UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
October 30, 2012
SUPERMEDIA INC.
(Exact name of Registrant as specified in its charter)
Delaware |
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1-32939 |
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20-5095175 |
(State of Incorporation) |
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(Commission File Number) |
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(I.R.S. Employer |
2200 West Airfield Drive, P.O. Box 619810, DFW Airport, Texas 75261
(Address of Principal Executive Offices)
(972) 453-7000
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On October 30, 2012, SuperMedia Inc. (the Company) issued a press release announcing its financial results for the fiscal quarter ended September 30, 2012. A copy of the press release is furnished as part of this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
Non-GAAP Measures
The Companys press release and financial schedules include financial information prepared in conformity with accounting principles generally accepted in the United States (GAAP) as well as non-GAAP financial information. The non-GAAP financial information includes:
· EBITDA, which is earnings before interest, taxes, gains on early extinguishment of debt, reorganization items, depreciation and amortization;
· EBITDA margin, which is EBITDA divided by total operating revenue;
· adjusted EBITDA;
· adjusted EBITDA margin, which is adjusted EBITDA divided by total operating revenue; and
· free cash flow, which is cash from operations minus capital expenditures, including software capitalization.
EBITDA is determined by adjusting net income for interest, taxes, gains on early extinguishment of debt, reorganization items, depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total operating revenue. Management believes that EBITDA and EBITDA margin are useful to investors and other users of our financial information in evaluating our operating performance. EBITDA and EBITDA margin are used internally to evaluate current operating expense efficiency and operating profitability by excluding interest, tax, gains on early extinguishment of debt, reorganization items, depreciation and amortization items. In addition, EBITDA is used internally for incentive compensation purposes.
Adjusted EBITDA and adjusted EBITDA margin are adjusted for the impacts of certain unique costs including severance costs, merger transaction costs, post-employment benefits amortization, impairments and certain other non-recurring costs. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total operating revenue. Descriptions of the adjustments made to prepare our adjusted EBITDA and adjusted EBITDA margin are provided in the financial schedules accompanying the press release attached as Exhibit 99.1 to this Current Report.
Management believes the presentations of adjusted EBITDA and adjusted EBITDA margin assist readers in better understanding our results of operations and trends from period to period, consistent with managements evaluation of the Companys consolidated results of operations for a variety of internal measures including strategic business planning, capital allocation and incentive compensation. Management believes that the adjusted EBITDA and adjusted EBITDA margin are more indicative of future operating results than GAAP results of operations because of the non-operational and/or non-recurring nature of the items adjusted.
Free cash flow is defined as cash from operations minus capital expenditures, including software capitalization. Management believes that free cash flow is useful to investors and other users of our
financial information because management regularly reviews free cash flow as an important indicator of how much cash is generated by normal business operations.
As a result of these factors, management provides this information externally, along with a reconciliation to their comparable GAAP amounts, so readers have access to the detail and general nature of adjustments made to GAAP results to arrive at non-GAAP measures.
Management provides non-GAAP financial information to enhance the understanding of the Companys GAAP consolidated financial statements and readers should consider the information in addition to, but not instead of, the Companys financial statements prepared in accordance with GAAP. This non-GAAP financial information may be determined or calculated differently by other companies.
Item 7.01. Regulation FD Disclosure.
The Company is furnishing herewith additional information in conjunction with the October 30, 2012 press release. This additional information includes Company information and highlights of 2012 third quarter results. The press release and additional information, attached as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K, is being furnished and will not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that Section.
The information in this Current Report on Form 8-K will not be incorporated by reference into any registration statement or other document filed by the Company under the Securities Act of 1933, as amended, or the Exchange Act, unless specifically identified therein as being incorporated by reference.
Item 8.01. Other Events.
On August 20, 2012, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) providing for the merger (the Merger) between the Company and Dex One Corporation, a Delaware corporation (Dex One). Consummation of the Merger is subject to, among other things, receiving 100% approval from the current lenders to the Company and Dex One, respectively, to amend each partys existing credit agreements with their senior secured lenders all as set forth in the Merger Agreement. The Merger is also subject to other customary closing conditions. The Merger Agreement may be terminated by either party if the conditions to closing are not satisfied and the closing has not occurred before November 30, 2012, which date may, under certain circumstances, be extended until December 31, 2012.
Following the announcement of the proposed Merger, the current senior secured lenders for both companies formed a joint steering committee to evaluate the proposed amendments to the parties respective credit agreements as set forth in the Merger Agreement. Thus far, the senior secured lenders, acting through the steering committee, have rejected the proposed amendments to the parties respective credit agreements. The Company and Dex One continue to negotiate with the steering committee in an attempt to reach agreement on amendments to the parties respective credit agreements that will secure the consents necessary to effect the Merger. In light of the current negotiations, however, the Company recognizes that the parties may not be able to obtain sufficient approval from the senior secured lenders to any proposed amendments to the parties respective credit agreements. Therefore, possible alternatives to the current transaction structure to effect the Merger are under consideration, including a prepackaged restructuring of the parties senior secured indebtedness through proceedings instituted under Chapter 11 of the Bankruptcy Code to implement possible amendments that may garner sufficient, though not unanimous, support from the parties respective lenders, while otherwise maintaining the basic economic terms of the Merger Agreement. However, there can be no assurance the Company and Dex One can
effect a transaction through an alternative structure, that the necessary consents will be obtained, or that the Merger will be consummated.
The Merger Agreement may be terminated by either party if it determines in good faith that the lender consents will not be obtained by December 31, 2012. Accordingly, it is possible that the Merger Agreement will be terminated, unilaterally, by either party. The parties may amend the Merger Agreement to extend this deadline, or may waive the deadline, but it is possible that no agreement to amend, and no decision to waive, will be reached or that any agreement to so amend would contain terms or conditions that are different from those in the Merger Agreement.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
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Description |
99.1 |
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SuperMedia Inc. press release, dated October 30, 2012 |
99.2 |
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Additional Information from Investor Conference Call on October 30, 2012 |
Important Information For Investors and Security Holders
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The proposed merger transaction between SuperMedia Inc. (SuperMedia) and Dex One Corporation (Dex) will be submitted to the respective stockholders of SuperMedia and Dex. In connection with the proposed transaction, Newdex, Inc., a subsidiary of Dex (Newdex), will file with the Securities and Exchange Commission (SEC) a registration statement on Form S-4 that will include a joint proxy statement/prospectus to be used by SuperMedia and Dex to solicit the required approval of their stockholders and that also constitutes a prospectus of Newdex. INVESTORS AND SECURITY HOLDERS OF SUPERMEDIA AND DEX ARE ADVISED TO CAREFULLY READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS ASSOCIATED WITH THE TRANSACTION. A definitive joint proxy statement/prospectus will be sent to security holders of SuperMedia and Dex seeking their approval of the proposed transaction. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when available) and other relevant documents filed by SuperMedia and Dex with the SEC from the SECs website at www.sec.gov. Copies of the documents filed by SuperMedia with the SEC will be available free of charge on SuperMedias website at www.supermedia.com under the tab Investors or by contacting SuperMedias Investor Relations Department at (877) 343-3272. Copies of the documents filed by Dex with the SEC will be available free of charge on Dexs website at www.dexone.com under the tab Investors or by contacting Dexs Investor Relations Department at (800) 497-6329.
