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TheStreet Open House

SuperMedia Announces Second Quarter 2012 Results

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.

 
SuperMedia Inc.
Consolidated Statements of Comprehensive Income
         
Reported (GAAP)
Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011
(dollars in millions, except per share amounts)
 
6 Mos. Ended 6 Mos. Ended
Unaudited   6/30/12     6/30/11     % Change
 
Operating Revenue $ 712 $ 859 (17.1 )
 
Operating Expense
Selling 178 228 (21.9 )
Cost of sales (exclusive of depreciation and amortization) 170 216 (21.3 )
General and administrative 74 118 (37.3 )
Depreciation and amortization   80       88   (9.1 )
Total Operating Expense 502 650 (22.8 )
 
Operating Income 210 209 0.5
Interest expense, net   89       114   (21.9 )
Income Before Reorganization Items, Gains on Early
Extinguishment of Debt and Provision for Income Taxes 121 95 27.4
 
Reorganization items - (1 ) (100.0 )
Gains on early extinguishment of debt   51       -   NM
Income Before Provision for Income Taxes 172 94 83.0
Provision for income taxes   46       35   31.4
Net Income $ 126     $ 59   113.6
 

Basic and Diluted Earnings per Common Share (1) (2) (3)

$ 8.08 $ 3.79 113.2

Basic and diluted weighted-average common shares outstanding

15.3 15.1
 
Comprehensive Income
Net Income $ 126

 

$ 59 113.6
Adjustments for pension and post-employment benefits, net of tax (4)   173  

 

  3   NM
Total Comprehensive Income $ 299  

 

$ 62       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 $3 million and $2 million for the six months ended June 30, 2012 and 2011, respectively.

 

(3)

Basic and diluted earnings per common share for the six months ended June 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 $173 million includes a gain of $164 million associated with certain amendments to the Company's post-employment health care and life insurance benefit plans.

 
 

Schedule A

 
 
SuperMedia Inc.
Consolidated Statements of Comprehensive Income
         
Reported (GAAP)
Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011
(dollars in millions, except per share amounts)
 
3 Mos. Ended 3 Mos. Ended
Unaudited   6/30/12     6/30/11     % Change
 
Operating Revenue $ 349 $ 421 (17.1 )
 
Operating Expense
Selling 88 112 (21.4 )
Cost of sales (exclusive of depreciation and amortization) 84 106 (20.8 )
General and administrative 33 53 (37.7 )
Depreciation and amortization   40       44   (9.1 )
Total Operating Expense 245 315 (22.2 )
 
Operating Income 104 106 (1.9 )
Interest expense, net   43       57   (24.6 )
Income Before Reorganization Items, Gains on Early

 

Extinguishment of Debt and Provision for Income Taxes

 

61 49 24.5
 
Reorganization items - (1 ) (100.0 )
Gains on early extinguishment of debt   23       -   NM
Income Before Provision for Income Taxes

 

84 48 75.0
Provision for income taxes   20       19   5.3
Net Income $ 64     $ 29   120.7
 

Basic and Diluted Earnings per Common Share (1) (2)

$ 4.11 $ 1.89 117.5

Basic and diluted weighted-average common shares outstanding

15.3 15.1
 
Comprehensive Income
Net Income $ 64

 

$ 29 120.7
Adjustments for pension and post-employment benefits, net of tax (3)   173  

 

  5   NM
Total Comprehensive Income $ 237  

 

$ 34       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 for the three months ended June 30, 2012 and June 30, 2011 was $1 million for both periods.

 

(3)

Adjustments for pension and post-employment benefits, net of tax of $173 million includes a gain of $164 million associated with certain amendments to the Company's post-employment health care and life insurance benefit plans.

