UNITEDTable STATESof SECURITIES AND EXCHANGE COMMISSION Contents

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

~~FORM~~Washington, ~~10-Q~~D.C. 20549

~~(Mark~~FORM ~~one)~~10-Q

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

~~For~~þ ~~the~~QUARTERLY ~~quarterly~~REPORT ~~period~~PURSUANT ~~ended~~TO ~~March 31,~~SECTION ~~2007~~ 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the quarterly period ended September 30, 2007

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

~~For~~o ~~the~~TRANSITION ~~transition~~REPORT ~~period~~PURSUANT ~~from to~~ TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~file~~the ~~number~~transition ~~333-59287~~period from to

~~R.H.~~Commission ~~DONNELLEY~~file ~~INC.~~number 333-59287

~~(Exact~~R.H. ~~name~~DONNELLEY ~~of registrant as specified in its charter)~~INC.

Delaware		36-2467635
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
1001 Winstead Drive, Cary, N.C.		27513
(Address of principal executive offices)		(Zip Code)

(Exact name of registrant as specified in its charter)

(919) 297-1600


Delaware		36-2467635

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1001 Winstead Drive, Cary, N.C.		27513

(Address of principal executive offices)		(Zip Code)

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

~~N/A~~ (Registrant’s telephone number, including area code)

~~(Former Name, Former Address and Former~~N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 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 the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer o Non-accelerated filer þ

~~Large~~Indicate ~~accelerated~~by ~~filer~~check ~~o Accelerated~~mark ~~filer~~whether ~~o Non~~the registrant is a shell company (as defined in Rule 12b-~~accelerated~~2 ~~filer~~of the Exchange Act). Yes o No þ

Indicate bythe ~~check~~number ~~mark~~of ~~whether~~shares ~~the~~outstanding ~~registrant~~of iseach aof ~~shell~~the ~~company~~issuer’s ~~(as~~classes ~~defined~~of incommon ~~Rule 12b-2~~stock, ofas ~~the~~of ~~Exchange~~the ~~Act). Yes~~latest opracticable ~~No þ~~date:

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 November 1, 2007

Common Stock, no par value		200

	Title of Class			Shares Outstanding at May 1, 2007
	Common Stock, no par value			100

THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF R.H. DONNELLEY CORPORATION. THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

~~THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF~~ R.H. DONNELLEY ~~CORPORATION~~INC. ~~THE~~ ~~REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.~~

~~R.H. DONNELLEY INC.~~ INDEX TO FORM 10-Q

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at March 31, 2007 and December 31, 2006		3
	Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2007 and 2006		4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Narrative Analysis of Results of Operations *		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk **		24
Item 4T.	Controls and Procedures		24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 1A.	Risk Factors		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ***		25
Item 3.	Defaults Upon Senior Securities ***		25
Item 4.	Submission of Matters to a Vote of Security Holders ***		25
Item 5.	Other Information		25
Item 6.	Exhibits		26
SIGNATURES			30

Beginning with the Quarterly Report on Form 10-Q (the “Form 10-Q”) for the period ended June 30, 2007, R.H. Donnelley Inc. has modified its periodic reporting as compared to previously filed Quarterly Reports. Although this Form 10-Q contains all information required by applicable rules and regulations, it does not repeat certain information contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the “Form 10-K”). As a result, this Form 10-Q should be read together with the Form 10-K.

*	Pursuant to General Instruction H(2)(a) of Form 10-Q: (i) the information called for by Item 2 of Part I, Management’s Discussion and Analysis of Financial Condition and Results of Operations has been omitted and (ii) the registrant is providing a Management’s Narrative Analysis of Results of Operations.
			PAGE
**	Omitted pursuant to General Instruction H(2)(c) of Form 10-Q.
PART I. FINANCIAL INFORMATION
***	Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.
Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets at September 30, 2007 and December 31, 2006		4
		Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2007 and 2006		5
		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006		6
		Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Narrative Analysis of Results of Operations *			14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk **			20
Item 4.	Controls and Procedures			20
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings			21
Item 1A.	Risk Factors			21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ***			21
Item 3.	Defaults Upon Senior Securities ***			21
Item 4.	Submission of Matters to a Vote of Security Holders ***			21
Item 5.	Other Information			21
Item 6.	Exhibits			22
SIGNATURES				23
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PartTable I.of FINANCIAL INFORMATION Contents

Item 1. Financial Statements


*		Pursuant to General Instruction H(2)(a) of Form 10-Q: (i) the information called for by Item 2 of Part I, Management’s Discussion and Analysis of Financial Condition and Results of Operations has been omitted and (ii) the registrant is providing a Management’s Narrative Analysis of Results of Operations.

**		Omitted pursuant to General Instruction H(2)(c) of Form 10-Q.

***		Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

~~R.H. Donnelley Inc. and Subsidiaries~~3

ConsolidatedTable Balanceof Sheets (Unaudited)Contents

	March 31,			December 31,
(in thousands, except share data)	2007			2006
Assets
Current Assets
Cash and cash equivalents	$	6,289		$	4,905
Accounts receivable
Billed		110,369			120,387
Unbilled		340,264			347,051
Allowance for doubtful accounts and sales claims		(23,631	)		(25,476	)
Net accounts receivable		427,002			441,962
Deferred directory costs		64,470			67,204
Prepaid expenses and other current assets		37,861			50,017
Total current assets		535,622			564,088
Fixed assets and computer software, net		87,479			88,076
Amount due from Parent, net		425,990			426,192
Other non-current assets		47,559			52,147
Intangible assets, net		2,735,689			2,755,624
Goodwill		315,560			315,560
Total Assets	$	4,147,899		$	4,201,687
Liabilities and Shareholder’s Equity
Current Liabilities
Accounts payable and accrued liabilities	$	54,304		$	74,764
Accrued interest		28,314			11,950
Deferred directory revenue		429,654			439,100
Short-term deferred income taxes, net		9,430			100,943
Current portion of long-term debt		84,800			112,200
Total current liabilities		606,502			738,957
Long-term debt		2,428,069			2,442,269
Deferred income taxes, net		188,757			181,417
Other non-current liabilities		153,188			63,790
Total liabilities		3,376,516			3,426,433
Commitments and contingencies
Shareholder’s Equity
Common stock, no par value, authorized, issued and outstanding – 100 shares		308,942			308,942
Retained earnings		476,572			476,488
Accumulated other comprehensive loss		(14,131	)		(10,176	)
Total shareholder’s equity		771,383			775,254
Total Liabilities and Shareholder’s Equity	$	4,147,899		$	4,201,687

Part I. FINANCIAL INFORMATION

~~The~~Item 1. ~~accompanying~~Financial ~~notes are an integral part of the consolidated financial statements.~~Statements

3R.H. Donnelley Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)

R.H. Donnelley Inc. and Subsidiaries


	September 30,			December 31,
(in thousands, except share data)	2007			2006

Assets
Current Assets
Cash and cash equivalents	$	4,143		$	4,905
Accounts receivable
Billed		109,759			120,387
Unbilled		334,868			347,051
Allowance for doubtful accounts and sales claims		(22,139	)		(25,476	)

Net accounts receivable		422,488			441,962
Deferred directory costs		77,333			67,204
Prepaid expenses and other current assets		64,620			50,017

Total current assets		568,584			564,088

Fixed assets and computer software, net		95,078			88,076
Amount due from Parent, net		276,796			426,192
Other non-current assets		36,937			52,147
Intangible assets, net		2,695,819			2,755,624
Goodwill		313,753			315,560


Total Assets	$	3,986,967		$	4,201,687


Liabilities and Shareholder’s Equity

Current Liabilities
Accounts payable and accrued liabilities	$	76,232		$	74,764
Accrued interest		26,725			11,950
Deferred directory revenue		430,799			439,100
Short-term deferred income taxes, net		—			100,943
Current portion of long-term debt		77,326			112,200

Total current liabilities		611,082			738,957

Long-term debt		2,341,686			2,442,269
Deferred income taxes, net		199,879			181,417
Other non-current liabilities		52,033			63,790

Total liabilities		3,204,680			3,426,433

Commitments and contingencies

Shareholder’s Equity
Common stock, no par value, authorized, issued and outstanding — 100 shares		12,002			12,002
Additional paid-in capital		302,850			296,940
Retained earnings		485,217			476,488
Accumulated other comprehensive loss		(17,782	)		(10,176	)


Total shareholder’s equity		782,287			775,254


Total Liabilities and Shareholder’s Equity	$	3,986,967		$	4,201,687

~~Consolidated~~The ~~Statements~~accompanying notes are an integral part of ~~Income~~the ~~and~~condensed ~~Comprehensive~~consolidated ~~Income~~financial ~~(Unaudited)~~statements.

	Three months ended
	March 31,
(in thousands)	2007			2006
Net revenue	$	257,935		$	261,369
Expenses
Cost of revenue (exclusive of depreciation and amortization shown separately below)		110,401			107,637
General and administrative expenses		19,238			22,298
Depreciation and amortization		24,933			21,382
Total expenses		154,572			151,317
Operating income		103,363			110,052
Interest expense, net		48,192			49,933
Income before income taxes		55,171			60,119
Provision for income taxes		20,699			22,807
Net income	$	34,472		$	37,312
Comprehensive Income
Net income	$	34,472		$	37,312
Unrealized (loss) gain on interest rate swaps, net of tax		(4,269	)		4,675
Benefit plans adjustment, net of tax		314			—
Comprehensive income	$	30,517		$	41,987

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

4R.H. Donnelley Inc. and Subsidiaries Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

R.H. Donnelley Inc. and Subsidiaries


	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2007			2006			2007			2006


Net revenue	$	254,761		$	258,315		$	770,737		$	778,155

Expenses
Cost of revenue (exclusive of depreciation and amortization shown separately below)		108,608			102,507			334,412			309,607
General and administrative expenses		16,273			12,888			50,466			50,670
Depreciation and amortization		24,459			22,526			73,502			65,080

Total expenses		149,340			137,921			458,380			425,357

Operating income		105,421			120,394			312,357			352,798

Interest expense, net		(48,216	)		(49,102	)		(144,433	)		(146,465	)


Income before income taxes		57,205			71,292			167,924			206,333

Provision for income taxes		28,534			27,053			70,224			78,301


Net income	$	28,671		$	44,239		$	97,700		$	128,032


Comprehensive Income
Net income	$	28,671		$	44,239		$	97,700		$	128,032
Unrealized loss on interest rate swaps, net of tax		(6,343	)		(11,713	)		(8,721	)		(4,836	)
Benefit plans adjustment, net of tax		372			—			1,115			—

Comprehensive income	$	22,700		$	32,526		$	90,094		$	123,196

~~Consolidated~~The ~~Statements~~accompanying notes are an integral part of ~~Cash~~the ~~Flows~~condensed ~~(Unaudited)~~consolidated financial statements.

	Three months ended
	March 31,
(in thousands)	2007			2006
Cash Flows from Operating Activities
Net income	$	34,472		$	37,312
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization		24,933			21,382
Deferred income tax provision		19,560			22,807
Provision for bad debts		11,167			10,536
Stock-based compensation expense		5,575			14,803
Other non-cash charges		128			8,061
Changes in assets and liabilities:
Decrease in accounts receivable		3,794			33,023
Decrease in other assets		18,000			10,365
Decrease in accounts payable and accrued liabilities		(7,995	)		(7,738	)
Decrease in deferred directory revenue		(9,446	)		(41,331	)
(Decrease) increase in other non-current liabilities		(235	)		4,813
(Increase) in amount due from Parent, net		(4,921	)		(26,392	)
Net cash provided by operating activities		95,032			87,641
Cash Flows from Investing Activities
Additions to fixed assets and computer software		(7,455	)		(3,570	)
Net cash used in investing activities		(7,455	)		(3,570	)
Cash Flows from Financing Activities
Revolver borrowings		151,550			3,700
Revolver repayments		(178,950	)		(8,700	)
Credit facility repayments		(14,200	)		(71,340	)
Decrease in checks not yet presented for payment		(4,897	)		(2,051	)
Dividend to Parent		(39,696	)		—
Net cash used in financing activities		(86,193	)		(78,391	)
Increase in cash and cash equivalents		1,384			5,680
Cash and cash equivalents, beginning of year		4,905			6,963
Cash and cash equivalents, end of period	$	6,289		$	12,643
Supplemental Information:
Cash paid:
Interest	$	27,743		$	29,944
Income taxes, net	$	139		$	231

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

5R.H. Donnelley Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)

R.H. Donnelley Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (tabular amounts in thousands)


	Nine months ended
	September 30,
( in thousands)	2007			2006


Cash Flows from Operating Activities
Net income	$	97,700		$	128,032
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization		73,502			65,080
Deferred income tax provision		28,810			78,301
Provision for bad debts		33,210			27,867
Stock-based compensation expense		11,361			22,404
Other non-cash charges		3,195			3,582
Changes in assets and liabilities:
(Increase) in accounts receivable		(13,736	)		(1,272	)
Decrease in other assets		5,094			17,101
Increase in accounts payable and accrued liabilities		12,030			203
(Decrease) in deferred directory revenue		(8,300	)		(25,993	)
(Decrease) in other non-current liabilities		(131,174	)		(4,179	)
Decrease (increase) in amount due from Parent, net		138,480			(82,921	)

Net cash provided by operating activities		250,172			228,205

Cash Flows from Investing Activities
Additions to fixed assets and computer software		(23,750	)		(27,166	)

Net cash used in investing activities		(23,750	)		(27,166	)

Cash Flows from Financing Activities
Proceeds from the issuance of debt, net of costs		—			(1,397	)
Revolver borrowings		283,850			185,600
Revolver repayments		(309,750	)		(172,200	)
Credit facility repayments		(109,557	)		(215,580	)
(Decrease) increase in checks not yet presented for payment		(3,359	)		195
Dividends to Parent		(94,278	)		—
Excess tax benefits from exercise of stock options		5,910			—

Net cash used in financing activities		(227,184	)		(203,382	)

Decrease in cash and cash equivalents		(762	)		(2,343	)
Cash and cash equivalents, beginning of year		4,905			6,963

Cash and cash equivalents, end of period	$	4,143		$	4,620


Supplemental Information:
Cash paid:
Interest	$	119,024		$	121,740
Income taxes, net	$	1,938		$	231

1.The ~~Business~~accompanying ~~and~~notes ~~Basis~~are an integral part of ~~Presentation~~the condensed consolidated financial statements.

~~R.H. Donnelley Inc. is a direct wholly-owned subsidiary of R.H. Donnelley Corporation (“RHD” or~~6 “parent”). The interim consolidated financial statements of R.H. Donnelley Inc. and its direct and indirect wholly-owned subsidiaries (the “Company,” “RHDI,” “RHD Inc.,” “we,” “us” and “our”) have been prepared in accordance with the instructions to Quarterly Report on 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 31, 2006 (“2006 10-K”). The results 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 adjustments) considered necessary for a fair statement of financial position, results of operations and cash flows at the dates and for the periods presented have been included.

CertainTable prior period amounts included on the Consolidated Statements of Cash Flows have been reclassified to conform to the current period’s presentation. Contents

~~Our~~R.H. ~~parent,~~Donnelley ~~RHD, is one of the nation’s largest Yellow Pages and online local commercial search companies, based on revenue~~Inc. ~~We publish~~ and ~~distribute advertiser content utilizing two of the most~~Subsidiaries ~~highly~~Notes ~~recognizable~~to ~~brands~~Condensed inConsolidated ~~the~~Financial ~~industry,~~Statements ~~Embarq~~ (~~formerly known as Sprint~~Unaudited) ~~and AT&T (formerly~~ ~~known~~(tabular asamounts ~~SBC). During 2006, we published and distributed more than 30 million print directories and our print and online solutions helped approximately 250,000 national and local businesses~~ in 18thousands) ~~states reach consumers who were actively seeking to purchase products and services. Some of our~~ ~~markets include Las Vegas and Orlando and Lee County, Florida.~~

~~Significant~~1. Business ~~Developments~~and Basis of Presentation

OnR.H. ~~January 31,~~Donnelley ~~2006,~~Inc. ~~RHD~~is ~~acquired~~a ~~Dex~~direct ~~Media,~~wholly-owned ~~Inc~~subsidiary of R.H. Donnelley Corporation (“~~Dex~~RHD” ~~Media~~or “parent”). ~~for~~The aninterim ~~equity~~condensed ~~purchase~~consolidated ~~price~~financial ~~of $4.1 billion~~statements ~~consisting~~ of ~~36,547,381~~R.H. ~~shares~~Donnelley ~~of RHD common stock valued at $2~~Inc.~~2 billion~~ and ~~$1.9~~its ~~billion~~direct inand ~~cash~~indirect wholly-owned subsidiaries (the “~~Dex~~Company,” ~~Media Merger~~“RHDI,”). “RHD ~~also~~Inc.,” ~~assumed~~“we,” ~~all~~“us” ~~of Dex Media’s~~ and ~~its~~ ~~subsidiaries’~~“our”) ~~outstanding~~have ~~indebtedness~~been ~~with~~prepared ain ~~fair~~accordance ~~value of $5.5 billion, together~~ with ~~other~~the ~~costs for~~instructions ato ~~total~~Quarterly ~~aggregate~~Report ~~purchase~~on ~~price~~Form of10-Q ~~$9.8 billion.~~and should ~~Dex~~be ~~Media~~read isin ~~the~~conjunction ~~exclusive~~with ~~publisher of~~ the ~~“official”~~ ~~yellow~~financial ~~pages~~statements and ~~white~~related ~~pages~~notes ~~directories~~included ~~for~~in ~~Qwest~~our Annual ~~Communications~~Report ~~International~~on ~~Inc. (“Qwest”)~~Form ~~where~~10-K ~~Qwest~~for ~~was~~ the ~~primary~~year ~~incumbent~~ended ~~local~~December 31, ~~exchange~~2006 ~~carrier~~ (“~~ILEC~~2006 10-K”). inThe ~~November 2002.~~interim ~~Prior~~condensed toconsolidated ~~the~~financial ~~Dex~~statements ~~Media~~include ~~Merger,~~the ~~Dex~~accounts ~~Media~~of ~~was~~RHD aInc. ~~leading~~and ~~directory~~its ~~publisher~~direct inand indirect ~~the~~wholly-owned ~~United States~~subsidiaries. ~~The~~ ~~purpose~~All ofintercompany ~~the~~transactions ~~Dex~~and ~~Media~~balances ~~Merger~~between ~~was~~RHD toInc. ~~take~~and its asubsidiaries ~~further~~have ~~step~~been ineliminated. ~~the~~The ~~transformation~~results of ~~RHD~~interim ~~into~~periods ~~a leading~~are ~~publisher~~not necessarily indicative of ~~yellow~~results ~~pages~~for ~~directories,~~the asfull ~~well~~year asor toany ~~combine~~subsequent ~~the~~period. ~~complementary~~In ~~strengths~~the opinion of management, ~~both~~all ~~companies.~~adjustments ~~The~~(consisting ~~acquired business~~ of ~~Dex~~normal ~~Media~~recurring ~~and~~adjustments) ~~its~~considered ~~subsidiaries~~necessary ~~(“Dex~~for ~~Media~~a ~~Business”) now~~fair ~~operates~~statement asof ~~Dex~~financial ~~Media Inc.~~position, ~~one~~results of ~~RHD’s~~operations ~~direct,~~and ~~wholly-owned~~cash ~~subsidiaries.~~flows Asat ~~such,~~ the ~~results~~dates ~~of the~~and ~~Dex~~for ~~Media~~the periods ~~Business~~presented ~~are~~have ~~not~~been included ~~in the Company’s operating results~~.

