systems were integrated during 2004 into the Company’s existing internal control over financial reporting and related functions, processes and systems. Those elements of the acquired business’ internal control over financial reporting that were not integrated during 2004 into the Company’s existing internal control over financial reporting were excluded from management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004. During the first quarter of 2005, all significant elements of the acquired business’ internal control over financial reporting were integrated into the Company’s existing internal control over financial reporting and related functions, processes and systems and have been included in management’s evaluation of the disclosure controls and procedures for the period covered by this Quarterly Report on Form 10-Q.

	(b)		Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters described below. We periodically assess our liabilities and contingencies in connection with these matters based upon the latest information available to us. For those matters where it is probable that we have incurred a loss and the loss or range of loss can be reasonably estimated, we record reserves in our consolidated financial statements. In other instances, we are unable to make a reasonable estimate of any liability because of the uncertainties related to both the probable outcome and amount or range of loss. As additional information becomes available, we adjust our assessment and estimates of such liabilities accordingly.

Based on our review of the latest information available, we believe our ultimate liability in connection with pending legal proceedings, including the litigation and tax matters described below, will not have a material adverse effect on our results of operations, cash flows or financial position, as described below. No material amounts have been accrued in our financial statements with respect to any of these matters.

In order to understand our potential exposure under the litigation and tax matters described below under the captions “Information Resources, Inc.” and “Tax Matters,” you need to understand the relationship between us and D&B, and certain of our predecessors and affiliates that, through various corporate reorganizations and contractual commitments, have assumed varying degrees of responsibility with respect to such matters.

In November 1996, the company then known as The Dun & Bradstreet Corporation separated through a spin-off (“1996 Distribution”) into three separate public companies: The Dun and Bradstreet Corporation, ACNielsen Corporation (“ACNielsen”), and Cognizant Corporation (“Cognizant”). In June 1998, The Dun & Bradstreet Corporation separated through a spin-off (“1998 Distribution”) into two separate public companies: R.H. Donnelley Corporation (formerly The Dun & Bradstreet Corporation) and a new company that changed its name to The Dun & Bradstreet Corporation. Later in 1998, Cognizant separated through a spin-off (“Cognizant Distribution”) into two separate public companies: IMS Health Incorporated (“IMS”), and Nielsen Media Research, Inc. (“NMR”). In September 2000, The Dun & Bradstreet Corporation separated into two separate public companies: Moody’s Corporation, (“Moody’s”) (formerly The Dun & Bradstreet Corporation), and a new company that changed its name to The Dun & Bradstreet Corporation. As a result of the form of R.H. Donnelley Corporation’s separation from The Dun & Bradstreet Corporation in 1998, we are the corporate successor of and technically the defendant and taxpayer referred to below as D&B with respect to any matter accruing prior to June 30 1998.

Information Resources, Inc.

The following is a description of an antitrust lawsuit filed in 1996 by Information Resources, Inc. (“IRI”). VNU N.V., a publicly traded Dutch company (“VNU”), and its U.S. subsidiaries VNU, Inc., AC Nielsen, AC Nielsen (US), Inc. (“ACN (US)”), and NMR (collectively, the “VNU Parties”), have assumed exclusive joint and several liability for any judgment or settlement of this antitrust lawsuit (collectively, the “IRI Liabilities”). As a result of the indemnity obligation, we do not have any exposure to a judgment or settlement of this lawsuit unless the VNU Parties default on their obligations. In the event of such default, we have contingent liability for this matter as a result of our succeeding to D&B’s liabilities and obligations as part of the 1998 Distribution. In such event, however, under the contractual commitments described below, any such amounts that we might need to pay would be shared equally (50% each) by D&B and Moody’s, on a joint and several basis. Only if D&B and Moody’s were unable to bear all or a part of the IRI Liabilities, would we be liable, and then only to the extent that either of them could not satisfy their joint and several indemnity obligations to us.

On February 1, 2005, the U.S. District Court for the Southern District of New York entered a final judgment against IRI dismissing IRI’s claims with prejudice and on the merits. IRI filed a notice of appeal to the Second Circuit Court of Appeals. The appeal has been fully briefed, but no argument date has yet been set for this appeal. Due to the dismissal of this matter and several layers of indemnity described above, our disclosure regarding this matter will be relatively brief.

In July 1996, IRI filed a complaint, subsequently amended in 1997, in the United States District Court for the Southern District of New York, naming as defendants D&B (now, the Company, as successor of D&B), A.C. Nielsen Company (a subsidiary of ACNielsen) and IMS (then known as Cognizant), at the time of the filing, all wholly owned subsidiaries of D&B.

The amended complaint alleged, among other claims, various violations of U.S. antitrust laws under Sections 1 and 2 of the Sherman Antitrust Act. IRI sought damages in excess of $650.0 million, which IRI sought to treble under the antitrust laws. IRI also sought punitive damages of an unspecified amount, which we believe are precluded as a result of the prior dismissal of one of IRI’s claims.