 
 

Schedule B

 
 
SuperMedia Inc.
Reconciliation of Non-GAAP Measures
     
Six Months Ended June 30, 2012 and 2011
(dollars in millions)
 
Unaudited  

6 Mos. Ended6/30/12

   

6 Mos. Ended6/30/11

 
Net Income - GAAP $ 126 $ 59
Add/subtract non-operating items:
Provision for income taxes 46 35
Interest expense, net 89 114

Reorganization items (7)

- 1

Gains on early extinguishment of debt (6)

  (51 )       -  
Operating Income 210 209
Depreciation and amortization   80         88  
EBITDA (non-GAAP) (1)   290         297  
 
Adjustments:

Severance costs (5)

  2         9  
Adjusted EBITDA (non-GAAP) (2) $ 292       $ 306  
 
 
Operating Revenue $ 712 $ 859
 

Operating Income margin (3)

29.5 % 24.3 %
Impact of depreciation and amortization   11.2 %       10.3 %
EBITDA margin (non-GAAP) (4)   40.7 %       34.6 %
Impact of adjustments   0.3 %       1.0 %
Adjusted EBITDA margin (non-GAAP) (4)   41.0 %       35.6 %
Notes:
 

(1)

EBITDA is a non-GAAP measure that represents earnings before interest, taxes, gains on early extinguishment of debt, depreciation and amortization.

 

(2)

Adjusted EBITDA is a non-GAAP measure that adjusts EBITDA for certain unique costs including severance costs.

 

(3)

Operating Income margin is calculated by dividing Operating Income by Operating Revenue.

 

(4)

EBITDA and Adjusted EBITDA margin is calculated by dividing EBITDA and Adjusted EBITDA by Operating Revenue.

 

(5)

Severance costs are associated with headcount reductions.

 

(6)

Gains on early extinguishment of debt represents the gains associated with the purchase of a portion of the Company's debt below par value.

 

(7)

Reorganization items represent charges that are directly associated with the process of reorganizing the business under Chapter 11 of the United States Bankruptcy Code.

 
 

Schedule C

 
 
SuperMedia Inc.
Reconciliation of Non-GAAP Measures
     
Three Months Ended June 30, 2012 and 2011
(dollars in millions)
 
Unaudited  

3 Mos. Ended6/30/12

   

3 Mos. Ended6/30/11

 
Net Income - GAAP $ 64 $ 29
Add/subtract non-operating items:
Provision for income taxes 20 19
Interest expense, net 43 57

Reorganization items (7)

- 1

Gains on early extinguishment of debt (6)

  (23 )       -  
Operating Income 104 106
Depreciation and amortization   40         44  
EBITDA (non-GAAP) (1)   144         150  
 
Adjustments:

Severance costs (5)

  -         2  
Adjusted EBITDA (non-GAAP) (2) $ 144       $ 152  
 
 
Operating Revenue $ 349 $ 421
 

Operating Income margin (3)

29.8 % 25.2 %
Impact of depreciation and amortization   11.5 %       10.4 %
EBITDA margin (non-GAAP) (4)   41.3 %       35.6 %
Impact of adjustments   0.0 %       0.5 %
Adjusted EBITDA margin (non-GAAP) (4)   41.3 %       36.1 %
Notes:
 

(1)

EBITDA is a non-GAAP measure that represents earnings before interest, taxes, gains on early extinguishment of debt, depreciation and amortization.

 

(2)

Adjusted EBITDA is a non-GAAP measure that adjusts EBITDA for certain unique costs including severance costs.

 

(3)

Operating Income margin is calculated by dividing Operating Income by Operating Revenue.

 

(4)

EBITDA and Adjusted EBITDA margin is calculated by dividing EBITDA and Adjusted EBITDA by Operating Revenue.

 

(5)

Severance costs are associated with headcount reductions.

 

(6)

Gains on early extinguishment of debt represents the gains associated with the purchase of a portion of the Company's debt below par value.

 

(7)

Reorganization items represent charges that are directly associated with the process of reorganizing the business under Chapter 11 of the United States Bankruptcy Code.

 
 

Schedule D

 
 
SuperMedia Inc.
Consolidated Balance Sheets
         
Reported (GAAP)
As of June 30, 2012 and December 31, 2011
(dollars in millions)
 
Unaudited   6/30/2012     12/31/2011    

$ Change

 
Assets
Current assets:
Cash and cash equivalents $ 77 $ 90 $ (13 )
Accounts receivable, net of allowances of $47 and $59 132 147 (15 )
Accrued taxes receivable - 27 (27 )
Deferred directory costs 138 155 (17 )
Prepaid expenses and other   12         12         -  
Total current assets   359         431         (72 )
Property, plant and equipment 126 127 (1 )
Less: accumulated depreciation   63         53         10  
  63         74         (11 )
Goodwill 704 704 -
Intangible assets, net 281 345 (64 )
Pension assets 83 75 8
Other non-current assets   4         4         -  
Total Assets $ 1,494       $ 1,633       $ (139 )
 
