UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

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

For the fiscal year ended December 31, 2008

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

For the transition period from                      to                     

DEX MEDIA WEST LLC

(Exact name of registrant as specified in its charter)

Delaware		25-1903487
(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

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þ No o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of October 30, 2009, R.H. Donnelley Corporation indirectly owned all of the registrant’s owner’s equity.

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

 

 

EXPLANATORY NOTE

     Dex Media West LLC (the “Company”) filed a Form 10-K for the fiscal year ended December 31, 2008 (the “Original Filing”) with the Securities and Exchange Commission on March 31, 2009. This Amendment No. 1 is being filed solely for the purpose of adding the signature of KPMG LLP, the Company’s Independent Registered Public Accounting Firm, to KPMG’s Report of Independent Registered Public Accounting Firm (“Report”) on page F-3 included in this Amendment No. 1, which signature was inadvertently omitted from the Original Filing.

     For purposes of this Amendment No. 1, and in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 8 of Part II of the Original Filing has been amended and restated in its entirety. Other than adding KPMG’s signature to its Report, there are no other changes to Item 8 of Part II of the Original Filing. Except as expressly set forth in this Amendment No. 1, the Original Filing has not been amended, updated or otherwise modified.

     In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our principal executive officer and principal financial officer are being filed as exhibits to this Amendment No. 1.

TABLE OF CONTENTS

		PART II
Item 8.		Financial Statements and Supplementary Data			F-1
		PART IV
Signatures					1
EX-31.1
EX-31.2
EX-32.1

PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

		Page
Dex Media West LLC
Management’s Report on Internal Control Over Financial Reporting			F-2
Report of Independent Registered Public Accounting Firm			F-3
Consolidated Balance Sheets as of December 31, 2008 and 2007			F-4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2008 and 2007, the eleven months ended December 31, 2006 (Successor Company) and the one month ended January 31, 2006 (Predecessor Company)			F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007, the eleven months ended December 31, 2006 (Successor Company) and the one month ended January 31, 2006 (Predecessor Company)			F-6
Consolidated Statements of Changes in Owner’s Equity for the years ended December 31, 2008 and 2007, the eleven months ended December 31, 2006 (Successor Company) and the one month ended January 31, 2006 (Predecessor Company)			F-7
Notes to Consolidated Financial Statements			F-8

Management’s Report on Internal Control Over Financial Reporting

The management of Dex Media West LLC and subsidiary (an indirect wholly-owned subsidiary of R.H. Donnelley Corporation) (the Company) is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting within the meaning of Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in the financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Dex Media West LLC’s internal control over financial reporting as of December 31, 2008. In undertaking this assessment, management used the criteria established by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission contained in the Internal Control — Integrated Framework.

Based on its assessment, management identified a material weakness in Dex Media West LLC’s internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As a result of the material weakness described below, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2008 based on the COSO criteria.

Dex Media West LLC’s processes, procedures and controls related to financial reporting were not effective to ensure that amounts related to deferred income tax assets and liabilities and the resulting current and deferred income tax expense and related footnote disclosures were accurate. The Company did not maintain effective controls over the review and analysis of calculations and related supporting documentation underlying the deferred tax provision to ensure a complete, comprehensive and timely review of deferred income tax accounts and related footnote disclosures. The material weakness resulted in material errors in the foregoing accounts included in the Company’s preliminary financial statements as of and for the year ended December 31, 2008 that were corrected prior to the issuance of the Company’s consolidated financial statements.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholder
Dex Media West LLC:

We have audited the accompanying consolidated balance sheets of Dex Media West LLC (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive income (loss), cash flows and changes in owner’s equity for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dex Media West LLC as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 157, Fair Value Measurement, effective January 1, 2008, FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: an Interpretation of FASB Statement No. 109, effective January 1, 2007 and Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R), effective December 31, 2006.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has significant amounts of maturing debt which it may be unable to satisfy commencing March 31, 2010, significant negative impacts on operating results and cash flows from the overall downturn in the global economy and higher customer attrition, and possible debt covenant violations in 2009 that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ KPMG LLP

Raleigh, North Carolina
March 31, 2009

DEX MEDIA WEST LLC

CONSOLIDATED BALANCE SHEETS

		December 31,
(in thousands)		2008				2007
Assets
Current Assets
Cash and cash equivalents		$	71,306			$	7,992
Accounts receivable
Billed			108,289				82,854
Unbilled			287,794				324,079
Allowance for doubtful billed accounts and sales claims			(21,352	)			(13,598	)
Net accounts receivable			374,731				393,335
Deferred directory costs			64,179				68,741
Short-term deferred income taxes, net			11,168				27,456
Prepaid expenses and other current assets			23,670				30,520
Total current assets			545,054				528,044
Fixed assets and computer software, net			44,708				45,390
Other non-current assets			46,258				8,723
Intangible assets, net			4,344,066				4,858,713
Goodwill			—				1,354,053
Total assets		$	4,980,086			$	6,794,923
Liabilities and Owner’s Equity
Current Liabilities
Accounts payable and accrued liabilities		$	27,741			$	28,860
Affiliates payable, net			253,423				243,138
Accrued interest			50,195				52,008
Deferred directory revenue			414,144				467,249
Current portion of long-term debt			16,875				136,457
Total current liabilities			762,378				927,712
Long-term debt			2,281,560				2,167,528
Deferred income taxes, net			699,695				1,284,205
Other non-current liabilities			19,023				19,911
Total liabilities			3,762,656				4,399,356
Commitments and contingencies
Owner’s Equity
Owner’s interest			2,241,276				2,428,291
Accumulated deficit			(1,021,317	)			(26,013	)
Accumulated other comprehensive loss			(2,529	)			(6,711	)
Total owner’s equity			1,217,430				2,395,567
Total liabilities and owner’s equity		$	4,980,086			$	6,794,923

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

DEX MEDIA WEST LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

										Successor Company					Predecessor Company
		Years Ended December 31,								Eleven Months Ended					One Month Ended
(in thousands)		2008				2007				December 31, 2006					January 31, 2006
Net revenues		$	912,898			$	948,024			$	435,723				$	78,803
Expenses
Production, publication and distribution expenses (exclusive of depreciation and amortization shown separately below)			129,467				141,663				109,855					11,678
Selling and support expenses			232,146				229,607				189,806					18,295
General and administrative expenses			32,840				35,517				34,993					8,616
Depreciation and amortization			199,829				192,935				130,735					14,661
Impairment charges			1,682,934				—				—					—
Total expenses			2,277,216				599,722				465,389					53,250
Operating income (loss)			(1,364,318	)			348,302				(29,666	)				25,553
Interest expense, net			(193,253	)			(181,243	)			(184,025	)				(17,700	)
Income (loss) before income taxes			(1,557,571	)			167,059				(213,691	)				7,853
(Provision) benefit for income taxes			562,267				(60,842	)			81,461					(3,134	)
Net income (loss)		$	(995,304	)		$	106,217			$	(132,230	)			$	4,719
Comprehensive Income (Loss)
Net income (loss)		$	(995,304	)		$	106,217			$	(132,230	)			$	4,719
Unrealized gain (loss) on interest rate swaps, net of tax provision (benefit) of $4,600, ($3,258) and ($1,384) for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively			7,719				(5,545	)			(2,175	)				—
Benefit plans adjustment, net of tax (benefit) provision of $(2,008) and $367 for the years ended December 31, 2008 and 2007, respectively			(3,537	)			630				—					—
Comprehensive income (loss)		$	(991,122	)		$	101,302			$	(134,405	)			$	4,719

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

DEX MEDIA WEST LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

										Successor Company					Predecessor Company
		Years Ended December 31,								Eleven Months Ended					One Month Ended
(in thousands)		2008				2007				December 31, 2006					January 31, 2006
Cash Flows from Operating Activities
Net income (loss)		$	(995,304	)		$	106,217			$	(132,230	)			$	4,719
Reconciliation of net income (loss) to net cash provided by operating activities:
Impairment charges			1,682,934				—				—					—
Loss on extinguishment of debt			2,142				—				—					—
Depreciation and amortization			199,829				192,935				130,735					14,661
Deferred income tax (benefit) provision			(583,278	)			59,939				(81,461	)				3,134
Provision for bad debts			53,662				24,235				15,734					4,605
Stock-based compensation expense			8,904				11,939				9,934					1,587
Interest rate swap ineffectiveness			7,992				—				981					194
Amortization of debt fair value adjustment			(14,059	)			(13,021	)			(11,091	)				—
Amortization of deferred financing costs			5,027				1,825				1,997					1,141
Other non-cash items, net			(8,964	)			(4,825	)			—					—
Changes in assets and liabilities:
(Increase) in accounts receivable, net of provision for bad debts			(35,059	)			(54,937	)			(21,990	)				(1,966	)
Decrease (increase) in other assets			17,461				10,856				(43,022	)				2,132
(Decrease) increase in accounts payable and accrued liabilities and accrued interest			(542	)			3,082				(16,791	)				2,569
(Decrease) increase in deferred directory revenue			(50,287	)			4,806				434,387					110
Increase (decrease) in affiliates payable			654				100,403				35,647					(253	)
Increase in other non-current liabilities			16,272				4,994				764					87
Increase in amounts due to affiliates related to post-retirement and other post-employment benefits			—				—				4,032					534
Net cash provided by operating activities			307,384				448,448				327,626					33,254
Cash Flows from Investing Activities
Additions to fixed assets and computer software			(19,285	)			(34,812	)			(14,341	)				(538	)
Net cash used in investing activities			(19,285	)			(34,812	)			(14,341	)				(538	)
Cash Flows from Financing Activities
Credit facility borrowings, net of costs			1,035,491				—				—					—
Proceeds from issuance of long-term debt, net of costs			—				—				444,193					—
Note and credit facility repayments			(1,053,491	)			(397,425	)			(467,365	)				—
Revolver borrowings			141,300				148,200				279,400					—
Revolver repayments			(159,300	)			(130,200	)			(279,400	)				(5,000	)
Premium paid on debt redemption			—				—				(2,914	)				—
Payment of debt refinance costs			—				—				(671	)				—
Increase (decrease) in checks not yet presented for payment			1,048				423				15					(491	)
Excess tax benefits from the exercise of stock options			1,898				—				—					—
Distributions to Owner			(191,731	)			(55,000	)			(276,072	)				(10,186	)
Net cash used in financing activities			(224,785	)			(434,002	)			(302,814	)				(15,677	)
Increase (decrease) in cash and cash equivalents			63,314				(20,366	)			10,471					17,039
Cash and cash equivalents, beginning of period			7,992				28,358				17,887					848
Cash and cash equivalents, end of period		$	71,306			$	7,992			$	28,358				$	17,887
Supplemental Information:
Cash paid:
Interest, net		$	191,162			$	195,081			$	199,272				$	8,746
Income taxes, net			66				—				—					—
Non-cash financing activities:
Contribution by Owner		$	2,818			$	2,966			$	3,156				$	1,114

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

CONSOLIDATED STATEMENTS OF CHANGES IN OWNER’S EQUITY

										Accumulated
										Other				Total
		Owner’s				Accumulated				Comprehensive				Owner’s
(in thousands)		Interest				(Deficit) Income				Income (Loss)				Equity
Predecessor Company
Balance, December 31, 2005		$	1,064,445			$	—			$	—			$	1,064,445
Net income			—				4,719				—				4,719
Contribution by Owner			1,114				—				—				1,114
Distributions to Owner			—				(2,320	)			—				(2,320	)
Stock-based compensation expense			1,587				—				—				1,587
Balance, January 31, 2006		$	1,067,146			$	2,399			$	—			$	1,069,545
Successor Company
Capitalization at RHD Merger		$	2,753,241			$	—			$	—			$	2,753,241
Net loss			—				(132,230	)			—				(132,230	)
Unrealized loss on interest rate swaps, net of tax			—				—				(2,175	)			(2,175	)
Adjustment to initially apply SFAS No. 158, net of tax			—				—				379				379
Contribution by Owner			3,156				—				—				3,156
Distributions to Owner			(276,072	)			—				—				(276,072	)
Balance, December 31, 2006			2,480,325				(132,230	)			(1,796	)			2,346,299
Net income			—				106,217				—				106,217
Unrealized loss on interest rate swaps, net of tax			—				—				(5,545	)			(5,545	)
Benefit plans adjustment, net of tax			—				—				630				630
Contribution by Owner			2,966				—				—				2,966
Distributions to Owner			(55,000	)			—				—				(55,000	)
Balance, December 31, 2007			2,428,291				(26,013	)			(6,711	)			2,395,567
Net loss			—				(995,304	)			—				(995,304	)
Excess tax benefits from the exercise of stock options			1,898				—				—				1,898
Unrealized gain on interest rate swaps, net of tax			—				—				7,719				7,719
Benefit plans adjustment, net of tax			—				—				(3,537	)			(3,537	)
Contribution by Owner			2,818				—				—				2,818
Distributions to Owner			(191,731	)			—				—				(191,731	)
Balance, December 31, 2008		$	2,241,276			$	(1,021,317	)		$	(2,529	)		$	1,217,430

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

DEX MEDIA WEST LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands, except share and per share data)

1. Business and Presentation

Dex Media West LLC is a subsidiary of Dex Media West, Inc. and an indirect wholly-owned subsidiary of Dex Media, Inc. (“Dex Media” or “Owner”),which is a direct wholly-owned subsidiary of R.H. Donnelley Corporation (“RHD”). The consolidated financial statements include the accounts of Dex Media West LLC and its wholly-owned subsidiary, Dex Media West Finance Co. (the “Company,” “Dex Media West,” “we,” “us” and “our”). All intercompany transactions and balances have been eliminated.