OnOur ~~September 6~~parent, ~~2006,~~ RHD ~~acquired (the “Local Launch Acquisition”) Local Launch~~, ~~Inc. (“Local Launch”). Local Launch~~ is aone ~~leading~~of ~~local~~the ~~search~~nation’s ~~products,~~largest ~~platform,~~Yellow Pages and ~~fulfillment~~online ~~provider that enables resellers to sell Internet advertising solutions to~~ local ~~advertisers.~~commercial ~~Local Launch~~search ~~specializes~~companies, inbased ~~search~~on ~~through~~revenue. ~~publishing,~~We ~~distribution,~~publish ~~directory,~~ and ~~organic~~distribute ~~marketing~~advertiser ~~solutions. The~~content ~~purpose~~utilizing two of the ~~Local~~most highly ~~Launch~~recognizable ~~Acquisition~~brands ~~was~~in tothe ~~support~~industry, ~~the~~Embarq ~~expansion~~(formerly ofknown ~~RHD~~as Sprint) and ~~the~~AT&T ~~Company’s~~(formerly ~~current~~known ~~local~~as ~~search~~SBC). ~~engine~~During ~~marketing~~2006, ~~(“SEM”)~~we published and ~~search~~distributed ~~engine~~more ~~optimization~~than ~~(“SEO”)~~30 million ~~offerings~~print directories and ~~provide~~our ~~new,~~print ~~innovative~~and online solutions tohelped ~~enhance~~approximately ~~RHD~~250,000 national and ~~the Company’s~~ local ~~SEM~~businesses ~~and~~in ~~SEO capabilities.~~18 ~~The~~states ~~acquired~~reach ~~business~~consumers ofwho ~~Local~~were ~~Launch~~actively ~~(“Local~~seeking ~~Launch~~to ~~Business”)~~purchase ~~now~~products ~~operates~~and asservices. ~~one~~Some of ~~RHD’s~~our ~~direct,~~markets ~~wholly-owned~~include ~~subsidiaries.~~Las AsVegas ~~such,~~and ~~the~~Orlando ~~results~~and ofLee ~~the~~County, ~~Local Launch Business are not included in the Company’s operating results~~Florida.

~~2. Summary of~~ Significant ~~Accounting~~Business ~~Policies~~Developments

~~Principles~~On August 23, 2007, RHD acquired Business.com, Inc. (“Business.com”), a leading business search engine and directory and performance based advertising network, for a disclosed amount of ~~Consolidation~~$345.0 million (the “Business.com Acquisition”). The ~~consolidated~~purchase ~~financial~~price ~~statements~~determined ~~include~~in accordance with generally accepted accounting principles (“GAAP”) is $334.2 million and excludes certain items such as the ~~accounts~~value of unvested equity awards. The purpose of the Business.com Acquisition was to expand RHD and the Company’s existing interactive portfolio by adding leading Internet advertising talent ~~Inc.~~and technology, to strengthen RHD and ~~its~~the ~~direct~~Company’s position in the expanding local commercial search market and ~~indirect~~to ~~wholly-owned~~develop ~~subsidiaries~~an online performance based advertising network. ~~All~~Business.com ~~intercompany~~also provides ~~transactions~~the established business-to-business online properties of Business.com, Work.com and ~~balances~~the Business.com ~~between~~Advertising ~~RHD~~Network. ~~Inc~~We expect to adopt the Business.com technology platform to serve ~~and~~our ~~its~~existing ~~subsidiaries~~advertiser ~~have~~base. ~~been~~Business.com ~~eliminated~~now operates as a direct, wholly-owned subsidiary of RHD. As such, the results of Business.com are not included in the Company’s operating results.

6On October 2, 2007, RHD issued $1.0 billion aggregate principal amount of 8.875% Series A-4 Senior Notes due 2017 (“Series A-4 Notes”). Proceeds from this issuance were (a) used to repay a $328 million RHD credit facility used to fund RHD’s acquisition of Business.com, (b) contributed to RHDI in order to provide funding for the tender offer and consent solicitation of RHDI’s $600 million aggregate principal amount 10.875% Senior Subordinated Notes due 2012 (“Senior Subordinated Notes”) and (c) used to pay related fees and expenses and for other general corporate purposes. On October 17, 2007, RHD issued an additional $500 million of Series A-4 Notes. Certain proceeds from this issuance were transferred to RHDI in order to repay a portion of the term loans outstanding under the existing RHDI credit facility and pay related fees and expenses.

~~Revenue~~In ~~Recognition.~~October 2007, Weunder ~~earn revenue principally from~~ the ~~sale~~terms ofand ~~advertising~~conditions ~~into our yellow pages directories. Revenue from the sale~~ of ~~such advertising is deferred when~~ a ~~directory~~tender ~~is published,~~offer ~~net of estimated sales claims,~~ and ~~recognized~~consent ~~ratably~~solicitation ~~over the life of a directory,~~to ~~which~~purchase isRHDI’s ~~typically 12~~$600 ~~months~~million ~~(the~~Senior ~~“deferral~~Subordinated ~~and~~Notes ~~amortization method”). The Company also recognizes revenue for those Internet-based advertising products~~ that ~~are~~RHDI ~~bundled~~commenced ~~with~~on ~~print~~September 18, ~~advertising using~~2007, ~~the~~$599.9 million, ~~deferral~~or ~~and amortization method~~99.9%, ~~Revenue~~of ~~with respect to Internet-based advertising that is not bundled with print advertising is recognized ratably over~~ the ~~period~~outstanding ~~the~~Senior ~~advertisement~~Subordinated ~~appears on~~Notes ~~the~~were ~~site~~repurchased. ~~Revenue~~As ~~with respect to our other products and services, such as SEM and SEO services,~~a isresult ~~recognized~~of asthe ~~delivered~~tender oroffer ~~fulfilled. Revenue~~ and ~~deferred~~consent ~~revenue~~solicitation ~~from the sale~~ of ~~advertising is~~RHDI’s ~~recorded~~Senior ~~net~~Subordinated ~~of an allowance for sales claims~~Notes, ~~estimated~~we ~~based on historical experience on a~~expect ~~directory-by-directory basis. We increase or decrease this estimate as information or circumstances indicate~~ that ~~the~~RHDI ~~estimate~~will ~~may~~ no longer ~~adequately~~be ~~represent~~required ~~the~~to ~~amount~~file ofquarterly ~~claims~~and ~~we may~~annual ~~incur~~reports ~~for~~pursuant ato ~~directory~~Section 13 inor 15(d) ~~the future. The Company recorded sales claims allowances~~ of ~~$2.2 million and $3.6 million for~~ the ~~three~~Securities ~~months~~Exchange ~~ended~~Act ~~March 31,~~of ~~2007 and 2006, respectively~~1934.

~~The~~See ~~Company~~Note ~~enters into transactions~~10, ~~such~~“Subsequent ~~as exclusivity arrangements~~Events, sponsorships and other media access transactions, where the Company’s products and services are promoted by a third party and, in exchange, the Company carries the third party’s advertisement. The Company accounts for these transactions in accordance with Emerging Issues Task Force (“EITF”) ~~Issue No. 99-17, Accounting~~ for ~~Advertising~~additional ~~Barter~~information ~~Transactions.~~regarding ~~Revenue~~these ~~and~~financing ~~expense related to such transactions are included in the consolidated statements of income consistent with,~~ and ~~only to the extent of,~~other ~~reasonably~~related ~~similar and recent items sold or purchased for cash~~transactions.

~~In certain cases, the Company enters into agreements with customers that involve the delivery of~~7 more than one product or service. Revenue for such arrangements is allocated to the separate units of accounting using the relative fair value method in accordance with EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.

DeferredTable Directory Costs. 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, which is typically 12 months. These costs are specifically identifiable to a particular directory and include sales commissions and print, paper and initial distribution costs. Such costs that are paid prior to directory publication are classified as prepaid expenses and other current assets until publication, when they are then reclassified as deferred directory costs. Contents

~~Cash and Cash Equivalents~~2. ~~Cash~~Summary ~~equivalents include liquid investments with a maturity~~ of ~~less than~~Significant ~~three~~Accounting ~~months at their time of purchase. The Company places its investments with high quality~~Policies ~~financial institutions. At times, such investments may be in excess of federally insured limits.~~

~~Accounts~~Intangible ~~Receivable.~~Assets Accounts receivable consist of balances owed to us by our advertising customers. Advertisers typically enter into a twelve-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 Company the total 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. Billed receivables are recorded net of an allowance for doubtful accounts and ~~sales claims,~~Goodwill 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 no longer appropriately represents the amount of bad debts and sales claims we may incur. Unbilled receivables represent contractually owed amounts, net of an allowance for sales claims, for published directories that have yet to be billed to advertisers.

~~Fixed~~In ~~Assets~~connection ~~and~~with ~~Computer~~prior ~~Software.~~business ~~Fixed~~combinations, certain long-term intangible assets ~~and~~were ~~computer~~identified in ~~software~~accordance ~~are~~with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations (“SFAS No. 141”) and recorded at ~~cost~~their estimated fair values. In accordance with SFAS ~~Depreciation~~No. 142, Goodwill and ~~amortization~~Other isIntangible ~~provided~~Assets ~~over~~(“SFAS No. 142”), the fair values of the identifiable intangible assets are being amortized over their estimated useful lives ofin a manner that best reflects the economic benefit derived from such assets. ~~using~~Goodwill ~~the~~is not amortized but is subject to ~~straight-line~~impairment ~~method.~~testing ~~Estimated~~on ~~useful~~an ~~lives~~annual ~~are~~basis. ~~thirty~~Amortization ~~years~~expense ~~for~~was ~~buildings,~~$19.9 million ~~five~~and ~~years~~$19.4 million for ~~machinery~~the ~~and~~three ~~equipment~~months ended September 30, ~~ten~~2007 ~~years~~and ~~for~~2006, ~~furniture~~respectively, and ~~fixtures~~$59.8 million and ~~three~~$55.9 million tofor ~~five~~the ~~years~~nine ~~for~~months ~~computer equipment~~ended September 30, 2007 and ~~computer~~2006, ~~software~~respectively. ~~Leasehold~~During ~~improvements~~the ~~are~~three months ~~amortized~~ended onSeptember 30, ~~a straight-line~~2007, ~~basis~~our ~~over~~parent re-occupied the ~~shorter~~remaining portion of ~~the~~our ~~term~~leased facilities ofin Chicago, Illinois, which we vacated in conjunction with the ~~lease~~2005 orRestructuring Actions (defined in Note 4, “Restructuring Charges”). As a result, we have reversed the ~~estimated~~remaining amount ~~useful~~of ~~life~~our reserve related to these leased facilities at September 30, 2007 of $1.8 million, with a corresponding offset to goodwill. No impairment losses related to our intangible assets and goodwill were recorded during the three and nine months ended September 30, 2007 and 2006, ~~improvement~~respectively.

7Interest Expense and Deferred Financing Costs

~~Interest Expense and Deferred Financing Costs.~~ Certain costs associated with the issuance of debt instruments are capitalized and included in Other ~~other~~ non-current assets on the condensed consolidated balance sheets. These costs are amortized to interest expense over the terms of the related 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 effective interest method. Amortization of deferred financing costs included in interest expense was $43.15 million and $3.41 million for the three months ended ~~March~~September 3130, 2007 and 2006, respectively, and $10.8 million and $9.6 million for the nine months ended September 30, 2007 and 2006, respectively. Apart from business combinations, it is the Company’s policy to recognize losses incurred in conjunction with debt extinguishments as a component of interest expense.

Advertising ~~Expense. We recognize advertising expenses as incurred. These expenses include public~~Expenses relations, media, on-line advertising and other promotional and sponsorship costs. Total advertising expense was $2.4 million and $6.1 million for the three months ended March 31, 2007 and 2006, respectively.

~~Concentration~~We ofrecognize ~~Credit~~advertising ~~Risk.~~expenses ~~Approximately~~as ~~85%~~incurred. ofThese ~~our~~expenses ~~directory~~include ~~advertising~~public ~~revenue~~relations, ~~is derived~~media, ~~from~~on-line ~~the sale of~~ advertising toand ~~local~~other ~~small-~~promotional and ~~medium-sized~~sponsorship ~~businesses~~costs. ~~These~~Total ~~advertisers typically enter into 12-month~~ advertising ~~sales~~expense ~~contracts and make monthly payments over the term~~was ~~of the contract~~$5.1 million ~~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~~$4.1 million Iffor the ~~advertisers~~three ~~qualify,~~months weended ~~may~~September 30, ~~extend~~2007 ~~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~~2006, ~~full collection of delinquent accounts can take~~respectively, ~~an extended period of time~~ and ~~involve significant costs~~$11.9 million ~~While~~and ~~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~~$11.7 million Wefor dothe ~~not~~nine ~~require~~months ~~collateral~~ended ~~from our advertisers~~September 30, ~~although~~2007 weand ~~do charge interest to advertisers that do not pay by specified due dates~~2006, respectively.

~~The~~Concentration ~~remaining approximately 15%~~ of ~~our~~Credit ~~directory advertising revenue is derived from the sale of~~Risk advertising to national or large regional chains, such as rental car companies, automobile repair shops and pizza delivery businesses. Substantially all of the revenue derived through national accounts is serviced through CMRs from which we accept orders. 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 directories, 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 has been historically 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.

AtApproximately ~~March 31,~~85% ~~2007,~~of weour ~~had~~directory ~~interest~~advertising ~~rate~~revenue ~~swap~~is ~~agreements~~derived ~~with~~from ~~major~~the ~~financial~~sale ~~institutions~~of ~~with~~advertising ato ~~notional~~local ~~value~~small- ofand $1medium-sized businesses.~~4 billion.~~ WeMost new advertisers and advertisers desiring to expand their advertising programs are ~~exposed~~subject to a credit ~~risk~~review. inWhile ~~the~~we ~~event~~do not believe that ~~one~~extending credit orto ~~more~~our oflocal ~~the counterparties~~advertisers towill ~~the~~have ~~agreements~~a ~~does~~material ~~not,~~adverse effect on our results of operations or financial ~~cannot~~condition, ~~meet~~no ~~their~~assurances ~~obligation~~can be given. ~~The~~We ~~notional~~do ~~amount~~not require collateral from our isadvertisers, ~~used~~although towe ~~measure~~do charge interest to beadvertisers ~~paid~~that ordo ~~received~~not ~~and~~pay ~~does~~by ~~not~~specified ~~represent~~due ~~the~~dates. The ~~amount~~remaining approximately 15% of ~~exposure~~our ~~to credit~~directory ~~loss.~~advertising ~~Any~~revenue ~~loss~~is ~~would~~derived befrom ~~limited~~the sale of advertising to ~~the~~national ~~amount~~or ~~that~~large ~~would~~regional ~~have~~chains. ~~been~~Substantially ~~received~~all ~~over~~of the revenue derived through ~~remaining~~national ~~life~~accounts ofis ~~the~~serviced ~~swap~~through ~~agreement~~certified marketing representatives (“CMRs”) from which we accept orders. ~~The~~We ~~counterparties~~receive topayment for the ~~swap~~value ~~agreements~~of ~~are~~advertising ~~major financial~~placed ~~institutions~~in ~~with~~our ~~credit~~directories, ~~ratings~~net of the ACMR’s orcommission, ~~higher~~directly from the CMR. WeWhile dowe ~~not~~are ~~currently~~still ~~foresee~~exposed ato ~~material~~ credit risk, ~~associated~~the ~~with~~amount of losses from these ~~swap~~accounts ~~agreements;~~has ~~however~~been historically less than the local accounts as the advertisers, noand ~~assurances~~in ~~can~~some cases the CMRs, tend to be ~~given~~larger companies with greater financial resources than local advertisers.

~~Derivative Financial Instruments. The Company accounts for its derivative financial instruments~~8 and hedging activities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”), as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FAS 133 and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. We do not use derivative financial instruments for trading or speculative purposes and our derivative financial instruments are limited to interest rate swap agreements. The Company utilizes a combination of fixed rate and variable rate debt to finance its operations. The variable rate debt exposes the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to mitigate the interest rate risk on a portion of its variable rate borrowings. Additionally, our 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. To satisfy this objective and requirement, the Company has entered into fixed interest rate swap agreements to manage fluctuations in cash flows resulting from changes in interest rates on variable rate debt. The Company’s interest rate swap agreements effectively convert $1.4 billion, or approximately 71%, of our variable rate debt to fixed rate debt, mitigating our exposure to increases in interest rates. At March 31, 2007, approximately 76% of our total debt outstanding consists of variable rate debt,

8 Table of Contents

~~excluding~~At ~~the effect~~September 30, of2007, ~~our~~we had interest rate ~~swaps~~swap agreements with major financial institutions with a notional value of $1.2 billion. ~~Including~~We are exposed to credit risk in the ~~effect~~event that one or more of the ~~our~~counterparties ~~interest~~to ~~rate~~the ~~swaps~~agreements does not, ~~total~~or ~~fixed~~cannot, meet their obligation. The notional ~~rate~~amount ~~debt~~is ~~comprised~~used ~~approximately~~to ~~78%~~measure interest to be paid or received and does not represent the amount of exposure ~~our~~to ~~total~~credit ~~debt~~loss. ~~portfolio~~Any asloss would be limited to the amount that would have been received over the remaining life of ~~March 31~~the swap agreement. The counterparties to the swap agreements are major financial institutions with credit ratings of A or higher. We do not currently foresee a material credit risk associated with these swap agreements; however, ~~2007~~no assurances can be given.