SuperMedia and Dex and their respective directors, executive officers and certain other members of management may be deemed to be participants in the solicitation of proxies from their respective security holders with respect to the transaction. Information about these persons is set forth in SuperMedias proxy statement relating to its 2012 Annual Meeting of Shareholders and Dexs proxy statement relating to its 2012 Annual Meeting of Stockholders, as filed with the SEC on April 11, 2012 and March 22, 2012, respectively, and subsequent statements of changes in beneficial ownership on file with the SEC. These documents can be obtained free of charge from the sources described above. Security holders and investors may obtain additional information regarding the interests of such persons, which may be different than those of the respective companies security holders generally, by reading the joint proxy statement/prospectus and other relevant documents regarding the transaction (when available), which will be filed with the SEC.
Forward-Looking Statements
Certain statements contained in this document are forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995, including but not limited to, statements about the benefits of the proposed transaction and combined company, including future financial and operating results and synergies, plans, objectives, expectations and intentions and other statements relating to the proposed transaction and the combined
company that are not historical facts. Where possible, the words believe, expect, anticipate, intend, should, will, would, planned, estimated, potential, goal, outlook, may, predicts, could, or the negative of such terms, or other comparable expressions, as they relate to Dex, SuperMedia, the combined company or their respective management, have been used to identify such forward-looking statements. All forward-looking statements reflect only Dexs and SuperMedias current beliefs and assumptions with respect to future business plans, prospects, decisions and results, and are based on information currently available to Dex and SuperMedia. Accordingly, the statements are subject to significant risks, uncertainties and contingencies, which could cause Dexs, SuperMedias or the combined companys actual operating results, performance or business plans or prospects to differ materially from those expressed in, or implied by, these statements.
Factors that could cause actual results to differ materially from current expectations include risks and other factors described in Dexs and SuperMedias publicly available reports filed with the SEC, which contain discussions of various factors that may affect the business or financial results of Dex, SuperMedia or the combined company. Such risks and other factors, which in some instances are beyond either companys control, include: the continuing decline in the use of print directories; increased competition, particularly from existing and emerging digital technologies; ongoing weak economic conditions and continued decline in advertising sales; the companies ability to collect trade receivables from customers to whom they extend credit; the companies ability to generate sufficient cash to service their debt; the companies ability to comply with the financial covenants contained in their debt agreements and the potential impact to operations and liquidity as a result of restrictive covenants in such debt agreements; the companies ability to refinance or restructure their debt on reasonable terms and conditions as might be necessary from time to time; increasing interest rates; changes in the companies and the companies subsidiaries credit ratings; changes in accounting standards; regulatory changes and judicial rulings impacting the companies businesses; adverse results from litigation, governmental investigations or tax related proceedings or audits; the effect of labor strikes, lock-outs and negotiations; successful realization of the expected benefits of acquisitions, divestitures and joint ventures; the companies ability to maintain agreements with major Internet search and local media companies; the companies reliance on third-party vendors for various services; and other events beyond their control that may result in unexpected adverse operating results.
With respect to the proposed merger, important factors could cause actual results to differ materially from those indicated by forward-looking statements included herein, including, but not limited to, the ability of Dex and SuperMedia to consummate the transaction on the terms set forth in the merger agreement; the risk that anticipated cost savings, growth opportunities and other financial and operating benefits as a result of the transaction may not be realized or may take longer to realize than expected; the risk that benefits from the transaction may be significantly offset by costs incurred in integrating the companies; potential adverse impacts or delay in completing the transaction as a result of obtaining consents from lenders to Dex or SuperMedia; failure to receive the approval of the stockholders of either Dex or SuperMedia for the transaction; and difficulties in connection with the process of integrating Dex and SuperMedia, including: coordinating geographically separate organizations; integrating business cultures, which could prove to be incompatible; difficulties and costs of integrating information technology systems; and the potential difficulty in retaining key officers and personnel. These risks, as well as other risks associated with the merger, will be more fully
discussed in the proxy statement/prospectus included in the registration statement on Form S-4 that Newdex intends to file with the SEC in connection with the proposed transaction.
None of Dex, SuperMedia or the combined company is responsible for updating the information contained in this document beyond the publication date, or for changes made to this document by wire services or Internet service providers.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
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SUPERMEDIA INC. | ||
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By: |
/s/ Cody Wilbanks | |
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Name: |
Cody Wilbanks |
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Title: |
Executive Vice President |
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General Counsel and Secretary |
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Date: October 30, 2012 |
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Exhibit 99.1
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FOR IMMEDIATE RELEASE
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October 30, 2012
Media Relations Contact:
Andrew Shane
972/453-6473
andrew.shane@supermedia.com
Investor Relations Contact:
Cliff Wilson
972/453-6188
cliff.wilson@supermedia.com
SuperMedia Announces Third Quarter 2012 Results
Q3 2012 Summary
· Proposed merger with Dex One Corporation to create a national provider of social, local and mobile marketing solutions announced August 21st
· Operating income of $125 million and operating margin of 37.9 percent
· Operating revenue of $330 million
· Total debt reduced by $36 million during Q3 2012, resulting in total debt principal reduction of $270 million in 2012
DALLAS SuperMedia (NASDAQ:SPMD) today announced its financial results for the third quarter and year to date 2012.
The headline for the third quarter was the announcement of our merger agreement with Dex One, said Peter McDonald, president and CEO of SuperMedia. The merged company will have local presence and national scale to be a leader in providing local, social and mobile marketing solutions to businesses and delivering results.