We are a leader in local search within the Dex West States (defined below). Our Triple Play™ solutions (“Triple Play”) are comprised of our Dex-branded solutions, which include Dex yellow pages print directories, our proprietary dexknows.com^® online search site, and the Dex Search Network™. We also co-brand our print local search solutions with Qwest, a recognizable brand in the industry, in order to further differentiate our local search solutions from those of our competitors. During 2008, our Triple Play solutions serviced more than 200,000 national and local businesses in 7 states.

Dex Media West is the exclusive publisher of the “official” yellow pages and white pages directories for Qwest Corporation, the local exchange carrier of Qwest Communications International Inc. (“Qwest”), in Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming (collectively, the “Dex West States”).

Certain prior period amounts included in the consolidated balance sheets and consolidated statements of cash flows have been reclassified to conform to the current period’s presentation.

Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The accompanying historical consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The assessment of our ability to continue as a going concern was made by management considering, among other factors: (i) the significant amount of maturing debt obligations; (ii) the current global credit and liquidity crisis; (iii) the significant negative impact on our operating results and cash flows from the overall downturn in the global economy and an increase in competition and more fragmentation in the local business search space; (iv) that certain of our credit ratings have been recently downgraded; and (v) that RHD’s common stock ceased trading on the New York Stock Exchange (“NYSE”) on December 31, 2008 and is now traded over-the-counter on the Pink Sheets. This is further reflected by our goodwill impairment charges of $1.4 billion and intangible asset impairment charges of $326.0 million recorded for the year ended December 31, 2008. Management has also considered our projected inability to comply with certain covenants under our debt agreements over the next 12 months. These circumstances and events have increased the risk that we will be unable to continue to satisfy all of our debt obligations when they are required to be performed, and, in management’s view, raise substantial doubt as to whether the Company will be able to continue as a going concern for a reasonable period of time.

Based on current financial projections, we expect to be able to continue to generate cash flow from operations in amounts sufficient to satisfy our interest and principal payment obligations through March 2010. Our ability to satisfy our debt repayment obligations will depend in large part on our success in (i) refinancing certain of these obligations through other issuances of debt or equity securities; (ii) amending or restructuring some of the terms, maturities and principal amounts of these obligations; or (iii) effecting other transactions or agreements with holders of such obligations. Should we be unsuccessful in these efforts, we would potentially incur payment and/or other defaults on certain of our debt obligations, which, if not waived by our respective lenders, could lead to the acceleration of all or most of our debt obligations.

Our credit facility and the indentures governing our notes also contain financial covenants relating to, among other items, maximum consolidated leverage, minimum interest coverage and maximum senior secured leverage, as defined therein. Under the credit facility, these covenants are generally maintenance tests, meaning that they are measured each quarter, with failure to meet the test constituting an event of default under the credit agreement. Our ability to maintain compliance with these financial covenants during 2009 is dependent on various factors, certain of which are outside of our control. Such factors include our ability to generate sufficient revenues and cash flows from operations, our ability to achieve reductions in our outstanding indebtedness, changes in interest rates and the impact on earnings, investments and liabilities.

Based on our current forecast, and absent a modification or waiver, the minimum interest coverage and total leverage covenants of the Dex Media West credit facility will not be satisfied when measured as of the fourth quarter of 2009 and first quarter of 2010, respectively. As noted below the covenant default at Dex Media West could cause a cross default at Dex Media as of the fourth quarter of 2009.

Substantially all of the assets of Dex Media West and its subsidiary, including their equity interests, are pledged to secure the obligations under the credit facility. The failure to comply with the financial covenants contained in the credit facility would result in one or more events of default, which, if not cured or waived, could require the applicable borrower to repay the borrowings thereunder before their scheduled due dates. If we are unable to make such repayments or otherwise refinance these borrowings, the lenders under the credit facility could pursue the various default remedies set forth in the credit facility agreement, including executing on the collateral securing the credit facility. In addition, events of default under the credit facility may trigger events of default under the indentures governing our notes.

An event of default at Dex Media West would create a default at Dex Media. Furthermore, certain actions by Dex Media would create a default at Dex Media West under the credit agreement. An event of default at RHD would not create an event of default at Dex Media or Dex Media West.

Significant Financing Developments

We have a substantial amount of debt and significant debt service obligations due in large part to the financings associated with the RHD Merger (defined below) and other prior acquisitions. As of December 31, 2008, we had total outstanding debt of $2.3 billion (including fair value adjustments of $63.1 million required by generally accepted accounting principles (“GAAP”) as a result of the RHD Merger) and had $90.0 million available under the revolving portion of our credit facility.

On June 6, 2008, we refinanced our credit facility. The new Dex Media West credit facility consists of a $130.0 million Term Loan A maturing in October 2013, a $950.0 million Term Loan B maturing in October 2014 and a $90.0 million revolving credit facility maturing in October 2013 (“Dex Media West Revolver”), except as otherwise noted. For additional information relating to the maturities under the new Dex Media West credit facility, see Note 4, “Long-Term Debt, Credit Facility and Notes.”

As a result of the refinancing of our former credit facility on June 6, 2008, the existing interest rate swaps associated with our former credit facility having a notional amount of $650.0 million at December 31, 2008 are no longer highly effective in offsetting changes in cash flows. Accordingly, cash flow hedge accounting treatment under Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) is no longer permitted. Interest expense for the year ended December 31, 2008 includes a non-cash charge of $15.0 million resulting from amounts charged to accumulated other comprehensive loss related to these interest rate swaps prior to June 6, 2008. Interest expense for the year ended December 31, 2008 also includes a reduction of $7.0 million resulting from the change in the fair value of these interest rate swaps between June 6, 2008 and December 31, 2008.

See Note 2, “Summary of Significant Accounting Policies — Interest Expense and Deferred Financing Costs” and Note 4, “Long-Term Debt, Credit Facility and Notes,” for additional information.

Historical Overview

Dex Media’s directory business was acquired from Qwest Dex, Inc. (“Qwest Dex”) in a two phase purchase between Dex Holdings LLC (“Dex Holdings”), the former parent of Dex Media, and Qwest Dex. Dex Holdings and Dex Media were formed by two private equity firms, The Carlyle Group and Welsh, Carson, Anderson & Stowe (the “Selling Shareholders”). In the first phase of the purchase, which was consummated on November 8, 2002, Dex Holdings assigned its right to purchase the directory business of Qwest Dex in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota (collectively, the “Dex East States”) to Dex Media (the “Dex East Acquisition”). In the second phase of the purchase, which was consummated on September 9, 2003, Dex Holdings assigned its right to purchase the directory business of Qwest Dex in the Dex West States to Dex Media (the “Dex West Acquisition”). Dex Holdings was dissolved effective January 1, 2005. The Dex East States and the Dex West States are collectively referred to as the “Dex States.”

On January 31, 2006, our indirect parent, Dex Media, merged with and into Forward Acquisition Corporation (“FAC”), a wholly-owned subsidiary of RHD. Pursuant to the Agreement and Plan of Merger dated October 3, 2005 (“Merger Agreement”), each share of Dex Media common stock was converted into the right to receive $12.30 in cash and 0.24154 of a share of RHD common stock, resulting in an aggregate cash value of $1.9 billion and aggregate stock value of $2.2 billion, based on 36,547,381 newly issued shares of RHD common stock valued at $61.82 per share, for an equity purchase price of $4.1 billion. RHD also assumed all of Dex Media’s outstanding indebtedness on January 31, 2006 with a fair market value of $5.5 billion (together with other costs for a total aggregate purchase price of $9.8 billion). In addition, all outstanding Dex Media stock options were converted into stock options of RHD at a ratio of 1 to 0.43077 and the Dex Media, Inc. Stock Option Plan and the Dex Media, Inc. 2004 Incentive Award Plan, which governed those Dex Media stock options, were terminated. In connection with the consummation of this merger (the “RHD Merger”), the name of FAC was changed to Dex Media, Inc. As a result of the RHD Merger, Dex Media became a wholly-owned subsidiary of RHD. For ease of reference throughout this annual report on Form 10-K “Dex Media” means (a) at all times prior to the RHD Merger, Dex Media, Inc., the predecessor of FAC and a direct subsidiary of Dex Holdings LLC and (b) at all times following the RHD Merger, Dex Media, Inc., formerly known as FAC, a direct subsidiary of RHD.

“Predecessor Company” refers to the operations of Dex Media West prior to the consummation of the RHD Merger on January 31, 2006. “Successor Company” refers to the operations of Dex Media West subsequent to the consummation of the RHD Merger.

2. Summary of Significant Accounting Policies

Revenue Recognition

Our directory advertising revenues are earned primarily from the sale of advertising in yellow pages directories we publish. Revenue from the sale of such advertising is deferred when a directory is published, net of estimated sales claims, and recognized ratably over the life of a directory, which is typically 12 months (the “deferral and amortization method”). Directory advertising revenues also include revenues for Internet-based advertising products, including our proprietary local search site, dexknows.com, and our Dex Search Network. Revenues with respect to our Internet-based advertising products that are sold with print advertising are initially deferred until the service is delivered or fulfilled and recognized ratably over the life of the contract. Revenues with respect to Internet-based services that are not sold with print advertising are recognized as delivered or fulfilled.

In the Predecessor Company financial statements, revenue from the sale of local advertising was recorded net of actual sales claims received. In the Successor Company financial statements, revenue and deferred revenue from the sale of advertising is recorded net of an allowance for sales claims, estimated based primarily on historical experience. We increase or decrease this estimate as information or circumstances indicate that the estimate may no longer represent the amount of claims we may incur in the future. For the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, the adjustment to revenue for sales claims was $19.8 million, $21.6 million and $17.5 million, respectively. For the one month ended January 31, 2006, the Predecessor Company recorded sales claims allowances of less than $0.1 million.

In certain cases, the Company enters into agreements with customers that involve the delivery of 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.

Deferred 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. In the Predecessor Company financial statements, deferred directory costs also included employee and systems support costs directly associated with the publication of directories.

Cash and Cash Equivalents

Cash equivalents include liquid investments with a maturity of less than three months at their time of purchase. At times, such investments may be in excess of federally insured limits.

Accounts Receivable

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, estimated based on historical experience. We increase or decrease this estimate as information or circumstances indicate that the estimate may no longer represent the amount of bad debts and sales claims that are probable to be incurred. We do not record an allowance for doubtful accounts until receivables are billed.

Identifiable Intangible Assets and Goodwill

Successor Company

As a result of the RHD Merger, certain long-term intangible assets were identified in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”) and recorded at their estimated fair values. The excess purchase price over the net tangible and identifiable intangible assets acquired of $1.4 billion was recorded as goodwill. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), the fair values of the identifiable intangible assets are being amortized over their estimated useful lives in a manner that best reflects the economic benefit derived from such assets. Goodwill is not amortized but is subject to impairment testing on an annual basis or more frequently if we believe indicators of impairment exist.

As a result of the decline in the trading value of Dex Media’s and our debt and RHD’s debt and equity securities during the first quarter of 2008 and continuing negative industry and economic trends that directly affected RHD’s and our business, RHD performed impairment tests as of March 31, 2008 of its goodwill, definite-lived intangible assets and other long-lived assets in accordance with SFAS No. 142 and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), respectively. RHD used estimates and assumptions in its impairment evaluations, including, but not limited to, projected future cash flows, revenue growth and customer attrition rates.