In December 2004, the Court entered an order that barred IRI from arguing that defendant’s pricing practices or discounts were illegal or anti-competitive unless it could satisfy a specified burden of proof. In response to this ruling, in a press release, IRI stated, in relevant part, “without this evidence, IRI believes that little would be left of IRI’s case to take to trial.” As a result, IRI asked the Court to enter a final judgment against it so that it could take an immediate appeal to the Second Circuit. Defendants did not object to this request. As noted above, the case was dismissed by the District Court and IRI has filed an appeal. The appeal has been fully briefed, but no argument date has yet been set for this appeal.

In connection with the 1996 Distribution, Cognizant (now NMR), ACNielsen and D&B (now the Company) entered into an Indemnity and Joint Defense Agreement. On July 30, 2004, the VNU Parties, the Company, D&B, Moody’s and IMS entered into an Amended and Restated Indemnity and Joint Defense Agreement (the “Amended JDA”).

Pursuant to the Amended JDA, any and all IRI Liabilities incurred by us, D&B, Moody’s or IMS relating to a judgment (even if not final) or any settlement being entered into in the IRI action will be jointly and severally assumed and fully discharged exclusively by the VNU Parties. Under the Amended JDA, the VNU Parties have agreed to, jointly and severally, indemnify us, D&B, Moody’s and IMS from and against all IRI Liabilities to which we become subject.

Under the agreements relating to the 1998 Distribution, D&B assumed the defense and agreed to indemnify us against any payments that we may be required to make with respect to the IRI Liabilities and related legal fees. As required by those agreements, Moody’s Corporation, which subsequently separated from D&B in the 2000 Distribution, has agreed to be jointly and severally liable with D&B for the indemnity obligation to us. We understand that D&B and Moody’s have agreed amongst themselves to share equally (50% each) these indemnity obligations to us. Only if D&B and Moody’s were unable to bear all or a part of their aggregate 50% share of the liability would we be liable, and then only to the extent that either of them could not satisfy their joint and several indemnity obligations to us.

Because liability for violations of the antitrust laws is joint and several and because the rights and obligations relating to the Amended JDA are based on contractual relationships, the failure of the VNU Parties to fulfill their obligations under the Amended JDA could result in the other parties bearing all or a share of the IRI Liabilities. Joint and several liability for the IRI Liabilities means that even where more than one defendant is determined to have been responsible for an alleged wrongdoing, the plaintiff can collect all or part of the judgment from just one of the defendants. This is true regardless of whatever contractual allocation of responsibility the defendants and any other indemnifying parties may have made, including the allocations described above between the VNU Parties, the Company, D&B, Moody’s and IMS.

Accordingly, and as a result of the allocations of liability described above, in the event the VNU Parties default on their obligations under the Amended JDA, each of D&B and Moody’s will be jointly and severally responsible for the payment of any portion of any judgment or settlement ultimately payable by the Company (which is the defendant in the IRI action), which could be as high as all of the IRI Liabilities.

While, as described above, the IRI lawsuit has been dismissed with prejudice on the merits, IRI has filed an appeal. Accordingly, we are unable to predict the outcome of the IRI litigation or the financial condition of any of the VNU Parties or the other defendants at the time of any such outcome (and hence we cannot estimate their ability to pay the IRI Liabilities pursuant to the Amended JDA or the judgment or settlement in the IRI action). Nonetheless, while we cannot assure you as to the outcome of this matter, management presently believes that the VNU Parties have sufficient financial resources and borrowing capacity to satisfy their obligations under the Amended JDA and, if they default, D&B and Moody’s have sufficient financial resources and borrowing capacity to reimburse us for any payments we may be required to make and related costs we may incur in connection with this matter. Therefore, management presently believes that the ultimate resolution of this matter would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition. Accordingly, no amount in respect of this matter has been accrued in our consolidated financial statements.

Tax Matters

D&B entered into global tax-planning initiatives in the normal course of its business, primarily through tax-free restructurings of both its foreign and domestic operations (collectively, “Legacy Tax Matters”). The IRS is currently disputing certain tax positions taken with respect to the Legacy Tax Matters. The status of these Legacy Tax Matters is summarized below, including the settlement of the matter described below under ”Royalty Expense Deductions – 1993-1997.”

Pursuant to a series of tax sharing and other agreements (collectively, “Tax Sharing Agreements”) relating to the spin-offs and separations referred to above, IMS and NMR are jointly and severally liable for, and must pay one-half of, and D&B and Moody’s are jointly and severally liable for, and must pay the other half of, any amounts resulting from the Legacy Tax Matters summarized below under “Royalty Expense Deductions 1993-1997” and D&B and Moody’s are jointly and severally liable for all amounts resulting from the Legacy Tax Matters summarized below under “ Amortization and Royalty Expense Deductions/Royalty Income — 1997-2005.”