The transaction also will create financial benefits for shareholders and lenders. Our employees have performed very well in continuing to improve the companys operating margin during the quarter, while doing an excellent job of planning for the post-close integration of the companies, he added.
Merger Update
SuperMedia and Dex One Corporation (Dex) announced the execution of a definitive agreement to combine in a stock-for-stock merger of equals on August 21, 2012.(1) Following the announcement of the proposed merger, a joint steering committee of the senior secured lenders for both companies was formed to evaluate the proposed amendments to the parties respective credit agreements as set forth
(1) Dex One and SuperMedia Will Combine to Create a National Provider of Social, Local and Mobile Marketing Solutions Press Release
in the merger agreement. The consent of the lenders to the proposed amendments is a condition to closing the merger. Thus far, the senior secured lenders, acting through the steering committee, have rejected the proposed amendments to the parties respective credit agreements. SuperMedia and Dex continue to negotiate with the steering committee to reach agreement on amendments to the parties respective credit agreements. The parties are also considering alternatives to the current transaction structure, including a prepackaged restructuring of the parties senior secured indebtedness through proceedings instituted under Chapter 11 of the Bankruptcy Code to implement acceptable credit agreement amendments that may garner sufficient, though not unanimous, support from the parties respective lenders, while otherwise maintaining the basic economic terms of the Merger Agreement. However, there can be no assurance that SuperMedia and Dex can effect a transaction through an alternative structure, that the necessary consents will be obtained, or that the Merger will be consummated.
Third Quarter Financial Results
Operating revenue was $330 million, a decline of $69 million or 17.3 percent compared with the same quarter last year.
Operating income was $125 million, compared with an operating loss of $897 million in Q3 2011, which included a non-cash impairment charge of $1,003 million associated with a write down of goodwill.
Operating income margin was 37.9 percent, compared with a negative 224.8 percent for Q3 2011.
Net income was $52 million, compared with a net loss of $968 million in Q3 2011, which included the after-tax impact of a goodwill impairment of $997 million.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, which excludes proposed merger transaction costs and the amortization of the deferred gains/losses related to other post-employment benefit plans was $137 million, a decline of 12.7 percent compared with Q3 2011 adjusted EBITDA of $157 million, which excludes severance costs, a non-recurring vendor settlement and a non-cash impairment charge associated with a write down of goodwill.
Adjusted EBITDA margin, a non-GAAP measure, was 41.5 percent, a 220 basis point improvement from 39.3 percent in the same quarter last year.
Total expenses, excluding depreciation and amortization, merger transaction costs, the amortization of the deferred gains/losses related to the post-employment benefit plans, severance costs, a non-recurring vendor settlement and a non-cash impairment charge, were $193 million, compared with Q3 2011 expenses of $242 million, a reduction of $49 million or 20.2 percent.
During the third quarter, SuperMedia reduced indebtedness under its loan agreement by $36 million. SuperMedias total indebtedness at September 30, 2012 was $1.475 billion.
Advertising sales(2) declined 19.1 percent, compared with a decline of 15.6 percent reported for the same quarter last year.
(2) Net advertising sales is an operating measure used by the Company to compare advertising sales for current advertising periods to corresponding sales for previous periods. It is important to distinguish net advertising sales from operating revenue, which on our financial statements is recognized under the deferral and amortization method.
2012 Year-to-date Financial Results
Operating revenue was $1,042 million, a decline of $216 million or 17.2 percent compared with the same period last year.
Operating income was $335 million, compared with an operating loss of $688 million which included a non-cash impairment charge of $1,003 million associated with a write down of goodwill in Q3 2011.
Operating income margin was 32.1 percent, compared with a negative 54.7 percent in year-to-date Q3 2011.
Net income was $178 million, including a $51 million non-taxable gain on early extinguishment of debt, compared with a net loss of $909 million, which included the after-tax impact of a goodwill impairment of $997 million.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, which excludes the gains realized on early extinguishment of debt, merger transaction costs, the amortization of the deferred gains/losses related to other post-employment benefit plans, as well as severance costs, was $429 million, a decline of 7.3 percent compared with adjusted EBITDA of $463 million for year to date 2011 which excludes severance costs, a non-recurring vendor settlement and a non-cash impairment charge associated with a write down of goodwill.
Adjusted EBITDA margin, a non-GAAP measure, was 41.2 percent compared with 36.8 percent for year to date 2011, a 440 basis point improvement.
Total expenses, excluding depreciation and amortization, merger transaction costs, the amortization of the deferred gains/losses related to the post-employment benefit plans, severance costs, a non-recurring vendor settlement and a non-cash impairment charge, were $613 million, compared with $795 million in the same period last year, a reduction of $182 million or 22.9 percent.
Free cash flow for 2012, a non-GAAP measure, was $225 million, representing cash provided by operating activities of $234 million, less capital expenditures (including capitalized software) of $9 million.
The Companys cash balance on September 30, 2012, was $94 million.
Advertising sales(3) declined 18.8 percent, compared with a decline of 16.7 percent reported for the same period last year.
Earnings Call and Webcast Information
Individuals within the United States can access todays earnings call by dialing 888/603-6873. International participants should dial 973/582-2706. The pass code for the call is: 51095102. In order to
(3) Advertising sales for the nine months ended September 30, 2011 include negative adjustments of $11 million, related to the financial distress and operational wind down of a single certified marketing representative in our third-party national sales channel. Excluding this impact, advertising sales for the nine months ended September 30, 2012 would have reflected a decline of 19.6 percent. As of June 2011, these accounts were transitioned to other certified marketing representative firms.
ensure a prompt start time, please dial into the call by 9:50am (Eastern). A replay of the teleconference will be available at 800/585-8367. International callers can access the replay by calling 404/537-3406. The replay pass code is: 51095102. The replay will be available through November 13, 2012. In addition, a live Web cast will be available on SuperMedias Web site in the Investor Relations section at www.supermedia.com.
Basis of Presentation and Non-GAAP Financial Measures
For the readers convenience, the financial information accompanying this release provides a reconciliation of GAAP to non-GAAP and adjusted non-GAAP results. SuperMedia believes that the use of non-GAAP financial measures provide useful information to investors to gain an overall understanding of its current financial performance. Specifically, SuperMedia believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that SuperMedia believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring SuperMedias performance and SuperMedia believes that it is providing investors with financial measures that most closely align to its internal measurement processes.