The impairment test of RHD’s definite-lived intangible assets and other long-lived assets was performed by comparing the carrying amount of its intangible assets and other long-lived assets to the sum of their undiscounted expected future cash flows. In accordance with SFAS No. 144, impairment exists if the sum of the undiscounted expected future cash flows is less than the carrying amount of the intangible asset, or its related group of assets, and other long-lived assets. RHD’s testing results of its definite-lived intangible assets and other long-lived assets indicated no impairment as of March 31, 2008.

RHD’s impairment test for goodwill involved a two step process. The first step involved comparing the fair value of RHD with the carrying amount of its assets and liabilities, including goodwill. The fair value of RHD was determined using a market based approach, which reflects the market value of its debt and equity securities as of March 31, 2008. As a result of RHD’s testing, it determined that its fair value was less than the carrying amount of its assets and liabilities, requiring it to proceed with the second step of the goodwill impairment test. In the second step of the testing process, the impairment loss is determined by comparing the implied fair value of RHD’s goodwill to the recorded amount of goodwill. The implied fair value of goodwill is derived from a discounted cash flow analysis for RHD using a discount rate that results in the present value of assets and liabilities equal to the then current fair

value of RHD’s debt and equity securities. Based upon this analysis, RHD recognized a non-cash impairment charge of $2.5 billion during the three months ended March 31, 2008. The Company’s share of the impairment charge, based on a discounted cash flow analysis, was $1.1 billion.

Since the trading value of RHD’s equity securities further declined in the second quarter of 2008 and as a result of continuing negative industry and economic trends that directly affected RHD’s and our business, RHD performed additional impairment tests of its goodwill, definite-lived intangible assets and other long-lived assets as of June 30, 2008. RHD’s testing results of its definite-lived intangible assets and other long-lived assets indicated no impairment as of June 30, 2008. As a result of these tests, RHD recognized a non-cash goodwill impairment charge of $660.2 million during the three months ended June 30, 2008, and together with the impairment charge recognized in the first quarter of 2008, a total impairment charge of $3.1 billion was recognized by RHD during the year ended December 31, 2008. The Company’s share of the impairment charge, based on a discounted cash flow analysis, was $262.5 million during the three months ended June 30, 2008, and together with the impairment charge recognized in the first quarter of 2008, a total impairment charge of $1.4 billion was recognized by the Company during the year ended December 31, 2008. As a result of this impairment charge, we have no recorded goodwill at December 31, 2008.

In addition to the non-cash goodwill impairment charge, we recognized a change in goodwill of $2.9 million associated with the RHD Merger that related to deferred income taxes during the year ended December 31, 2008. No impairment losses were recorded related to our goodwill during the year ended December 31, 2007.

Given the ongoing global credit and liquidity crisis and the significant negative impact on financial markets, the overall economy and the continued decline in our advertising sales and other operating results and downward revisions to our forecasted results, the recent downgrade of certain of our credit ratings, the continued decline in the trading value of Dex Media’s and our debt and RHD’s debt and equity securities and the recent suspension of trading of RHD’s common stock on the NYSE, RHD performed impairment tests of its definite-lived intangible assets and other long-lived assets in accordance with SFAS No. 144 as of December 31, 2008. As a result of these tests, we recognized a non-cash charge of $326.0 million during the fourth quarter of 2008, comprised of $251.0 million associated with the local customer relationships and $75.0 million associated with the national customer relationships acquired in the RHD Merger. The fair values of the intangible assets were derived from a discounted cash flow analysis using a discount rate that results in the present value of assets and liabilities equal to the then current fair value of RHD’s debt and equity securities.

In connection with RHD’s impairment testing of its definite-lived intangible assets and other long-lived assets, SFAS No. 144 also requires an evaluation of the remaining useful lives of these assets and to consider, among other things, the effects of obsolescence, demand, competition, and other economic factors, including the stability of the industry in which we operate, known technological advances, legislative actions that result in an uncertain or changing regulatory environment, and expected changes in distribution channels. Based on this evaluation, the remaining useful lives of our directory services agreements acquired by RHD in the RHD Merger (collectively, the “Dex Directory Services Agreements”) will be reduced to 33 years effective January 1, 2009 in order to better reflect the period these intangible assets are expected to contribute to our future cash flow.

No impairment losses were recorded related to our definite-lived intangible assets and other long-lived assets during the year ended December 31, 2007 and the eleven months ended December 31, 2006, respectively.

In accordance with SFAS No. 144, the carrying value of the local and national customer relationships acquired in the RHD Merger have been adjusted by the impairment charges noted above. The adjusted carrying amounts of these intangible assets represent their new cost basis. Accumulated amortization prior to the impairment charges has been eliminated and the new cost basis will be amortized over the remaining useful lives of the intangible assets. Amortization expense related to our intangible assets was $179.9 million, $175.9 million and $115.3 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively. Amortization for the five succeeding years is estimated to be approximately $220.9 million, $152.9 million, $146.8 million, $145.3 million and $143.6 million, respectively. Amortization expense in 2009 is expected to increase by approximately $41.3 million as a result of the reduction of remaining useful lives associated with our directory services agreements and revision to the carrying values of our local and national customer relationships subsequent to the impairment charges during the fourth quarter of 2008. Annual amortization of intangible assets for tax purposes is approximately $243.5 million.

The acquired long-term intangible assets and their respective book values, as adjusted, at December 31, 2008 are shown in the following table.

		December 31, 2008
		Directory				Local				National
		Services				CMR				CMR				Trade				Advertising
		Agreements				Relationships				Relationships				Names				Commitment				Total
Fair value		$	4,231,745			$	140,186			$	30,318			$	279,455			$	14,971			$	4,696,675
Accumulated amortization			(294,505	)			—				—				(54,457	)			(3,647	)			(352,609	)
Net intangible assets		$	3,937,240			$	140,186			$	30,318			$	224,998			$	11,324			$	4,344,066

The acquired intangible assets and their respective book values at December 31, 2007 are shown in the following table:

		December 31, 2007
		Directory				Local				National
		Services				CMR				CMR				Trade				Advertising
		Agreements				Relationships				Relationships				Names				Commitment				Total
Fair value		$	4,240,000			$	495,000			$	120,000			$	280,000			$	15,000			$	5,150,000
Accumulated amortization			(193,492	)			(50,167	)			(9,454	)			(35,778	)			(2,396	)			(291,287	)
Net intangible assets		$	4,046,508			$	444,833			$	110,546			$	244,222			$	12,604			$	4,858,713

At December 31, 2008, the book values of our intangible assets have decreased as compared to the respective book values at December 31, 2007, due to adjustments related to deferred income tax liabilities established upon completion of the RHD Merger.

In connection with the RHD Merger, RHD acquired the Dex Directory Services Agreements, which Dex Media had entered into with Qwest, including, (1) a publishing agreement with a term of 50 years commencing November 8, 2002 (subject to automatic renewal for additional one-year terms), which grants us the right to be the exclusive official directory publisher of listings and classified advertisements of Qwest’s telephone customers in the geographic areas in the Dex States in which Qwest (and its successors) provided local telephone services as of November 8, 2002, as well as having the exclusive right to use certain Qwest branding on directories in those markets and (2) a non-competition agreement with a term of 40 years commencing November 8, 2002, pursuant to which Qwest (on behalf of itself and its affiliates and successors) has agreed not to sell directory products consisting principally of listings and classified advertisements for subscribers in the geographic areas in the Dex States in which Qwest provided local telephone service as of November 8, 2002 that are directed primarily at consumers in those geographic areas. The fair value assigned to the Dex Media Directory Services Agreements for Dex Media West of $4.2 billion was based on the multi-period excess earnings method and was amortized under the straight-line method over 42 years through December 31, 2008. The remaining useful life has been changed as noted above. Under the multi-period excess earnings method, the projected cash flows of the intangible assets are computed indirectly, which means that future cash flows are projected with deductions made to recognize returns on appropriate contributory assets, leaving the excess, or residual net cash flow, as indicative of the intangible asset fair value.

As a result of the RHD Merger, RHD also acquired (1) an advertising commitment agreement whereby Qwest has agreed to purchase an aggregate of $20.0 million of advertising per year through 2017 from Dex Media at pricing on terms at least as favorable as those offered to similar large customers and (2) an intellectual property contribution agreement pursuant to which Qwest assigned and or licensed to Dex Media the Qwest intellectual property previously used in the Qwest directory services business along with (3) a trademark license agreement pursuant to which Qwest granted to Dex Media the right until November 2007 to use the Qwest Dex and Qwest Dex Advantage marks in connection with directory products and related marketing material in the Dex States and the right to use these marks in connection with dexknows.com (the intangible assets in (2) and (3) collectively, “Trade Names”). The fair value assigned to the Dex Media advertising commitment was based on the multi-period excess earnings method and is being amortized under the straight-line method over 12 years.

During the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, the Company recorded a non-cash contribution from its Owner related to the annual settlement with Dex Media West of allocated amounts under the Advertising Commitment Agreement among the Company, Dex Media East and Qwest of $2.8 million, $3.0 million and $3.2 million, respectively.

The fair values of the local and national customer relationships were determined based on the multi-period excess earnings method. As a result of cost uplift (defined below) from purchase accounting being substantially amortized, during the first quarter of 2007, we commenced amortization of local customer relationships established as a result of the RHD Merger. These intangible assets are being amortized under the “income forecast” method, which assumes the value derived from customer relationships is greater in the earlier years and steadily declines over time. The weighted average useful life of these relationships, subsequent to the impairment charges noted above, is approximately 20 years.

The fair value of the Trade Names 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 Names. This asset is being amortized under the straight-line method over 15 years.

If industry and economic conditions in RHD’s markets continue to deteriorate and if the trading value of Dex Media’s and our debt and RHD’s debt and equity securities decline further, RHD will be required to once again assess the recoverability and useful lives of its long-lived assets and other intangible assets, which could result in additional impairment charges, a reduction of remaining useful lives and acceleration of amortization expense.

Predecessor Company

As a result of the Dex Media West Acquisition certain intangible assets were identified and recorded at their estimated fair value. Amortization expense was $13.4 million for the one month ended January 31, 2006.

The fair values of local and national customer relationships were determined based on the present value of estimated future cash flows and were being amortized using a declining method in relation to the estimated retention periods of the acquired customers, which was twenty years and twenty-five years, respectively. The acquired Dex trademark was a perpetual asset and not subject to amortization. Other intangible assets including non-compete/publishing agreements, the Qwest Dex Trademark agreement and advertising agreement were amortized on a straight-line basis over the thirty-nine, four and fourteen years, respectively.

During the one month ended January 31, 2006, the Company recorded a non-cash contribution from its Owner related to the annual settlement with Dex Media West of allocated amounts under the Advertising Commitment Agreement among the Company, Dex Media East and Qwest of $1.1 million.

In accordance with SFAS No. 142, goodwill was not amortized, but was subject to periodic impairment testing. No impairment losses were recorded during the one month ended January 31, 2006. The balances of intangible assets from the Dex West Acquisition were eliminated in purchase accounting as a result of the RHD Merger.

Fixed Assets and Computer Software

Fixed assets and computer software are recorded at cost. Fixed assets and computer software acquired in conjunction with acquisitions are recorded at fair value on the acquisition date. Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line method. Estimated useful lives are five years for machinery and equipment, ten years for furniture and fixtures, and three to five years for computer equipment and computer software. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Fixed assets and computer software at December 31, 2008 and 2007 consisted of the following:

		2008					2007
Computer software		$	68,514				$	52,317
Computer equipment			13,105					11,076
Machinery and equipment			771					814
Furniture and fixtures			3,234					3,054
Leasehold improvements			5,178					5,534
Construction in Process — Computer software and equipment			507					5,016
Total cost			91,309					77,811
Less accumulated depreciation and amortization			(46,601	)				(32,421	)
Net fixed assets and computer software		$	44,708				$	45,390

Depreciation and amortization expense on fixed assets and computer software for the years ended December 31, 2008 and 2007, the eleven months ended December 31, 2006 and one month ended January 31, 2006 was as follows:

										Successor Company					Predecessor Company
		Year Ended December 31,								Eleven Months Ended					One Month Ended
		2008				2007				December 31, 2006					January 31, 2006
Depreciation of fixed assets		$	3,802			$	4,253			$	4,854				$	431
Amortization of computer software			16,169				12,744				10,532					859
Total depreciation and amortization on fixed assets and computer software		$	19,971			$	16,997			$	15,386				$	1,290

During the year ended December 31, 2008, we retired certain computer software fixed assets, which resulted in an impairment charge of $0.2 million.