On the day a derivative contract is executed, the Company may designate the derivative instrument as a hedge of the variability of cash flows to be received or paid (cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its riskStock-~~management~~Based ~~objective and strategy for undertaking the hedge, the hedging instrument, the~~Awards hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

~~All~~RHD ~~derivative~~and ~~financial~~the ~~instruments~~Company ~~are~~account ~~recognized~~for asstock-based ~~either~~compensation ~~assets~~under orSFAS ~~liabilities~~No. 123 on(R), ~~the~~Share-Based ~~consolidated~~Payment ~~balance~~(“SFAS ~~sheets~~No. 123 ~~with~~(R)”). ~~measurement~~RHD atallocates ~~fair~~compensation ~~value.~~expense Onto aits ~~quarterly basis~~subsidiaries, including the Company, ~~fair~~consistent ~~values of~~with the ~~interest~~method ~~rate~~it ~~swaps~~utilizes ~~are~~to ~~determined~~allocate ~~based~~employee onwages ~~quoted market prices~~ and, benefits to ~~the extent the~~its ~~swaps~~subsidiaries. ~~provide~~The anCompany ~~effective~~recorded ~~hedge,~~stock-based ~~the~~compensation ~~differences~~expense ~~between~~related ~~the~~to ~~fair~~stock-based ~~value and the book value of the~~awards ~~swaps~~granted ~~are~~under ~~recognized~~RHD’s invarious ~~accumulated~~employee ~~other~~and ~~comprehensive~~non-employee ~~loss,~~stock aincentive ~~component~~plans of ~~shareholder’s equity~~$2.8 million and ~~For~~$3.9 million ~~derivative~~for ~~financial~~the ~~instruments~~three ~~that~~months ~~are~~ended ~~not designated or do not qualify as hedged transactions~~September 30, ~~the~~2007 ~~initial~~and ~~fair value~~2006, ~~if any~~respectively, and ~~any subsequent gains or losses on the change in~~$11.4 ~~the~~million ~~fair~~and ~~value are reported in earnings as a component of interest expense~~$22.4 million ~~Any~~for ~~gains or losses related to~~ the ~~quarterly~~nine ~~fair~~months ~~value~~ended ~~adjustments~~September 30, ~~are~~2007 ~~presented~~and as2006, ~~a non-cash operating activity on the consolidated statements of cash flows~~respectively.

~~The~~On ~~Company~~February 27, ~~discontinues~~2007, ~~hedge~~RHD ~~accounting~~granted ~~prospectively~~1.1 million ~~when~~SARs itto iscertain ~~determined~~employees, ~~that~~including ~~the derivative~~executive isofficers, ~~no longer effective~~ in ~~offsetting~~conjunction ~~changes~~with inits ~~the~~annual ~~cash~~grant ~~flows~~ of ~~the~~stock ~~hedged~~incentive ~~item~~awards. These SARs, ~~the~~which ~~derivative~~are orsettled ~~hedged~~in ~~item~~RHD iscommon ~~expired~~stock, ~~sold,~~were ~~terminated,~~granted ~~exercised~~at ora ~~management~~grant ~~determines~~price ~~that~~of ~~designation~~$74.31 ofper share, which was equal to the ~~derivative~~market asvalue aof ~~hedging~~RHD’s ~~instrument~~common isstock noon ~~longer~~the ~~appropriate.~~grant Indate, ~~situations~~and invest ~~which~~ratably ~~hedge accounting~~over isthree ~~discontinued,~~years. ~~the~~In accordance ~~Company~~with ~~continues~~SFAS toNo. 123 ~~carry~~(R), ~~the~~we ~~derivative~~recognized atnon-cash ~~its~~compensation ~~fair~~expense ~~value~~related onto ~~the~~these SARs ~~consolidated~~of ~~balance~~$0.6 million ~~sheet~~ and ~~recognizes~~$3.9 million ~~any~~for ~~subsequent~~the ~~changes~~three inand ~~its~~nine ~~fair~~months ~~value~~ended inSeptember 30, ~~earnings as a~~2007, ~~component~~respectively, ofwhich ~~interest~~includes ~~expense~~$2.6 million ~~Please~~related ~~refer~~ to ~~Note~~non-substantive 5vesting, ~~“Derivative~~for ~~Financial~~the ~~Instruments”~~nine ~~for~~months ~~additional~~ended ~~information~~September 30, ~~regarding our derivative financial instruments and hedging activities~~2007.

~~Income Taxes. We account for income taxes under the asset and liability method in accordance with~~Estimates SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”). Deferred tax liabilities or assets reflect temporary differences between amounts of assets and liabilities for financial and tax reporting. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is established to offset any deferred tax assets if, based upon the available information, it is more likely than not that some or all of the deferred tax assets will not be realized.

InThe ~~June 2006,~~preparation ~~the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation~~ of ~~FASB Statement No. 109 (“FIN No. 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s~~ financial statements in ~~accordance~~conformity with ~~SFAS~~GAAP ~~No. 109.~~requires ~~FIN~~management ~~No. 48~~to ~~prescribes a recognition~~make ~~threshold~~estimates and ~~measurement~~assumptions ~~principles~~that ~~for~~affect the ~~financial~~reported ~~statement~~amounts ~~recognition and measurement~~ of ~~tax positions~~assets, ~~taken or expected to be taken on a tax return. Under FIN No. 48~~liabilities, ~~the~~revenue ~~impact of an~~and ~~uncertain~~certain ~~income~~expenses ~~tax~~and ~~position on an income tax return must be recognized at~~ the ~~largest~~disclosure ~~amount~~of ~~that is~~contingent ~~more~~assets ~~likely~~and ~~than not to be sustained upon audit by the relevant taxing authority~~liabilities. AnActual ~~uncertain~~results could ~~income~~differ ~~tax~~materially ~~position~~from ~~will~~those ~~not~~estimates beand ~~recognized if it is has less than a 50% likelihood of being sustained~~assumptions. ~~Additionally,~~Estimates ~~FIN~~and ~~No. 48~~assumptions ~~provides~~are ~~guidance~~used onin ~~derecognition, classification, interest~~the ~~and~~determination ~~penalties,~~of ~~accounting~~sales ~~in interim periods~~allowances, ~~disclosures~~allowances ~~and transition requirements. This interpretation is effective~~ for ~~fiscal~~doubtful ~~years beginning after December 15~~accounts, ~~2006~~depreciation and ~~as such~~amortization, we ~~adopted~~employee ~~FIN~~benefit ~~No. 48~~plans, onrestructuring ~~January 1~~reserves, ~~2007.~~and ~~Please~~certain ~~refer~~assumptions pertaining to ~~Note~~RHD’s stock-based 7awards, ~~“Income~~among ~~Taxes,” for additional information~~others.

~~Pension~~New ~~and~~Accounting ~~Postretirement Benefits. Pension and other postretirement benefits represent estimated~~Pronouncements amounts to be paid to employees in the future. The accounting for benefits reflects the recognition of these benefit costs over the employee’s approximate service period based on the terms of the plan and the investment and funding decisions made. The determination of the benefit obligation and the net periodic pension and other postretirement benefit costs requires RHD management to make assumptions regarding the discount rate, return on retirement plan assets, increase in future compensation and healthcare cost trends. Changes in these assumptions can have a significant impact on the projected benefit obligation, funding requirement and net periodic benefit cost. The assumed discount rate is the rate at which the pension benefits could be settled. For the three months ended March 31, 2007 and 2006, RHD used the Citigroup Pension Liability Index as the appropriate discount rate for its defined benefit pension plans. The expected long-term rate of return on plan assets is based on the mix of assets held by the plan and

9We have reviewed accounting pronouncements that were issued as of September 30, 2007, which the Company has not yet adopted, and do not believe that these pronouncements will have a material impact on our financial position or operating results.

~~the expected long-term rates of return within each asset class~~3. ~~The anticipated~~Credit ~~trend of future healthcare costs is based on historical experience and external~~Facility ~~factors. Please refer to Note 8, “Benefit Plans,” for additional information.~~

~~Stock~~As of September 30, 2007, the outstanding balances of Term Loans A-~~Based~~4, ~~Awards~~D-1, and D-2 under RHDI’s senior secured credit facility, as amended and restated (“RHDI Credit Facility”) totaled $1,781.6 million, comprised of $94.8 million, $333.4 million and $1,353.4 million, respectively, and $29.5 million was outstanding under the $175.0 million Revolving Credit Facility (the “RHDI Revolver”) (with an additional $0.3 million utilized under a standby letter of credit). The weighted average interest rate of outstanding debt under the RHDI Credit Facility was 6.97% and 6.86% at September 30, 2007 and December 31, 2006, respectively. On October 17, 2007, a portion of the Term Loans A-4, D-1, and D-2 were repaid from certain proceeds of RHD’s Series A-4 Notes that were contributed to RHDI. See Note 10, “Subsequent Events,” for additional information.

~~RHD maintains a shareholder approved stock incentive plan, the 2005 Stock Award and Incentive Plan~~9 (“2005 Plan”), whereby certain RHD employees and non-employee directors are eligible to receive stock options, stock appreciation rights (“SARs”), limited stock appreciation rights in tandem with stock options and restricted stock. Prior to adoption of the 2005 Plan, RHD maintained a shareholder approved stock incentive plan, the 2001 Stock Award and Incentive Plan (“2001 Plan”). Under the 2005 Plan and 2001 Plan, 5 million and 4 million shares, respectively, were originally authorized for grant. Stock awards are typically granted at the market value of RHD’s common stock at the date of the grant, become exercisable in ratable installments or otherwise, over a period of one to five years from the date of grant, and may be exercised up to a maximum of ten years from the date of grant. RHD’s Compensation Committee determines termination, vesting and other relevant provisions at the date of the grant. RHD has implemented a policy of issuing treasury shares held by RHD to satisfy stock issuances associated with stock-based award exercises.

Non-employeeTable directors of RHD receive options to purchase 1,500 shares and an award of 1,500 shares of restricted stock upon election to the Board. Non-employee directors also receive, on an annual basis, options to purchase 1,500 shares and an award of 1,500 shares of restricted stock. Non-employee directors may also elect to receive additional equity awards in lieu of all or a portion of their cash fees. Contents

~~RHD and the Company account for stock-based compensation under SFAS No~~4. ~~123~~ ~~(R),~~Restructuring ~~Share-Based~~Charges Payment (“SFAS No. 123 (R)”). RHD allocates compensation expense to its subsidiaries, including the Company, consistent with the method it utilizes to allocate employee wages and benefits to its subsidiaries. The Company recorded stock-based compensation expense related to stock-based awards granted under RHD’s various employee and non-employee stock incentive plans of $5.6 million and $14.8 million for the three months ended March 31, 2007 and 2006, respectively.

OnThe ~~February 27,~~tables ~~2007,~~below ~~RHD~~highlight ~~granted~~the ~~1.1 million~~activity ~~SARs to certain employees, including executive officers,~~ in ~~conjunction~~our ~~with~~restructuring ~~its~~reserves ~~annual~~for ~~grant of stock incentive awards. These SARs, which are settled in RHD common stock, were granted at a grant price of $74.31 per share, which was equal to~~ the ~~market~~three ~~value of RHD’s common stock on the grant date,~~ and ~~vest~~nine ratably over three years. In accordance with SFAS No. 123 (R), we recognized non-cash compensation expense related to these SARs of $2.8 million, which includes $2.6 million related to non-substantive vesting, for the three months ended ~~March~~September 3130, 2007.

Estimates. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and certain expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates and assumptions. Estimates and assumptions are used in the determination of sales allowances, allowances for doubtful accounts, depreciation and amortization, employee benefit plans, restructuring reserves, and certain assumptions pertaining to RHD’s stock-based awards, among others.


	2003			2005
	Restructuring			Restructuring
Three months ended September 30, 2007	Actions			Actions			Total


Balance at June 30, 2007	$	877		$	1,837		$	2,714
Payments		(47	)		(29	)		(76	)
Reserve reversal credited to goodwill		—			(1,808	)		(1,808	)

Balance at September 30, 2007	$	830		$	—		$	830

New Accounting Pronouncements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS No. 159 is to provide opportunities to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact the adoption of SFAS No. 159 will have on our consolidated financial position and results of operations.


	2003			2005
	Restructuring			Restructuring
Nine months ended September 30, 2007	Actions			Actions			Total


Balance at December 31, 2006	$	971		$	1,943		$	2,914
Payments		(141	)		(135	)		(276	)
Reserve reversal credited to goodwill		—			(1,808	)		(1,808	)

Balance at September 30, 2007	$	830		$	—		$	830

InDuring ~~September 2006,~~ the ~~FASB~~three ~~issued~~months ~~SFAS~~ended ~~No.~~September ~~157~~30, ~~Fair Value Measurements (“SFAS No. 157”)~~2007, ~~which defines~~our ~~fair~~parent ~~value,~~re-occupied ~~establishes~~the aremaining ~~framework~~portion ~~for~~of our ~~measuring~~leased ~~fair~~facilities ~~value~~ in ~~GAAP~~Chicago, ~~and~~Illinois, ~~expands disclosures~~which ~~about~~we ~~fair~~vacated ~~value~~in ~~measurements.~~conjunction ~~SFAS~~with ~~No. 157~~the is2005 Restructuring ~~effective~~Actions. ~~for~~As ~~fiscal~~a ~~years beginning after November 15~~result, ~~2007,~~we ~~and~~have ~~interim~~reversed ~~periods~~the ~~within~~remaining ~~those~~amount ~~fiscal~~of ~~years.~~our Wereserve ~~are~~related ~~currently assessing~~to ~~the~~these ~~impact~~leased ~~the~~facilities ~~adoption~~at ofSeptember 30, ~~SFAS~~2007 Noof $1.8 ~~157~~million, ~~will~~with ~~have~~a oncorresponding ~~our~~offset ~~consolidated financial position and~~to ~~results of operations~~goodwill.

10In connection with prior business combinations, liabilities were established for vacated leased facilities. Payments for the three and nine months ended September 30, 2007 reflect lease payments associated with those facilities. Remaining payments related to the 2003 Restructuring Actions will be made through 2012.

We5. ~~have~~Income ~~reviewed other new accounting standards not identified above and do not believe any other~~Taxes ~~new standards will have a material impact on our financial position or operating results.~~

3In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting ~~Intangible~~for ~~Assets~~Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109 (“FIN No. 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and ~~Goodwill~~measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. Under FIN No. 48, the impact of an uncertain income tax position on an income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN No. 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition requirements. This interpretation is effective for fiscal years beginning after December 15, 2006 and as such, we adopted FIN No. 48 on January 1, 2007.

OnAs ~~September~~a result of implementing FIN No. 148, ~~2004,~~ we ~~completed~~recognized ~~the~~an ~~acquisition~~increase of ~~the~~$159.9 million ~~directory~~in ~~publishing business (“AT&T~~the ~~Directory~~liability ~~Business”)~~for ofunrecognized ~~AT&T~~tax ~~Inc.~~benefits ~~(“AT&T”) (formerly known~~ as ~~SBC~~of ~~Communications~~January 1, ~~Inc~~2007., ~~“SBC”)~~The increase in ~~Illinois~~ ~~and Northwest Indiana (~~the ~~“Territory”), including AT&T’s interests in The DonTech II~~liability ~~Partnership~~included ~~(“DonTech”),~~ a ~~50/50~~reduction ~~general~~in ~~partnership~~deferred ~~between~~tax usliabilities ~~and~~of ~~AT&T (collectively, the “AT&T Directory Acquisition”) for~~ $1165.412 ~~billion~~million inand ~~cash,~~an ~~after~~increase ~~working~~in ~~capital adjustments and the~~retained ~~settlement~~earnings of a $305.3 million ~~liquidation preference owed to us related to DonTech~~.

OnAs of January 31, ~~2003,~~2007 weand ~~completed~~September 30, ~~the~~2007, ~~acquisition~~and ofafter the ~~directory~~impact ~~business~~of (recognizing the ~~“Embarq~~increase ~~Directory~~in ~~Business”)~~the ofliability ~~Sprint~~for ~~Nextel~~unrecognized ~~Corporation~~tax ~~(“Sprint”)~~benefits, ~~(formerly~~our ~~known~~unrecognized astax ~~Sprint~~benefits ~~Corporation)~~total by$173.9 million and ~~acquiring~~$11.5 million, ~~all~~respectively, ~~the~~which ~~outstanding~~includes ~~capital~~accrued ~~stock~~interest of(discussed ~~the~~below). ~~various~~Included ~~entities~~in ~~comprising~~the balance ~~Sprint~~of ~~Publishing~~unrecognized ~~& Advertising~~benefits ~~(collectively~~at January 1, ~~the~~2007 ~~“Embarq~~and ~~Acquisition”)~~September 30, ~~for~~2007 are $25.236 ~~billion~~million inand $7.7 million, ~~cash~~respectively, of tax benefits that, if recognized, would favorably affect the effective tax rate.

~~As a result of the AT&T Directory Acquisition and the Embarq Acquisition, certain long-term~~10 intangible assets were identified and recorded at their estimated fair value. Amortization expense was $19.9 million and $18.2 million for the three months ended March 31, 2007 and 2006, respectively. The acquired long-term intangible assets and their respective book values at March 31, 2007 are shown in the table below.

	Directory
	Services			Local Customer			National CMR
	Agreements			Relationships			Relationships			Trade Names			Total
Initial fair value:
AT&T	$	952,500		$	90,000		$	55,000		$	—		$	1,097,500
Embarq		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		(188,500	)		(64,088	)		(15,723	)		(8,500	)		(276,811	)
Net intangible assets	$	2,389,000		$	225,912		$	99,277		$	21,500		$	2,735,689

~~Directory~~Our ~~services~~policy ~~agreements~~is ~~between~~to ~~AT&T~~recognize ~~and~~accrued ~~the~~interest ~~Company include a directory services license agreement, a non-competition agreement, an Internet Yellow Pages reseller agreement~~ and apenalties ~~directory publishing~~related listing agreement (collectively, “AT&T Directory Services Agreements”) with certain affiliates of AT&T. The directory services license agreement designates us as the official and exclusive provider of yellow pages directory services for AT&T (and its successors) in the Territory, grants us the exclusive license (and obligation as specified in the agreement) to ~~produce,~~ ~~publish~~unrecognized ~~and~~tax ~~distribute~~benefits ~~white pages directories~~ in ~~the Territory as AT&T’s agent and grants~~ usincome ~~the~~tax ~~exclusive license (and obligation as specified in the agreement) to use the AT&T brand and logo on print directories in the Territory~~expense. ~~The~~As ~~non-competition~~of ~~agreement prohibits AT&T (and its affiliates and successors), with certain limited exceptions, from (1)~~January ~~producing~~1, ~~publishing~~2007 and ~~distributing~~ ~~yellow and white pages print directories in the Territory, (2)~~September ~~soliciting or selling local or national yellow or white pages advertising for inclusion in such directories~~30, and (3) soliciting or selling local Internet yellow pages advertising for certain Internet yellow pages directories in the Territory or licensing AT&T marks to any third party for that purpose. The Internet Yellow Pages reseller agreement grants us the (a) exclusive right to sell to local advertisers within the Territory Internet yellow pages advertising focused upon products and services to be offered within the Territory2007, ~~and~~we (b) non-exclusive right to sell to local (excluding National advertisers) advertisers within the Territory Internet yellow pages advertising focused upon products and services to be offered outside of the Territory, in each case, onto the YellowPages.com platform. The directory publishing listing agreement gives us the right to purchase and use basic AT&T subscriber listing information and updates for the purpose of publishing directories. The AT&T Directory Services Agreements (other than the Internet Yellow Pages reseller agreement) have ~~initial~~accrued terms of 50 years, subject to automatic renewal and early termination under specified circumstances. The Internet Yellow Pages reseller agreement has a term of 5 years. The fair value assigned to the AT&T Directory Services Agreements and the Internet Yellow Pages reseller agreement of $~~950~~3.06 million and $23.52 million, respectively, ~~was based~~related onto ~~the~~interest ~~present value of estimated future cash flows~~ and ishave ~~being~~not ~~amortized~~accrued ~~under~~any ~~the straight-line~~amount ~~method~~for ~~over~~tax ~~50 years and 5 years, respectively~~penalties.

