Idearc Announces First Quarter 2008 Results
06 Mai 2008 - 2:00PM
Business Wire
Idearc Inc. (NYSE: IAR) today announced financial results for the
quarter ended March 31, 2008. Frank Gatto, the Company�s acting
chief executive officer, said, �The set of assets that make this
business an attractive investment are still in place and the
business fundamentals are still sound and solid. The economic
softness that began in the latter half of 2007 continues to impact
our results and, while the first quarter proved to be challenging,
we remain committed to our multi-product strategy, which we believe
will ultimately maximize value to our investors.� Financial Summary
Idearc reports financial results on a GAAP basis and on an adjusted
pro forma basis to eliminate the impact of transition and certain
non-recurring costs. The adjusted pro forma basis measures are
described and are reconciled to the corresponding GAAP measures in
the accompanying financial schedules. The Company reported
first-quarter 2008 multi-product revenues of $770 million, a
decrease of 4.5 percent compared to the same period in 2007. The
Company reported Internet revenue of $73 million in the first
quarter, a 7.4 percent increase over the same period in 2007.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the first quarter 2008 were $359 million, up 1.4
percent compared to the same period in 2007. On an adjusted pro
forma basis, first-quarter EBITDA was $367 million, a decrease of
3.2 percent compared to the same period in 2007. Adjusted pro forma
EBITDA margins reflected a slight increase at 47.7 percent in the
first quarter 2008, compared to 47.0 percent in the same period in
2007. Net income was $111 million (an increase of 7.8 percent
versus the same period in 2007), or 76 cents per diluted share, for
the first quarter 2008. On an adjusted pro forma basis,
first-quarter net income was $116 million (a decrease of 2.5
percent versus the same period in 2007), or 79 cents per diluted
share. Free cash flow for the period was $193 million based on cash
from operating activities of $202 million, less capital
expenditures of $9 million. Multi-product advertising sales for the
first quarter declined 6.2 percent compared to 2007. Webcast
Information Idearc welcomes investors, media and other interested
parties to join Frank Gatto, Idearc acting CEO, and Samuel D. (Dee)
Jones, acting chief financial officer, in a discussion via a
webcast and teleconference beginning today at 10:00 a.m. (Eastern).
Individuals within the United States can access the earnings call
by dialing 888-603-6873. International participants should dial
973-582-2706. The pass code for the call is: 42201312. In order to
ensure a prompt start time, please dial in to the call by 9:50 a.m.
(Eastern). A replay of the teleconference will be available at
800-642-1687. International callers can access the replay by
calling 706-645-9291. The replay pass code is 42201312. The replay
will be available through May 20. In addition, a live webcast will
be available on Idearc's Web site at www.idearc.com, under the
Investor Relations tab. Certain statements included in this press
release and the hyperlinked materials constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect Idearc
management's current views with respect to Idearc's financial
performance and future events with respect to its business and
industry in general. Statements that include the words "believe,"
"anticipate," "foresee," and similar expressions identify
forward-looking statements. Idearc cautions you not to place undue
reliance on these forward-looking statements. The following
important factors could affect future results and could cause those
results to differ materially from those expressed in the
forward-looking statements: (i) risks related to Idearc's
substantial indebtedness; (ii) risks related to Idearc's declining
print revenue; (iii) limitations on Idearc's operating and
strategic flexibility under the terms of its debt agreements; (iv)
changes in Idearc's competitive position due to competition from
other yellow pages directories publishers and other traditional and
new media and its ability to anticipate or respond to changes in
technology and user preferences; (v) declining use of print yellow
pages directories; (vi) access to capital markets and changes in
credit ratings; (vii) changes in the availability and cost of paper
and other raw materials used to print directories and reliance on
third-party printers and distributors; (viii) increased credit risk
associated with reliance on small- and medium-sized businesses;
(ix) changes in operating performance; (x) increased demands on
management as a result of operating as an independent company; (xi)
Idearc's ability to attract and retain qualified executives; (xii)
Idearc's ability to maintain good relations with its unionized
employees; (xiii) changes in U.S. labor, business, political and/or
economic conditions; (xiv) changes in governmental regulations and
policies and actions of regulatory bodies; (xv) risks inherent in