Interest Expense and Deferred Financing Costs

Interest expense for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006 was $193.7 million, $182.1 million and $184.3 million, respectively. Interest expense for the one month ended January 31, 2006 was $17.7 million. For the Successor Company, the Predecessor Company’s deferred financing costs were eliminated as a result of purchase accounting required under GAAP. For the Predecessor Company, certain costs associated with the issuance of debt instruments were capitalized on the consolidated balance sheet. These costs were being amortized to interest expense over the terms of the related debt agreements. Both the Predecessor and Successor Company used the bond outstanding method 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 for the Successor Company was $5.0 million, $1.8 million and $2.0 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively. Amortization of deferred financing costs included in interest expense for the Predecessor Company was $1.1 million for the one month ended January 31, 2006. Apart from business combinations, the Company’s policy is to recognize losses incurred in conjunction with debt extinguishments as a component of interest expense. Interest expense for the year ended December 31, 2008 includes the write-off of unamortized deferred financing costs of $2.1 million associated with the refinancing of our former credit facility, which has been accounted for as an extinguishment of debt.

As a result of the ineffective interest rate swaps associated with the refinancing of our former credit facility, interest expense for the year ended December 31, 2008 includes a non-cash charge of $15.0 million resulting from amounts charged to accumulated other comprehensive loss related to these interest rate swaps prior to June 6, 2008. Interest expense for the year ended December 31, 2008 also includes a reduction of $7.0 million resulting from the change in the fair value of these interest rate swaps between June 6, 2008 and December 31, 2008. Prospective gains or losses on the change in the fair value of these interest rate swaps will be reported in earnings as a component of interest expense.

In conjunction with the RHD Merger and as a result of purchase accounting required under GAAP, our debt was recorded at its fair market value on January 31, 2006. We recognize an offset to interest expense in each period subsequent to the RHD Merger for the amortization of the corresponding fair value adjustment over the life of the respective debt. The offset to interest expense was $14.1 million, $13.0 million and $11.1 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively.

Advertising Expense

We recognize advertising expenses as incurred. These expenses include media, public relations, promotional and sponsorship costs and on-line advertising. Total advertising expense was $14.1 million, $18.9 million and $10.4 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively. Total advertising expense was $2.3 million for the one month ended January 31, 2006. Total advertising expense for the year ended December 31, 2008 includes $5.2 million of costs associated with traffic purchased and distributed to multiple advertiser landing pages on our proprietary local search site, with no comparable expense for the year ended December 31, 2007 and the eleven months ended December 31, 2006.

Concentration of Credit Risk

Approximately 85% of our directory advertising revenue is derived from the sale of advertising to local small- and medium-sized businesses. These advertisers typically enter into 12-month advertising sales contracts and make monthly payments over the term of the contract. Some advertisers prepay the full amount or a portion of the contract value. Most new advertisers and advertisers desiring to expand their advertising programs are subject to a credit review. If the advertisers qualify, we may extend credit to them for their advertising purchase. Small- and medium-sized businesses tend to have fewer financial resources and higher failure rates than large businesses. In addition, full collection of delinquent accounts can take an extended period of time and involve significant costs. We do not require collateral from our advertisers, although we do charge late fees to advertisers that do not pay by specified due dates.

The remaining approximately 15% of our directory advertising revenue is derived from the sale of advertising to national or large regional chains, such as rental car companies, automobile repair shops and pizza delivery businesses. 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.

During the year ended December 31, 2008, we experienced adverse bad debt trends attributable to economic challenges in our markets. Our bad debt expense represented 5.9% of our net revenue for the year ended December 31, 2008, as compared to 2.6% for the year ended December 31, 2007 and 3.6% for the eleven months ended December 31, 2006. We expect that these economic challenges will continue in our markets, and, as such, our bad debt experience and operating results will continue to be adversely impacted in the foreseeable future.

At December 31, 2008, we had interest rate swap agreements with major financial institutions with a notional amount of $650.0 million. We are exposed to credit risk in the event that one or more of the counterparties to the agreements does not, or cannot, meet their obligation. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. Any loss would be limited to the amount that would have been received over the remaining life of the swap agreement. The counterparties to the swap agreements are major financial institutions with credit ratings of AA- or higher. We do not currently foresee a material credit risk associated with these swap agreements; however, no assurances can be given.

Labor Unions

Dex Media has approximately 1,800 employees of which approximately 1,200, or approximately 67%, are represented by labor unions covered by two collective bargaining agreements. The unionized employees are represented by either the International Brotherhood of Electrical Workers of America (“IBEW”), which represents approximately 400 of the unionized workforce, or the Communication Workers of America (“CWA”), which represents approximately 800 of the unionized workforce. Dex Media’s collective bargaining agreement with the IBEW expires in May 2009 and its collective bargaining agreement with the CWA expires in October 2009. Dex Media intends to engage in good faith bargaining and, as such, the results of those negotiations cannot yet be determined.

Derivative Financial Instruments and Hedging Activities

We account for our derivative financial instruments and hedging activities in accordance with 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. We utilize a combination of fixed rate and variable rate debt to finance our operations. The variable rate debt exposes us 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 a fixed rate on at least 33% of our indebtedness. To satisfy this objective, we have entered into fixed interest rate swap agreements to manage fluctuations in cash flows resulting from changes in interest rates on variable rate debt. Our interest rate swap agreements effectively convert $650.0 million, or approximately 60%, of our variable rate debt to fixed rate debt, mitigating our exposure to increases in interest rates. At December 31, 2008, approximately 47% of our total debt outstanding consists of variable rate debt, excluding the effect of our interest rate swaps. Including the effect of our interest rate swaps, total fixed rate debt comprised approximately 81% of our total debt portfolio as of December 31, 2008.

On the day a derivative contract is executed, we 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, we formally document the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the 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. We formally assess, 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 derivative financial instruments are recognized as either assets or liabilities on the consolidated balance sheets with measurement at fair value. On a quarterly basis, the fair values of the interest rate swaps are determined based on quoted market prices and, to the extent the swaps provide an effective hedge, the differences between the fair value and the book value of the swaps are recognized in accumulated other comprehensive loss, a component of owner’s equity. For derivative instruments that are not designated or do not qualify as hedged transactions, the initial fair value, if any, and any subsequent gains or losses on the change in the fair value are reported in earnings as a component of interest expense. Any gains or losses related to the quarterly fair value adjustments are presented as a non-cash operating activity on the consolidated statements of cash flows.

The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer highly effective in offsetting changes in the cash flows of the hedged item, the derivative or hedged item is expired, sold, terminated, exercised, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. In situations in which hedge accounting is discontinued, we continue to carry the derivative at its fair value on the consolidated balance sheet and recognize any subsequent changes in its fair value in earnings as a component of interest expense. Any amounts previously recorded to accumulated other comprehensive loss will be amortized to interest expense in the same period(s) in which the interest expense of the underlying debt impacts earnings.

See Note 5, “Derivative Financial Instruments,” for additional information regarding our derivative financial instruments and hedging activities.

Pension and Postretirement Benefits

Pension and postretirement benefits represent estimated 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 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. During 2008, 2007 and 2006, we utilized the Citigroup Pension Liability Index as the appropriate discount rate for our defined benefit pension plan.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). This statement requires recognition of the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in the statement of financial position and to recognize changes in that funded status in accumulated other comprehensive loss in the year in which the changes occur. SFAS No. 158 also requires measurement of the funded status of a plan as of the date of the statement of financial position. SFAS No. 158 became effective for recognition of the funded status of the benefit plans for fiscal years ending after December 15, 2006 and is effective for the measurement date provisions for fiscal years ending after December 15, 2008. We have adopted the funded status recognition provisions of SFAS No. 158 related to our defined benefit pension and postretirement plans and comply with the measurement date provisions of SFAS No. 158.

During October 2008, RHD froze all current defined benefit plans covering all non-union employees and curtailed the non-union retiree health care and life insurance benefits. See Note 8, “Benefit Plans,” for further information regarding our benefit plans.

Income Taxes

We account for income taxes under the asset and liability method in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”). Deferred income tax liabilities and 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 income tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred income tax assets will not be realized.

In June 2006, the 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 with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and 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.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. See Note 7, “Income Taxes,” for more information regarding our benefit (provision) for income taxes as well as the impact of adopting FIN No. 48.

Stock-Based Awards

Successor Company

RHD maintains a shareholder approved stock incentive plan, the 2005 Stock Award and Incentive Plan (“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 time of grant. RHD’s Compensation & Benefits 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.

As of December 31, 2008, non-employee 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.

RHD and the Company adopted the provisions of SFAS No. 123 (R), Share-Based Payment (“SFAS No. 123 (R)”), using the Modified Prospective Method. Under this method, we are required to record compensation expense in the consolidated statement of operations for all RHD employee stock-based awards granted, modified or settled after the date of adoption and for the unvested portion of previously granted stock awards that remain outstanding as of the beginning of the period of adoption based on their grant date fair values. RHD estimates forfeitures over the requisite service period when recognizing compensation expense. Estimated forfeitures are adjusted to the extent actual forfeitures differ, or are expected to materially differ, from such estimates. For the year ended December 31, 2008, RHD and the Company utilized a forfeiture rate of 8% in determining compensation expense. For the year ended December 31, 2007 and the eleven months ended December 31, 2006, RHD and the Company utilized a forfeiture rate of 5% in determining compensation expense.

RHD allocates stock-based compensation expense to its subsidiaries, including the Company, consistent with the method it utilizes to allocate employee wages and benefits to its subsidiaries. Information presented below related to compensation expense, with the exception of unrecognized compensation expense, represents what has been allocated to the Company for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006.

The following table depicts the effect of adopting SFAS No. 123 (R) on net loss for the eleven months ended December 31, 2006. The Company’s reported net loss for the eleven months ended December 31, 2006, which reflects compensation expense related to RHD’s stock-based awards recorded in accordance with SFAS No. 123 (R), is compared to net loss for the same period that would have been reported had such compensation expense been determined under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”).

		Eleven Months Ended
		December 31, 2006
		As Reported				Per APB No. 25
Total stock-based compensation expense		$	9,934			$	3,074
Net loss			(132,230	)			(127,985	)

Predecessor Company

For the one month ended January 31, 2006, the Predecessor Company accounted for the stock-based awards under the recognition and measurement principles of SFAS No. 123 (R).

See Note 6, “Stock Incentive Plans,” for additional information regarding RHD’s and our stock incentive plans and the adoption of SFAS No. 123 (R).

Fair Value of Financial Instruments

SFAS No. 107, Disclosures About Fair Value of Financial Instruments (“SFAS No. 107”), requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. At December 31, 2008 and 2007, the fair value of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximated their carrying value based on the short-term nature of these instruments. The Company has utilized quoted market prices, where available, to compute the fair market value of our long-term debt as disclosed in Note 4, “Long-Term Debt, Credit Facility and Notes.” These estimates of fair value may be affected by assumptions made and, accordingly, are not necessarily indicative of the amounts the Company could realize in a current market exchange.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy, which gives the highest priority to quoted prices in active markets, is comprised of the following three levels:

Level 1 — Unadjusted quoted market prices in active markets for identical assets and liabilities.

Level 2 — Observable inputs, other than Level 1 inputs. Level 2 inputs would typically include quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 — Prices or valuations that require inputs that are both significant to the measurement and unobservable.

SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. As such, we adopted SFAS No. 157 effective January 1, 2008. The adoption of SFAS No. 157 did not impact our consolidated financial position and results of operations. In accordance with SFAS No. 157, the following table represents our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2008 and the level within the fair value hierarchy in which the fair value measurements are included.

		Fair Value Measurements at
		December 31, 2008
		Using Significant Other
Description		Observable Inputs (Level 2)
Derivatives — Liabilities		$	(5,731	)

Valuation Techniques

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date.

Fair value for our derivative instruments was derived using pricing models. Pricing models take into account relevant observable market inputs that market participants would use in pricing the asset or liability. The pricing models used to determine fair value incorporate contract terms (including maturity) as well as other inputs including, but not limited to, interest rate yield curves and the creditworthiness of the counterparty. In accordance with SFAS No. 157, the impact of our own credit rating is also considered when measuring the fair value of liabilities. Our credit rating could have a material impact on the fair value of our derivative instruments, our results of operations or financial condition in a particular reporting period. For the year ended December 31, 2008, the impact of applying our credit rating in determining the fair value of our derivative instruments was a reduction to our interest rate swap liability of $1.0 million.

Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgment, and the pricing inputs are observed from actively quoted markets, as is the case for our derivative instruments. The pricing models used by the Company are widely accepted by the financial services industry. As such and as noted above, our derivative instruments are categorized within Level 2 of the fair value hierarchy.

Fair Value Control Processes

The Company employs control processes to validate the fair value of its derivative instruments derived from the pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and that the assumptions are reasonable.

In February 2008, the FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP No. 157-2”), which defers the effective date of SFAS No. 157 for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis, to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company has elected the deferral option permitted by FSP No. 157-2 for its non-financial assets and liabilities initially measured at fair value in prior business combinations including intangible assets and goodwill. We do not expect the adoption of FSP No. 157-2 to have a material impact on our consolidated financial statements.

Estimates

The preparation of financial statements in conformity with 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 recoverability of long-lived assets, sales allowances, allowances for doubtful accounts, depreciation and amortization, employee benefit plans expense, restructuring reserves, and certain assumptions pertaining to RHD’s stock-based awards, among others.

New Accounting Pronouncements

The FASB issued FASB Staff Position (“FSP”) FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”), in April 2008. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset, as determined under the provisions of SFAS No. 142, and the period of expected cash flows used to measure the fair value of the asset in accordance with SFAS No. 141(R), Business Combinations (“SFAS No. 141(R)”). FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively to intangible assets acquired subsequent to its effective date. Accordingly, the Company plans to adopt the provisions of this FSP on January 1, 2009. The impact that the adoption of FSP FAS 142-3 may have on the Company’s results of operations and financial condition will depend on the nature and extent of any intangible assets acquired subsequent to its effective date.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 amends SFAS No. 133 and requires enhanced disclosures of derivative instruments and hedging activities such as the fair value of derivative instruments and presentation of gains or losses in tabular format, as well as disclosures regarding credit risks and strategies and objectives for using derivative instruments. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 and, as such, the Company plans to adopt the provisions of this standard on January 1, 2009. Although SFAS No. 161 requires enhanced disclosures, its adoption will not impact the Company’s results of operations or financial condition.

In December 2007, the FASB issued SFAS No. 141(R). SFAS No. 141(R), replaces SFAS No. 141, Business Combinations, and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any goodwill acquired in a business combination. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of a business combination. SFAS No. 141(R) is to be applied on a prospective basis and, for the Company, would be effective for any business combination transactions with an acquisition date on or after January 1, 2009. The impact that the adoption of this pronouncement may have on the Company’s results of operations and financial condition will depend on the nature and extent of any business combinations subsequent to its effective date.

We have reviewed other accounting pronouncements that were issued as of December 31, 2008, 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.

3. Restructuring Charges

The table below shows the activity in our restructuring reserves during the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006.

		2006				2007				2008
		Restructuring				Restructuring				Restructuring
		Actions				Actions				Actions				Total
Balance at January 31, 2006		$	—			$	—			$	—			$	—
Additions to reserve charged to goodwill			9,644				—				—				9,644
Payments			(6,418	)			—				—				(6,418	)
Balance at December 31, 2006			3,226				—				—				3,226
Additions to reserve charged to goodwill			62				—				—				62
Additions to reserve charged to earnings			—				254				—				254
Payments			(1,626	)			—				—				(1,626	)
Reserve reversal credited to goodwill			(318	)			—				—				(318	)
Balance at December 31, 2007			1,344				254				—				1,598
Additions to reserve charged to earnings			—				119				10,924				11,043
Payments			(746	)			(373	)			(7,645	)			(8,764	)
Reserve reversal credited to earnings			(598	)			—				—				(598	)
Balance at December 31, 2008		$	—			$	—			$	3,279			$	3,279

During the second quarter of 2008, RHD initiated a restructuring plan that included headcount reductions, consolidation of responsibilities and vacated leased facilities (“2008 Restructuring Actions”) to occur throughout 2008 and into 2009. During the year ended December 31, 2008, we recognized a restructuring charge to earnings associated with the 2008 Restructuring Actions of $10.9 million, primarily related to outside consulting services and severance, and made payments of $7.6 million

During the year ended December 31, 2007, we recognized a restructuring charge to earnings of $0.3 million associated with headcount reductions and consolidation of responsibilities to be effectuated during 2008 (“2007 Restructuring Actions”). During the year ended December 31, 2008, we recognized a restructuring charge to earnings of $0.1 million associated with the 2007 Restructuring Actions and made payments of $0.4 million, which consist primarily of payments for severance. No payments were made associated with the 2007 Restructuring Actions during the year ended December 31, 2007.

As a result of the RHD Merger, we completed a restructuring that included the termination and relocation of certain employees as well as vacating certain of Dex Media’s leased facilities in Colorado, Minnesota, Nebraska and Oregon. We estimated our share of the costs associated with terminated employees, including Dex Media executive officers, and abandonment of certain of the leased facilities, net of estimated sublease income, to be approximately $9.6 million and such costs were charged to goodwill during the eleven months ended December 31, 2006. During January 2007, we finalized our estimate of costs associated with terminated employees and recognized a charge to goodwill of $0.1 million. During 2007, we finalized our assessment of the relocation reserve established as a result of the RHD Merger and as a result, we reversed the remaining amount in the reserve of $0.3 million, with a corresponding offset to goodwill. During the year ended December 31, 2008, we reversed a portion of the reserve related to severance and our leased facilities by $0.6 million, with a corresponding credit to earnings. Payments made with respect to severance and relocation during the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006 totaled $0.3 million, $0.9 million and $6.1 million, respectively. Payments of $0.4 million, $0.7 million and $0.3 million were made during the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively, with respect to our vacated leased facilities.

The Successor Company recognized merger related expenses of $1.5 million during the eleven months ended December 31, 2006 with no comparable expense during the years ended December 31, 2008 and 2007. These merger related costs for the eleven months ended December 31, 2006 included $1.2 million for bonuses to retain certain employees through the transition of the RHD Merger. The Predecessor Company recognized merger related expenses of $1.7 million during the one month ended January 31, 2006. These costs included legal and financial advisory fees, as well as stock compensation expense related to the acceleration of vesting of certain stock-based awards upon consummation of the RHD Merger.

Restructuring charges that are charged to earnings are included in general and administrative expenses on the consolidated statements of operations.

4. Long-Term Debt, Credit Facility and Notes

Long-term debt of the Company at December 31, 2008 and 2007, including fair value adjustments required by GAAP as a result of the RHD Merger, consisted of the following:

		December 31,				December 31,
		2008				2007
Credit Facility		$	1,080,000			$	1,071,491
8.5% Senior Notes due 2010			393,883				398,736
5.875% Senior Notes due 2011			8,761				8,774
9.875% Senior Subordinated Notes due 2013			815,791				824,984
Total			2,298,435				2,303,985
Less: current portion			16,875				136,457
Long-term debt		$	2,281,560			$	2,167,528

The Company’s credit facility and the indentures governing the notes contain usual and customary representations and warranties as well as affirmative and negative covenants that, among other things, place limitations on our ability to (i) incur additional indebtedness; (ii) pay dividends on our subsidiary’s equity interests, repurchase its equity interests or make other payments to Dex Media; (iii) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (iv) make capital expenditures; (v) issue capital stock of our subsidiaries; (vi) engage in transactions with our affiliates; and (vii) make investments, loans and advances, in each case, subject to customary and negotiated exceptions and limitations, as applicable. The Company’s credit facility also contains financial covenants relating to maximum consolidated leverage, minimum interest coverage and maximum senior secured leverage as defined therein. Substantially all of the assets of Dex Media West and its subsidiary, including their equity interests, are pledged to secure the obligations under their respective credit facility.

Credit Facility

On June 6, 2008, we refinanced our credit facility. The new Dex Media West credit facility consists of a $130.0 million Term Loan A maturing in October 2013, a $950.0 million Term Loan B maturing in October 2014 and a $90.0 million Dex Media West Revolver. In the event that more than $25.0 million of our 9.875% Senior Subordinated Notes due 2013 (or any refinancing or replacement thereof) are outstanding, the Dex Media West Revolver, Term Loan A and Term Loan B will mature on the date that is three months prior to the final maturity of such notes. The new Dex Media West credit facility includes an up to $400.0 million uncommitted incremental

facility (“Incremental Facility”) that may be incurred as additional revolving loans or additional term loans, subject to obtaining commitments for such loans. The Incremental Facility is fully available if used to refinance our 8.5% Senior Notes due 2010, however is limited to $200.0 million if used for any other purpose. The proceeds from the new Dex Media West credit facility were used to refinance the former Dex Media West credit facility and pay related fees and expenses. The refinancing of our credit facility was accounted for as an extinguishment of debt resulting in a loss charged to interest expense during the year ended December 31, 2008 of $2.1 million related to the write-off of unamortized deferred financing costs.

As of December 31, 2008, the principal amounts owed under the new Dex Media West credit facility totaled $1,080.0 million, comprised of $130.0 million under Term Loan A and $950.0 million under Term Loan B and no amount was outstanding under the Dex Media West Revolver. The weighted average interest rate of outstanding debt under the new Dex Media West credit facility was 7.10% at December 31, 2008. The weighted average interest rate of outstanding debt under the former Dex Media West credit facility was 6.51% at December 31, 2007.

As of December 31, 2008, the new Dex Media West credit facility bears interest, at our option, at either:

	•		The highest of (i) the base rate determined by the Administrative Agent, JP Morgan Chase Bank, N.A., (ii) the Federal Funds Effective Rate (as defined) plus 0.50%, and (iii) 4.0%, in each case, plus a 2.75% (or 2.50% if the leverage ratio is less than 3.00 to 1.00) margin on the Dex Media West Revolver and Term Loan A and a 3.0% margin on Term Loan B; or
	•		The higher of (i) LIBOR rate and (ii) 3.0% plus a 3.75% (or 3.50% if the leverage ratio is less than 3.00 to 1.00) margin on the Dex Media West Revolver and Term Loan A and a 4.0% margin on Term Loan B. 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.

Notes

At December 31, 2008, Dex Media West had total outstanding notes of $1,218.4 million, comprised of $393.9 million 8.5% Senior Notes, $8.7 million 5.875% Senior Notes and $815.8 million Senior Subordinated Notes.

Dex Media West issued $385.0 million aggregate principal amount of 8.5% Senior Notes due 2010. These Senior Notes are unsecured obligations of Dex Media West and interest is payable on February 15^th and August 15^th of each year. As of December 31, 2008, $385.0 million aggregate principal amount was outstanding excluding fair value adjustments. At December 31, 2008, the 8.5% Senior Notes had a fair market value of $231.0 million.

The 8.5% Senior Notes with a face value of $385.0 million are now redeemable at our option at the following prices (as a percentage of face value):

Redemption Year		Price
2009 and thereafter			100.000	%

Dex Media West issued $300.0 million aggregate principal amount of 5.875% Senior Notes due 2011. These Senior Notes are unsecured obligations of Dex Media West and interest is payable on May 15^th and November 15^th of each year. As of December 31, 2008, $8.7 million aggregate principal amount was outstanding excluding fair value adjustments. At December 31, 2008, the 5.875% Senior Notes had a fair market value of $5.2 million.

The 5.875% Senior Notes with a remaining face value of $8.7 million are redeemable at our option beginning in 2008 at the following prices (as a percentage of face value):

Redemption Year		Price
2009			101.469	%
2010 and thereafter			100.000	%

Dex Media West issued $780 million aggregate principal amount of 9.875% Senior Subordinated Notes due 2013. These Senior Subordinated Notes are unsecured obligations of Dex Media West and interest is payable on February 15^th and August 15^th of each year. As of December 31, 2008, $761.7 million aggregate principal amount was outstanding excluding fair value adjustments. At December 31, 2008, the 9.875% Senior Subordinated Notes had a fair market value of $180.9 million.

The 9.875% Senior Subordinated Notes with a remaining face value of $761.7 million are redeemable at our option beginning in 2008 at the following prices (as a percentage of face value):

Redemption Year		Price
2009			103.292	%
2010			101.646	%
2011 and thereafter			100.000	%

Aggregate maturities of long-term debt (including current portion and excluding fair value adjustments under purchase accounting) at December 31, 2008 were:

2009		$	16,875
2010			412,375
2011			37,720
2012			33,875
2013			829,650
Thereafter			904,875
Total		$	2,235,370

See Note 1, “Business and Presentation — Significant Financing Activities” for additional information on the financing activities conducted during the year ended December 31, 2008.