Liabilities and Stockholders' (Deficit)
Current liabilities:
Current maturities of long-term debt $ 1 $ 4 $ (3 )
Accounts payable and accrued liabilities 106 126 (20 )
Deferred revenue 82 82 -
Deferred tax liabilities 8 4 4
Other   13         18         (5 )
Total current liabilities   210         234         (24 )
Long-term debt 1,510 1,741 (231 )
Employee benefit obligations 97 364 (267 )
Non-current deferred tax liabilities 122 43 79
Unrecognized tax benefits 42 39 3
 
Stockholders' (deficit):
Common stock ($.01 par value; 60 million shares authorized,
15,668,058 and 15,468,740 shares issued and outstanding
in 2012 and 2011, respectively) - - -
Additional paid-in capital 212 210 2
Retained (deficit) (841 ) (967 ) 126
Accumulated other comprehensive income (loss)   142         (31 )       173  
Total stockholders' (deficit)   (487 )       (788 )       301  
Total Liabilities and Stockholders' (Deficit) $ 1,494       $ 1,633       $ (139 )
 
 

Schedule E

 
 
SuperMedia Inc.
Consolidated Statements of Cash Flows
         
Reported (GAAP) and Non-GAAP Financial Reconciliation - Free Cash Flow
Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011
(dollars in millions)
 
Unaudited  

6 Mos. Ended6/30/12

   

6 Mos. Ended6/30/11

   

$ Change

 
Cash Flows from Operating Activities
Net Income $ 126 $ 59 $ 67
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense 80 88 (8 )
Gains on early extinguishment of debt (51 ) - (51 )
Employee retirement benefits 1 9 (8 )
Deferred income taxes (20 ) (12 ) (8 )
Provision for uncollectible accounts 13 35 (22 )
Stock-based compensation expense 2 2 -
Changes in current assets and liabilities
Accounts receivable and unbilled accounts receivable 2 - 2
Deferred directory costs 17 16 1
Other current assets 2 (5 ) 7
Accounts payable and accrued liabilities 9 (132 ) 141
Other, net   (5 )       (11 )       6  
Net cash provided by operating activities   176         49         127  
 
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)   (6 )       (7 )       1  
Net cash used in investing activities   (6 )       (7 )       1  
 
Cash Flows from Financing Activities
Repayment of long-term debt (182 ) (36 ) (146 )
Other, net   (1 )       -         (1 )
Net cash used in financing activities   (183 )       (36 )       (147 )
Increase (decrease) in cash and cash equivalents (13 ) 6 (19 )
Cash and cash equivalents, beginning of year   90         174         (84 )
Cash and cash equivalents, end of period $ 77       $ 180       $ (103 )
 
 
Non-GAAP Financial Reconciliation - Free Cash Flow  

6 Mos. Ended6/30/12

   

6 Mos. Ended6/30/11

   

$ Change

Unaudited
 
Net cash provided by operating activities $ 176 $ 49 $ 127
Less: Capital expenditures (including capitalized software)   (6 )       (7 )       1  
Free Cash Flow $ 170       $ 42       $ 128  
 
 

Schedule F

 
 
SuperMedia Inc.
Advertising Sales
  (dollars in millions)
                     
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited   6/30/12     6/30/11     6/30/10       6/30/12     6/30/11     6/30/10
 

Net Advertising Sales (1) (2)

$ 314 $ 389 $ 465 $ 641 $ 785 $ 944
% Change year-over-year (19.3 %) (16.3 %) (18.3 %) (16.8 %)
                                                 
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 three and six months ended June 30, 2011 include negative adjustments of $2 million and $11 million, respectively, 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 three and six months ended June 30, 2012 would have reflected a decline of 19.7% and 19.5%, respectively, compared to a decline of 15.9% and 15.7% for the three and six months ended June 30, 2011, respectively. As of June 2011, these accounts were transitioned to other certified marketing representative firms.

 
 

Schedule G

(SPMD-G)

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