While we cannot assure you as to the outcome of these Legacy Tax Matters (other than the settled portion of the Royalty Expense Matter), management presently believes that D&B and Moody’s have sufficient financial resources, borrowing capacity and, where applicable, indemnity rights against IMS and NMR (who succeeded to Cognizant’s indemnity obligations under the Cognizant Distribution) and IMS and NMR in turn have sufficient financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, so as to reimburse us for any payments we may be required to make and related costs we may incur in connection with these Legacy Tax Matters. Therefore, management presently believes that the ultimate resolution of these Legacy Tax Matters would not have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Royalty Expense Deductions – 1993 – 1997

Beginning in the second quarter of 2003, D&B received (on our behalf) a series of communications from the IRS proposing adjustments with respect to a partnership transaction entered into in 1993. Specifically, the IRS proposed to disallow certain royalty expense deductions claimed by D&B on its 1993 through 1997 tax returns. The IRS also separately challenged the tax treatment of certain royalty payments received by that partnership and proposed reallocating certain partnership income to D&B. These matters are collectively referred to herein as the Royalty Expense Matter.

We understand that D&B estimates that the disallowance of the 1993 and 1994 royalty expense deductions would result in a loss to it of approximately $5.0 million in pending tax refunds and that the additional tax liability to it with respect to (a) the disallowance of the 1995 and 1996 royalty expense deductions could be up to approximately $47.4 million (tax, interest and penalties, net of tax benefits) and (b) its share of the reallocated partnership income could be up to approximately $23.6 million (tax, interest and penalties, net of tax benefits). We understand that D&B believes that the position of the IRS regarding the partnership income is inconsistent with its position with respect to the same royalty expense deductions described above and, therefore, the IRS would be unlikely to prevail on both positions. We understand that D&B has filed a protest with respect to the 1993 and 1994 tax refunds, and intends to attempt to resolve this matter with the IRS before proceeding to litigation, if necessary.

In July 2005, we (as the taxpayer of record) entered into a settlement agreement with the IRS resolving the disallowance of the 1995 and 1996 royalty expense deductions portion of the Royalty Expense Matter. Under the terms of the settlement, the aggregate tax liability will be approximately $56.0 million (including interest and penalties) for 1995 and $86.0 million (including interest and penalties) for 1996, subject to final bill(s) from the IRS, which we expect to be consistent with prior computations it has provided to D&B.

While this matter has now been settled with the IRS, each of the relevant parties have consented to the settlement without prejudice to certain claims they may have against each other based upon the prior tender of the initial settlement agreement by us and D&B and the refusal to consent thereto by IMS and NMR during 2004, as disclosed in prior periodic reports.

The 1993, 1994, and 1997 royalty expense deduction portions of the Royalty Expense Matter remain pending before the IRS.

Amortization and Royalty Expense Deductions/Royalty Income – 1997 – 2005

In the fourth quarter of 2003, D&B received (on our behalf) IRS notices of proposed adjustment with respect to a partnership transaction entered into in 1997. The IRS asserted that certain amortization expense deductions claimed by D&B on its 1997 and 1998 tax returns should be disallowed.

In April 2004, D&B received (on our behalf) proposed notices of deficiency from the IRS, proposing adjustments with respect to the same 1997 partnership transaction consistent with the notices of proposed adjustment. We understand that D&B filed protests relating to this matter for the 1997 and 1998 tax years with the IRS Office of Appeals. During the third quarter of 2004, D&B was informed by the IRS Office of Appeals that the 1997 and 1998 tax years were being returned to the Examination Division of the IRS for further development of the issues.

In the second quarter of 2005, D&B received (on our behalf) IRS notices of proposed adjustment for 1999 through 2002, with respect to the same 1997 partnership transaction referred to above. The IRS again asserted that certain amortization expense deductions claimed by D&B on its 1999 through 2002 tax returns should be disallowed. We understand that D&B anticipates that the IRS will issue proposed notices of deficiency for 1999 through 2002, reflecting the adjustments proposed in the notices of proposed adjustment received during the second quarter of 2005.

In addition, the IRS has asserted that royalty expense deductions, claimed by D&B on its tax returns for 1997 through 2002 for royalties paid to the partnership should be disallowed. The IRS also has asserted that the receipt of these same royalties by the partnership should be reallocated to and reported as royalty income by D&B, including the portions of the royalties that were allocated to third party partners in the partnership, and, thus, included in their taxable income. We understand that D&B believes that the IRS’ stated positions with respect to the treatment of the royalty expense and royalty income are mutually inconsistent, making it unlikely that the IRS will prevail on both of the positions. We also understand that D&B nonetheless believes that the IRS may seek to issue notices with respect to both of these inconsistent positions.