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Forward-Looking Statements
Some statements included in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the federal securities laws. Statements that include the words may, will, could, should, would, believe, anticipate, forecast, estimate, expect, preliminary, intend, plan, project, outlook and similar statements of a future or forward-looking nature identify forward-looking statements. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and industry in general. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the risks related to the following:
· our inability to provide assurance for the long-term continued viability of our business;
· reduced advertising spending and increased contract cancellations by our clients, which causes reduced revenue;
· declining use of print yellow pages directories by consumers;
· competition from other yellow pages directory publishers and other traditional and new media;
· our ability to anticipate or respond to changes in technology and user preferences;
· changes in our operating performance;
· limitations on our operating and strategic flexibility and the ability to operate our business, finance our capital needs or expand business strategies under the terms of our credit agreement;
· failure to comply with the financial covenants and other restrictive covenants in our credit agreement;
· limited access to capital markets and increased borrowing costs resulting from our leveraged capital structure and debt ratings;
· changes in the availability and cost of paper and other raw materials used to print our directories;
· our reliance on third-party providers for printing, publishing and distribution services;
· credit risk associated with our reliance on small- and medium-sized businesses as clients;
· our ability to attract and retain qualified key personnel;
· our ability to maintain good relations with our unionized employees;
· changes in labor, business, political and economic conditions;
· changes in governmental regulations and policies and actions of federal, state and local municipalities;
· the outcome of pending or future litigation and other claims;
· the potential adverse impacts of failure to complete, or delay in completing the proposed merger with Dex as a result of obtaining consents from the stockholders and secured creditors of Dex or the Company;
· the possibility that our merger agreement with Dex could be unilaterally terminated by either party;
· the business uncertainties and contractual restrictions arising from the timing and closing of the proposed merger with Dex, including the possible inability to consummate the proposed transaction on the terms set forth in the merger agreement;
· the significant costs associated with the potential transaction with Dex;
· the risk that we may not timely or successfully realize the anticipated cost savings, growth opportunities and other financial and operating benefits as a result of the transaction; and
· difficulties in connection with the process of integrating Dex and the Company, including the risk that benefits from the transaction may be significantly offset by costs incurred in integrating the companies.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission (the SEC), including the information in Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the year ended December 31, 2011 as updated in the subsequent quarterly reports on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. All forward-looking statements included in this report are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Important Information For Investors and Security Holders
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The proposed merger transaction between SuperMedia and Dex will be submitted to the respective stockholders of SuperMedia and Dex. In connection with the proposed transaction, Newdex, Inc., a subsidiary of Dex (Newdex), will file with the SEC a registration statement on Form S-4 that will include a joint proxy statement/prospectus to be used by SuperMedia and Dex to solicit the required approval of their stockholders and that also constitutes a prospectus of Newdex. INVESTORS AND SECURITY HOLDERS OF SUPERMEDIA AND DEX ARE ADVISED TO CAREFULLY READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS ASSOCIATED WITH THE TRANSACTION. A
definitive joint proxy statement/prospectus will be sent to security holders of SuperMedia and Dex seeking their approval of the proposed transaction. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when available) and other relevant documents filed by SuperMedia and Dex with the SEC from the SECs website at www.sec.gov. Copies of the documents filed by SuperMedia with the SEC will be available free of charge on SuperMedias website at www.supermedia.com under the tab Investors or by contacting SuperMedias Investor Relations Department at (877) 343-3272. Copies of the documents filed by Dex with the SEC will be available free of charge on Dexs website at www.dexone.com under the tab Investors or by contacting Dexs Investor Relations Department at (800) 497-6329.
SuperMedia and Dex and their respective directors, executive officers and certain other members of management may be deemed to be participants in the solicitation of proxies from their respective security holders with respect to the transaction. Information about these persons is set forth in SuperMedias proxy statement relating to its 2012 Annual Meeting of Shareholders and Dexs proxy statement relating to its 2012 Annual Meeting of Stockholders, as filed with the SEC on April 11, 2012 and March 22, 2012, respectively, and subsequent statements of changes in beneficial ownership on file with the SEC. These documents can be obtained free of charge from the sources described above. Security holders and investors may obtain additional information regarding the interests of such persons, which may be different than those of the respective companies security holders generally, by reading the joint proxy statement/prospectus and other relevant documents regarding the transaction (when available), which will be filed with the SEC.
About SuperMedia
SuperMedia Inc. (NASDAQ: SPMD) helps small and medium-sized businesses grow through effective local marketing solutions across print, online, mobile and social media. SuperMedia provides a full range of solutions including: the award-winning SuperGuarantee® program, Superpages® directories, published for Verizon®, FairPoint® and Frontier®, Superpages.com®, EveryCarListed.com®, Superpages for your mobile and Superpages direct mail products. For more information, visit www.supermedia.com.
SPMD-G
SuperMedia Inc.
Consolidated Statements of Comprehensive Income (Loss)
Reported (GAAP)
Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011
(dollars in millions, except per share amounts)
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9 Mos. Ended |
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9 Mos. Ended |
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Unaudited |
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9/30/12 |
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9/30/11 |
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% Change |
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Operating Revenue |
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$ |
1,042 |
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$ |
1,258 |
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(17.2 |
) |
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Operating Expense |
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Selling |
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261 |
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334 |
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(21.9 |
) | ||
Cost of sales (exclusive of depreciation and amortization) |
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249 |
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312 |
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(20.2 |
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General and administrative |
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78 |
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166 |
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(53.0 |
) | ||
Depreciation and amortization |
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119 |
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131 |
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(9.2 |
) | ||
Impairment charge |
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1,003 |
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(100.0 |
) | ||
Total Operating Expense |
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707 |
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1,946 |
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(63.7 |
) | ||
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Operating Income (Loss) |
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335 |
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(688 |
) |
NM |
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Interest expense, net |
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129 |
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172 |
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(25.0 |
) | ||
Income (Loss) Before Reorganization Items, Gains on Early Extinguishment of Debt and Provision for Income Taxes |
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206 |
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(860 |
) |
NM |
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Reorganization items |
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(1 |
) |
(1 |
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Gains on early extinguishment of debt |
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51 |
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NM |
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Income (Loss) Before Provision for Income Taxes |
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256 |
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(861 |
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NM |
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Provision for income taxes |
|
78 |
|
48 |
|
62.5 |
| ||
Net Income (Loss) |
|
$ |
178 |
|
$ |
(909 |
) |
NM |
|
|
|
|
|
|
|
|
| ||
Basic and Diluted Earnings (Loss) per Common Share (1) (2) (3) |
|
$ |
11.36 |
|
$ |
(60.15 |
) |
NM |
|
Basic and diluted weighted-average common shares outstanding |
|
15.3 |
|
15.1 |
|
|
| ||
|
|
|
|
|
|
|
| ||
Comprehensive Income (Loss) |
|
|
|
|
|
|
| ||
Net Income (Loss) |
|
$ |
178 |
|
$ |
(909 |
) |
NM |
|
Adjustments for pension and post-employment benefits, net of tax (4) |
|
137 |
|
12 |
|
NM |
| ||
Total Comprehensive Income (Loss) |
|
$ |
315 |
|
$ |
(897 |
) |
NM |
|
Notes:
(1) Equity based awards granted had no impact on the calculation of diluted earnings per common share.