11In July 2007, we effectively settled all issues under consideration with the Internal Revenue Service (“IRS”) related to its audit for taxable years 2003 and 2004. As a result of the settlement, the unrecognized tax benefits associated with our uncertain Federal tax positions decreased by $167.0 million during the three and nine months ended September 30, 2007. As a result of the IRS settlement, we recognized additional interest expense of $1.4 million and $0.9 million related to the taxable years 2004 and 2005, respectively. The recognition of this interest expense within our tax provision has increased our effective tax rate for the three and nine months ended September 30, 2007. The unrecognized tax benefits impacted by the IRS audit primarily related to items for which the ultimate deductibility was highly certain but for which there was uncertainty regarding the timing of such deductibility.

~~Directory~~It ~~services~~is ~~agreements~~reasonably ~~between~~possible ~~Embarq~~that ~~and~~ the ~~Company,~~amount ~~which were executed in May 2006 in conjunction with Sprint’s spin-off~~ of ~~its~~unrecognized ~~local~~tax ~~telephone~~benefits ~~business,~~disclosed ~~include~~above ~~a directory services~~could ~~license~~decrease ~~agreement,~~within athe ~~trademark~~next ~~license~~twelve ~~agreement~~months. ~~and~~We aare ~~non-competition~~currently ~~agreement~~under ~~with~~audit ~~certain affiliates~~in ofNew ~~Embarq,~~York asfor ~~well~~taxable asyears 2000 athrough ~~non-competition~~2003 ~~agreement~~and ~~with~~North ~~Sprint~~Carolina ~~entered~~for ~~into~~taxable inyears ~~January~~ 2003 ~~(collectively~~through ~~“Embarq Directory Services Agreements”)~~2006. ~~The~~During ~~Embarq~~the ~~Directory~~three ~~Services~~months ~~Agreements~~ended ~~replaced~~September 30, ~~the previously existing analogous agreements with Sprint~~2007, ~~except~~we ~~that~~recorded ~~Sprint remained~~an ~~bound~~increase ~~by their non-competition agreement. The directory services license agreement grants us the exclusive license (and obligation as specified~~ in the ~~agreement)~~liability ~~to produce, publish and distribute yellow and white pages directories~~ for ~~Embarq~~unrecognized ~~(and~~tax ~~its~~benefits ~~successors) in 18 states where Embarq provided local telephone service at the time~~ of ~~the agreement~~ $3.4 million. ~~The~~If ~~trademark license agreement grants us~~ the ~~exclusive~~New ~~license~~York (and ~~obligation~~North asCarolina ~~specified~~audits inare ~~the~~resolved ~~agreement)~~within tothe ~~use certain~~next ~~specified Embarq trademarks in those markets~~twelve months, ~~and~~ the ~~non-competition~~total ~~agreements~~amount ~~prohibit Embarq~~of ~~and~~unrecognized ~~Sprint~~tax ~~(and~~benefits ~~their~~reported ~~respective~~above ~~affiliates~~could ~~and~~decrease ~~successors) in those markets from selling~~by ~~local~~approximately ~~directory advertising, with certain limited exceptions, or producing, publishing and distributing print directories~~$11.5 million. The ~~Embarq~~unrecognized ~~Directory~~tax ~~Services~~benefits ~~Agreements~~related ~~have initial terms of 50 years, commencing in January 2003, subject~~ to ~~automatic renewal and early termination under specified circumstances. The fair value of~~ the ~~Embarq~~New ~~Directory~~York ~~Services~~and ~~Agreements of $1.6~~North ~~billion~~Carolina ~~was~~audits ~~determined~~relate ~~based~~to onapportionment ~~the~~and ~~present~~allocation ~~value~~ of ~~estimated~~income ~~future~~among ~~cash~~our ~~flows~~legal ~~at the time of the Embarq Acquisition in January 2003, and is being amortized under the straight-line method over 50 years~~entities.

~~The~~As ~~fair~~noted ~~values~~above, ofin ~~local~~July 2007, ~~and~~we ~~national~~effectively ~~customer~~settled ~~relationships~~the ~~obtained~~IRS’s asfederal atax ~~result~~audit offor the ~~AT&T~~taxable ~~Directory~~years ~~Acquisition~~2003 and ~~Embarq~~2004. ~~Acquisition~~Therefore, ~~were~~tax ~~determined~~years ~~based~~2005 onand ~~the~~2006 ~~present~~are ~~value~~still ~~of estimated~~subject ~~future~~to ~~cash~~examination ~~flows~~by ~~and~~the IRS. ~~are~~In ~~being~~addition, ~~amortized~~certain ~~under~~state ~~the~~tax ~~income~~returns ~~forecast~~are ~~method~~under ~~that~~examination ~~assumes~~by various regulatory ~~the~~authorities, ~~value~~including ~~derived~~New ~~from~~York ~~customer~~and ~~relationships~~North isCarolina. ~~greater~~Our instate ~~the~~tax ~~earlier~~return years ~~and~~are ~~steadily~~open ~~declines~~to ~~over~~examination ~~time.~~for ~~The~~an ~~weighted~~ average ~~useful~~of ~~life~~three ofyears. ~~these~~However, ~~relationships~~certain isjurisdictions ~~approximately~~remain 20 open to examination longer than three years due to the existence of net operating loss carryforwards.

The fair value of acquired trade names obtained as a result of the Embarq Acquisition was determined based on the “relief from royalty” method, which values the trade names based on the estimated amount that a company would have to pay in an arms length transaction to use these trade names6. ~~This~~Benefit ~~asset is being amortized under the straight-line method over 15 years.~~Plans

~~The~~In ~~excess~~accordance ~~purchase~~with ~~price~~SFAS ~~for~~No. 132, ~~the~~Employers’ ~~AT&T~~Disclosures ~~Directory~~About ~~Acquisition~~Pensions and ~~Embarq~~Other ~~Acquisition~~Postretirement Benefits ~~over~~(Revised 2003), the ~~net tangible~~following ~~and~~table ~~identifiable~~provides ~~intangible~~the ~~assets~~components ~~acquired~~ of ~~$218.6 million~~net periodic benefit cost for the three and ~~$97.0~~nine months ended September ~~million~~30, ~~respectively,~~ ~~was~~2007 ~~recorded~~and ~~as goodwill~~2006.

In accordance with SFAS No. 142, goodwill is not amortized, but is subject to periodic impairment testing. No impairment losses were recorded for the three months ended March 31, 2007 and 2006.


	Pension Benefits
	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2007			2006			2007			2006

Service cost	$	1,589		$	1,352		$	4,767		$	4,056
Interest cost		1,852			1,691			5,557			5,073
Expected return on plan assets		(2,135	)		(2,063	)		(6,405	)		(6,188	)
Amortization of prior service cost		41			33			123			100
Amortization of net loss		353			468			1,058			1,403

Net periodic benefit cost	$	1,700		$	1,481		$	5,100		$	4,444

4. Long-Term Debt, Credit Facility and Notes


	Postretirement Benefits
	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2007		2006		2007		2006

Service cost	$	153	$	183	$	459	$	547
Interest cost		331		313		993		937
Amortization of prior service cost		203		202		610		608
Amortization of net loss		—		65		—		195

Net periodic benefit cost	$	687	$	763	$	2,062	$	2,287

~~Long-term debt of the Company at March 31, 2007 and December 31, 2006 consisted of the following:~~11

	March 31, 2007		December 31, 2006
Credit Facility	$	1,904,935	$	1,946,535
8.875% Senior Notes due 2010		7,934		7,934
10.875% Senior Subordinated Notes due 2012		600,000		600,000
Total		2,512,869		2,554,469
Less current portion		84,800		112,200
Long-term debt	$	2,428,069	$	2,442,269

12During the three and nine months ended September 30, 2007, RHD made contributions of $1.9 million and $3.5 million, respectively, to its pension plans for RHDI employees. During the three and nine months ended September 30, 2007, RHD made contributions of $0.1 million and $0.4 million, respectively, to its postretirement plans for RHDI employees. RHD expects to make total contributions of approximately $3.8 million and $1.0 million to its pension plans and postretirement plans, respectively, in 2007 for RHDI employees.

~~Credit~~7. ~~Facility~~Business Segments

AsManagement ofreviews ~~March 31, 2007, our senior secured credit facility, as amended~~ and ~~restated~~analyzes ~~(“Credit Facility”),~~its ~~consists~~business of apublishing ~~$323.4 million~~yellow ~~Term~~pages ~~Loan~~directories ~~A-4, a $350 million Term Loan D-1, a $1,422.0 million Term Loan D-2~~ and ~~a $175.0 million Revolving Credit Facility (the “Revolver”) for an~~related ~~aggregate~~local ~~Credit~~commercial ~~Facility~~search ofas ~~$2,270.4 million.~~one ~~All~~operating ~~Term Loans require quarterly principal and interest payments~~segment. ~~The Credit Facility provides for a new Term Loan C for potential borrowings up~~ to $400 million, such proceeds, if borrowed, to be used to fund acquisitions, refinance certain indebtedness or to make certain restricted payments. As of March 31, 2007, the outstanding balances of Term Loans A-4, D-1, and D-2 totaled $1,876.9 million, comprised of $148.8 million, $340.8 million and $1,387.3 million, respectively, and $28.0 million was outstanding under the Revolver (with an additional $0.4 million utilized under a standby letter of credit). The Revolver and Term Loan A-4 will mature in December 2009 and Term Loans D-1 and D-2 will mature in June 2011. The weighted average interest rate of outstanding debt under the Credit Facility was 6.73% and 6.86% at March 31, 2007 and December 31, 2006, respectively.

As8. ~~amended,~~Legal ~~as of March 31, 2007, our Credit Facility bears interest, at our option, at either:~~Proceedings

	•		The higher of (i) a base rate as determined by the Administrative Agent, Deutsche Bank Trust Company Americas and (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, and in each case, plus a 0.25% margin on the Revolver and Term Loan A-4 and a 0.50% margin on Term Loan D-1 and Term Loan D-2; or
	•		The LIBOR rate plus a 1.25% margin on the Revolver and Term Loan A-4 and a 1.50% margin on Term Loan D-1 and Term Loan D-2. We may elect interest periods of 1, 2, 3 or 6 months (or 9 or 12 months if, at the time of the borrowing, all lenders agree to make such term available), for LIBOR borrowings.

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters. In many of these matters, plaintiffs allege that they have suffered damages from errors or omissions of improper listings contained in directories published by us. 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 condensed 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.

The ~~Credit~~Company ~~Facility~~is ~~and~~exposed ~~the~~to ~~indentures~~potential ~~governing~~defamation ~~the~~and ~~notes~~breach ~~(described~~of ~~below)~~privacy ~~contain~~claims ~~usual~~arising ~~and~~from our ~~customary~~publication ~~negative~~of ~~covenants~~directories ~~that,~~and ~~among~~our ~~other~~methods ~~things~~of collecting, ~~place~~processing ~~limitations~~and onusing ~~our~~advertiser ~~ability~~and telephone tosubscriber ~~(i) incur~~data. ~~additional~~If ~~indebtedness;~~such ~~(ii) pay~~data ~~dividends~~were ~~and~~determined ~~repurchase~~to ~~our~~be ~~capital~~inaccurate ~~stock;~~or ~~(iii) enter into~~if ~~mergers,~~data ~~consolidations,~~stored ~~acquisitions,~~by ~~asset~~us were ~~dispositions~~improperly accessed and ~~sale-leaseback~~disseminated ~~transactions; (iv) make~~by ~~capital~~us ~~expenditures;~~or ~~(v) issue~~by ~~capital~~unauthorized ~~stock~~persons, ofthe ~~our~~subjects ~~subsidiaries;~~of ~~(vi) engage in~~our ~~transactions~~data ~~with~~and ~~our~~users ~~affiliates;~~of ~~and~~the ~~(vii) make~~data ~~investments,~~we ~~loans~~collect and ~~advances.~~publish ~~The~~could ~~Credit Facility~~submit ~~also~~claims ~~contains~~against ~~financial~~the ~~covenants~~Company. ~~relating~~ Although to ~~maximum~~date ~~consolidated~~we ~~leverage,~~have ~~minimum interest~~not ~~coverage~~experienced ~~and~~any ~~maximum~~material ~~senior~~claims ~~secured~~relating ~~leverage~~to asdefamation ~~defined~~or ~~therein.~~breach ~~Substantially all~~ of ~~our~~privacy, we ~~and~~may ~~our~~be ~~subsidiaries~~party ~~assets,~~to ~~including~~such ~~our~~proceedings ~~capital~~in ~~stock and~~ the ~~capital~~future ~~stock~~that ofcould ~~our~~have ~~subsidiaries, are~~a ~~pledged~~material toadverse ~~secure~~effect ~~the~~on ~~obligations under the Credit Facility~~our business.

~~Notes~~Based on our review of the latest information available, we believe our ultimate liability in connection with pending or threatened legal proceedings will not have a material adverse effect on our results of operations, cash flows or financial position. No material amounts have been accrued in our condensed consolidated financial statements with respect to any of such matters.

In ~~connection with the Embarq Acquisition~~July 2007, weThe ~~issued~~Dun ~~$325 million~~& ~~8.875%~~Bradstreet ~~Senior~~Corporation ~~Notes due 2010~~ (“~~Senior Notes~~D&B”) ~~and~~advised ~~$600 million~~us ~~10.875%~~that ~~Senior~~it ~~Subordinated~~would ~~Notes~~not ~~due~~appeal ~~2012~~the ~~(“Subordinated~~IRS’ ~~Notes”).~~determination ~~RHD~~of ~~and~~deficiencies ~~our~~with ~~direct~~respect ~~and~~to ~~indirect~~the ~~wholly-owned~~remaining ~~subsidiaries~~Legacy ~~jointly~~Tax ~~and~~Matter ~~severally,~~(as ~~fully and~~defined ~~unconditionally,~~in ~~guarantee these notes. These notes are our unsecured obligations and interest~~the is2006 ~~paid on these notes semi~~10-~~annually~~K) ~~on June 15th~~ and ~~December 15th.~~that ~~On December 20,~~amounts ~~2005,~~on wedeposit ~~repurchased~~with ~~through a tender offer and exit consent solicitation $317.1 million of~~ the ~~Senior~~IRS ~~Notes.~~were ~~Proceeds~~more ~~from~~than ~~our~~sufficient ~~Credit Facility’s $350 million Term Loan D-1 were used~~ to fund ~~the partial repurchase of the Senior Notes, a call premium of $25.3 million and pay~~such ~~transaction costs of the tender offer~~deficiencies. ~~The~~Accordingly, ~~partial~~all ~~repurchase~~Legacy ofTax ~~the~~Matters ~~Senior~~have ~~Notes~~now ~~was~~been ~~accounted for as an extinguishment of debt~~resolved.

139. Related Party Transactions and Allocations

5Certain transactions are managed by RHD on a centralized basis. ~~Derivative~~Under ~~Financial~~this ~~Instruments~~centralized cash management program, RHD and the Company advance funds and allocate certain operating expenditures to each other. These net intercompany balances have been classified as non-current assets or liabilities at September 30, 2007 and December 31, 2006, as the Company is not required to nor intends to settle these balances with RHD during the next twelve months. Changes in net intercompany balances as a result of operating transactions have been presented as operating activities on the condensed consolidated statements of cash flows for the nine months ended September 30, 2007 and 2006.

~~The Credit Facility bears interest at variable rates and, accordingly, our earnings and cash flow~~12 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 approximately 71% of the Company’s variable rate debt to fixed rate debt as of March 31, 2007. Including the effect of our interest rate swaps, total fixed rate debt comprised approximately 78% of our total debt portfolio as of March 31, 2007. Under the terms of the agreements, the Company receives variable interest based on three-month LIBOR and pays a fixed rate of interest.

Effective Dates	Notional Amount			Pay Rates			Maturity Dates
(amounts in millions)
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	(2)		3.210% - 3.740	%	September 17, 2007 - September 17, 2009
September 23, 2004		150	(2)		3.160% - 3.438	%	September 24, 2007 - September 23, 2008
December 20, 2005		300	(4)		4.74% - 4.752	%	December 20, 2007 - December 22, 2008
May 26, 2006		200	(1)		5.2725% -5.275	%	May 26, 2009
May 31, 2006		100	(1)		5.295% - 5.312	%	May 31, 2008 - May 31, 2009
Total	$	1,350

(1)		Consists of two swaps.
(2)		Consists of three swaps.
(3)		Consists of four swaps.
(4)		Consists of six swaps.

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 RHD, with very limited exceptions under the terms of our credit facility and the indentures governing our notes. During the nine months ended September 30, 2007 and within the terms of our credit facility and the indentures governing our notes, the Company paid dividends of $94.3 million to RHD. These dividends are presented as a financing activity on the condensed consolidated statement of cash flows for the nine months ended September 30, 2007. The Company did not pay any dividends to RHD during the nine months ended September 30, 2006. The indentures governing our notes no longer contain such restrictions. See Note 10, “Subsequent Events,” for additional information regarding the tender offer and consent solicitation.

~~By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk~~10. ~~Credit~~Subsequent ~~risk is the possible failure of the~~Events counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it is not subject to credit risk. The Company minimizes the credit risk in derivative financial instruments by entering into transactions with major financial institutions with credit ratings of A or higher.