Impact of RHD Merger

As a result of the RHD Merger, an adjustment was established to record the acquired debt at fair value on January 31, 2006. This fair value adjustment is amortized as a reduction of interest expense over the remaining term of the respective debt agreements using the effective interest method and does not impact future scheduled interest or principal payments. Amortization of the fair value adjustment included as a reduction of interest expense was $14.1 million, $13.0 million and $11.1 million during the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively. A total premium of $101.2 million was recorded upon consummation of the RHD Merger, of which $63.1 million remains unamortized at December 31, 2008, as shown in the following table.

										Long-Term Debt at
		Unamortized Fair				Long-Term Debt				December 31, 2008
		Value Adjustment at				at December 31,				Excluding Unamortized
		December 31, 2008				2008				Fair Value Adjustment
Dex Media West
Dex Media West 8.5% Senior Notes		$	8,883			$	393,883			$	385,000
Dex Media West 5.875% Senior Notes			41				8,761				8,720
Dex Media West 9.875% Senior Subordinated Notes			54,141				815,791				761,650
Total Dex Media West Outstanding Debt at January 31, 2006		$	63,065			$	1,218,435			$	1,155,370

5. Derivative Financial Instruments

The new Dex Media West credit facility bears interest at variable rates and, accordingly, our earnings and cash flow are affected by changes in interest rates. The Company has entered into the following interest rate swaps that effectively convert approximately $650.0 million of the Company’s variable rate debt to fixed rate debt as of December 31, 2008.

Effective Dates		Notional Amount				Pay Rates				Maturity Dates
(amounts in millions)
February 14, 2006		$	200	(2)			4.925% - 4.93%			February 14, 2009
May 25, 2006			100	(1)			5.326%			May 26, 2009
May 26, 2006			200	(2)			5.2725% - 5.275%			May 26, 2009
June 12, 2006			150	(2)			5.27% - 5.279%			June 12, 2009
Total		$	650

By using derivative financial instruments to hedge exposures to changes in interest rates, the Company exposes itself to credit risk and market risk. Credit risk is the possible failure of the 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, 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 AA- or higher.

Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

These interest rate swap agreements effectively convert $650.0 million of variable rate debt to fixed rate debt, mitigating our exposure to increases in interest rates. Under the terms of the Dex Media West swap agreements, which have not been designated as cash flow hedges, we receive variable interest based on the three-month LIBOR and as of December 31, 2008, pay a weighted average fixed rate of 5.2%. The interest rate swaps mature at varying dates from February 2009 — June 2009. The weighted average rate received on our interest rate swaps was 2.1% during the year ended December 31, 2008. These periodic payments and receipts are recorded as interest expense.

For derivative instruments that are not designated or do not qualify as hedged transactions, the initial fair value, if any, and any subsequent gains or losses in the change in the fair value are reported in earnings as a component of interest expense. As a result of the refinancing of the former Dex Media West credit facility, the interest rate swaps associated with this credit facility were deemed ineffective on June 6, 2008. Interest expense for the year ended December 31, 2008 includes a non-cash charge of $15.0 million resulting from amounts charged to accumulated other comprehensive loss related to these interest rate swaps prior to June 6, 2008. Interest expense for the year ended December 31, 2008 also includes a reduction of $7.0 million resulting from the change in the fair value of these interest rate swaps between June 6, 2008 and December 31, 2008. For the eleven months ended December 31, 2006, the Company recorded a reduction to interest expense of $0.6 million as a result of the change in fair value of undesignated interest rate swaps. For the one month ended January 31, 2006, the Company recorded a reduction to interest expense of $0.2 million as a result of the change in fair value of undesignated interest rate swaps. During May 2006, the Company entered into $450.0 million notional value of interest rate swaps, which were not designated as cash flow hedges until July 2006. The Company recorded changes in the fair value of these interest rate swaps as a reduction to interest expense of $2.3 million for the eleven months ended December 31, 2006.

During the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, the Company reclassified $22.3 million of hedging losses and $2.9 million and $1.1 million of hedging gains into earnings, respectively. As of December 31, 2008, $4.8 million of deferred losses, net of tax, on derivative instruments recorded in accumulated other comprehensive loss are expected to be reclassified to earnings during the next 12 months. Transactions and events are expected to occur over the next 12 months that will necessitate reclassifying these derivative losses to earnings.

6. Stock Incentive Plans

Successor Company

For the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, the Company recognized $8.9 million, $11.9 million and $9.9 million, respectively, of stock-based compensation expense related to stock-based awards granted under RHD’s various employee and non-employee stock incentive plans.

RHD allocates stock-based compensation expense to its subsidiaries, including the Company, consistent with the method it utilizes to allocate employee wages and benefits to its subsidiaries. Information presented below related to compensation expense, with the exception of unrecognized compensation expense, represents what has been allocated to the Company for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006. All other information presented below, including unrecognized compensation expense, relates to RHD’s stock award and incentive plans in total.

During the year ended December 31, 2008, the Company was able to utilize the tax benefit resulting from stock-based award exercises of $4.0 million. During the year ended December 31, 2007 and the eleven months ended December 31, 2006, the Company was not able to utilize the tax benefit resulting from stock-based award exercises due to net operating loss carryforwards. As such, neither operating nor financing cash flows were affected by the tax impact of stock-based award exercises for the year ended December 31, 2007 and the eleven months ended December 31, 2006.

Under SFAS No. 123 (R), the fair value of RHD’s stock options and SARs is calculated using the Black-Scholes model at the time these stock-based awards are granted. The amount, net of estimated forfeitures, is then amortized over the vesting period of the stock-based award. The weighted average fair value per share of stock options and SARs granted during the years ended December 31, 2008, 2007 and 2006 was $2.49, $22.47 and $20.08, respectively. The following assumptions were used in valuing these stock-based awards for the years ended December 31, 2008, 2007 and 2006, respectively.

		December 31, 2008				December 31, 2007				December 31, 2006
Expected volatility			58.8	%			23.5	%			28.2	%
Risk-free interest rate			2.8	%			4.5	%			4.4	%
Expected life		5 Years				5 Years				5 years
Dividend yield			0	%			0	%			0	%

RHD estimates expected volatility based on the historical volatility of the price of its common stock over the expected life of the stock-based awards. The expected life represents the period of time that stock-based awards granted are expected to be outstanding, which is estimated consistent with the simplified method permitted by Staff Accounting Bulletin No. 110, Use of a Simplified Method in Developing Expected Term of Share Options (“SAB No. 110”). The simplified method calculates the expected life as the average of the vesting and contractual terms of the award. The risk-free interest rate is based on applicable U.S. Treasury yields that approximate the expected life of stock-based awards granted.

RHD grants restricted stock to certain of its employees, including executive officers, and non-employee directors in accordance with the 2005 Plan. Under SFAS No. 123 (R), compensation expense related to these awards is measured at fair value on the date of grant based on the number of shares granted and the quoted market price of RHD’s common stock at such time.

For the year ended December 31, 2008, RHD granted 3.7 million stock options and SARs, which includes 1.2 million SARs granted in connection with the Exchange Program (defined below). The following table presents a summary of RHD’s stock options and SARs activity and related information for the year ended December 31, 2008:

						Weighted Average				Aggregate
						Exercise/Grant				Intrinsic
		Shares				Price Per Share				Value
Awards outstanding, January 1, 2008			5,863,802			$	48.51			$	3
Granted			3,700,469				5.38				—
Exercises			(18,653	)			5.16				(1	)
Exchanged			(4,186,641	)			49.57				—
Forfeitures			(427,716	)			39.02				—
Awards outstanding, December 31, 2008			4,931,261			$	15.70			$	2
Available for future grants at December 31, 2008			3,279,565

The total intrinsic value of RHD’s stock-based awards vested during the years ended December 31, 2008 and 2007 was less than $0.1 million and $1.7 million, respectively. The total fair value of RHD’s stock-based awards vested during the years ended December 31, 2008 and 2007 was $16.6 million and $19.0 million, respectively.

The following table summarizes information about RHD’s stock-based awards outstanding and exercisable at December 31, 2008:

		Stock Awards Outstanding													Stock Awards Exercisable
						Weighted Average													Weighted Average
Range of						Remaining				Weighted Average									Remaining				Weighted Average
Exercise/Grant						Contractual Life				Exercise/Grant									Contractual Life				Exercise/Grant
Prices		Shares				(In Years)				Price Per Share					Shares				(In Years)				Price Per Share
$  0.22 - $  7.11			3,629,894				6.34			$	5.00					378,717				6.25			$	6.36
$10.78 - $14.75			96,859				4.35				10.78					96,859				4.35				10.78
$15.22 - $19.41			66,060				6.74				18.17					34,039				5.28				18.12
$24.75 - $29.59			337,049				.89				25.75					337,049				.89				25.75
$30.11 - $39.21			23,798				4.33				33.81					13,598				3.08				31.81
$41.10 - $43.85			192,667				2.36				41.42					192,667				2.36				41.42
$46.06 - $55.25			23,660				3.32				50.88					20,160				3.13				50.26
$56.55 - $66.23			323,865				3.85				63.63					293,843				3.77				63.78
$70.44 - $80.68			237,409				5.18				74.55					147,492				5.15				74.46
			4,931,261				5.53			$	15.70					1,514,424				3.76			$	34.96

The aggregate intrinsic value of RHD’s exercisable stock-based awards as of December 31, 2008 was less than $0.1 million.

The following table summarizes the status of RHD’s non-vested stock awards as of December 31, 2008 and changes during the year ended December 31, 2008:

		Non-vested				Weighted Average				Non-Vested				Weighted Average
		Stock Options				Grant Date Exercise				Restricted				Grant Date Fair
		and SARs				Price Per Award				Stock				Value Per Award
Non-vested at January 1, 2008			2,088,640			$	63.96			$	151,564			$	62.67
Granted			3,700,469				5.38				767,649				3.81
Vested			(976,891	)			45.86				(170,490	)			18.65
Unvested exchanged			(1,035,252	)			66.91				—				—
Forfeitures			(360,129	)			40.06				(39,194	)			41.03
Non-vested at December 31, 2008			3,416,837			$	7.45			$	709,529			$	10.81

As of December 31, 2008, there was $17.0 million of total unrecognized compensation cost related to RHD’s non-vested stock-based awards. The cost is expected to be recognized over a weighted average period of approximately two years. After applying RHD’s estimated forfeiture rate, RHD expects 3.1 million non-vested stock-based awards to vest over a weighted average period of approximately two years. The intrinsic value at December 31, 2008 of RHD’s non-vested stock-based awards expected to vest is less than $0.1 million and the corresponding weighted average grant date exercise price is $7.45 per share.

On March 4, 2008, RHD granted 2.2 million stock appreciation rights (“SARs”) to certain employees, including executive officers, in conjunction with its annual grant of stock incentive awards. These SARs, which are settled in RHD common stock, were granted at a grant price of $7.11 per share, which was equal to the market value of RHD’s common stock on the grant date, and vest ratably over three years. In accordance with SFAS No. 123 (R), we recognized non-cash compensation expense related to these SARs of $1.5 million for the year ended December 31, 2008.

In April 2008, RHD increased its estimated forfeiture rate in determining compensation expense from 5% to 8%. This adjustment was based on a review of historical forfeiture information and resulted in a reduction to compensation expense of $0.6 million during the year ended December 31, 2008.

In March 2008, RHD’s Board of Directors approved, subject to shareholder approval, which was obtained in May 2008, a program under which RHD’s current employees, including executive officers, were permitted to surrender certain then outstanding stock options and stock appreciation rights (“SARs”), with exercise prices substantially above the then current market price of RHD’s common stock, in exchange for fewer new SARs, with new vesting requirements and an exercise price equal to the market value of RHD’s common stock on the grant date (the “Exchange Program”). The exercise prices of the outstanding options and SARs eligible for the Exchange Program ranged from $10.78 to $78.01. Other outstanding stock awards, including restricted stock units, were not eligible for the Exchange Program.

The Exchange Program was designed to provide eligible employees with an opportunity to exchange deeply underwater options and SARs for new SARs covering fewer shares, but with an exercise price based on the current, dramatically lower market price.

The Exchange Program allowed for a separate exchange ratio for each outstanding group of options or SARs taking into account such factors as the Black-Scholes value of the surrendered awards and the new SARs to be granted in the Exchange Program, as well as the exercise price and remaining life of each tranche, and other considerations to ensure that the Exchange Program accomplished its intended objectives. The weighted average exchange ratio for eligible awards held by senior management members (as described below) was 1 to 3.8, whereas the weighted average exchange ratio for eligible awards held by all other eligible employees was 1 to 3.5. These senior management members are RHD’s named executive officers, three other members of RHD’s executive committee and RHD’s three general managers of sales. Non-employee directors of RHD were not eligible to participate in the Exchange Program, nor were former employees holding otherwise eligible options and SARs.