(2) Net income allocated to participating securities (unvested restricted stock awards) which are eligible to receive dividend equivalents is excluded from the calculation of EPS. The amount excluded from earnings per common share was $5 million for the nine months ended September 30, 2012.
(3) Basic and diluted earnings per common share for the nine months ended September 30, 2012 includes a correction of a calculation error that was previously reported for the three months ended March 31, 2012. The corrected basic and diluted earnings per common share for the three months ended March 31, 2012 was $3.97 as opposed to $3.92 previously reported.
(4) Adjustments for pension and post-employment benefits, net of tax of $137 million includes an adjustment for the after-tax deferred gain of $161 million associated with certain amendments to the Companys other post-employment benefit plans. This is offset by amortization of $29 million ($18 million after-tax) of deferred gains/losses related to other post-employment benefits which is included in net income as part of general and administrative expense.
SuperMedia Inc.
Consolidated Statements of Comprehensive Income (Loss)
Reported (GAAP)
Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
(dollars in millions, except per share amounts)
|
|
3 Mos. Ended |
|
3 Mos. Ended |
|
|
| ||
Unaudited |
|
9/30/12 |
|
9/30/11 |
|
% Change |
| ||
|
|
|
|
|
|
|
| ||
Operating Revenue |
|
$ |
330 |
|
$ |
399 |
|
(17.3 |
) |
|
|
|
|
|
|
|
| ||
Operating Expense |
|
|
|
|
|
|
| ||
Selling |
|
83 |
|
106 |
|
(21.7 |
) | ||
Cost of sales (exclusive of depreciation and amortization) |
|
79 |
|
96 |
|
(17.7 |
) | ||
General and administrative |
|
4 |
|
48 |
|
(91.7 |
) | ||
Depreciation and amortization |
|
39 |
|
43 |
|
(9.3 |
) | ||
Impairment charge |
|
|
|
1,003 |
|
(100.0 |
) | ||
Total Operating Expense |
|
205 |
|
1,296 |
|
(84.2 |
) | ||
|
|
|
|
|
|
|
| ||
Operating Income (Loss) |
|
125 |
|
(897 |
) |
NM |
| ||
Interest expense, net |
|
40 |
|
58 |
|
(31.0 |
) | ||
Income (Loss) Before Reorganization Items and Provision for Income Taxes |
|
85 |
|
(955 |
) |
NM |
| ||
|
|
|
|
|
|
|
| ||
Reorganization items |
|
(1 |
) |
|
|
NM |
| ||
|
|
|
|
|
|
|
| ||
Income (Loss) Before Provision for Income Taxes |
|
84 |
|
(955 |
) |
NM |
| ||
Provision for income taxes |
|
32 |
|
13 |
|
146.2 |
| ||
Net Income (Loss) |
|
$ |
52 |
|
$ |
(968 |
) |
NM |
|
|
|
|
|
|
|
|
| ||
Basic and Diluted Earnings (Loss) per Common Share (1) (2) |
|
$ |
3.27 |
|
$ |
(63.97 |
) |
NM |
|
Basic and diluted weighted-average common shares outstanding |
|
15.3 |
|
15.1 |
|
|
| ||
|
|
|
|
|
|
|
| ||
Comprehensive Income (Loss) |
|
|
|
|
|
|
| ||
Net Income (Loss) |
|
$ |
52 |
|
$ |
(968 |
) |
NM |
|
Adjustments for pension and post-employment benefits, net of tax (3) |
|
(36 |
) |
9 |
|
NM |
| ||
Total Comprehensive Income (Loss) |
|
$ |
16 |
|
$ |
(959 |
) |
NM |
|
(1) Equity based awards granted had no impact on the calculation of diluted earnings per common share.
(2) Net income allocated to participating securities (unvested restricted stock awards) which are eligible to receive dividend equivalents is excluded from the calculation of EPS. The amount excluded from earnings per common share was $2 million for the three months ended September 30, 2012.
(3) Adjustments for pension and post-employment benefits, net of tax of ($36) million includes an amortization credit of $29 million ($18 million after-tax) included in net income as part of general and administrative expense, which represents the after-tax amortization of deferred gains/losses associated with the Companys other post-employment benefits.
SuperMedia Inc.
Reconciliation of Non-GAAP Measures
Nine Months Ended September 30, 2012 and 2011
(dollars in millions)
Unaudited |
|
9 Mos. Ended |
|
9 Mos. Ended |
| ||
|
|
|
|
|
| ||
Net Income (Loss) - GAAP |
|
$ |
178 |
|
$ |
(909 |
) |
Add/subtract non-operating items: |
|
|
|
|
| ||
Provision for income taxes |
|
78 |
|
48 |
| ||
Interest expense, net |
|
129 |
|
172 |
| ||
Reorganization items (5) |
|
1 |
|
1 |
| ||
Gains on early extinguishment of debt (6) |
|
(51 |
) |
|
| ||
Operating Income (Loss) |
|
335 |
|
(688 |
) | ||
Depreciation and amortization |
|
119 |
|
131 |
| ||
EBITDA (non-GAAP) (1) |
|
454 |
|
(557 |
) | ||
|
|
|
|
|
| ||
Adjustments: |
|
|
|
|
| ||
Severance costs/other (7) |
|
2 |
|
17 |
| ||
Merger transaction costs (8) |
|
2 |
|
|
| ||
Post-employment benefits amortization (9) |
|
(29 |
) |
|
| ||
Impairment charge (10) |
|
|
|
1,003 |
| ||
Adjusted EBITDA (non-GAAP) (2) |
|
$ |
429 |
|
$ |
463 |
|
|
|
|
|
|
| ||
Operating Revenue |
|
$ |
1,042 |
|
$ |
1,258 |
|
|
|
|
|
|
| ||
Operating Income (Loss) margin (3) |
|
32.1 |
% |
-54.7 |
% | ||
Impact of depreciation and amortization |
|
11.5 |
% |
10.4 |
% | ||
EBITDA margin (non-GAAP) (4) |
|
43.6 |
% |
-44.3 |
% | ||
Impact of adjustments |
|
-2.4 |
% |
81.1 |
% | ||
Adjusted EBITDA margin (non-GAAP) (4) |
|
41.2 |
% |
36.8 |
% |
Notes:
(1) EBITDA is a non-GAAP measure that represents earnings before interest, taxes, reorganization items, gains on early extinguishment of debt, depreciation and amortization.