Idearc's spin-off from its former parent corporation, Verizon
Communications Inc., including increased costs and reduced
profitability associated with operating as an independent company;
and (xvi) risks associated with Idearc's obligations under
agreements entered into with Verizon in connection with the
spin-off. For a discussion of these and other risks and
uncertainties, see Idearc Inc.'s periodic filings with the
Securities and Exchange Commission, which you may view at
www.sec.gov, and in particular, Idearc Inc.'s Annual Report on Form
10-K for the year ended December 31, 2007. IDEARC INC. � � �
Consolidated Statements of Income � Reported (GAAP) Three Months
Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
(dollars in millions, except per share amounts) � � � 3 Mos. Ended
3 Mos. Ended Unaudited � 3/31/08 � 3/31/07 � % Change Operating
Revenue Print products $ 696 $ 737 (5.6 ) Internet 73 68 7.4 Other
� 1 � � 1 - Total Operating Revenue � 770 � � 806 (4.5 ) �
Operating Expense Selling 185 188 (1.6 ) Cost of sales (exclusive
of depreciation and amortization) 147 158 (7.0 ) General and
administrative 79 106 (25.5 ) Depreciation and amortization � 20 �
� 22 (9.1 ) Total Operating Expense 431 474 (9.1 ) � Operating
Income 339 332 2.1 Interest expense, net � 166 � � 170 (2.4 )
Income Before Provision for Income Taxes � 173 162 6.8 Provision
for income taxes � 62 � � 59 5.1 Net Income $ 111 � $ 103 7.8 �
Basic and Diluted Earnings per Common Share (1) $ .76 $ .70 8.6
Basic and diluted weighted-average common shares outstanding (in
millions) 146 146 � Dividends Declared per Common Share $ .3425 $
.3425 � Prior period amounts presented above and in the following
schedules have been reclassified to conform to current year
presentation. � Note: (1) Restricted stock awards granted in 2007
had no material impact on the calculation of diluted earnings per
common share. IDEARC INC. � � � Consolidated Statements of Income �
Adjusted Pro Forma (Non-GAAP)(1) Three Months Ended March 31, 2008
Compared to Three Months Ended March 31, 2007 (dollars in millions,
except per share amounts) � � � 3 Mos. Ended 3 Mos. Ended Unaudited
� 3/31/08 � 3/31/07 � % Change Operating Revenue Print products $
696 $ 737 (5.6 ) Internet 73 68 7.4 Other � 1 � � 1 - Total
Operating Revenue � 770 � � 806 (4.5 ) � Operating Expense Selling
185 188 (1.6 ) Cost of sales (exclusive of depreciation and
amortization) 147 158 (7.0 ) General and administrative 71 81 (12.3
) Depreciation and amortization � 20 � � 22 (9.1 ) Total Operating
Expense 423 449 (5.8 ) � Operating Income 347 357 (2.8 ) Interest
expense, net � 166 � � 170 (2.4 ) Income Before Provision for
Income Taxes � 181 187 (3.2 ) Provision for income taxes � 65 � �
68 (4.4 ) Net Income $ 116 � $ 119 (2.5 ) � Basic and Diluted
Earnings per Common Share (2) $ .79 $ .82 (3.7 ) Basic and diluted
weighted-average common shares outstanding (in millions) 146 146
Note: (1) These consolidated statements of income provide a
comparison of the three months ended March 31, 2008 adjusted pro
forma results to the three months ended December 31, 2007 adjusted
pro forma results. The following schedules provide reconciliations
from our reported GAAP results to adjusted pro forma non-GAAP
results for the periods shown above. (2) Restricted stock awards
granted in 2007 had no material impact on the calculation of
diluted earnings per common share. � � � � IDEARC INC. Consolidated
Statements of Income � Reconciliation from Reported (GAAP) to
Adjusted Pro Forma (Non-GAAP) Three Months Ended March 31, 2008
(dollars in millions, except per share amounts) � � Transition
Costs 3 Mos. Ended 3/31/08 � � 3 Mos. Ended 3/31/08 Unaudited �
Reported (GAAP) � Stock-Based Compensation(3) � Separation Costs
(4) � Adjusted Pro Forma (Non-GAAP) Operating Revenue Print
products $ 696 $ - $ - $ 696 Internet 73 - - 73 Other � 1 � � � - �
� � - � � � 1 � Total Operating Revenue � 770 � � � - � � � - � � �
770 � � Operating Expense Selling 185 - - 185 Cost of sales
(exclusive of depreciation and amortization) 147 - - 147 General
and administrative 79 (1 ) (7 ) 71 Depreciation and amortization �
20 � � � - � � � - � � � 20 � Total Operating Expense � 431 � � �
(1 ) � � (7 ) � � 423 � � Operating Income 339 1 7 347 Interest
expense, net � 166 � � � - � � � - � � � 166 � Income Before
Provision for Income Taxes 173 1 7 181 Provision for income taxes �
62 � � � - � � � 3 � � � 65 � Net Income $ 111 � � $ 1 � � $ 4 � �
$ 116 � � � Basic and Diluted Earnings per Common Share $ .76 $ .01
$ .03 $ .79 � � Operating Income $ 339 $ 1 $ 7 $ 347 Depreciation
and Amortization � 20 � � � - � � � - � � � 20 � EBITDA (non-GAAP)
(1) $ 359 � � $ 1 � � $ 7 � � $ 367 � � � Operating Income margin
(2) 44.0 % 45.1 % Impact of depreciation and amortization � 2.6 % �
� � � � � 2.6 % EBITDA margin (non-GAAP) (1) � 46.6 % � � � � � �
47.7 % Notes: (1) EBITDA is a non-GAAP measure that represents
earnings before interest, taxes, depreciation, and amortization.