~~Market~~On ~~risk~~October 2, is2007, ~~the~~RHD ~~adverse~~issued ~~effect~~$1.0 billion onof Series A-4 Notes. Proceeds from the ~~value~~Series A-4 ofNotes were (a) used ~~financial~~to ~~instrument~~repay ~~that~~a ~~results~~$328 million ~~from~~RHD acredit ~~change~~facility used to fund RHD’s acquisition of Busisness.com, (b) contributed to RHDI in ~~interest~~order ~~rates~~to provide funding for the tender offer and consent solicitation of RHDI’s $600 million Senior Subordinated Notes and (c) used to pay related fees and expenses and for other general corporate purposes. ~~The~~On ~~market~~October 17, ~~risk~~2007, ~~associated~~RHD ~~with~~issued ~~interest~~an additional $500 million of Series A-~~rate~~4 ~~contracts~~Notes. isCertain ~~managed~~proceeds byfrom this issuance were transferred to RHDI in ~~establishing~~order ~~and~~to ~~monitoring~~repay ~~parameters~~a ~~that~~portion ~~limit~~of the ~~types~~term ~~and~~loans ~~degree~~outstanding ofunder ~~market~~the ~~risk~~existing ~~that~~RHDI ~~may~~credit befacility and ~~undertaken~~pay related fees and expenses.

~~The~~In ~~Company~~October 2007, under the terms and conditions of a tender offer and consent solicitation to purchase RHDI’s ~~interest~~$600 million ~~rate~~Senior ~~swap~~Subordinated ~~agreements~~Notes ~~effectively~~that ~~convert~~RHDI commenced on September 18, 2007, $1599.49 ~~billion~~million, or 99.9%, of ~~our~~the ~~variable~~outstanding ~~rate~~Senior Subordinated Notes were repurchased. The tender offer will be accounted for as an extinguishment of debt resulting in a loss charged to ~~fixed~~interest expense ~~rate~~during ~~debt~~the three months ending December 31, ~~mitigating~~2007. ~~our~~RHDI ~~exposure~~expects to ~~increases~~redeem inthe ~~interest~~remaining outstanding ~~rates~~Senior Subordinated Notes. ~~Under~~December 15, 2007 is the first date upon which such redemption may occur pursuant to the terms of that indenture. This statement shall not constitute ~~the~~a ~~interest~~notice ~~rate~~of ~~swap~~redemption ~~agreements~~under that indenture, weand ~~receive~~such ~~variable~~notice, ~~interest~~if ~~based~~made, onwill ~~the~~only ~~three-month~~be ~~LIBOR~~made ~~and~~in ~~pay~~accordance awith ~~weighted~~the ~~average~~applicable ~~fixed~~provisions ~~rate~~ of 4that indenture.~~21%.~~ ~~The~~As ~~interest~~a ~~rate~~result ~~swaps~~of ~~mature~~the attender ~~varying~~offer ~~dates from~~and ~~September 2007~~consent ~~through~~solicitation ~~September 2009.~~of ~~The~~RHDI’s ~~weighted~~Senior ~~average~~Subordinated ~~variable~~Notes, ~~rate~~we ~~received~~expect onthat ~~our~~RHDI ~~interest~~will no longer be ~~rate~~required ~~swaps~~to ~~was~~file ~~5.35%~~quarterly ~~during~~and ~~the~~annual ~~three~~reports ~~months~~pursuant ~~ended~~to ~~March~~Section ~~31,~~13 ~~2007.~~or ~~These~~15(d) ~~periodic~~of ~~payments~~the ~~and~~Securities ~~receipts~~Exchange ~~are~~Act ~~recorded~~of ~~as interest expense~~1934.

~~Interest~~On ~~rate~~October 17, ~~swaps~~2007, ~~with~~RHDI arepaid ~~notional value of~~ $1191.40 ~~billion~~million ~~have~~of ~~been~~the ~~designated~~term asloans ~~cash~~outstanding ~~flow~~under ~~hedges~~the RHDI Credit toFacility ~~hedge~~from ~~three-month~~the ~~LIBOR~~proceeds of the Series A-~~based~~4 ~~interest~~Notes ~~payments~~issued on ~~$1.4~~October ~~billion~~17, 2007. The partial repayment of ~~bank~~the ~~debt.~~term Asloans ofoutstanding ~~March 31, 2007,~~under ~~these~~the ~~respective~~RHDI ~~interest~~Credit ~~rate~~Facility ~~swaps~~will ~~provided~~be anaccounted ~~effective~~for ~~hedge~~as an extinguishment of ~~the~~debt ~~three-month LIBOR-based~~resulting in a loss charged to interest ~~payments~~expense onduring ~~$1.4 billion~~the ofthree ~~bank~~months ending ~~debt~~December 31, 2007.

1413

6.Table Restructuringof Charges Contents

~~The~~Item 2. Management’s ~~table~~Narrative ~~below~~Analysis ~~shows~~of ~~the~~Results ~~activity~~of ~~in our restructuring reserves for the three months ended March~~Operations ~~31, 2007.~~

	2003			2005
	Restructuring			Restructuring
	Actions			Actions			Total
Balance at December 31, 2006	$	971		$	1,943		$	2,914
Payments		(11	)		(52	)		(63	)
Balance at March 31, 2007	$	960		$	1,891		$	2,851

Pursuant to General Instruction H(2)(a) of Form 10-Q: (i) the information called for by Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, has been omitted and (ii) we are providing the following Management’s Narrative Analysis and Results of Operations.

During the first quarter of 2005, we completed a restructuring relating to the integration of the AT&T Directory Business. There were 63 employees 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 estimated the costs associated with the terminated employees and the abandonment of certain of our leased facilities to be approximately $8.8 million and such costs were charged to goodwill during the first quarter of 2005. Residual payments made with respect to relocation during the three months ended March 31, 2006 were less than $0.1 million. Payments of less than $0.1 million and $0.3 million, net of sublease income, were made during the three months ended March 31, 2007 and 2006, respectively, with respect to the leased facilities in Chicago, Illinois. The remaining lease payments will be made through 2012. During 2006, we formalized a plan to reForward-~~occupy~~Looking ~~in early 2007 a~~Information portion of the leased facilities in Chicago, Illinois, which we vacated in conjunction with the AT&T Directory Acquisition. As a result, we reduced our reserve related to these leased facilities at December 31, 2006 by $3.5 million, with a corresponding offset to goodwill.

~~Following~~Certain ~~the~~statements ~~Embarq~~contained ~~Acquisition~~in onthis ~~January 3,~~Quarterly ~~2003,~~Report weon ~~consolidated~~Form ~~publishing~~10-Q ~~and~~regarding ~~technology~~our future operating ~~operations~~results, ~~sales~~performance, ~~offices~~business ~~and~~plans ~~administrative~~or ~~personnel~~prospects and ~~relocated~~any ~~the~~other ~~headquarters~~statements ~~functions~~not constituting ~~from~~historical ~~Overland~~fact ~~Park,~~are ~~Kansas~~“forward-looking ~~and~~statements” ~~Purchase,~~subject ~~New~~to ~~York~~the tosafe ~~Cary,~~harbor ~~North~~created ~~Carolina.~~by ~~Approximately~~the ~~140~~Private ~~people~~Securities ~~were~~Litigation ~~affected~~Reform byAct ~~the~~of ~~relocation~~1995. ofWhere ~~the~~possible, ~~headquarters~~words ~~functions~~such inas ~~Overland~~“believe,” ~~Park~~“expect,” “anticipate,” ~~Kansas~~“should,” ~~and Purchase~~“will,” ~~New~~“would,” ~~York~~“planned,” of“estimated,” ~~which~~“potential,” 75“goal,” ~~were~~“outlook,” “could,” ~~included~~and insimilar ~~the~~expressions, ~~restructuring~~are ~~reserve.~~used ~~The~~to ~~remaining~~identify 65such forward-looking statements. All ~~people~~forward-looking ~~relocated~~statements ~~with~~reflect ~~the~~only ~~Company.~~our Incurrent ~~2003,~~beliefs ~~$2.9 million~~and ~~was~~assumptions ~~charged~~with respect to ~~goodwill~~our future ~~representing~~results, ~~the closure~~business ofplans ~~the~~and ~~pre-press~~prospects, ~~publishing~~and ~~facility~~are ~~operated~~based insolely ~~Blountville~~on information currently available to us. Accordingly, ~~Tennessee~~these ~~and~~statements ~~severance~~are ~~paid~~ subject to ~~certain~~significant ~~Embarq~~risks ~~executives~~and ~~who~~uncertainties and ~~were~~our ~~terminated~~actual ~~immediately~~results, ~~upon~~business ~~the~~plans ~~closing~~and ofprospects ~~the~~could ~~Embarq~~differ significantly from those ~~Acquisition~~expressed in, or implied by, these statements. ~~The~~We ~~reserve~~caution ~~for~~readers ~~the~~not ~~pre-press~~to ~~publishing~~place ~~facility~~undue ~~was~~reliance ~~$2.2 million~~on, and ~~which~~we ~~represented the~~undertake ~~remaining~~no ~~lease~~obligation ~~payments~~to update, ~~net~~other ofthan ~~estimated~~imposed ~~sub-lease~~by ~~income~~law, any forward-looking statements. ~~Net~~Such ~~payments~~risks, ofuncertainties ~~less~~and ~~than~~contingencies ~~$0.1 million~~are ~~and~~described ~~$0.1~~in detail in Item ~~million~~1A, ~~were~~“Risk Factors” ~~made~~of ~~with~~our ~~respect~~Annual toReport ~~the~~on ~~former~~Form ~~pre~~10-~~press~~K ~~publishing~~for ~~facility during~~ the ~~three~~year ~~months~~ ended ~~March~~December 31, ~~2007~~2006 ~~and~~ (“2006 10-K”). Unless otherwise indicated, ~~respectively~~the terms “Company,” “RHD Inc.,” ~~Remaining~~“RHDI,” ~~payments~~“we,” ~~will~~“us” beand ~~made~~“our” refer to ~~through~~R.H. ~~2012~~Donnelley Inc. and its direct and indirect wholly-owned subsidiaries.

~~Restructuring~~Corporate ~~charges that are charged to earnings are included in general and administrative~~Overview ~~expenses on our consolidated statements of income.~~

15Our parent, R.H. Donnelley Corporation (“RHD”), is one of the nation’s largest Yellow Pages and online local commercial search companies, based on revenue. We publish and distribute advertiser content utilizing two of the most highly recognizable brands in the industry, Embarq (formerly known as Sprint) and AT&T (formerly known as SBC). Our “triple-play” integrated marketing solutions assist advertisers by attracting large volumes of ready-to-buy consumers through the combination of our print directories, Internet Yellow Pages (“IYP”) and search engine marketing (“SEM”) and search engine optimization (“SEO”) services.

7As previously announced by RHD, we are utilizing a new Dex market brand for all of our print and online products across our entire footprint. ~~Income~~As ~~Taxes~~part of this branding strategy, RHD also announced DexKnows.com® as its new uniform resource locator (“URL”) across its entire footprint that will upgrade our existing online sites over the remainder of 2007 and into 2008. This initiative was undertaken as IYP is a cornerstone of our “triple play” strategy and this platform will make our rich, accurate content available on a single search site. We will continue to leverage the recognizable Embarq and AT&T brands on our print products in those respective markets while also creating a single look and feel for both print and online products by highlighting the Dex name. Within the Qwest markets, the Dex brand has tremendous name recognition and DexKnows.com is the leader in online local search. The DexKnows.com site leverages this success and adds enhanced capabilities, new features and an intuitive interface. In the AT&T and Embarq markets, we will convert the existing online sites in stages over the remainder of 2007 and into 2008.

AsSignificant aBusiness ~~result of implementing FIN No. 48, we recognized an increase of $159.9 million in the~~Developments ~~liability for unrecognized tax benefits. The increase in the liability included a reduction in deferred tax liabilities of $165.2 million and an increase in retained earnings of $5.3 million.~~

AsOn ~~of January~~August 123, 2007, RHD acquired Business.com, Inc. (“Business.com”), a leading business search engine and ~~after~~directory ~~the~~and ~~impact~~performance based advertising network, for a disclosed amount of ~~recognizing~~$345.0 million (the ~~increase~~“Business.com inAcquisition”). ~~the~~The ~~liability~~purchase ~~for unrecognized~~price ~~tax~~determined ~~benefits,~~in ~~our~~accordance ~~unrecognized~~with generally ~~tax~~accepted ~~benefits~~accounting ~~total~~principles (“GAAP”) is $~~173~~334.92 million, ~~which~~and ~~includes~~excludes certain items such ~~accrued~~as ~~interest~~the ~~disclosed~~value ~~below~~of unvested equity awards. ~~Included~~The inpurpose of the ~~balance~~Business.com ofAcquisition ~~unrecognized~~was ~~benefits~~to atexpand RHD ~~January 1~~and the Company’s existing interactive portfolio by adding leading Internet advertising talent and technology, to strengthen RHD and the Company’s position in the expanding local commercial ~~2007~~search ~~are~~market $5and to develop an online performance based advertising network.~~6 million~~ Business.com also provides the established business-to-business online properties of ~~tax~~Business.com, ~~benefits~~Work.com ~~that~~and the Business.com Advertising Network. We expect to adopt the Business.com technology platform to serve our existing advertiser base. Business.com now operates as a direct, ifwholly-owned ~~recognized~~subsidiary of RHD. As such, ~~would~~the ~~affect~~results of Business.com are not included in the ~~effective~~Company’s ~~tax~~operating ~~rate~~results.

~~Our policy is to recognize accrued interest and penalties related to unrecognized tax benefits in~~14 ~~income tax expense. As of January 1, 2007, we have accrued $3.6 million related to interest and have not accrued any amount for tax penalties.~~

WeTable believe it is reasonably possible that the amount of unrecognized tax benefits disclosed above could decrease within the next twelve months. We are currently under audit by the Internal Revenue Service (“IRS”) for taxable years 2003 and 2004 and in New York for 2000 through 2003. If the New York audit is resolved within the next twelve months, the total amount of unrecognized tax benefits reported above could decrease by approximately $7.5 million. The unrecognized tax benefits related to the New York audit relate to apportionment and the filing of combined income tax returns. Based upon the status of the IRS audit for 2003 and 2004, we do not expect the unrecognized tax benefits associated with our uncertain Federal tax positions to change within the next twelve months. The unrecognized tax benefits related to the IRS audit primarily relate to items in which the ultimate deductibility is highly certain but for which there is uncertainty regarding the timing of such deductibility. Contents

AsOn ~~noted~~October 2, ~~above~~2007, weRHD ~~are~~issued ~~currently~~$1.0 billion ~~under~~aggregate ~~federal~~principal ~~tax~~amount ~~audit~~of by8.875% ~~the~~Series A-4 ~~IRS~~Senior Notes ~~for~~due ~~the~~2017 ~~taxable~~(“Series A-4 ~~years~~Notes”). ~~2003~~Proceeds ~~and 2004.~~from ~~Therefore,~~this ~~tax~~issuance ~~years~~were ~~2003~~(a) used ~~through~~to ~~2006~~repay ~~are~~a ~~still~~$328 million ~~subject~~RHD credit facility used to ~~examination~~fund byRHD’s ~~the~~acquisition ~~IRS~~of Business.com, In(b) contributed to RHDI ~~addition,~~in ~~certain~~order ~~state~~to ~~tax~~provide ~~returns~~funding ~~are~~for ~~under~~the ~~examination~~tender byoffer ~~various~~and ~~regulatory~~consent ~~authorities,~~solicitation of RHDI’s $600 million ~~including~~aggregate ~~New~~principal ~~York~~amount 10.875% ~~Our~~Senior ~~state~~Subordinated ~~tax~~Notes ~~return~~due ~~years~~2012 ~~are~~(“Senior ~~open~~Subordinated Notes”) and (c) used to ~~examination~~pay related fees and expenses and for other general corporate purposes. On October 17, 2007, RHD issued an ~~average~~additional $500 million of ~~three years~~Series A-4 Notes. ~~However,~~Certain ~~certain~~proceeds ~~jurisdictions~~from ~~remain~~this issuance ~~open~~were transferred to ~~examination~~RHDI ~~longer~~in ~~than~~order to repay a portion of the ~~three~~term ~~year~~loans outstanding under ~~average~~the ~~due~~existing toRHDI ~~the~~credit ~~existence~~facility ofand ~~net~~pay ~~operating~~related ~~loss~~fees ~~carryforwards~~and expenses.

~~There~~In ~~were~~October 2007, nounder ~~significant~~the ~~changes~~terms and conditions of a tender offer and consent solicitation to purchase ~~any~~RHDI’s $600 million Senior Subordinated Notes that RHDI commenced on September 18, 2007, $599.9 million, or 99.9%, of the ~~amounts~~outstanding ~~noted~~Senior ~~above~~Subordinated ~~during~~Notes were repurchased. As a result of the ~~three~~tender ~~months~~offer ~~ended~~and consent solicitation of RHDI’s Senior Subordinated Notes, we expect ~~March~~that RHDI will no longer be required to file quarterly and annual reports pursuant to Section ~~31,~~13 ~~2007~~or 15(d) of the Securities Exchange Act of 1934.

8.See ~~Benefit~~Item 1, ~~Plans~~“Financial Statements (Unaudited) — Note 10, Subsequent Events,” for additional information regarding these financing and other related transactions.

~~Pension~~Segment ~~Plans. Effective January 1, 2007, the DonTech Retirement Plan was merged with and into~~Reporting the RHD Retirement Plan. The merger of these plans streamlines our administrative processes but does not materially impact our consolidated financial statements. The RHD cash balance defined benefit pension plan covers substantially all of our employees with at least one year of service. The benefits to be paid to employees are based on age, years of service and a percentage 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 of our 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. Annual pension costs are determined using the projected unit credit actuarial cost method. RHD’s funding policy is to contribute an amount at least equal to the minimum legal funding requirement. RHD was not required to make and has not made any contributions during the three months ended March 31, 2007 and 2006. RHD’s underlying pension plan assets are invested in diversified portfolios consisting primarily of equity and debt securities.

~~RHD~~Management ~~also~~reviews ~~has an unfunded non-qualified defined benefit pension plan, the Pension Benefit Equalization Plan (“PBEP”), which covers senior executives~~ and ~~certain~~analyzes ~~key~~its ~~RHDI~~business ~~employees.~~of ~~Benefits~~publishing ~~are~~yellow ~~based~~pages ~~on years~~directories ~~of service~~ and ~~compensation (including compensation not permitted to be taken into account~~related ~~under~~local ~~the~~commercial ~~previously~~search ~~mentioned~~as ~~defined~~one ~~benefit~~operating ~~pension plan)~~segment.

16New Accounting Pronouncements

~~Savings~~We ~~Plans.~~have ~~RHD~~reviewed ~~offers~~accounting apronouncements ~~defined~~that ~~contribution~~were ~~401(k)~~issued ~~savings~~as ~~plan~~of toSeptember 30, ~~substantially~~2007, ~~all~~which ~~RHDI~~the ~~employees~~Company ~~and~~has ~~contributes~~not ~~50%~~yet ~~for~~adopted, ~~each~~and ~~dollar~~do ~~contributed~~not bybelieve athat ~~participating~~the ~~employee,~~pronouncements upwill tohave a ~~maximum~~ ofmaterial 6%impact on ofour ~~each~~financial ~~participating~~position ~~employee’s~~or ~~salary~~operating ~~(including bonus and commissions)~~results.