In addition to the foregoing, and in connection with the notices received during the second quarter of 2005, the IRS has asserted that certain business expenses incurred by D&B during 1999 through 2002 should be capitalized and amortized over a 15-year period, if, but only if, the proposed adjustments described above are not sustained.

We understand that D&B estimates that its additional tax liability as a result of the disallowance of the 1997 through 2002 amortization deductions and the disallowance of such deductions claimed from 2003 to date could be up to $64.4 million (tax, interest and penalties, net of tax benefits). This transaction is scheduled to expire in 2012 and, unless earlier terminated, based on current interest rates and tax rates, additional tax exposure would increase at a rate of approximately $2.1 million per quarter (including potential penalties) as future amortization expenses are deducted.

In the event the IRS were to prevail on both positions with respect to the royalty expense and royalty income, which D&B believes unlikely, D&B estimates that the additional tax liability to it as a result of the disallowance of the 1997 through 2002 royalty expense deductions, the disallowance of such deductions claimed from 2003 to date and the inclusion of the reallocated royalty income for all relevant years could be up to $143.3 million (tax, interest and penalties, net of tax benefits), which would be in addition to the $64.4 million noted above related to the amortization expense deduction.

Conclusion

As a result of our assessment of our exposure in these matters relating to our prior relationship with D&B and its former affiliates, especially in light of our indemnity arrangements with D&B and Moody’s (and the VNU Parties with respect to the IRI matter), and their respective financial resources, borrowing capacity and, in the case of certain Legacy Tax Matters, indemnity rights against IMS and NMR, and in turn IMS and NMR’s respective financial resources and borrowing capacity to satisfy their respective indemnity obligations to D&B and Moody’s, no material amounts have been accrued in our consolidated financial statements for any of these D&B-related litigation and tax matters.

Other Matters

The Company is exposed to potential defamation and breach of privacy claims arising from our publication of directories and our methods of collecting, processing and using advertiser and telephone subscriber data. If such data was determined to be inaccurate or if data stored by us was improperly accessed and disseminated by us or by unauthorized persons, the subjects of our data and users of that data we collect and publish could submit litigation claims against the Company. Although to date we have not experienced any material claims relating to defamation or breach of privacy, we may be party to such proceedings in the future that could have a material adverse effect on our business.

Item 4. Submission of Matters to a Vote of Security Holders

Our Annual Meeting of Stockholders (“Meeting”) was held in Cary, North Carolina on April 26, 2005. At the Meeting, the Company’s stockholders elected David M. Veit as a Class III director to serve a three-year term, as follows:


			Votes
Name	Votes For		Withheld
David M. Veit		22,885,722		7,782,180

The Board of Directors now comprises 10 members consisting of three classes. As described in our Proxy Statement relating to the Meeting, pursuant to the Certificate of Designations governing our Preferred Stock, the holders of the Preferred Stock are entitled to elect two directors to the Company’s Board of Directors, without any approval or veto right by the Company’s other stockholders. In accordance with that provision, at the Meeting, the holders of the Preferred Stock unanimously (voting the equivalent of 4,951,599 shares of our common stock in favor) re-elected Messrs. Robert R. Gheewalla and Terrence M. O’Toole as Class III directors to serve three-year terms. The other members of our Board of Directors (Nancy Cooper, Scott Flanders, Robert Kamerschen, Alan Schultz, David C. Swanson, Barry Lawson Williams and Edwina Woodbury) were not subject to re-election by stockholders this year and continue in office.

At the Meeting, the Company’s stockholders also approved the 2005 Stock Award and Incentive Plan, as follows:


	Votes For		Votes Against		Abstentions
Approval of the 2005 Stock Award and Incentive Plan		20,121,289		6,291,100		588,977

At the Meeting, the Company’s stockholders also ratified the appointment of PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm for 2005, as follows:


	Votes For		Votes Against		Abstentions
Ratification of the appointment of PwC		30,433,450		228,523		5,929

Lastly, at the Meeting, the Company’s stockholders also approved a stockholder proposal relating to the Company’s stockholder rights plan, as follows:


	Votes For		Votes Against		Abstentions
Stockholder Proposal re: Rights Plan		15,020,528		11,914,711		66,127

With respect to the approval of the 2005 Stock Award and Incentive Plan and the approval of the stockholder proposal, there were also 3,666,536 broker non-votes.

Item 6. Exhibits

(a)

Exhibits:


Exhibit No.		Document
2.1^#		Stock Purchase Agreement, dated as of September 21, 2002, by and among the Company, Sprint Corporation and Centel Directories LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 1, 2002, Commission File No. 001-07155)

2.2		Supplemental Agreement to Stock Purchase Agreement, dated as of December 31, 2002, by and among the Company, Sprint Corporation and Centel Directories LLC (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155).