(2) Adjusted EBITDA is a non-GAAP measure that adjusts EBITDA for certain unique costs.
(3) Operating Income (Loss) margin is calculated by dividing Operating Income (Loss) by Operating Revenue.
(4) EBITDA and Adjusted EBITDA margin is calculated by dividing EBITDA and Adjusted EBITDA by Operating Revenue.
(5) Reorganization items represent charges that are directly associated with the process of reorganizing the business under Chapter 11 of the United States Bankruptcy Code.
(6) Gains on early extinguishment of debt represents the gains associated with the purchase of a portion of the Companys debt below par value.
(7) Severance costs are associated with headcount reductions. Other items includes charges associated with a non-recurring vendor settlement.
(8) Merger transaction costs are costs associated with the proposed merger transaction with Dex One.
(9) Post-employment benefits amortization includes $32 million related to a deferred pretax gain of $257 million ($161 million after-tax) associated with plan amendments and amortization of unrecognized net losses of $3 million related to other post-employment benefits.
(10) Represents a non-cash impairment charge associated with the write down of goodwill.
SuperMedia Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended September 30, 2012 and 2011
(dollars in millions)
Unaudited |
|
3 Mos. Ended |
|
3 Mos. Ended |
| ||
|
|
|
|
|
| ||
Net Income (Loss) - GAAP |
|
$ |
52 |
|
$ |
(968 |
) |
Add/subtract non-operating items: |
|
|
|
|
| ||
Provision for income taxes |
|
32 |
|
13 |
| ||
Interest expense, net |
|
40 |
|
58 |
| ||
Reorganization items (5) |
|
1 |
|
|
| ||
Operating Income (Loss) |
|
125 |
|
(897 |
) | ||
Depreciation and amortization |
|
39 |
|
43 |
| ||
EBITDA (non-GAAP) (1) |
|
164 |
|
(854 |
) | ||
|
|
|
|
|
| ||
Adjustments: |
|
|
|
|
| ||
Severance costs/other (6) |
|
|
|
8 |
| ||
Merger transaction costs (7) |
|
2 |
|
|
| ||
Post-employment benefits amortization (8) |
|
(29 |
) |
|
| ||
Impairment charge (9) |
|
|
|
1,003 |
| ||
Adjusted EBITDA (non-GAAP) (2) |
|
$ |
137 |
|
$ |
157 |
|
|
|
|
|
|
| ||
Operating Revenue |
|
$ |
330 |
|
$ |
399 |
|
|
|
|
|
|
| ||
Operating Income (Loss) margin (3) |
|
37.9 |
% |
-224.8 |
% | ||
Impact of depreciation and amortization |
|
11.8 |
% |
10.8 |
% | ||
EBITDA margin (non-GAAP) (4) |
|
49.7 |
% |
-214.0 |
% | ||
Impact of adjustments |
|
-8.2 |
% |
253.3 |
% | ||
Adjusted EBITDA margin (non-GAAP) (4) |
|
41.5 |
% |
39.3 |
% |
Notes:
(1) EBITDA is a non-GAAP measure that represents earnings before interest, taxes, reorganization items, gains on early extinguishment of debt, depreciation and amortization.
(2) Adjusted EBITDA is a non-GAAP measure that adjusts EBITDA for certain unique costs.
(3) Operating Income (Loss) margin is calculated by dividing Operating Income (Loss) by Operating Revenue.
(4) EBITDA and Adjusted EBITDA margin is calculated by dividing EBITDA and Adjusted EBITDA by Operating Revenue.
(5) Reorganization items represent charges that are directly associated with the process of reorganizing the business under Chapter 11 of the United States Bankruptcy Code.
(6) Severance costs are associated with headcount reductions. Other items includes charges associated with a non-recurring vendor settlement.
(7) Merger tranasation costs are costs associated with the proposed merger transaction with Dex One.
(8) Post-employment benefits amortization includes $32 million related to a deferred pretax gain of $257 million ($161 million after-tax) associated with plan amendments and amortization of unrecognized net losses of $3 million related to other post-employment benefits.
(9) Represents a non-cash impairment charge associated with the write down of goodwill.
SuperMedia Inc.