~~Postretirement Benefits. RHD has an unfunded postretirement benefit plan that provides certain~~15 ~~healthcare and life insurance benefits to certain RHDI full-time employees who reach retirement eligibility while working for RHDI.~~

InTable accordance with SFAS No. 132, Employers’ Disclosures About Pensions and Other Postretirement Benefits (Revised 2003), the following table provides the components of net periodic benefit cost of RHD’s pension and postretirement benefit plans for the three months ended March 31, 2007 and 2006: Contents

	Pension Benefits						Postretirement Benefits
	Three Months						Three Months
	Ended March 31,						Ended March 31,
	2007			2006			2007		2006
Service cost	$	1,234		$	1,352		$	153	$	182
Interest cost		1,821			1,691			331		312
Expected return on plan assets		(2,085	)		(2,063	)		—		—
Amortization of prior service cost		33			33			203		203
Amortization of net loss		272			468			—		65
Net periodic benefit cost	$	1,275		$	1,481		$	687	$	762

RESULTS OF OPERATIONS
Nine months ended September 30, 2007 and 2006

~~RHD~~Factors ~~expects~~Affecting ~~to make contributions of approximately $3.8 million and $1.0 million to its pension~~Comparability ~~plans and postretirement plans, respectively, in 2007 for RHDI employees.~~

9Our operating results in 2007 have been and will be impacted by investments in our “triple play” strategy, focusing on our online products and services, and our directory publishing business with new product introductions in our Embarq and AT&T markets. ~~Business~~These ~~Segments~~investments include launching RHD’s new Dex market brand and new URL, DexKnows.com across our entire footprint, the introduction of plus companion directories in our Embarq and AT&T markets, as well as associated marketing and advertising campaigns, employee training associated with new product introductions, and consolidation of our IT platform.

~~Management~~Net ~~reviews and analyzes its business of publishing yellow pages directories and related~~Revenue ~~local commercial search as one operating segment.~~

~~10.~~The ~~Legal~~components ~~Proceedings~~of our net revenue for the nine months ended September 30, 2007 and 2006 were as follows:

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters. In many of these matters, plaintiffs allege that they have suffered damages from errors or omissions of improper listings contained in directories published by us. 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.


	Nine months ended September 30,
(amounts in millions)	2007			2006			$ Change


Gross directory advertising revenue	$	769.6		$	778.9		$	(9.3	)
Sales claims and allowances		(7.2	)		(8.4	)		1.2

Net directory advertising revenue		762.4			770.5			(8.1	)
Other revenue		8.3			7.7			0.6

Total	$	770.7		$	778.2		$	(7.5	)

~~The~~Our ~~Company~~directory advertising revenue is ~~exposed~~earned toprimarily ~~potential~~from ~~defamation~~the ~~and~~sale ~~breach~~of advertising in yellow pages directories we publish, net of ~~privacy~~sales claims ~~arising~~and ~~from~~allowances. ~~our~~Directory advertising revenue also ~~publication~~includes ofrevenue ~~directories~~for ~~and~~those ~~our~~Internet-based ~~methods~~advertising ofproducts ~~collecting~~that are bundled with print advertising, ~~processing~~including ~~and~~certain ~~using~~IYP ~~advertiser~~products, and ~~telephone~~ ~~subscriber~~Internet-based ~~data.~~advertising Ifproducts not bundled with print advertising, such ~~data~~as ~~were~~our ~~determined~~SEM toand beSEO ~~inaccurate~~services. orDirectory ifadvertising ~~data~~revenue ~~stored~~is affected by ~~us were~~several ~~improperly~~factors, ~~accessed~~including ~~and~~changes ~~disseminated~~in bythe usquantity orand bysize ~~unauthorized~~of ~~persons~~advertisements sold, defectors and new advertisers as well as the ~~subjects~~proportion of ~~our~~premium advertisements sold, changes in the ~~data~~pricing of advertising, changes in the quantity and ~~users~~mix of ~~the~~advertising ~~data~~purchased weper ~~collect~~account and the ~~publish~~introduction ~~could~~of ~~submit~~additional ~~claims~~products ~~against~~that ~~the~~generate ~~Company~~incremental revenue. ~~Although~~ Revenue with respect to print ~~date~~advertising, weand ~~have~~Internet-based ~~not~~advertising ~~experienced~~products ~~any~~that ~~material~~are ~~claims~~bundled ~~relating~~with toprint ~~defamation~~advertising, is orrecognized ~~breach~~under ofthe ~~privacy~~deferral and amortization method, wewhereby revenue is initially deferred ~~may~~when bea ~~party~~directory tois ~~such~~published ~~proceedings~~and inrecognized ratably over the ~~future~~directory’s ~~that~~life, ~~could~~which ~~have~~is atypically 12 months. ~~material~~Revenue ~~adverse~~with ~~effect~~respect onto ~~our~~Internet-based services that are not bundled with print ~~business~~advertising, such as SEM and SEO services, is recognized as delivered or fulfilled.

~~Based~~Total onnet ~~our~~revenue ~~review~~for of the ~~latest~~nine ~~information~~months ~~available~~ended September 30, we2007 ~~believe~~was ~~our~~$770.7 million, ~~ultimate~~compared ~~liability~~to $778.2 million for the nine months ended September 30, 2006. The decrease in total net revenue of ~~connection~~$7.5 million ~~with~~for ~~pending~~the ornine ~~threatened~~months ~~legal~~ended ~~proceedings~~September 30, ~~will~~2006 ~~not~~is ~~have~~primarily a ~~material~~result ~~adverse~~of ~~effect~~declines onin ~~our~~renewal ~~results~~business and sales productivity related to systems modernization and weaker housing trends in certain of ~~operations~~our Embarq markets, ~~cash~~declines ~~flows~~in orsome of our AT&T markets during the first quarter of ~~financial~~2007 ~~position~~due to re-alignment of the coverage areas of our publications to better reflect shopping patterns as well as weaker national directory revenue across the AT&T footprint. NoThese ~~material~~declines ~~amounts~~are partially ~~have~~offset ~~been~~by ~~accrued~~increased net revenue from new product introductions, including online products and services, in both our ~~consolidated~~Embarq ~~financial~~and ~~statements with~~AT&T ~~respect~~markets, toand ~~any~~increased ofInternet-based ~~such~~revenue ~~matters~~in both our Embarq and AT&T markets.

17Other revenue for the nine months ended September 30, 2007 totaled $8.3 million, representing an increase of $0.6 million from other revenue of $7.7 million reported for the nine months ended September 30, 2006. Other revenue includes barter revenue, late fees received on outstanding customer balances, commissions earned on sales contracts with respect to advertising placed into other publishers’ directories, and sales of directories and certain other advertising-related products. The increase in other revenue for the nine months ended September 30, 2007 is primarily due to late fees revenue and revenue from other advertising-related products.

~~11. Related Party Transactions and Allocations~~16

CertainTable transactions are managed by RHD on a centralized basis. Under this centralized cash management program, RHD and the Company advance funds and allocate certain operating expenditures to each other. These net intercompany balances have been classified as non-current assets or liabilities at March 31, 2007 and December 31, 2006, as the Company is not required to nor intends to settle these balances with RHD during the next twelve months. As the change in net intercompany balances came as a result of operating transactions, they have been presented as operating activities on the consolidated statements of cash flows for the three months ended March 31, 2007 and 2006. Contents

~~In general, substantially all of the net assets of the Company and its subsidiaries are restricted~~Expenses from being paid as dividends to any third party, and our subsidiaries are restricted from paying dividends, loans or advances to RHD, with very limited exceptions under the terms of our Credit Facility and the indentures governing our notes. During the three months ended March 31, 2007 and within the terms of our Credit Facility and the indentures governing our notes, the Company paid a dividend of $39.7 million to RHD. This dividend is presented as a financing activity on the consolidated statement of cash flows for the three months ended March 31, 2007. The Company did not pay any dividends to RHD during the three months ended March 31, 2006. See Note 4, “Long-Term Debt, Credit Facility and Notes” for a further description of our debt instruments.

18The components of our total expenses for the nine months ended September 30, 2007 and 2006 were as follows:

Item 2. Management’s Narrative Analysis of Results of Operations


	Nine months ended September 30,
(amounts in millions)	2007		2006		$ Change


Cost of revenue	$	334.4	$	309.6	$	24.8
General and administrative expenses		50.5		50.7		(0.2	)
Depreciation and amortization		73.5		65.1		8.4

Total	$	458.4	$	425.4	$	33.0

~~Pursuant~~Substantially all expenses are derived from our directory publishing business and Internet-based advertising products and services. Certain costs directly related to ~~General~~the ~~Instruction~~selling Hand production of directories are initially deferred and recognized ratably over the life of the directory. These costs are specifically identifiable to a particular directory and include sales commissions and print, paper and initial distribution costs. Sales commissions include commissions paid to employees for sales to local advertisers and to certified marketing representatives (2“CMRs”)(, which act as our channel to national advertisers. All other expenses, such as sales person salaries, sales manager compensation, sales office occupancy, publishing and information technology services, are not specifically identifiable to a) ofparticular ~~Form~~directory ~~10-Q~~and are recognized as incurred. Our costs recognized in a reporting period consist of: (i) ~~the~~costs ~~information~~incurred ~~called~~in ~~for~~that byperiod ~~Item~~and fully recognized in that period; (ii) 2costs incurred in a prior period, a portion of which is amortized ~~Management’s~~and ~~Discussion~~recognized in the current period; and ~~Analysis~~(iii) costs incurred in the current period, a portion of which ~~Financial~~is ~~Condition~~amortized and ~~Results~~recognized in the current period and the balance of ~~Operations~~which is deferred until future periods. Consequently, ~~has~~there ~~been~~will be a difference between costs recognized in any given ~~omitted~~period and ~~(ii) we~~costs incurred in the given period, which may be significant. All deferred costs related to the sale and production of directories are ~~providing~~recognized ratably over the ~~following~~life ~~Management’s~~of ~~Narrative~~each directory ~~Analysis~~under the deferral and ~~Results~~amortization method of accounting, with cost recognition ~~Operations~~commencing in the month of directory distribution.

~~Forward-Looking~~Cost ~~Information~~of Revenue

~~Certain~~Total ~~statements~~cost ~~contained~~of inrevenue ~~this~~for Quarterly Report on 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~~nine ~~harbor~~months ~~created~~ended ~~by the Private Securities Litigation Reform Act of 1995. Where possible~~September 30, ~~words~~2007 ~~such~~was as “believe,” “expect,” “anticipate,” “should,” “will,” “would,” “planned,” “estimated,” “potential,” “goal,” “outlook,” “could,” and similar expressions, are used to identify such forward-looking statements$334. ~~All forward-looking statements reflect only our current beliefs and assumptions with respect to our future results~~4 million, ~~business~~compared ~~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~~$309. 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, uncertainties and contingencies are described in detail in Item6 ~~1A,~~million ~~“Risk Factors”~~reported ~~of our Annual Report on Form 10-K~~ for the ~~year~~nine months ended ~~December~~September 3130, 2006 ~~(“2006 10-K”)~~. ~~Unless~~ ~~otherwise~~The ~~indicated,~~primary ~~the~~components ~~terms “Company,” “RHD Inc.,” “RHDI,” “we,” “us” and “our” refer to~~of ~~R.H.~~the ~~Donnelley Inc~~$24.8 million ~~and~~increase ~~its~~in ~~direct~~cost ~~and~~of ~~indirect~~revenue ~~wholly-owned~~are ~~subsidiaries.~~as follows:

Corporate Overview


	Nine months ended
	September 30, 2007
(amounts in millions)	$ Change

Increased print, paper and distribution expenses	$	9.9
Increased information technology (“IT”) expenses		9.4
Increased Internet production and distribution costs		6.3
Increased bad debt expense		5.3
Amortization of cost uplift in 2006 from the AT&T Directory Acquisition		(2.1	)
All other, net		(4.0	)

Total increase in cost of revenue for the nine months ended September 30, 2007	$	24.8

~~Our parent, R.H. Donnelley Corporation (“RHD”), is one of the nation’s largest Yellow Pages and~~17 online local commercial search companies, based on revenue. We publish and distribute advertiser content utilizing two of the most highly recognizable brands in the industry, Embarq (formerly known as Sprint) and AT&T (formerly known as SBC). Our “triple-play” integrated marketing solutions assist advertisers by attracting large volumes of ready-to-buy consumers through the combination of our print directories, Internet Yellow Pages (“IYP”) and search engine marketing (“SEM”) and search engine optimization (“SEO”) services. During 2006, our print and online solutions helped approximately 250,000 national and local businesses in 18 states reach consumers who were actively seeking to purchase products and services. Our approximately 800 sales representatives work on a daily basis to help bring these local businesses and consumers together to satisfy their mutual objectives utilizing our “triple play” products and services.

DuringTable 2006, we published and distributed more than 30 million print directories in many of the country’s most attractive growth markets including Las Vegas and Orlando and Lee County, Florida. Our print directories provide comprehensive local information to consumers, facilitating their active search for products and services offered by local merchants. Contents

~~Our~~During ~~online~~the ~~products~~nine ~~and~~months ~~services~~ended ~~(IYP~~September 30, ~~SEM~~2007, ~~and~~print, ~~SEO)~~paper ~~provide~~and ~~merchants~~distribution ~~with~~expenses ~~additional reach to~~increased ~~connect~~$9.9 million, ~~with~~compared ~~consumers who are actively seeking~~ to ~~purchase products and services on~~ the ~~Internet. These~~nine ~~powerful~~months ~~offerings~~ended ~~not~~September 30, ~~only distribute local advertisers’ content to our proprietary IYP sites~~2006, ~~but~~primarily ~~extend~~as toa ~~other~~result ~~major~~of ~~online search platforms, including Google® and~~the ~~Yahoo!®,~~introduction ~~providing~~of ~~additional~~companion ~~qualified~~directories ~~leads~~in ~~for~~certain ~~our advertisers~~markets. WeCompanion ~~also~~directories ~~help~~are ~~local businesses~~a ~~take~~small ~~advantage~~format directory ofthat ~~the~~serves ~~expanding~~as ~~online~~a ~~market~~complement ~~by assisting them~~ to ~~determine~~ the ~~optimal display~~core ofdirectory, ~~information~~with inreplicated ~~their~~advertising ~~IYP~~from ~~profile or~~ the core ~~right~~directory ~~combination~~available ~~of SEM and SEO tactics~~ for ~~prominent~~ ~~appearance~~an onadditional ~~the Internet~~charge.

~~This~~During ~~compelling~~the ~~set~~nine ofmonths ~~“triple~~ended ~~play”~~September 30, ~~products~~2007, ~~and~~we ~~services,~~incurred inapproximately ~~turn~~$9.4 million of additional IT expenses, ~~generates~~compared ~~among~~to the ~~strongest~~nine months ended September 30, 2006, due to enhancements ~~returns~~and ~~for~~technical ~~advertisers~~support of ~~any~~multiple ~~advertising~~production ~~media~~systems ~~available~~as ~~today.~~we ~~This~~continue ~~strong~~implementing ~~advertiser~~our ~~return~~integration ~~uniquely~~plan ~~positions~~to ~~RHDI~~a ~~and~~consolidated ~~its~~IT ~~800~~platform. ~~sales~~This ~~representatives~~increase asis ~~trusted~~partially ~~advisors~~offset ~~for~~by ~~marketing~~cost ~~support~~savings resulting ~~and~~from ~~service~~lower inrates ~~the~~associated ~~local~~with ~~markets~~a wenew ~~serve~~IT contract, which became effective in July 2007.

~~RHD~~Also ~~recently~~during ~~announced~~the anine ~~new~~months ~~Dex~~ended ~~market~~September 30, ~~brand~~2007, ~~for~~the ~~all~~Company ofincurred ~~our~~additional ~~print~~expenses ~~and online products across our~~of ~~entire footprint~~$6.3 million, Ascompared ~~part~~to ofthe ~~this~~nine ~~branding~~months ~~strategy~~ended September 30, ~~RHD~~2006, ~~also~~related ~~announced~~to ~~DexKnows.com®~~Internet asproduction ~~its~~and ~~new~~distribution ~~uniform~~due ~~resource~~to ~~locator~~investment ~~(“URL”)~~in ~~across its entire footprint that will upgrade~~ our ~~existing~~triple ~~online~~play ~~sites over the remainder of 2007~~strategy. This ~~initiative~~investment ~~was~~focuses ~~undertaken as IYP is a~~on ~~cornerstone~~enhancing of our ~~“triple~~online ~~play”~~products ~~strategy~~ and ~~this~~services ~~platform will make our rich~~(IYP, ~~accurate~~SEM ~~content available~~and ~~on a single search site~~SEO). ~~We will continue to leverage the recognizable Embarq and~~

19Bad debt expense increased $5.3 million for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, due to increased provision expense driven by an increase in customer bad debts in certain of our Embarq markets.

~~AT&T brands~~As ona ~~our~~result ~~print~~of ~~products~~purchase inaccounting ~~those~~required ~~respective~~by ~~markets~~GAAP, ~~while~~we ~~also~~recorded ~~creating~~the adeferred ~~single~~directory ~~look~~costs related ~~and~~to ~~feel for~~directories ~~both~~that ~~print~~were ~~and~~scheduled ~~online~~to ~~products~~publish bysubsequent ~~highlighting~~to our acquisition of the directory ~~Dex~~publishing ~~name~~business of AT&T Inc. ~~The~~in ~~Dex~~Illinois ~~brand~~and ~~has~~Northwest ~~tremendous~~Indiana ~~name~~(“AT&T Directory ~~recognition~~Acquisition”) ~~within~~at ~~its~~their ~~markets~~fair ~~where~~value, ~~DexOnline.com~~determined isas (a) the ~~leader~~estimated inbillable ~~online~~value ~~local~~of ~~search.~~the ~~The~~published ~~DexKnows.com~~directory ~~site~~less ~~leverages~~(b) the ~~this~~expected ~~success~~costs ~~and~~to ~~adds~~complete ~~enhanced~~the ~~capabilities~~directories, ~~new~~plus ~~features~~(c) a ~~and~~normal anprofit margin. ~~intuitive~~We ~~interface~~refer to this purchase accounting entry as “cost uplift.” The ~~conversion~~fair value of ~~existing~~these ~~online~~costs ~~sites~~was determined ~~will~~to ~~occur~~be in$81.3 million ~~stages~~for the AT&T Directory Acquisition. These costs are amortized as cost of revenue over the ~~remainder~~ terms of ~~2007~~the ~~starting~~applicable ~~with~~directories ~~DexOnline.com~~and ~~followed~~such byamortization totaled $2.1 million for the ~~Embarq~~nine ~~and~~months ~~AT&T~~ended ~~markets~~September 30, 2006, with no comparable expense in 2007.