In connection with the Exchange Program, on July 14, 2008, RHD granted 1.2 million SARs to certain employees, including certain senior management members of RHD, Dex Media and the Company, in exchange for 4.2 million outstanding options and SARs for a total recapture of 3.0 million shares. These SARs, which are settled in RHD’s common stock, were granted at a grant price of $1.69 per share. The SARs granted in the Exchange Program have a seven-year term and a new three-year vesting schedule, subject to accelerated vesting upon the occurrence of certain events. Exercisability of the SARs granted to senior management members is conditioned upon the achievement of the following stock price appreciation targets, in addition to the three year service-based vesting requirements for all new SARs: (a) the first vested tranche of new SARs shall not be exercisable until RHD’s stock price equals or exceeds $20 per share; (b) the second vested tranche of new SARs shall not be exercisable until RHD’s stock price equals or exceeds $30 per share; and (c) the third and final vested tranche of new SARs shall not be exercisable until RHD’s stock price equals or exceeds $40 per share. These share price appreciation conditions will be deemed satisfied if at any time during the life of the new SARs the average closing price of RHD’s common stock during any ten consecutive trading days equals or exceeds the specified target stock price, provided, however, that otherwise vested SARs that do not become exercisable prior to their expiration date due to the failure to achieve these performance conditions shall terminate unexercised. In addition, the following events effectively accelerate the exercisability of one-third (100% if an involuntary termination occurs within two years of change in control) of the total new SARs granted to each senior management member if any stock appreciation target has yet to have been met at that time: voluntary or involuntary termination, death, disability or retirement.

The Exchange Program has been accounted for as a modification under SFAS No. 123 (R). In calculating the incremental compensation cost of a modification, the fair value of the modified award was compared to the fair value of the original award measured immediately before its terms or conditions were modified. RHD used the Black-Scholes valuation model to determine the fair value of all original stock awards before modification and the fair value of the modified awards granted to non-senior management members. RHD utilized the Trinomial valuation model to determine the fair value of the modified awards granted to senior management members due to the stock appreciation vesting requirements noted above.

RHD will recognize an incremental non-cash charge of $0.6 million associated with the Exchange Program over its three year vesting period, of which less than $0.1 million was recognized by us during the year ended December 31, 2008.

On February 27, 2007, RHD granted 1.1 million stock appreciation rights (“SARs”) to certain employees, including executive officers, in conjunction with its annual 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 value of RHD’s common stock on the grant date, and vest ratably over three years. In accordance with SFAS No. 123 (R), we recognized non-cash compensation expense related to these SARs of $1.9 million and $3.8 million for the years ended December 31, 2008 and 2007, respectively.

On December 13, 2006, RHD granted 0.1 million shares of restricted stock to certain executive officers. These restricted shares, which are settled in RHD’s common stock, were granted at a grant price of $60.64 per share, which was equal to the market value of RHD’s common stock on the date of grant. The vesting of these restricted shares is contingent upon RHD’s common stock equaling or exceeding $65.00 per share for 20 consecutive trading days and continued employment with RHD through the third anniversary of the date of grant. In accordance with SFAS No. 123 (R), the Company recognized non-cash compensation expense related to these restricted shares of $0.2 million, $0.8 million and less than $0.1 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively.

On February 21, 2006, RHD granted 0.1 million shares of restricted stock to certain employees, including executive officers. These restricted shares, which are settled in RHD’s common stock, were granted at a grant price of $64.26 per share, which was equal to the market value of RHD’s common stock on the date of grant, and vest ratably over three years. In accordance with SFAS No. 123 (R), the Company recognized non-cash compensation expense related to these restricted shares of $0.6 million, $0.6 million and $0.9 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively.

On February 21, 2006, RHD granted 0.6 million SARs to certain employees, not including executive officers, in conjunction with its annual grant of stock incentive awards. These SARs, which are settled in RHD common stock, were granted at a grant price of $64.26 per share, which was equal to the market value of RHD’s common stock on the grant date, and vest ratably over three years. On February 24, 2005, RHD granted 0.5 million SARs to certain employees, not including executive officers, in conjunction with its annual grant of stock incentive awards. These SARs, which are settled in RHD common stock, were granted at a grant price of $59.00 per share, which was equal to the market value of RHD’s common stock on the grant date, and vest ratably over three years. On July 28, 2004, RHD granted 0.9 million SARs to certain employees, including executive officers, in connection with the AT&T Directory Acquisition. These SARs, which are settled in RHD common stock, were granted at a grant price of $41.58 per share, which was equal to the market value of RHD’s common stock on the grant date, and initially were scheduled to vest entirely only after five years. The maximum appreciation of the July 28, 2004 and February 24, 2005 SAR grants is 100% of the initial grant price. The Company recognized non-cash compensation expense related to these and other smaller SAR grants of $1.3 million, $2.5 million and $2.4 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively.

In connection with the RHD Merger, RHD granted on October 3, 2005, 1.1 million SARs to certain employees, including executive officers. These SARs were granted at an exercise price of $65.00 (above the then prevailing market price of RHD’s common stock) and vest ratably over three years. The award of these SARs was contingent upon the successful completion of the RHD Merger. The Company recognized non-cash compensation expense related to these SARs of $1.9 million, $2.4 million and $1.9 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively.

At January 31, 2006, stock-based awards outstanding under the existing Dex Media equity compensation plans totaled 4.0 million Dex Media option shares and had a weighted average exercise price of $5.48 per option share. As a result of the RHD Merger, all outstanding Dex Media equity awards were converted to RHD equity awards on February 1, 2006. Upon conversion to RHD equity awards, the number of securities to be issued upon exercise of outstanding awards totaled 1.7 million shares of RHD and had a weighted average exercise price of $12.73 per share. At December 31, 2008, the number of RHD shares remaining available for future issuance totaled less than 0.5 million under the 2004 Plan. For the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, the Company’s non-cash compensation expense related to these converted awards totaled $0.6 million, $0.9 million and $1.5 million, respectively.

The RHD Merger triggered a change in control under RHD’s stock incentive plans. Accordingly, all awards granted to employees through January 31, 2006, with the exception of stock-based awards held by executive officers and members of the Board of Directors (who waived the change of control provisions of such awards), became fully vested. In addition, the vesting conditions related to the July 28, 2004 SARs grant, noted above, were modified as a result of the RHD Merger, and the SARs now vest ratably over three years from the date of grant. For the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, 0.5 million, $0.8 million and $1.6 million, respectively, of non-cash compensation expense, which is included in the total non-cash compensation expense amounts noted above, was recognized as a result of these modifications. The Company’s non-cash stock-based compensation expense relating to existing stock options held by executive officers as of January 1, 2006, which were not modified as a result of the RHD Merger, as well as non-cash stock-based compensation expense from smaller grants issued subsequent to the RHD Merger not mentioned above, totaled $1.0 million, $0.9 million and $3.2 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively.

Predecessor Company

For the one month ended January 31, 2006, the Predecessor Company accounted for the stock-based awards under the recognition and measurement principles of SFAS No. 123 (R). Prior to adopting SFAS No. 123 (R) on January 1, 2006, the Predecessor Company accounted for stock-based awards granted to employees and non-employee directors in accordance with the intrinsic value-based method prescribed by APB No. 25. Compensation expense related to the issuance of stock options to employees or non-employee directors was only recognized if the exercise price of the stock option was less than the market value of the underlying common stock on the date of grant. In accordance with the Modified Prospective Method, financial statement amounts for the prior periods presented in this annual report on Form 10-K have not been restated to reflect the fair value method of expensing stock-based compensation.

On October 5, 2005, the Predecessor Company entered into Letter Agreements with its officers which, among other things, included terms to accelerate the vesting of certain stock options upon consummation of the RHD Merger (“modifications”). As a result of the modifications, stock options to purchase approximately 1.3 million shares of Dex Media common stock became fully exercisable immediately prior to the consummation of the RHD Merger. The Predecessor Company recorded stock-based compensation expense for stock options of $1.2 million during the one month ended January 31, 2006, under the guidance of SFAS No. 123(R), including $1.1 million as a result of these modifications. Had such compensation expense been determined under APB No. 25, the Company would have recorded stock-based compensation expense of $13.1 million during the one month ended January 31, 2006, of which $13.0 million related to the modifications.

Under the terms of the restricted stock agreements, all unvested shares became vested upon consummation of the RHD Merger. The Predecessor Company recorded stock-based compensation expense for restricted stock of $0.4 million during the one month ended January 31, 2006, including $0.3 million related to this acceleration of vesting.

7. Income Taxes

Deferred tax assets and liabilities are determined based on the estimated future tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by tax rates at which temporary differences are expected to reverse. Deferred tax benefit (provision) is the result of changes in the deferred tax assets and liabilities.

Benefit (provision) for income taxes consisted of:

										Successor Company					Predecessor Company
		Year Ended December 31,								Eleven Months Ended					One Month Ended
		2008				2007				December 31, 2006					January 31, 2006
Current provision
U.S. Federal		$	(18,207	)		$	(903	)		$	—				$	—
State and local			(2,804	)			—				—					—
Total current provision			(21,011	)			(903	)			—					—
Deferred benefit (provision)
U.S. Federal			558,673				(52,385	)			76,230					(2,650	)
State and local			24,605				(7,554	)			5,231					(484	)
Total deferred benefit (provision)			583,278				(59,939	)			81,461					(3,134	)
Benefit (provision) for income taxes		$	562,267			$	(60,842	)		$	81,461				$	(3,134	)

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and our effective tax rate, which has been applied to the Company’s income (loss) before income taxes.

										Successor Company					Predecessor Company
		Year Ended December 31,								Eleven Months Ended					One Month Ended
		2008				2007				December 31, 2006					January 31, 2006
Statutory U.S. Federal tax rate			35.0	%			35.0	%			35.0	%				35.0	%
State and local taxes, net of U.S. Federal tax benefit			3.5				3.0				2.4					3.6
Non-deductible expense			—				0.1				0.7					0.5
Valuation allowance			—				0.1				—					0.8
Other, net			(2.4	)			(1.8	)			—					—
Effective tax rate			36.1	%			36.4	%			38.1	%				39.9	%

Deferred tax assets and liabilities consisted of the following at December 31, 2008 and 2007.

		2008				2007
Deferred tax assets
Allowance for doubtful accounts		$	8,209			$	2,453
Deferred and other compensation			10,704				7,081
Deferred directory revenue			—				19,968
Deferred financing costs			12,287				17,655
Debt and other interest			31,178				32,594
Pension and other retirement benefits			19,381				7,774
Restructuring reserves			1,517				563
Net operating loss and credits carryforwards			1,400				13,402
Other, net			538				1,881
Total deferred tax assets			85,214				103,371
Valuation allowance			(38	)			(169	)
Net deferred tax assets			85,176				103,202
Deferred tax liabilities
Fixed assets and capitalized software			8,316				6,235
Purchased goodwill and intangible assets			765,310				1,353,716
Other, net			77				—
Total deferred tax liabilities			773,703				1,359,951
Net deferred tax liabilities		$	688,527			$	1,256,749

Successor Company

The 2008 benefit for income taxes of $562.3 million is comprised of a federal income tax benefit of $540.5 million, of which $558.7 million represents a deferred income tax benefit and $18.2 million represents a current tax provision, and a state income tax benefit of $21.8 million, of which $24.6 million represents a deferred income tax benefit and $2.8 million represents a current tax provision. The 2008 benefit for income taxes resulted in an effective tax rate of 36.1% and generated regular taxable income of approximately $62.6 million. In addition, the Company recognized a $1.4 million current federal tax provision related to alternative minimum taxes. The Company’s alternative minimum taxable income is offset on a consolidated basis by losses for alternative minimum tax purposes at RHD. As a result, the Company has recorded an additional intercompany liability for $1.4 million in recognition of the utilization of RHD’s alternative minimum taxable losses. As of December 31, 2008, the Company has a total intercompany liability of $1.4 million related to income taxes.

The Company is included in the consolidated federal income tax return and combined or consolidated state income tax returns, where permitted, for RHD. The Company is a single member limited liability company and is disregarded as a separate taxable entity from Dex Media for federal and relevant state income tax purposes. The Company calculates and records income taxes as if it filed a separate corporate income tax return on a stand alone basis.