2.3^#		Preferred Stock and Warrant Purchase Agreement, dated as of September 21, 2002, among R.H. Donnelley Corporation and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 1, 2002, Commission File No. 001-07155)

2.4^#		Purchase Agreement dated as of July 28, 2004 by and among R.H. Donnelley Corporation, Ameritech Corporation and Ameritech Publishing, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on August 2, 2004, Commission File No. 001-07155)

2.5		Amendment No. 1 to the Purchase Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, Ameritech Corporation and Ameritech Publishing, Inc. (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the three and six months ended June 30, 1999, filed with the Securities and Exchange Commission on May 14, 1999 Commission File No. 001-07155)

3.2		By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the three and six months ended June 30, 1999, filed with the Securities and Exchange Commission on May 14, 1999 Commission File No. 001-07155)

3.3		Certificate of Incorporation of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)

3.4		By-laws of R.H. Donnelley Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on July 17, 1998, Registration No. 333-59287)

3.5		Certificate of Designations of Convertible Cumulative Preferred Stock of R.H. Donnelley Corporation (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)


Exhibit No.		Document
3.6		Certificate of Designations of Series B-1 Convertible Cumulative Preferred Stock of R.H. Donnelley Corporation (incorporated by reference to Exhibit 3.1 to the Current Report Form 8-K, filed with the Securities and Exchange Commission on December 3, 2002, Commission File No. 001-07155)

4.1		Rights Agreement, dated as of October 27, 1998, between R.H. Donnelley Corporation and First Chicago Trust Company (incorporated by reference to Exhibit 4 to the Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on November 5, 1998, Commission File No. 001-07155)

4.2		Amendment No. 1 to Rights Agreement, dated as of February 26, 2001, by and among R.H. Donnelley Corporation, First Chicago Trust Company of New York (as initial Rights Agent) and The Bank of New York (as successor Rights Agent) (incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission on March 28, 2001, Commission File No. 001-07155)

4.3		Amendment No. 2 to Rights Agreement, dated as of September 21, 2002, between the Company and The Bank of New York, as successor Rights Agent (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form 8-A , filed with the Securities and Exchange Commission on October 1, 2002, Commission File No. 001-07155)

4.4		Form of Warrant Agreement, dated as of November 25, 2002, between the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

4.5		Form of Warrant Agreement, dated January 3, 2003, between the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

4.6		Registration Rights Agreement, dated as of November 25, 2002, among the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 3, 2002, Commission File No. 001-07155)

4.7		Indenture dated as of December 3, 2002 between R.H. Donnelley Inc. (as successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.13 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)

4.8		Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc., as Issuer, the Company and the other guarantors signatory thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.14 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)

4.9		Form of 8.875% Senior Notes due 2010 (included in Exhibit 4.13)


Exhibit No.		Document
4.10		Guarantees relating to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.16 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)

4.11		Indenture dated as of December 3, 2002 between R.H. Donnelley Inc. (as successor to R.H. Donnelley Finance Corporation I), as Issuer, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.17 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)

4.12		Supplemental Indenture dated as of January 3, 2003 among R.H. Donnelley Inc., as Issuer, the Company and the other guarantors signatory thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.18 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)

4.13		Form of 10.875% Senior Subordinated Notes due 2012 (included in Exhibit 4.17)

4.14		Guarantees relating to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.20 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 001-07155)

4.15		Second Supplemental Indenture dated as of January 9, 2004 among R.H. Donnelley Inc., as Issuer, the Company and other guarantors signatory thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.21 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2004, Commission File No. 001-07155)

4.16		Second Supplemental Indenture, dated as of September 1, 2004, by and among R.H. Donnelley Inc., the guarantors party thereto and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 of R.H. Donnelley Inc. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

4.17		Third Supplemental Indenture, dated as of September 1, 2004, by and among R.H. Donnelley Inc., the guarantors party thereto and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 of R.H. Donnelley Inc. (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

4.18		Senior Guarantees relating to Second Supplemental Indenture to the Indenture governing the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

4.19		Senior Subordinated Guarantees relating to the Third Supplemental Indenture to the Indenture governing the 10.875% Notes due 2012 (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)


Exhibit No.		Document
4.20^#		Indenture, dated as of January 14, 2005, among R.H. Donnelly Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 19, 2005, Commission File No. 001-07155)

4.21		Form of 6 7/8% Senior Notes due 2013 (included in Exhibit 4.26)

10.1^#		Form of Distribution Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the Securities and Exchange Commission on September 30, 1998, Commission File No. 001-07155)

10.2^#		Form of Tax Allocation Agreement between the Company (f/k/a The Dun & Bradstreet Corporation) and The New Dun & Bradstreet Corporation (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K of the Company (f/k/a The Dun & Bradstreet Corporation), filed with the Securities and Exchange Commission on September 30, 1998, Commission File No. 001-07155)