EBITDA margin is a non-GAAP measure calculated by dividing EBITDA
by total operating revenue. (2) Operating income margin is
calculated by dividing operating income by total operating revenue.
(3) The stock-based compensation costs relate to a one-time
incentive compensation award granted to most of the Company's
employees in January 2007. (4) Separation costs are costs
associated with becoming a stand-alone entity as a result of the
spin-off from Verizon. IDEARC INC. � � � � Consolidated Statements
of Income � Reconciliation from Reported (GAAP) to Adjusted Pro
Forma (Non-GAAP) Three Months Ended March 31, 2007 (dollars in
millions, except per share amounts) � � Transition Costs 3 Mos.
Ended 3/31/07 � � 3 Mos. Ended 3/31/07 Unaudited � Reported (GAAP)
� Stock-Based Compensation(3) � Separation Costs (4) � Adjusted Pro
Forma (Non-GAAP) Operating Revenue Print products $ 737 $ - $ - $
737 Internet 68 - - 68 Other � 1 � � � - � � � - � � � 1 � Total
Operating Revenue � 806 � � � - � � � - � � � 806 � � Operating
Expense Selling 188 - - 188 Cost of sales (exclusive of
depreciation and amortization) 158 - - 158 General and
administrative 106 (9 ) (16 ) 81 Depreciation and amortization � 22
� � � - � � � - � � � 22 � Total Operating Expense � 474 � � � (9 )
� � (16 ) � � 449 � � Operating Income 332 9 16 357 Interest
expense, net � 170 � � � - � � � - � � � 170 � Income Before
Provision for Income Taxes 162 9 16 187 Provision for income taxes
� 59 � � � 3 � � � 6 � � � 68 � Net Income $ 103 � � $ 6 � � $ 10 �
� $ 119 � � � Basic and Diluted Earnings per Common Share $ .70 $
.04 $ .07 $ .82 � � Operating Income $ 332 $ 9 $ 16 $ 357
Depreciation and Amortization � 22 � � � - � � � - � � � 22 �
EBITDA (non-GAAP) (1) $ 354 � � $ 9 � � $ 16 � � $ 379 � � �
Operating Income margin (2) 41.2 % 44.3 % Impact of depreciation
and amortization � 2.7 % � � � � � � 2.7 % EBITDA margin (non-GAAP)
(1) � 43.9 % � � � � � � 47.0 % Notes: (1) EBITDA is a non-GAAP
measure that represents earnings before interest, taxes,
depreciation, and amortization. EBITDA margin is a non-GAAP measure
calculated by dividing EBITDA by total operating revenue. (2)
Operating income margin is calculated by dividing operating income
by total operating revenue. (3) The stock-based compensation costs
relate to a one-time incentive compensation award granted to most
of the Company's employees in January 2007. (4) Separation costs
are costs associated with becoming a stand-alone entity as a result
of the spin-off from Verizon. � � IDEARC INC. Consolidated Balance
Sheets � Reported (GAAP) As of March 31, 2008 and December 31, 2007
(dollars in millions) � � � Unaudited � 3/31/2008 � 12/31/2007 �
Assets Current assets: Cash and cash equivalents $ 179 $ 48
Accounts receivable, net of allowances of $85 and $77 414 423
Deferred directory costs 311 312 Prepaid expenses and other � 7 � �
� 10 � Total current assets � 911 � � � 793 � Property, plant and
equipment 473 471 Less: accumulated depreciation � 364 � � � 356 �
� 109 � � � 115 � Goodwill 73 73 Intangible assets, net 298 303
Pension assets 174 171 Non-current deferred tax assets 166 124 Debt
issuance costs 84 86 Other noncurrent assets � 2 � � � 2 � Total
Assets $ 1,817 � � $ 1,667 � � � Liabilities and Stockholders'
Equity (Deficit) Current liabilities: Accounts payable and accrued
liabilities $ 340 $ 272 Deferred revenue 209 209 Current maturities
of long-term debt 67 48 Current deferred taxes 24 28 Other � 28 � �
� 31 � Total current liabilities � 668 � � � 588 � Long-term debt
8,989 9,020 Employee benefit obligations 321 327 Unrecognized tax
benefits 107 109 Other liabilities 360 223 � Stockholders' equity
(deficit): Common stock ($.01 par value; 225 million shares
authorized, 146,527,395 and 146,795,971 shares issued and
outstanding in 2008 and 2007, respectively) 1 1 Additional paid-in
capital (deficit) (8,775 ) (8,776 ) Retained earnings 422 361