At December 31, 2007, the Company had federal net operating loss carryforwards which were utilized against the Company’s taxable income during 2008. A portion of the benefits from the net operating loss carryforwards are generated by the exercise of stock awards and are reflected in owner’s interest as required by SFAS No. 123(R). The 2008 and 2007 tax deductions for stock awards were $0.2 million and $10.7 million, respectively. At December 31, 2007, the Company had unrealized stock option deductions from prior periods of approximately $40.0 million, of which $10.1 million was utilized against the Company’s taxable income during 2008. A portion of the benefits from the net operating loss carryforwards is reflected in intangible assets on the consolidated balance sheet at December 31, 2008, as a portion of these net operating loss carryforwards are generated by deductions related to the excess tax basis over book basis in goodwill at the time of the RHD Merger. During 2008, tax benefits from the excess tax basis amortization in goodwill reduced our intangible asset impairment charge and intangible assets by $16.6 million and $8.8 million, respectively. In addition, the Company has alternative minimum tax credit carryforwards of approximately $1.4 million, which are available to reduce future federal income taxes over an indefinite period.

In assessing the realizability of our deferred income tax assets, we have considered whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. In making this determination, under the applicable financial reporting standards, we are allowed to consider the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies. The Company believes that it is more likely than not that some of the deferred income tax assets resulting from state net operating losses will not be realized, contributing to a valuation allowance of less than $0.1 million.

The 2007 provision for income taxes of $60.8 million is comprised of a federal tax provision of $53.3 million, of which $52.4 million is deferred, and a state deferred tax provision of $7.5 million. The 2007 provision for income taxes resulted in an effective tax rate of 36.4% and generated regular taxable income of approximately $13.1 million. In addition, the Company recognized a $0.9 million current federal tax provision related to alternative minimum taxes. The Company’s alternative minimum taxable income is offset on a consolidated basis by losses for alternative minimum tax purposes at RHD.

The 2006 income tax benefit of $81.5 million is comprised of a deferred tax benefit generated in the period. The 2006 tax benefit resulted in an effective tax rate of 38.1% and generated losses for tax purposes of approximately $46.2 million related to tax deductions recorded with respect to the intangible assets that existed prior to the RHD Merger and carried over for tax purposes. A deferred tax liability in the amount of $1.3 billion has been recognized in accordance with SFAS No. 109 for the difference between the assigned values for financial reporting purposes and the tax bases of the assets and liabilities acquired by RHD as a result of the RHD Merger.

Predecessor Company

In the Predecessor Company, Dex Media West was included in the consolidated federal income tax return and combined or consolidated state income tax returns, where permitted, for Dex Media. Dex Media West was a single member limited liability company disregarded as a separate taxable entity from Dex Media for income tax purposes. Dex Media had no other business operations or investments. For purposes of these financial statements, the Company calculated and recorded income taxes as if it filed a separate corporate income tax return on a stand-alone basis.

No additional valuation allowance had been provided for, except as described below. In management’s judgment, it was more likely than not that the remaining net operating loss carryforwards would be utilized before the end of the expiration periods. This presumption was based upon the book and taxable income already generated by the Company in 2005 and expected to be generated by the Company over the next several years.

Dex Media West had an ownership change under Internal Revenue Code section 382 upon the consummation of the RHD Merger. The Company determined the limitation for future use for tax purposes of certain built in losses in accordance with section 382 as of the date of the RHD Merger. The Company does not expect that the limitation determined at the date of the RHD Merger will reduce the utilization of such losses in the foreseeable future.

Adoption of FIN No. 48

As of December 31, 2008 and December 31, 2007, the Company has no material liability for unrecognized tax benefits.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits and tax liabilities in income tax expense. The Company has not accrued any amount for possible tax penalties.

The Company is subject to tax in the United States and various state jurisdictions. The Company’s federal tax returns through the year ended November 30, 2003 have been audited by the Internal Revenue Service (“IRS”). Therefore, tax years 2003 through 2007 are still subject to examination by the IRS. The Company’s major state jurisdictions are open to possible adjustment by state tax authorities for an average of three years.

8. Benefit Plans

On October 21, 2008, the Compensation & Benefits Committee of RHD’s Board of Directors approved a comprehensive redesign of RHD’s and Dex Media’s employee retirement savings and pension plans. Effective January 1, 2009, except as described below, the sole retirement benefit available to all non-union employees of RHD and the Company will be provided through a single defined contribution plan. This unified 401(k) plan will replace the pre-existing Dex Media 401(k) savings plan. RHD will continue to maintain the R.H. Donnelley 401(k) Restoration Plan for those employees with compensation in excess of the IRS annual limits.

In conjunction with establishing the new unified defined contribution plan, RHD and Dex Media have frozen the Dex Media, Inc. Pension Plan covering all non-union employees, effective as of December 31, 2008. In connection with the freeze, all pension plan benefit accruals for non-union plan participants ceased as of December 31, 2008, however, all plan balances remained intact and interest credits on participant account balances, as well as service credits for vesting and retirement eligibility, continue in accordance with the terms of the respective plans. In addition, supplemental transition credits have been provided to certain plan participants nearing retirement who would otherwise lose a portion of their anticipated pension benefit at age 65 as a result of freezing the current plans. Similar supplemental transition credits have been provided to certain plan participants who were grandfathered under a final average pay formula when the defined benefit plans were previously converted from traditional pension plans to cash balance plans.

Additionally, on October 21, 2008, the Compensation & Benefits Committee of RHD’s Board of Directors approved for non-union employees (i) the elimination of all non-subsidized access to retiree health care and life insurance benefits effective January 1, 2009, (ii) the elimination of subsidized retiree health care benefits for any Medicare-eligible retirees effective January 1, 2009 and (iii) the phase out of subsidized retiree health care benefits over a three-year period beginning January 1, 2009 (with all non-union retiree health care benefits terminating January 1, 2012). With respect to the phase out of subsidized retiree health care benefits, if an eligible retiree becomes Medicare-eligible at any point in time during the phase out process noted above, such retiree will no longer be eligible for retiree health care coverage.

As a result of implementing the freeze on Dex Media’s defined benefit plans, we recognized one-time non-cash curtailment gains of $2.0 million during the year ended December 31, 2008, entirely offset by losses incurred on plan assets and recognition of previously unrecognized prior service costs that had been charged to accumulated other comprehensive loss. As a result of eliminating retiree health care and life insurance benefits for non-union employees, we recognized one-time non-cash curtailment gains of $13.1 million during the year ended December 31, 2008.

The following represents a summary of each of Dex Media’s benefit plans offered to Dex Media West employees prior to the redesign of RHD’s employee retirement savings and pension plans in October 2008, as the redesign was not effective until January 1, 2009.

Pension Plan. Dex Media has a noncontributory defined benefit pension plan covering substantially all management and occupational (union) employees. Annual pension costs are determined using the projected unit credit actuarial cost method. Our funding policy is to contribute an amount at least equal to the minimum legal funding requirement. Dex Media was required to make contributions of $9.5 million and $12.8 million to its pension plan for the years ended December 31, 2008 and 2007, respectively. No contributions were required or made to the Dex Media pension plan for the eleven months ended December 31, 2006 or the one month ended January 31, 2006. The underlying pension plan assets are invested in diversified portfolios consisting primarily of equity and debt securities. A measurement date of December 31 is used for all of our plan assets.

Savings Plan. Dex Media offers a defined contribution 401(k) savings plan to substantially all employees. For management employees, Dex Media contributes 100% of the first 4% of each participating employee’s salary and 50% of the next 2%. For management employees, the Dex Media match is limited to 5% of each participating employee’s eligible earnings. For occupational employees, Dex Media contributes 81% of the first 6% of each participating employee’s salary not to exceed 4.86% of eligible earnings for any one pay period. Dex Media’s matching contributions are limited to $4,860 per occupational employee annually. Contributions under this plan were $2.7 million, $3.3 million and $2.8 million for the years ended December 31, 2008 and 2007 and the eleven months ended December 31, 2006, respectively. Contributions under this plan were $0.4 million for the one month ended January 31, 2006.

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

General Description. Effective January 1, 2004, all employees were transferred to another indirect wholly-owned subsidiary of Dex Media, Dex Media Service LLC (“Service Co.”). After January 1, 2004, employee-related liabilities, including pension and other postretirement obligations are primarily included in Service Co.’s reported liabilities with an offsetting asset recorded as an affiliate receivable from Dex Media West for the portion of the liabilities associated with the Dex Media West employees. Dex Media West is charged and carries an affiliate payable for the portion of the liabilities associated with employees providing services to Dex Media West. Under the Shared Services and Employees Agreement dated September 9, 2003, expenses related to Dex Media West employees providing services entirely for Dex Media West are allocated 100% to Dex Media West. Shared employee expenses are allocated and charged to Dex Media West based upon Dex Media West’s proportional share of consolidated Dex Media revenue.

Presentation. The liabilities presented below represent the Dex Media pension and postretirement benefit plans on a consolidated basis. The expenses related to these benefit plans are presented on the allocated basis described above.

Benefit Obligations and Funded Status

A summary of the funded status of Dex Media’s benefit plans at December 31, 2008 and 2007 is as follows:

		Pension Plan								Postretirement Plan
(in thousands)		2008				2007				2008				2007
Change in benefit obligation
Benefit obligation, beginning of year		$	168,943			$	186,992			$	71,977			$	68,732
Service cost			7,069				8,225				1,160				1,357
Interest cost			10,142				10,309				4,333				3,999
Actuarial loss (gain)			15,816				(16,154	)			(1,983	)			1,057
Benefits paid			(1,739	)			(1,609	)			(3,490	)			(3,168	)
Curtailments gain			(3,189	)			—				(17,444	)			—
Plan settlements			(41,242	)			(18,820	)			—				—
Benefit obligation, end of year		$	155,800			$	168,943			$	54,553			$	71,977
Change in plan assets
Fair value of plan assets, beginning of year		$	133,950			$	134,431			$	—			$	—
Return (loss) on plan assets			(35,133	)			7,197				—				—
Employer contributions			9,560				12,751				3,490				3,168
Benefits paid			(1,739	)			(1,609	)			(3,490	)			(3,168	)
Plan settlements			(41,242	)			(18,820	)			—				—
Fair value of plan assets, end of year		$	65,396			$	133,950			$	—			$	—
Funded status at end of year		$	(90,404	)		$	(34,993	)		$	(54,553	)		$	(71,977	)

Net amounts recognized in Dex Media’s consolidated balance sheets at December 31, 2008 and 2007 are as follows:

		Pension Plan								Postretirement Plan
		2008				2007				2008				2007
Current liabilities		$	—			$	—			$	(5,635	)		$	(5,734	)
Non-current liabilities			(90,404	)			(34,993	)			(48,918	)			(66,243	)
Net amount recognized		$	(90,404	)		$	(34,993	)		$	(54,553	)		$	(71,977	)

The accumulated benefit obligation for the defined benefit pension plan was $150.4 million and $159.6 million at December 31, 2008 and 2007, respectively.

Components of Net Periodic Benefit Expense

The net periodic benefit expense of the pension plan allocated to Dex Media West for the years ended December 31, 2008 and 2007, the eleven months ended December 31, 2006, and the one month ended January 31, 2006 is as follows:

										Successor Company					Predecessor Company
		Year Ended December 31,								Eleven Months Ended					One Month Ended
		2008				2007				December 31, 2006					January 31, 2006
Service cost		$	4,907			$	5,763			$	4,919				$	398
Interest cost			6,711				6,946				6,294					494
Expected return on plan assets			(6,796	)			(7,201	)			(6,378	)				(594	)
Amortization of unrecognized net gain			(163	)			—				—					(9	)
Settlement loss (gain)			2,578				(1,148	)			(689	)				—
Other adjustments			—				(3	)			—					—
Net periodic benefit expense		$	7,237			$	4,357			$	4,146				$	289

The net periodic benefit expense of the postretirement plan allocated to Dex Media West for the years ended December, 31, 2008 and 2007, the eleven months ended December 31, 2006, and the one month ended January 31, 2006 is as follows:

										Successor Company					Predecessor Company
		Year Ended December 31,								Eleven Months Ended					One Month Ended
		2008				2007				December 31, 2006					January 31, 2006
Service cost		$	820			$	968			$	1,366				$	94
Interest cost			2,781				2,516				2,170					173
Amortization of unrecognized prior service credit			(5	)			(5	)			—					(22	)
Curtailment gain			(13,069	)			—				—					—
Amortization of unamortized net gain			(27	)			—				—					—
Other adjustments			—				(3	)			—					—
Net periodic benefit (income) expense		$	(9,500	)		$	3,476			$	3,536				$	245