10.3^#		Amended and Restated Indemnity and Joint Defense Agreement dated as of July 30, 2004, by and among VNU, N.V., VNU, Inc., ACNielson Corporation, AC Nielson (US), Inc., Nielson Media Research, Inc., R.H. Donnelley Corporation, the Dun & Bradstreet Corporation, Moody’s Corporation, and IMS Health Incorporated (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2004, Commission File No. 001-07155)

10.4^#		DonTech II Partnership Agreement, effective August 19, 1997, by and between R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) and R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to Ameritech Publishing of Illinois, Inc. (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)

10.5		Amendment No. 1 to DonTech II Partnership Agreement dated as of January 28, 2000 between R.H. Donnelley Inc. and R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to Ameritech Publishing of Illinois, Inc. (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2004, Commission File No. 001-07155)

10.6^#		Revenue Participation Agreement, dated as of August 19, 1997, by and between R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to APIL Partners Partnership, and R.H. Donnelley APIL, Inc., as assignee of R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation) (incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)

10.7^#		Master Agreement, executed August 19, 1997, by and among R.H. Donnelley Inc. (f/k/a The Reuben H. Donnelley Corporation), the Company (f/k/a The Dun & Bradstreet Corporation), The Am-Don Partnership a/k/a DonTech, DonTech II, Ameritech Publishing, Inc., Ameritech Publishing of Illinois, Inc., Ameritech Corporation, DonTech I Publishing Company LLC and the APIL Partners Partnership (incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287) This agreement is no longer in effect.


Exhibit No.		Document
10.8^#		Exclusive Sales Agency Agreement, effective August 19, 1997, between R.H. Donnelley Publishing and Advertising of Illinois Partnership, as successor to APIL Partners Partnership, and DonTech II (incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on August 7, 1998, Registration No. 333-59287)

10.9		Agreement for Publishing Services, dated as of January 1, 2002 between Ameritech Publishing Inc. and R.H. Donnelley Inc. (certain portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to an Application for an Order Granting Confidential Treatment) (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2002, filed with the Securities and Exchange Commission on May 10, 2002, Commission File No. 001-07155) This agreement is no longer in effect.

10.10^		Key Employees’ Performance Unit Plan, as amended and restated (incorporated by reference to Exhibit 10.15 to Amendment No. 3 to the Registration Statement on Form S-4, filed with the Securities and Exchange Commission on September 28, 1998, Registration No. 333-59287)

10.11^		1991 Key Employees’ Stock Option Plan, as amended and restated through April 25, 2000 (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended September 30, 2000, filed with the Securities and Exchange Commission on November 13, 2000, Commission File No. 001-07155)

10.12^		Amended and Restated 1998 Directors’ Stock Plan (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission on March 27, 2000, Commission File No. 001-07155)

10.13^		Pension Benefit Equalization Plan (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002, Commission File No. 001-07155)

10.14^		2001 Stock Award and Incentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002, Commission File No. 001-07155)

10.15*^		2005 Stock Award and Incentive Plan

10.16*^		Form of Non-Qualified Stock Option Agreement under 2005 Plan

10.17*^		Form of Annual Incentive Program Award under 2005 Plan

10.18^		Form of Performance Unit Program Award (incorporated by reference to Exhibit 99.04 to the Registration Statement on Form S-8, filed with the Securities and Exchange Commission on July 25, 2001, Registration No. 333-65822)

10.19*^		Form of Stock Appreciation Rights Agreement under 2005 Plan

10.20^		Deferred Compensation Plan (incorporated by reference to Exhibit 4.01 to the Company’s Registration Statement on Form S-8, filed with the Securities and Exchange Commission on November 24, 1999, Registration No. 333-91613)


Exhibit No.		Document
10.21^		Employment Agreement effective as of May 1, 2002 between the Company and David C. Swanson (incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended September 30, 2002, filed with the Securities and Exchange Commission on August 14, 2002, Commission File No. 001-07155)

10.22^		Employment Agreement effective September 21, 2002 between the Company and Peter J. McDonald (incorporated by reference to Exhibit 10.30 to the Quarterly Report on Form 10-Q for the nine months ended September 30, 2002, filed with the Securities and Exchange Commission on November 12, 2002, Commission File No. 001-07155)

10.23^		Employment Agreement effective March 1, 2002 between the Company and Steven M. Blondy (incorporated by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2002, filed with the Securities and Exchange Commission on August 14, 2002, Commission File No. 001-07155)

10.24^		Employment Agreement dated as of January 1, 2001 between the Company and Robert J. Bush (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission on March 28, 2001, Commission File No. 001-07155)