~~Significant~~Changes ~~Business~~in the ~~Developments~~All other category for the nine months ended September 30, 2007 primarily relate to a decrease in print delivery management costs due to synergies resulting from RHD’s merger with Dex Media (the “Dex Media Merger”), a decrease in non-cash stock-based compensation expense, and achieving economies of scale in other areas subsequent to the Dex Media Merger, partially offset by higher advertising expenses to promote the Dex brand name for all of our print and online products and the use of DexKnows.com as RHD’s new URL across the Embarq and AT&T footprint, as well as an increase in sales training costs associated with new product introductions, including online products and services.

OnGeneral ~~January 31, 2006, RHD acquired Dex Media, Inc. (“Dex Media”) for an equity purchase price of $4.1 billion consisting of 36,547,381 shares of RHD common stock valued at $2.2 billion~~ and ~~$1.9 billion~~Administrative ~~in cash (the “Dex Media Merger”). RHD also assumed all of Dex Media’s and its~~Expenses subsidiaries’ outstanding indebtedness with a fair value of $5.5 billion, together with other costs for a total aggregate purchase price of $9.8 billion. Dex Media is the exclusive publisher of the “official” yellow pages and white pages directories for Qwest Communications International Inc. (“Qwest”) where Qwest was the primary incumbent local exchange carrier (“ILEC”) in November 2002. Prior to the Dex Media Merger, Dex Media was a leading directory publisher in the United States. The purpose of the Dex Media Merger was to take a further step in the transformation of RHD into a leading publisher of yellow pages directories, as well as to combine the complementary strengths of both companies. The acquired business of Dex Media and its subsidiaries (“Dex Media Business”) now operates as Dex Media Inc., one of RHD’s direct, wholly-owned subsidiaries. As such, the results of the Dex Media Business are not included in the Company’s operating results.

OnGeneral ~~September 6,~~and ~~2006,~~administrative ~~RHD acquired~~ (~~the~~ “~~Local Launch Acquisition~~G&A”) ~~Local~~expenses ~~Launch,~~for ~~Inc.~~the ~~(“Local Launch”).~~nine ~~Local~~months ~~Launch~~ended ~~is a leading local search products~~September 30, ~~platform,~~2007 ~~and~~were ~~fulfillment provider that~~$50.5 ~~enables~~million, ~~resellers~~compared to ~~sell Internet advertising solutions to local advertisers~~$50.7 million ~~Local~~reported ~~Launch specializes~~for inthe ~~search~~nine ~~through~~months ~~publishing,~~ended ~~distribution~~September 30, ~~directory, and organic marketing solutions~~2006. The decrease ~~purpose~~in ofG&A ~~the~~expenses ~~Local Launch Acquisition was to support the expansion~~ of ~~RHD~~$0.2 million ~~and~~for the ~~Company’s~~nine ~~current~~months ~~local~~ended ~~SEM~~September 30, ~~and~~2007 ~~SEO~~is ~~offerings~~primarily ~~and~~due ~~provide new, innovative solutions~~ to ~~enhance~~a ~~RHD~~decrease ~~and~~in ~~the~~non-cash ~~Company’s local SEM and SEO capabilities. The acquired business of Local Launch (“Local Launch Business”) now operates as one of RHD’s direct, wholly~~stock-~~owned~~based ~~subsidiaries.~~compensation ~~As such~~expense, ~~the~~partially ~~results~~offset ofby additional ~~the~~headcount ~~Local~~and ~~Launch~~related ~~Business are not included in the Company’s operating results~~expenses.

~~Segment~~Depreciation ~~Reporting~~and Amortization

~~Management~~Depreciation ~~reviews~~ and ~~analyzes~~amortization ~~its~~(“D&A”) ~~business~~expense for the nine months ended September 30, 2007 was $73.5 million, compared to $65.1 million for the nine months ended September 30, 2006. Amortization of ~~publishing~~intangible ~~yellow~~assets ~~pages~~was ~~directories~~$59.8 million ~~and~~for ~~related~~the nine months ended September 30, 2007, compared to ~~local~~$55.9 million ~~commercial~~reported ~~search~~for the nine months ended September 30, 2006. The increase in intangible asset amortization for the nine months ended September 30, 2007 is due to the change in amortization expense as ~~one~~provided ~~operating~~for ~~segment~~under the income forecast method related to the local customer relationships intangible assets.

~~New~~Depreciation ~~Accounting~~of ~~Pronouncements~~fixed assets and amortization of computer software was $13.7 million for the nine months ended September 30, 2007, compared to $9.2 million reported for the nine months ended September 30, 2006. The increase in depreciation of fixed assets and amortization of computer software for the nine months ended September 30, 2007 is due to fixed asset and computer software additions.

~~In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, The Fair~~18 Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS No. 159 is to provide opportunities to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact the adoption of SFAS No. 159 will have on our consolidated financial position and results of operations.

InTable September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”) and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently assessing the impact the adoption of SFAS No. 157 will have on our consolidated financial position and results of operations. Contents

WeOperating ~~have reviewed other new accounting standards not identified above and do not believe any other~~Income ~~new standards will have a material impact on our financial position or operating results.~~

20Operating income for the nine months ended September 30, 2007 and 2006 was as follows:

RESULTS OF OPERATIONS Three months ended March 31, 2007 and 2006


	Nine months ended September 30,
(amounts in millions)	2007		2006		$ Change


Total	$	312.4	$	352.8	$	(40.4	)

~~Net~~Operating ~~Revenue~~income for the nine months ended September 30, 2007 was $312.4 million, representing a decrease of $40.4 million from operating income of $352.8 million reported for the nine months ended September 30, 2006. The decrease in operating income for the nine months ended September 30, 2007 is a direct result of the revenue and expense trends described above.

~~The~~Interest ~~components of our net revenue for the three months ended March 31~~Expense, ~~2007 and 2006 were as~~Net ~~follows:~~

	Three Months Ended March 31,
(amounts in millions)	2007			2006			$ Change
Gross directory advertising revenue	$	257.4		$	262.4		$	(5.0	)
Sales claims and allowances		(2.2	)		(3.6	)		1.4
Net directory advertising revenue		255.2			258.8			(3.6	)
Other revenue		2.7			2.6			0.1
Total	$	257.9		$	261.4		$	(3.5	)

Net interest expense for the nine months ended September 30, 2007 was $144.4 million, compared to $146.5 million reported for the nine months ended September 30, 2006. The decrease in net interest expense of $2.1 million for the nine months ended September 30, 2007 is a result of lower average outstanding debt balances due to debt repayments. Net interest expense for the nine months ended September 30, 2007 includes $10.8 million of non-cash amortization of deferred financing costs, compared to $9.6 million of non-cash amortization of deferred financing costs for the nine months ended September 30, 2006.

~~Our~~Income ~~directory advertising revenue is earned primarily from the sale of advertising in yellow pages~~Taxes directories we publish, net of sales claims and allowances. Directory advertising revenue also includes revenue for those Internet-based advertising products that are bundled with print advertising, including certain IYP products, and Internet-based advertising products not bundled with print advertising, such as our SEM and SEO services. Directory advertising revenue is affected by several factors, including changes in the quantity and size of advertisements sold, defectors and new advertisers as well as the proportion of premium advertisements sold, changes in the pricing of advertising, changes in the quantity and mix of advertising purchased per account and the introduction of additional products that generate incremental revenue. Revenue with respect to print advertising, and Internet-based advertising products that are bundled with print advertising, is recognized under the deferral and amortization method, whereby revenue is initially deferred when a directory is published and recognized ratably over the directory’s life, which is typically 12 months. Revenue with respect to Internet-based advertising that is not bundled with print advertising is recognized ratably over the period the advertisement appears on the site. Revenue with respect to our other products and services, such as SEM and SEO services, is recognized as delivered or fulfilled.

~~Total~~The ~~net~~effective ~~revenue~~tax ~~for~~rate ~~the~~on ~~three~~income ~~months~~before ~~ended~~income ~~March 31,~~taxes ~~2007~~of ~~was $257~~41.~~9 million,~~8% ~~compared to $261.4 million~~ for the ~~corresponding~~nine ~~period~~months inended ~~the~~September 30, ~~prior~~2007 ~~year.~~compares ~~The~~to ~~decrease~~38% inon ~~total~~income ~~net~~before ~~revenue~~income oftaxes ~~$3.5 million~~ for the ~~three~~nine months ended ~~March~~September 3130, 2006. ~~2007~~As ~~is primarily~~ a result of ~~declines~~the inIRS ~~renewal business~~settlement ~~and~~in ~~sales~~July 2007, ~~productivity~~we ~~related~~recognized toadditional ~~systems~~interest ~~modernization~~expense ~~and weaker housing trends in~~of ~~certain~~$1.4 million ~~of our Embarq markets~~ and ~~declines~~$0.9 million inrelated ~~some of our AT&T markets due~~ to ~~re-alignment of~~ the ~~coverage~~ ~~areas~~taxable ofyears ~~our~~2004 ~~publications~~and to2005, ~~better reflect shopping patterns~~respectively. ~~These declines are~~The ~~partially~~effective ~~offset~~tax byrate ~~increased~~for ~~net~~the ~~revenue~~nine ~~from~~months ~~new~~ended ~~product introductions~~September 30, ~~including~~2007 ~~online~~is ~~products and~~reflective ~~services,~~of inthis ~~both~~interest expense ~~our~~as ~~Embarq~~well ~~and~~as ~~AT&T~~changes ~~markets, increases~~ in ~~national~~estimates ~~directory~~for ~~revenue~~state inand ~~our Embarq~~local ~~markets~~tax and ~~increased~~additions ~~internet-based~~to ~~revenue~~our inliability ~~our~~for unrecognized ~~Embarq~~tax ~~markets~~benefits.

~~Other revenue for the three months ended March 31, 2007 totaled $2.7 million, representing an~~19 increase of $0.1 million from other revenue of $2.6 million reported for the three months ended March 31, 2006. Other revenue includes barter revenue, late fees received on outstanding customer balances, commissions earned on sales contracts with respect to advertising placed into other publishers’ directories, and sales of directories and certain other advertising-related products.

21 Table of Contents

~~Expenses~~Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~The~~Omitted ~~components~~pursuant ofto ~~our~~General ~~total~~Instruction ~~expenses~~H(2)(c) ~~for~~of ~~the~~Form ~~three months ended March 31, 2007 and 2006 were as~~10-Q. ~~follows:~~

	Three Months Ended March 31,
(amounts in millions)	2007		2006		$ Change
Cost of revenue	$	110.4	$	107.6	$	2.8
General and administrative expenses		19.2		22.3		(3.1	)
Depreciation and amortization		24.9		21.4		3.5
Total	$	154.5	$	151.3	$	3.2

Item 4. Controls and Procedures

~~Substantially~~(a) Evaluation ~~all~~of ~~expenses~~Disclosure ~~are~~Controls ~~derived from our directory publishing business~~ and ~~Internet-based advertising products and services~~Procedures. ~~Certain~~Based ~~costs~~on ~~directly~~their ~~related~~evaluation, toas ~~the selling and production~~ of ~~directories~~ ~~are initially deferred and recognized ratably over~~ the ~~life~~end of the ~~directory.~~period ~~These costs~~covered ~~are~~by ~~specifically~~this ~~identifiable~~Quarterly toReport aon ~~particular~~Form ~~directory and include sales commissions and print~~10-Q, ~~paper~~of ~~and~~the ~~initial~~effectiveness ~~distribution~~of ~~costs.~~the ~~Sales commissions include commissions paid to~~Company’s ~~employees~~disclosure ~~for~~controls ~~sales to local advertisers~~ and toprocedures ~~certified marketing representatives~~ (~~“CMRs”), which act~~ as ~~our~~defined channel to national advertisers. All other expenses, such as sales person salaries, sales manager compensation, sales office occupancy, publishing and information technology services, are not specifically identifiable to a particular directory and are recognized as incurred. Our costs recognized in ~~a reporting period consist of:~~ Rules 13a-15(ie) ~~costs~~ ~~incurred in that period~~ and ~~fully recognized in that period;~~ 15d-15(iie) ~~costs~~ ~~incurred~~under inthe Securities aExchange ~~prior~~Act ~~period, a portion~~ of ~~which~~1934) ~~is amortized and recognized in~~ the ~~current~~principal ~~period;~~executive officer and ~~(iii) costs~~principal ~~incurred~~financial inofficer ~~the current period, a portion~~ of ~~which~~the isCompany ~~amortized~~have ~~and~~each ~~recognized~~concluded inthat ~~the~~such ~~current~~disclosure ~~period~~controls and ~~the~~procedures ~~balance~~are ofeffective ~~which~~and sufficient isto ~~deferred~~ensure ~~until future~~that ~~periods.~~information ~~Consequently,~~required ~~there~~to ~~will~~ be adisclosed ~~difference~~by ~~between~~the ~~costs~~Company ~~recognized~~ in ~~any~~reports ~~given~~that it ~~period~~files ~~and~~or ~~costs~~submits ~~incurred~~under in the ~~given~~Securities ~~period,~~Exchange ~~which~~Act ~~may~~of be1934 ~~significant.~~is ~~All~~recorded, ~~deferred~~processed, ~~costs related~~summarized ~~to the sale~~ and reported ~~production~~within ~~of directories are recognized ratably over~~ the ~~life~~time ofperiods ~~each directory~~specified ~~under~~in the ~~deferral~~Securities and ~~amortization~~Exchange ~~method~~Commission’s ofrules ~~accounting, with cost recognition~~and ~~commencing in the month of directory distribution~~forms.

~~Cost~~(b) Changes ofin ~~Revenue~~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.

~~Total cost of revenue for the three months ended March 31, 2007 was $110.4 million, compared to~~20 ~~$107.6 million reported for the corresponding period in the prior year. The primary components of the $2.8 million increase in cost of revenue are as follows:~~

(amounts in millions)	$ Change
Increased information technology (“IT”) expenses	$	4.7
Increased print, paper and distribution expenses		3.8
Increased internet production and distribution costs		1.4
Decreased stock-based compensation expense under SFAS No. 123 (R)		(3.3	)
Amortization of cost uplift in 2006 from the AT&T Directory Business		(1.9	)
All other		(1.9	)
Total increase in cost of revenue for the three months ended March 31, 2007	$	2.8

~~During~~PART ~~the three months ended March 31, 2007, we incurred approximately $4~~II.~~7 million~~ ofOTHER ~~additional~~INFORMATION IT expenses compared to the corresponding period in 2006, due to enhancements and technical support of multiple production systems. Print, paper and distribution expenses increased $3.8 million compared to the corresponding period in the prior year, primarily as a result of the introduction of plus companion directories in certain markets. Plus companion directories are a small format directory that serves as a complement to the core directory, with replicated advertising from the core directory available for an additional charge. Also during the three months ended March 31, 2007, the Company incurred expenses of $1.4 million related to internet production and distribution due to investment in our triple play strategy. This investment focuses on enhancing our online products and services (IYP, SEM and SEO), which includes rebranding initiatives associated with our new URL, DexKnows.com.

22Item 1. Legal Proceedings

~~Cost~~We ofare ~~revenue~~involved ~~for~~in ~~the~~various ~~three~~legal ~~months~~proceedings ~~ended~~arising ~~March 31,~~in ~~2007~~the ~~was~~ordinary ~~also~~course ~~impacted~~of byour ~~$2.0 million~~business, ofas ~~non-cash~~well ~~stock-based~~as ~~compensation~~certain ~~expense~~litigation ~~resulting~~and ~~from~~tax ~~SFAS No~~matters. ~~123~~ ~~(R),~~In ~~compared~~many toof ~~$5.3 million reported~~these ~~for~~matters, ~~the~~plaintiffs ~~three~~allege ~~months~~that ~~ended~~they have ~~March 31,~~suffered ~~2006.~~damages ~~The~~from ~~decrease~~errors or omissions of ~~$3.3 million~~improper islistings ~~primarily~~contained ~~due~~in directories topublished ~~one-time~~by ~~charges~~us. ~~recognized~~We ~~for~~periodically ~~the~~assess ~~three~~our ~~months~~liabilities ~~ended~~and ~~March 31,~~contingencies ~~2006~~in ~~from~~connection ~~modifications~~with tothese ~~stock-~~matters based ~~awards~~upon ~~due~~the tolatest ~~acceleration~~information ofavailable ~~vesting~~to ~~terms~~us. asFor athose ~~result~~matters ofwhere ~~the~~it ~~Dex~~is ~~Media~~probable that ~~Merger,~~we ~~offset by~~have ~~stock-based~~incurred ~~compensation~~a ~~expense~~loss ~~from~~and ~~new~~the ~~awards~~loss ~~granted~~or ~~during~~range ~~the~~of ~~three~~loss ~~months~~can ~~ended~~be ~~March 31~~reasonably estimated, we record ~~2007.~~reserves ~~The~~in ~~three~~our ~~months~~condensed ~~ended~~consolidated ~~March 31,~~financial ~~2007~~statements. ~~and~~In ~~2006~~other ~~includes~~instances, ~~$0.2 million~~we ~~and~~are ~~$3.1 million,~~unable to ~~respectively,~~make a reasonable estimate of ~~non-cash~~any ~~stock-based~~liability ~~compensation~~because ~~expense~~of ~~resulting~~the ~~from~~uncertainties ~~these~~related ~~2006~~to ~~modifications.~~both the ~~Cost~~probable ofoutcome ~~revenue~~and ~~includes~~amount ~~non-cash~~or ~~stock-based~~range ~~compensation~~of ~~expense~~loss. ~~for~~As ~~employees~~additional ~~whose~~information ~~wages~~becomes ~~are~~available, we ~~classified~~adjust asour ~~cost~~assessment and estimates of ~~revenue~~such liabilities accordingly.