Accumulated other comprehensive loss � (276 ) � � (186 ) Total
stockholders' equity (deficit) � (8,628 ) � � (8,600 ) Total
Liabilities and Stockholders' Equity (Deficit) $ 1,817 � � $ 1,667
� � � IDEARC INC. Consolidated Statements of Cash Flows � Reported
(GAAP) Three Months Ended March 31, 2008 Compared to Three Months
Ended March 31, 2007 (dollars in millions) � � � Unaudited � 3
Months Ended 3/31/08 � 3 Months Ended 3/31/07 � Cash Flows from
Operating Activities Net Income $ 111 $ 103 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 20 22 Employee retirement benefits 2
5 Deferred income taxes 2 (1 ) Provision for uncollectible accounts
39 32 Stock-based compensation (5 ) 12 � Changes in current assets
and liabilities Accounts receivable (30 ) (84 ) Deferred directory
costs 1 (15 ) Other current assets 4 (1 ) Accounts payable and
accrued liabilities 63 133 Other, net � (5 ) � � (5 ) Net cash
provided by operating activities � 202 � � � 201 � � Cash Flows
from Investing Activities Capital expenditures (including
capitalized software) � (9 ) � � (10 ) Net cash used in investing
activities � (9 ) � � (10 ) � Cash Flows from Financing Activities
Repayment of long-term debt (12 ) (12 ) Dividends paid to Idearc
stockholders � (50 ) � � (50 ) Net cash used in financing
activities � (62 ) � � (62 ) Increase in cash and cash equivalents
131 129 Cash and cash equivalents, beginning of year � 48 � � � 172
� Cash and cash equivalents, end of period $ 179 � � $ 301 � � � �
IDEARC INC. Multi-Product Advertising Sales (dollars in millions) �
� 3 Mos. Ended 3 Mos. Ended 3 Mos. Ended Unaudited � 3/31/08 �
3/31/07 � 3/31/06 � � Net Print Products Revenue(1) $ 652 $ 705 $
722 % Change year-over-year (7.5 %) (2.4 %) � Net Internet
Revenue(2) 73 68 52 % Change year-over-year 7.4 % 30.8 % � � � � �
� Net Multi-Product Advertising Sales(3) 725 773 774 % Change
year-over-year (6.2 %) (0.1 %) Notes: (1) Net print products
revenue represents the total revenue value (less a provision for
sales allowances) of directories published that will be amortized
over the life of the directories, which is typically 12 months.
Directories from preceding periods have been aligned to match the
publication schedule of 2008 publications, allowing for a
meaningful comparison of current publications to previous
publications. (2) Net Internet revenue represents total revenue for
our fixed-fee and performance-based advertising products less a
provision for sales allowances. Fixed-fee advertising includes
advertisement placement on our Superpages.com website, and website
development and hosting for our advertisers. Revenue from fixed-fee
advertisers is recognized monthly over the life of the advertising
service. Performance-based advertising revenue is earned when
consumers connect with our Superpages.com advertisers by a "click"
on their Internet advertising or a phone call to their business.
Revenue from performance-based advertising is recognized when there
is evidence that qualifying transactions have occurred. (3) Net
multi-product advertising sales is a statistical measure. It is
important to distinguish net multi-product advertising sales from
total operating revenue, which on our financial statements is
recognized under the deferral and amortization method. About Idearc
Inc. Idearc Inc. (NYSE: IAR) delivers products on multiple
platforms to help consumers find the information they want,
wherever they are. Idearc�s multi-platform of advertising solutions
includes Superpages.com�, Superpages MobileSM, Superpages MobileSM
for BlackBerry�, Switchboard.com�, LocalSearch.com, Verizon� Yellow
Pages, Verizon� White Pages, smaller-sized portable Verizon� Yellow
Pages Companion Directories, Solutions At Hand� magazine, Solutions
at Home� magazine, and Solutions on the Move� and Solutions Direct�
direct mail packages. For more information, visit www.idearc.com.
(IAR-G)
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