10.25^		Amendment No. 1 to Employment Agreement dated as of February 27, 2001 between the Company and Robert J. Bush (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission on March 28, 2001, Commission File No. 001-07155)

10.26		Letter Agreement, dated as of November 25, 2002, among the Company, R.H. Donnelley Inc. and investment partnerships affiliated with The Goldman Sachs Group, Inc (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 3, 2002, Commission File No. 001-07155)

10.27		Letter Agreement dated as of January 3, 2003 among the Company, R.H. Donnelley Inc. and investment partnerships affiliated with The Goldman Sachs Group, Inc (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

10.28		Letter Agreement, dated as of July 22, 2003 among the Company and investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.45 to the Company’s Quarterly Report on Form 10-Q for the three and six months ended September 30, 2003, filed with the Securities and Exchange Commission on August 13, 2003, Commission File No. 001-07155)

10.29^#		Directory Services License Agreement, dated as of January 3, 2003, by and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H. Donnelley Directory Company (f/k/a Centel Directory Company), Sprint Corporation, Sprint Directory Trademark Company, LLC and the Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)


Exhibit No.		Document
10.30^#		Trademark License Agreement, dated as of January 3, 2003, by and among Sprint Directory Trademark Company, LLC, R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C. and R.H. Donnelley Directory Company (f/k/a Centel Directory Company) (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

10.31^#		Publisher Trademark License Agreement, dated as of January 3, 2003, by and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), R.H. Donnelley Directory Company (f/k/a Centel Directory Company) and Sprint Corporation (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

10.32		Non-Competition Agreement, dated as of January 3, 2003, by and among the Company, R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H. Donnelley Directory Company (f/k/a Centel Directory Company), Sprint Corporation and the Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

10.33		Subscriber Listings Agreement, dated as of January 3, 2003, by and among R.H. Donnelley Publishing & Advertising, Inc. (f/k/a Sprint Publishing & Advertising, Inc.), CenDon L.L.C., R.H. Donnelley Directory Company (f/k/a Centel Directory Company), Sprint Corporation and the Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

10.34^#		Directory Services License Agreement, dated as of September 1, 2004, among R.H. Donnelley Corporation, R.H. Donnelley Publishing & Advertising of Illinois Partnership (formerly known as The APIL Partners Partnership), DonTech II Partnership, Ameritech Corporation, SBC Directory Operations, Inc. and SBC Knowledge Ventures, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

10.35		Non-Competition Agreement, dated as of September 1, 2004, between R.H. Donnelley Corporation and SBC Communications, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

10.36		SMARTpages Reseller Agreement, dated as of September 1, 2004, among SBC Communications, Inc., Southwestern Bell Yellow Pages, Inc., SBC Knowledge Ventures, L.P., R.H. Donnelley Corporation, R.H. Donnelley Publishing & Advertising of Illinois Partnership (formerly known as The APIL Partners Partnership) and DonTech II Partnership (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

10.37		Ameritech Directory Publishing Listing License Agreement, dated as of September 1, 2004, among R.H. Donnelley Publishing & Advertising of Illinois Partnership (formerly known as The APIL Partners Partnership), DonTech II Partnership and Ameritech Services Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)


Exhibit No.		Document
10.38^#		Credit Agreement, dated as of December 6, 2002, among the Company, R.H. Donnelley Inc., R.H. Donnelley Finance Corporation II (subsequently merged with and into R.H. Donnelley Inc.), the several lenders from time to time party thereto, Bear Stearns Corporate Lending Inc. and Citicorp North America, Inc., as joint syndication agents, BNP Paribas and Fleet National Bank, as joint documentation agents, Deutsche Bank Trust Company Americas, as administrative agent, and Deutsche Bank Securities Inc., Salomon Smith Barney Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint book runners (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)

10.39		First Amendment, dated as of December 5, 2003, among the Company, R.H. Donnelley Inc., the financial institutions parties thereto, Deutsche Bank Securities Inc., CitiGroup Global Markets Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint book runners, Bear Stearns Corporate Lending Inc. and Citicorp North America, Inc., as joint syndication agents, BNP Paribas and Fleet National Bank, as documentation agents, and Deutsche Bank Trust Company Americas, as administrative agent, to the Credit Agreement, dated as of December 6, 2002 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 26, 2004, Commission File No. 001-07155)

10.40^#		Amended and Restated Credit Agreement, dated as of September 1, 2004, by and among, R.H. Donnelley Inc., as borrower, R.H. Donnelley Corporation, the lenders from time to time parties thereto, J.P. Morgan Securities Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank and Bear Stearns Corporate Lending Inc., as co-syndication agents, Citicorp North America, Inc. and Goldman Sachs Credit Partners L.P., as co-documentation agents, and Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

