Yellow Pages advertising marketer R.H. Donnelley Corp. has completed a majority of its restructuring initiatives following the completion of a contract buyout from Bell Atlantic.
The buyout was part of a series of strategic actions announced in April to increase shareholder value, sharpen Donnelley's strategic focus, improve its earnings outlook and create a more efficient cost structure. The strategy included the sale of Cincinnati One Book Directory to Yellow Book. Donnelley also establiched a new, extended relationship with Sprint, which is expected to result in a one-time operating income benefit of approximately $25 million in the second quarter.
The net after-tax cash inflow from these strategic initiatives is expected to be approximately $125 million. The company has received a buyout payment from Bell Atlantic of approximately $114 million, a commission payment from Bell Atlantic of approximately $57 million for sales occurring prior to the buy out, and $8 million from the sale of the Cincinnati Directory. Donnelley also said it will record a one-time charge of $18 million in the quarter to cover severance and other restructuring costs and incur taxes of about $36 million. The company also said it will record a one-time, after-tax accounting gain of $55 million in the second quarter. The Bell Atlantic contracts represented 40% of Donnelley's business; approximately 120 directories were involved in the agreement.
By the end of the year, the company will have reduced employment to 700 from 1,450. This includes about 600 transferred to Bell Atlantic and about 50 Cincinnati employees to Yellow Book. The company implemented a reduction of more than 100 corporate and other support positions in the divested businesses. According to Frank R. Noonan, chairman and CEO, "We have done what we said we would do. We took these actions to improve our earnings base, create a more efficient cost structure, and establish a solid financial foundation for providing attractive shareholder returns." Donnelley anticipates achieving earnings per share in excess of $1.80 this year.
The company says it has trimmed its portfolio to its highest margin core businesses, Sprint and DonTech, both believed capable of providing above-industry growth. The company will use some proceeds from the buyout to reduce debt and continue current levels of funding for the company's Internet initiative, GetDigitalSmart. GetDigitalSmart is a service-based provider of branded Internet marketing and e-solutions tailored for particular market segments.
Noonan commented, "We are very pleased with both the outcome of the Bell Atlantic transaction, and with the combined effects of the bold actions we completed during the second quarter to realign our company. R.H. Donnelley has been an independent, publicly traded company for just two years and in that time we have taken tough, decisive steps to enhance shareholder value. We are focused on our highest margin businesses, and we have streamlined our organization and our cost structure to preserve and protect our strong value position."
Contact: R.H. Donnelley can be reached at 914-933-6419.
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