AsThe aCompany ~~result~~is ofexposed ~~purchase~~to ~~accounting~~potential ~~required~~defamation byand ~~GAAP,~~breach weof ~~recorded~~privacy ~~the~~claims ~~deferred~~arising ~~directory~~from ~~costs~~our ~~related~~publication toof directories ~~that~~and ~~were~~our ~~scheduled~~methods toof ~~publish~~collecting, ~~subsequent~~processing toand ~~our~~using ~~acquisition~~advertiser ~~of the~~and ~~directory~~telephone ~~publishing~~subscriber ~~business of AT&T Inc~~data. ~~(“AT&T~~If ~~Directory~~such ~~Business”)~~data atwere ~~their fair value,~~ determined asto ~~(a) the~~be ~~estimated~~inaccurate ~~billable~~or ~~value~~if ofdata ~~the~~stored ~~published~~by ~~directory less (b) the expected~~us ~~costs~~were toimproperly ~~complete~~accessed ~~the~~and ~~directories,~~disseminated ~~plus~~by ~~(c) a~~us ~~normal~~or ~~profit~~by ~~margin.~~unauthorized Wepersons, ~~refer~~the tosubjects ~~this~~of ~~purchase~~our ~~accounting~~data ~~entry~~and asusers ~~“cost~~of ~~uplift.”~~the ~~The~~data ~~fair~~we ~~value~~collect ofand ~~these~~publish ~~costs~~could ~~was~~submit ~~determined~~claims toagainst bethe ~~$81~~Company.3 Although ~~million~~to ~~for~~date ~~the~~we ~~AT&T~~have ~~Directory~~not ~~Acquisition.~~experienced ~~These~~any ~~costs~~material ~~are~~claims ~~amortized~~relating asto ~~cost~~defamation ofor ~~revenue~~breach ~~over the terms~~ of ~~the~~privacy, ~~applicable~~we may ~~directories~~be ~~and~~party to such ~~amortization~~proceedings ~~totaled~~in ~~$1.9 million for~~ the ~~three~~future ~~months ended~~that ~~March 31,~~could ~~2006,~~have ~~with~~a nomaterial ~~comparable~~adverse ~~expense~~effect inon ~~2007~~our business.

~~General~~Based ~~and~~on ~~Administrative~~our ~~Expenses~~review of the latest information available, we believe our ultimate liability in connection with pending or threatened legal proceedings will not have a material adverse effect on our results of operations, cash flows or financial position. No material amounts have been accrued in our condensed consolidated financial statements with respect to any of such matters.

~~General~~In ~~and administrative (“G&A”) expenses for the three months ended March~~July 312007, ~~2007 were $19.2 million compared to $22.3 million reported for the corresponding period in the prior year.~~ The ~~decrease~~ inDun G&A ~~expenses~~Bradstreet ~~for~~Corporation ~~the~~(“D&B”) ~~three~~advised ~~months~~us ~~ended~~that ~~March 31,~~it ~~2007~~would ofnot ~~$3.1 million~~appeal ~~is primarily due to a decrease in non-cash stock-based compensation expense. G&A expenses for~~ the ~~three months ended~~IRS’ ~~March 31,~~determination ~~2007 was impacted by $3.6 million~~ of ~~non-cash~~deficiencies ~~stock-based~~with ~~compensation~~respect ~~expense resulting from SFAS No. 123 (R), compared~~ to ~~$9.5 million reported for~~ the ~~three~~remaining ~~months~~Legacy ~~ended~~Tax ~~March 31,~~Matter ~~2006. The~~(as ~~decrease~~defined ofin ~~$5.9 million is primarily due to one-time charges recognized for~~ the ~~three months~~ ~~ended March 31,~~ 2006 ~~from modifications to stock~~10-~~based~~K) ~~awards~~and ~~due~~that toamounts ~~acceleration~~on ofdeposit ~~vesting~~with ~~terms as a result of~~ the ~~Dex~~IRS ~~Media~~were ~~Merger,~~more ~~offset~~than bysufficient ~~stock-based~~to ~~compensation~~fund ~~expense from new awards~~such ~~granted during the three months ended March 31, 2007~~deficiencies. ~~The three months ended March 31~~Accordingly, ~~2007~~all ~~and 2006~~Legacy ~~included~~Tax ~~$0.3 million~~Matters ~~and~~have ~~$5.4 million,~~now ~~respectively,~~been ~~of non-cash stock-based compensation expense resulting from these 2006 modifications~~resolved. ~~G&A expenses include non-cash stock-based~~ ~~compensation expense for employees whose wages are classified as G&A expenses.~~

~~Depreciation~~Item 1A. ~~and~~Risk ~~Amortization~~Factors

~~Depreciation~~No ~~and amortization (“D&A”) expense for the three months ended March 31, 2007 was $24~~changes.9 million, compared to $21.4 million for the three months ended March 31, 2006. Amortization of intangible assets was $19.9 million for the three months ended March 31, 2007, compared to $18.2 million reported for the three months ended March 31, 2006. The increase in intangible asset amortization for the three months ended March 31, 2007 is due to the change in amortization expense as provided for under the income forecast method related to the local customer relationships intangible assets. Depreciation of fixed assets and amortization of computer software was $5.0 million for the three months ended March 31, 2007, compared to $3.2 million reported for the three months ended March 31, 2006. The increase in depreciation of fixed assets and amortization of computer software for the three months ended March 31, 2007 is due to fixed asset and computer software additions.

23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Operating~~Omitted ~~Income~~pursuant to General Instruction H(2)(b) of Form 10-Q.

~~Operating income for the three months ended March~~Item ~~31,~~3. ~~2007~~Defaults ~~and~~Upon ~~2006~~Senior ~~was as follows:~~Securities

	Three Months Ended March 31,
(amounts in millions)	2007		2006		$ Change
Total	$	103.4	$	110.1	$	(6.7	)

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

~~Operating income for the three months ended March~~Item ~~31, 2007 was $103.~~4 ~~million, representing a decrease of $6~~.~~7 million~~ ~~from~~Submission ~~operating income~~ of ~~$110.1 million~~Matters ~~reported~~to ~~for the corresponding period in the prior year. The decrease in operating income for the three months ended March 31, 2007 is~~ a ~~direct~~Vote ~~result~~ of ~~the~~Security ~~decrease in net revenue of $3.5 million and increase in expenses of~~Holders ~~$3.2 million, as described above.~~

~~Interest~~Omitted ~~Expense,~~pursuant ~~Net~~to General Instruction H(2)(b) of Form 10-Q.

~~Net interest expense for the three months ended March~~Item ~~31, 2007 was $48~~5.~~2 million,~~ ~~compared~~Other ~~to $49.9~~Information million reported for the corresponding period in the prior year. The decrease in net interest expense for the three months ended March 31, 2007 of $1.7 million is a result of lower average outstanding debt balances due to debt repayments. Net interest expense for the three months ended March 31, 2007 includes $4.1 million of non-cash amortization of deferred financing costs, compared to $3.4 million of non-cash amortization of deferred financing costs for the corresponding period in the prior year.

~~Income Taxes~~None.

~~The effective tax rate on income before income taxes of 37.5% for the three months ended March 31,~~21 2007 compares to 37.9% on income before income taxes for the corresponding period in the prior year. The effective tax rate as of March 31, 2007 reflects a decrease in the state and local tax rate as a result of a change in state apportionment.

Item 3.Table Quantitativeof and Qualitative Disclosures About Market Risk Contents

~~Omitted~~Item 6. ~~pursuant~~Exhibits ~~to General Instruction H(2)(c) of Form 10-Q.~~

Item 4T. Controls and Procedures


Exhibit No.		Document

4.1		Fourth Supplemental Indenture, dated as of October 2, 2007, by and among R.H. Donnelley Inc., as issuer, R.H. Donnelley Corporation, as guarantor, the subsidiary guarantors, named therein, as guarantors, and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to R.H. Donnelley Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2007, Commission File No. 333-59287)

31.1*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2007 by David C. Swanson, Chairman and Chief Executive Officer of R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act

31.2*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2007 by Steven M. Blondy, Executive Vice President and Chief Financial Officer of 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 September 30, 2007 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chairman and Chief Executive Officer, and Steven M. Blondy, Executive Vice President and Chief Financial Officer, for R.H. Donnelley Inc.

~~(a) Evaluation~~* ofFiled ~~Disclosure Controls and Procedures~~herewith. 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 the Securities and Exchange Commission’s rules and forms.

~~(b) Changes in Internal Control Over Financial Reporting. There have not been any changes in the~~22 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.

24 Table of Contents

~~PART II. OTHER INFORMATION~~SIGNATURES

~~Item 1.~~Pursuant ~~Legal~~to ~~Proceedings~~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.

We are involved in various legal proceedings arising in the ordinary course of our business, as well as certain litigation and tax matters. In many of these matters, plaintiffs allege that they have suffered damages from errors or omissions of improper listings contained in directories published by us. 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.


	R.H. DONNELLEY INC.
Date: November 6, 2007	By:	/s/ Steven M. Blondy
		Steven M. Blondy
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)


		/s/ Karen E. Palczuk
		Karen E. Palczuk
		Interim Controller and Assistant Vice President — Process and Performance Management (Interim Principal Accounting Officer)

~~The Company is exposed to potential defamation and breach of privacy claims arising from our~~23 publication of directories and our methods of collecting, processing and using advertiser and telephone subscriber data. If such data were determined to be inaccurate or if data stored by us were improperly accessed and disseminated by us or by unauthorized persons, the subjects of our data and users of the 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.

BasedTable on our review of the latest information available, we believe our ultimate liability in connection with pending or threatened legal proceedings will not have a material adverse effect on our results of operations, cash flows or financial position. No material amounts have been accrued in our consolidated financial statements with respect to any of such matters. Contents

~~Item~~Exhibit ~~1A.~~Index ~~Risk Factors~~

None.


Exhibit No.		Document

4.1		Fourth Supplemental Indenture, dated as of October 2, 2007, by and among R.H. Donnelley Inc., as issuer, R.H. Donnelley Corporation, as guarantor, the subsidiary guarantors, named therein, as guarantors, and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to R.H. Donnelley Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2007, Commission File No. 333-59287)

31.1*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2007 by David C. Swanson, Chairman and Chief Executive Officer of R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act

31.2*		Certification of Quarterly Report on Form 10-Q for the period ended September 30, 2007 by Steven M. Blondy, Executive Vice President and Chief Financial Officer of 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 September 30, 2007 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chairman and Chief Executive Officer, and Steven M. Blondy, Executive Vice President and Chief Financial Officer, for R.H. Donnelley Inc.

~~Item 2.~~* ~~Unregistered~~Filed ~~Sales of Equity Securities and Use of Proceeds~~ herewith.

~~Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.~~24

Item 3. Defaults Upon Senior Securities

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

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

Omitted pursuant to General Instruction H(2)(b) of Form 10-Q.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.		Document
3.1		Certificate of Incorporation of the Company (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)
3.2		By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s 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 December 3, 2002, between the Company (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 Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 333-59287)
4.2		Form of 8.875% Senior Notes due 2010 (included in Exhibit 4.1)
4.3		Supplemental Indenture, dated as of January 3, 2003, among the Company., as Issuer, RHD 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 Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 333-59287)
4.4		Second Supplemental Indenture, dated as of September 1, 2004, by and among the Company , the guarantors party thereto and The Bank of New York, as Trustee, with respect to the 8.875% Senior Notes due 2010 of the Company (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. 333-59287)
4.5		Third Supplemental Indenture, dated as of December 6, 2005, among the Company, as Issuer, RHD and the subsidiary guarantors named therein, as Guarantors, 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 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 20, 2005, Commission File No. 333-59287)
4.6		Guarantees relating to the 8.875% Senior Notes due 2010 (incorporated by reference to Exhibit 4.16 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 333-59287)
4.7		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. 333-59287)
4.8		Indenture, dated as of December 3, 2002, between the Company (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 of the Company (incorporated by reference to Exhibit 4.17 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 333-59287)
4.9		Form of 10.875% Senior Subordinated Notes due 2012 (included in Exhibit 4.8)
4.10		Supplemental Indenture, dated as of January 3, 2003, among the Company, as Issuer, RHD 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 Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 333-59287)

Exhibit No.		Document
4.11		Second Supplemental Indenture, dated as of January 9, 2004, among the Company, as Issuer, RHD 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 Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 12, 2004, Commission File No. 333-59287)
4.12		Third Supplemental Indenture, dated as of September 1, 2004, among the Company, and the guarantors party thereto, as Guarantors, and The Bank of New York, as Trustee, with respect to the 10.875% Senior Subordinated Notes due 2012 of the Company (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. 333-59287)
4.13		Guarantees relating to the 10.875% Senior Subordinated Notes due 2012 (incorporated by reference to Exhibit 4.20 to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 20, 2003, Commission File No. 333-59287)
4.14		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. 333-59287)
10.1		Non-Competition Agreement, dated as of January 3, 2003, by and among RHD, 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 RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 17, 2003, Commission File No. 001-07155)
10.2		Letter from Sprint Nextel Corporation, dated as of May 16, 2006, acknowledging certain matters with respect to the Non-Competition Agreement described above as Exhibit 10.1 (incorporated by reference to Exhibit 10.12 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)
10.3		Directory Services License Agreement, dated as of May 16, 2006, by and among R.H. Donnelley Publishing & Advertising, Inc., CenDon, L.L.C., R.H. Donnelley Directory Company, Embarq Corporation, Embarq Directory Trademark Company, LLC and certain subsidiaries of Embarq Corporation formerly constituting Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.6 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)
10.4		Trademark License Agreement, dated as of May 16, 2006, by and among R.H. Donnelley Publishing & Advertising, Inc., R.H. Donnelley Directory Company and Embarq Directory Trademark Company, LLC (incorporated by reference to Exhibit 10.7 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)
10.5		Publisher Trademark License Agreement, dated as of May 16, 2006, by and among R.H. Donnelley Publishing & Advertising, Inc., CenDon, L.L.C., R.H. Donnelley Directory Company and Embarq Corporation (incorporated by reference to Exhibit 10.8 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)
10.6		Non-Competition Agreement, dated as of May 16, 2006, by and among RHD, R.H. Donnelley Publishing & Advertising, Inc., CenDon, L.L.C., R.H. Donnelley Directory Company, Embarq Corporation and certain subsidiaries of Embarq Corporation formerly constituting Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.9 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)

Exhibit No.		Document
10.7		Subscriber Listings Agreement, dated as of May 16, 2006, by and among R.H. Donnelley Publishing & Advertising, Inc., CenDon, L.L.C., R.H. Donnelley Directory Company, Embarq Corporation and certain subsidiaries of Embarq Corporation formerly constituting Sprint Local Telecommunications Division (incorporated by reference to Exhibit 10.10 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)
10.8		Standstill Agreement, dated as of May 16, 2006, by and between R.H. Donnelley Publishing & Advertising, Inc. and Embarq Corporation (incorporated by reference to Exhibit 10.11 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 19, 2006, Commission File No. 001-07155)
10.9#		Directory Services License Agreement, dated as of September 1, 2004, among RHD, R.H. Donnelley Publishing & Advertising of Illinois Partnership (f/k/a 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 RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.10		Non-Competition Agreement, dated as of September 1, 2004, by and between RHD and SBC Communications Inc. (incorporated by reference to Exhibit 10.2 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.11		SMARTpages Reseller Agreement, dated as of September 1, 2004, among SBC Communications, Inc., Southwestern Bell Yellow Pages, Inc., SBC Knowledge Ventures, L.P., the Company, R.H. Donnelley Publishing & Advertising of Illinois Partnership (f/k/a The APIL Partners Partnership) and DonTech II Partnership (incorporated by reference to Exhibit 10.3 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.12		Ameritech Directory Publishing Listing License Agreement, dated as of September 1, 2004, among R.H. Donnelley Publishing & Advertising of Illinois Partnership (f/k/a The APIL Partners Partnership), DonTech II Partnership and Ameritech Services Inc. (incorporated by reference to Exhibit 10.4 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 3, 2004, Commission File No. 001-07155)
10.13		Agreement to Amend and Restate, dated December 13, 2005, among RHD and lenders party to the Credit Agreement, dated as of November 8, 2002, as amended (incorporated by reference to Exhibit 10.4 to RHD’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2005, Commission File No. 001-07155). This Agreement is no longer in effect.
10.14		Agreement to Amend and Restate, dated December 13, 2005, among RHD and lenders party to the Credit Agreement, dated as of September 9, 2003, as amended (incorporated by reference to Exhibit 10.3 to RHD’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 19, 2005, Commission File No. 001-07155). This Agreement is no longer in effect.
10.15#		Second Amended and Restated Credit Agreement, dated December 13, 2005, among the Company, RHD, the several banks and other financial institutions or entities from time to time parties thereto as lenders, J.P. Morgan Securities Inc. and Deutsche Bank Trust Company Americas, as co-lead arrangers and joint-bookrunners, JPMorgan Chase Bank, N.A., as syndication agent, Bear Stearns Corporate Lending Inc., Credit Suisse, Cayman Islands Branch, Goldman Sachs Credit Partners L.P., UBS Securities LLC and Wachovia Bank, National Association, as co-documentation agents, and Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.1 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 19, 2005, Commission File No. 001-07155)
10.16		First Amendment, dated as of April 24, 2006, to the Second Amended and Restated Credit Agreement, dated December 13, 2005, among the Company, RHD, the several banks and other financial institutions or entities from time to time parties thereto as lenders, and Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.1 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2006, Commission File No. 001-07155)

Exhibit No.		Document
10.17		Second Amended and Restated Guaranty and Collateral Agreement, dated as of December 13, 2005, among the Company, RHD, and the subsidiaries of the Company party thereto, and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 10.2 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 19, 2005, Commission File No. 001-07155)
10.18		Reaffirmation, dated as of April 24, 2006, among RHD, the Company and its subsidiaries and Deutsche Bank Trust Company Americas, as administrative agent (incorporated by reference to Exhibit 10.2 to RHD’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2006, Commission File No. 001-07155)
31.1*		Certification of Quarterly Report on Form 10-Q for the period ended March 31, 2007 by David C. Swanson, Chairman and Chief Executive Officer of R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act
31.2*		Certification of Quarterly Report on Form 10-Q for the period ended March 31, 2007 by Steven M. Blondy, Executive Vice President and Chief Financial Officer of 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 March 31, 2007 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chairman and Chief Executive Officer, and Steven M. Blondy, Executive 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.

	R.H. DONNELLEY INC.
Date: May 10, 2007	By:	/s/ Steven M. Blondy
		Steven M. Blondy
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date: May 10, 2007	By:	/s/ Jeffrey A. Smith
		Jeffrey A. Smith
		Vice President and Controller (Principal Accounting Officer)

Exhibit Index

Exhibit No.		Document
31.1*		Certification of Quarterly Report on Form 10-Q for the period ended March 31, 2007 by David C. Swanson, Chairman and Chief Executive Officer of R.H. Donnelley Inc. under Section 302 of the Sarbanes-Oxley Act
31.2*		Certification of Quarterly Report on Form 10-Q for the period ended March 31, 2007 by Steven M. Blondy, Executive Vice President and Chief Financial Officer of 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 March 31, 2007 under Section 906 of the Sarbanes-Oxley Act by David C. Swanson, Chairman and Chief Executive Officer, and Steven M. Blondy, Executive Vice President and Chief Financial Officer, for R.H. Donnelley Inc.

* Filed herewith.

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