Consolidated Balance Sheets
Reported (GAAP)
As of September 30, 2012 and December 31, 2011
(dollars in millions)
Unaudited |
|
9/30/2012 |
|
12/31/2011 |
|
$ Change |
| |||
|
|
|
|
|
|
|
| |||
Assets |
|
|
|
|
|
|
| |||
Current assets: |
|
|
|
|
|
|
| |||
Cash and cash equivalents |
|
$ |
94 |
|
$ |
90 |
|
$ |
4 |
|
Accounts receivable, net of allowances of $43 and $59 |
|
117 |
|
147 |
|
(30 |
) | |||
Accrued taxes receivable |
|
|
|
27 |
|
(27 |
) | |||
Deferred directory costs |
|
130 |
|
155 |
|
(25 |
) | |||
Prepaid expenses and other |
|
11 |
|
12 |
|
(1 |
) | |||
Total current assets |
|
352 |
|
431 |
|
(79 |
) | |||
Property, plant and equipment |
|
128 |
|
127 |
|
1 |
| |||
Less: accumulated depreciation |
|
70 |
|
53 |
|
17 |
| |||
|
|
58 |
|
74 |
|
(16 |
) | |||
Goodwill |
|
704 |
|
704 |
|
|
| |||
Intangible assets, net |
|
250 |
|
345 |
|
(95 |
) | |||
Pension assets |
|
74 |
|
75 |
|
(1 |
) | |||
Other non-current assets |
|
6 |
|
4 |
|
2 |
| |||
Total Assets |
|
$ |
1,444 |
|
$ |
1,633 |
|
$ |
(189 |
) |
|
|
|
|
|
|
|
| |||
Liabilities and Stockholders (Deficit) |
|
|
|
|
|
|
| |||
Current liabilities: |
|
|
|
|
|
|
| |||
Current maturities of long-term debt |
|
$ |
1 |
|
$ |
4 |
|
$ |
(3 |
) |
Accounts payable and accrued liabilities |
|
105 |
|
126 |
|
(21 |
) | |||
Deferred revenue |
|
68 |
|
82 |
|
(14 |
) | |||
Deferred tax liabilities |
|
7 |
|
4 |
|
3 |
| |||
Other |
|
12 |
|
18 |
|
(6 |
) | |||
Total current liabilities |
|
193 |
|
234 |
|
(41 |
) | |||
Long-term debt |
|
1,474 |
|
1,741 |
|
(267 |
) | |||
Employee benefit obligations |
|
104 |
|
364 |
|
(260 |
) | |||
Non-current deferred tax liabilities |
|
100 |
|
43 |
|
57 |
| |||
Unrecognized tax benefits |
|
43 |
|
39 |
|
4 |
| |||
|
|
|
|
|
|
|
| |||
Stockholders (deficit): |
|
|
|
|
|
|
| |||
Common stock ($.01 par value; 60 million shares authorized, 15,666,504 and 15,468,740 shares issued and outstanding in 2012 and 2011, respectively) |
|
|
|
|
|
|
| |||
Additional paid-in capital |
|
213 |
|
210 |
|
3 |
| |||
Retained (deficit) |
|
(789 |
) |
(967 |
) |
178 |
| |||
Accumulated other comprehensive income (loss) |
|
106 |
|
(31 |
) |
137 |
| |||
Total stockholders (deficit) |
|
(470 |
) |
(788 |
) |
318 |
| |||
Total Liabilities and Stockholders (Deficit) |
|
$ |
1,444 |
|
$ |
1,633 |
|
$ |
(189 |
) |
SuperMedia Inc.
Consolidated Statements of Cash Flows
Reported (GAAP) and Non-GAAP Financial Reconciliation - Free Cash Flow
Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011
(dollars in millions)
Unaudited |
|
9 Mos. Ended |
|
9 Mos. Ended |
|
$ Change |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
| |||
Net Income (Loss) |
|
$ |
178 |
|
$ |
(909 |
) |
$ |
1,087 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
| |||
Depreciation and amortization expense |
|
119 |
|
131 |
|
(12 |
) | |||
Gains on early extinguishment of debt |
|
(51 |
) |
|
|
(51 |
) | |||
Employee retirement benefits |
|
(30 |
) |
12 |
|
(42 |
) | |||
Deferred income taxes |
|
(22 |
) |
(32 |
) |
10 |
| |||
Provision for uncollectible accounts |
|
15 |
|
50 |
|
(35 |
) | |||
Stock-based compensation expense |
|
3 |
|
3 |
|
|
| |||
Impairment charge |
|
|
|
1,003 |
|
(1,003 |
) | |||
Changes in current assets and liabilities |
|
|
|
|
|
|
| |||
Accounts receivable and unbilled accounts receivable |
|
15 |
|
3 |
|
12 |
| |||
Deferred directory costs |
|
25 |
|
36 |
|
(11 |
) | |||
Other current assets |
|
2 |
|
(1 |
) |
3 |
| |||
Accounts payable and accrued liabilities |
|
(4 |
) |
(139 |
) |
135 |
| |||
Other, net |
|
(16 |
) |
(17 |
) |
1 |
| |||
Net cash provided by operating activities |
|
234 |
|
140 |
|
94 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Investing Activities |
|
|
|
|
|
|
| |||
Capital expenditures (including capitalized software) |
|
(9 |
) |
(11 |
) |
2 |
| |||
Net cash used in investing activities |
|
(9 |
) |
(11 |
) |
2 |
| |||
|
|
|
|
|
|
|
| |||
Cash Flows from Financing Activities |
|
|
|
|
|
|
| |||
Repayment of long-term debt |
|
(218 |
) |
(36 |
) |
(182 |
) | |||
Other, net |
|
(3 |
) |
|
|
(3 |
) | |||
Net cash used in financing activities |
|
(221 |
) |
(36 |
) |
(185 |
) | |||
Increase (decrease) in cash and cash equivalents |
|
4 |
|
93 |
|
(89 |
) | |||
Cash and cash equivalents, beginning of year |
|
90 |
|
174 |
|
(84 |
) | |||
Cash and cash equivalents, end of period |
|
$ |
94 |
|
$ |
267 |
|
$ |
(173 |
) |
Non-GAAP Financial Reconciliation - Free Cash Flow |
|
9 Mos. Ended |
|
9 Mos. Ended |
|
$ Change |
| |||
Unaudited |
|
|
|
|
|
|
| |||
Net cash provided by operating activities |
|
$ |
234 |
|
$ |
140 |
|
$ |
94 |
|
Less: Capital expenditures (including capitalized software) |
|
(9 |
) |
(11 |
) |
2 |
| |||
Free Cash Flow |
|
$ |
225 |
|
$ |
129 |
|
$ |
96 |
|
SuperMedia Inc.
Advertising Sales
(dollars in millions)
|
|
3 Mos. Ended |
|
3 Mos. Ended |
|
3 Mos. Ended |
|
9 Mos. Ended |
|
9 Mos. Ended |
|
9 Mos. Ended |
| ||||||
Unaudited |
|
9/30/12 |
|
9/30/11 |
|
9/30/10 |
|
9/30/12 |
|
9/30/11 |
|
9/30/10 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Advertising Sales(1) (2) |
|
$ |
262 |
|
$ |
324 |
|
$ |
384 |
|
$ |
895 |
|
$ |
1,102 |
|
$ |
1,323 |
|
% Change year-over-year |
|
(19.1 |
)% |
(15.6 |
)% |
|
|
(18.8 |
)% |
(16.7 |
)% |
|
| ||||||
Notes:
(1) Net advertising sales is an operating measure used by the Company to compare advertising sales for current advertising periods to corresponding sales for previous periods. It is important to distinguish net advertising sales from operating revenue, which on our financial statements is recognized under the deferral and amortization method.