10.41		First Amendment, dated as of December 6, 2004, to the Amended and Restated Credit Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, R.H. Donnelley Inc., the lenders from time to time parties thereto, Deutsche Bank Trust Company Americas, as administrative agent and J.P. Morgan Securities Inc. as sole bookrunner and sole lead arranger and the other agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 8, 2004, Commission File No. 001-07155)

10.42		Second Amendment, dated as of January 7, 2005, to the Amended and Restated Credit Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, R.H. Donnelley Inc., the lenders from time to time parties thereto, Deutsche Bank Trust Company Americas, as administrative agent and the other agents party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 11, 2005, Commission File No. 001-07155)


Exhibit No.		Document
10.43		Amended and Restated Guaranty and Collateral Agreement, dated as of September 1, 2004, by and among R.H. Donnelley Corporation, R.H. Donnelley Inc., R.H. Donnelley APIL, Inc., R.H. Donnelley Publishing & Advertising, Inc., Get Digital Smart.com Inc., R.H. Donnelley Publishing & Advertising of Illinois Partnership, DonTech II Partnership, DonTech Holdings, LLC, and R.H. Donnelley Publishing & Advertising of Illinois Holdings, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)

10.44		Reaffirmation, dated as of December 6, 2004, by R.H. Donnelley Corporation, R.H. Donnelley Inc. and its subsidiaries in favor of Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 8, 2004, Commission File No. 001-07155)

10.45^#		Closing Agreement dated as of December 13, 2004 by and between the Company and the Commissioner of the Internal Revenue Service (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 16, 2004, Commission File No. 001-07155)

10.46		Closing Agreement dated as of July 21, 2005 by and between the Company and the Commissioner of the Internal Revenue Service (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 3, 2005, Commission File No. 001-07155)

10.47^#		Stock Purchase Agreement dated as of January 10, 2005, by and among R.H. Donnelley Corporation and certain investment partnerships affiliated with The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 11, 2005, Commission File No. 001-07155)

10.48		Registration Rights Agreement, dated as of January 14, 2005, among R.H. Donnelley Corporation and the initial purchasers that are party thereto (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 19, 2005, Commission File No. 001-07155)

14*		R.H. Donnelley Policy on Business Conduct

21		Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Quarterly Report on Form 10-Q for the three month period ended September 30, 2004, filed with the Securities and Exchange Commission on November 9, 2004, Commission File No. 001-07155)

31.1*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer of R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act

31.2*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act

31.3*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act


Exhibit No.		Document
31.4*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act

32.1*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Corporation

32.2*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Inc.


*		Filed herewith

^		Management contract or compensatory plan

#		The Company agrees to furnish supplementally a copy of any omitted exhibits or schedules to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 14, 2002	By:	R.H. DONNELLEY CORPORATION
		R.H. DONNELLEY CORPORATION
		/s/ Steven M. Blondy
Date: August 5, 2005	By:	/s/ Steven M. Blondy
		Steven M. Blondy Senior Vice President and Chief Financial Officer
		Steven M. Blondy
Date: August 14, 2002	By:	/s/ William C. Drexler
		Senior Vice President and Chief Financial Officer
		William C. Drexler Vice President and Controller
		(Principal Financial Officer)
Date: August 5, 2005	By:	/s/ Robert A. Gross
		Robert A. Gross
		Vice President and Controller
		(Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 14, 2002	By:	R.H. DONNELLEY INC.
		R.H. DONNELLEY INC.
		/s/ Steven M. Blondy
Date: August 5, 2005	By:	/s/ Steven M. Blondy
		Steven M. Blondy Senior Vice President and Chief Financial Officer
		Steven M. Blondy
Date: August 14, 2002	By:	/s/ William C. Drexler
		Senior Vice President and Chief Financial Officer
		William C. Drexler Vice President and Controller
		(Principal Financial Officer)
Date: August 5, 2005	By:	/s/ Robert A. Gross
		Robert A. Gross
		Vice President and Controller
		(Principal Accounting Officer)

2969

Exhibit Index


Exhibit No.		Document
10.15*		2005 Stock Award and Incentive Plan

10.16*		Form of Non-Qualified Stock Option Agreement under 2005 Plan

10.17*		Form of Annual Incentive Program Award under 2005 Plan

10.19*		Form of Stock Appreciation Rights Agreement under 2005 Plan

14*		R.H. Donnelley Policy on Business Conduct

31.1*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer of R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act

31.2*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer R.H. Donnelley Corporation under Section 302 of the Sarbanes-Oxley Act

31.3*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by David C. Swanson, Chief Executive Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act

31.4*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 by Steven M. Blondy, Senior Vice President and Chief Financial Officer for R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act

32.1*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Corporation

32.2*		Certification of Quarterly Report on Form 10-Q for the period ended June 30, 2005 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chief Executive Officer, and Steven M. Blondy, Senior Vice President and Chief Financial Officer, for R.H. Donnelley Inc.


*		Filed herewith

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