(2) Advertising sales for the nine months ended September 30, 2011 include negative adjustments of $11 million, related to the financial distress and operational wind down of a single certified marketing representative in our third-party national sales channel. Excluding this impact, advertising sales for the nine months ended September 30, 2012 would have reflected a decline of 19.6%. As of June 2011, these accounts were transitioned to other certified marketing representative firms.
Exhibit 99.2
|
Q3 2012 Earnings Presentation October 30, 2012 Peter McDonald, CEO Dee Jones, CFO |
|
Safe Harbor Statement Some statements included in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the federal securities laws. Statements that include the words may, will, could, should, would, believe, anticipate, forecast, estimate, expect, preliminary, intend, plan, project, outlook and similar statements of a future or forward-looking nature identify forward-looking statements. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and industry in general. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the risks related to the following: our inability to provide assurance for the long-term continued viability of our business; reduced advertising spending and increased contract cancellations by our clients, which causes reduced revenue; declining use of print yellow pages directories by consumers; competition from other yellow pages directory publishers and other traditional and new media; our ability to anticipate or respond to changes in technology and user preferences; changes in our operating performance; limitations on our operating and strategic flexibility and the ability to operate our business, finance our capital needs or expand business strategies under the terms of our credit agreement; failure to comply with the financial covenants and other restrictive covenants in our credit agreement; limited access to capital markets and increased borrowing costs resulting from our leveraged capital structure and debt ratings; changes in the availability and cost of paper and other raw materials used to print our directories; our reliance on third-party providers for printing, publishing and distribution services; credit risk associated with our reliance on small- and medium-sized businesses as clients; our ability to attract and retain qualified key personnel; our ability to maintain good relations with our unionized employees; changes in labor, business, political and economic conditions; changes in governmental regulations and policies and actions of federal, state and local municipalities; the outcome of pending or future litigation and other claims; the potential adverse impacts of failure to complete, or delay in completing the proposed merger with Dex as a result of obtaining consents from the stockholders and secured creditors of Dex or the Company; the possibility that our merger agreement with Dex could be unilaterally terminated by either party; the business uncertainties and contractual restrictions arising from the timing and closing of the proposed merger with Dex, including the possible inability to consummate the proposed transaction on the terms set forth in the merger agreement; the significant costs associated with the potential transaction with Dex; the risk that we may not timely or successfully realize the anticipated cost savings, growth opportunities and other financial and operating benefits as a result of the transaction; and difficulties in connection with the process of integrating Dex and the Company, including the risk that benefits from the transaction may be significantly offset by costs incurred in integrating the companies. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission (the SEC), including the information in Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the year ended December 31, 2011 as updated in the subsequent quarterly reports on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. All forward-looking statements included in this report are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
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Peter McDonald, CEO |
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National Presence: Increased Scale & Scope More Than 3,100 Marketing Consultants Building Trusted Relationships and Delivering Results to Over 700,000 Local Businesses |
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Financial Results YTD Expenses Expenses Down YTD 2011 2012 Adjusted EBITDA Margin 2011 2012 Adjusted Expense Reduction 22.9% Adjusted EBITDA margin 41.2% Improved EBITDA margin of 440 bps 1 Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, which excludes the gains realized on early extinguishment of debt, reorganizational items, merger transaction costs, severance costs, post-employment benefit amortization, as well as, a non-recurring vendor settlement and a non-cash impairment charge associated with a write down of goodwill in 2011. |
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Merchant Platform Patent Patent 8,239,393 for the Distribution of Online Listings The patent covers: Pacing budget delivery Distribution Partner Quality Scoring individual and comparatively Conversion Tracking calls, emails, and forms Client and Client Budget Distribution based on quality and volume potentials to various traffic sources Methods of Reverse Proxy, including but not limited to the methods of capturing calls, emails, forms, etc. Tracking traffic sources overall and relative to the above Grouping traffic sources based on common patterns and characteristics |
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Turning Leads Into Clients |
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Peter McDonald, CEO |
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Dee Jones, CFO |
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Financial Overview - Revenue Comparison Q3 2012 revenue declined 17.3 percent and 17.2 percent YTD compared to prior year 2011 Q3 2012 2012 Q3 2011 |
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Financial Overview Net Advertising Sales¹ Net ad sales exclusive of the CMR impact² -19.9% -19.7% -16.3 % -15.6% -19.1% (2) Advertising sales for the nine months ended September 30, 2011 include negative adjustments of $11 million, related to the financial distress and operational wind down of a single certified marketing representative in our third-party national sales channel. Excluding this impact, advertising sales for the nine months ended September 30, 2012 would have reflected a decline of 19.6%. As of June 2011, these accounts were transitioned to other certified marketing representative firms. (1) Net advertising sales is an operating measure used by the Company to compare advertising sales for current advertising periods to corresponding sales for previous periods. It is important to distinguish net advertising sales from operating revenue, which on our financial statements is recognized under the deferral and amortization method.. |
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Financial Overview - Adjusted EBITDA¹ Comparison 2011 Q3 2012 2012 Q3 2011 Q3 2012 adjusted EBITDA declined 12.7 percent 2012 YTD adjusted EBITDA declined 7.3 percent ¹Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP measure, which excludes the gains realized on early extinguishment of debt, reorganization items, merger transaction costs, severance costs , post-employment benefit amortization, as well as, a non-recurring vendor settlement and a non-cash impairment charge associated with a write down of goodwill in 2011. |
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Financial Overview YTD Adjusted Expenses ¹ Selling continued improvement in sales force efficiencies and related costs Cost of Sales primarily lower print volumes and distribution costs; efficiencies across all functions G&A lower bad debt expense; efficiencies across various functions ¹ Adjusted expenses exclude severance costs, merger transaction costs, post-employment benefits amortization, impairment charges and depreciation and amortization. |
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Financial Overview Debt Deleverage Total Debt Principal YTD reduced by $270M Total Cash impact $219M includes transaction fees of $1M Below Par Payment $116M is comprised of $60M in Q1, $56M in Q2 which represents cash payments of $32M and $33M, respectively 1/1/12 Cash Balance $90M Q1 Free Cash Flow $103M Payments At Par $4M Below Par $32M 3/31/12 Cash Balance $157M Q2 Free Cash Flow $67M Payments At Par $114M Below Par $33M 6/30/12 Cash Balance $77M Q3 Free Cash Flow $55M Payments At Par $36M Misc. $2M 9/30/12 Cash Balance $94M |
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