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Dex Media Announces Fourth Quarter and Full Year 2014 Earnings

By Thryv Contributor | 03.12.15
Dex Media Announces Fourth Quarter and Full Year 2014 Earnings

 

DALLAS–(BUSINESS WIRE)–Mar. 12, 2015–
Dex Media, Inc. (NASDAQ:DXM), one of the largest national providers of
social, local and mobile marketing solutions through direct
relationships with local businesses, today announced financial results
for the fourth quarter and year ended Dec. 31, 2014.Key highlights for full year 2014:

  • 9.2% digital ad sales growth
  • $388M net cash provided by operating activities
  • $381M bank debt retired
  • $43M business transformation costs recognized

“2014 was the first full year of operation for our combined company, and
we made progress on many fronts,” said Joe Walsh, president and CEO. “As
we look to 2015 and beyond, we are fully focused on reshaping the
business and creating a sustainable future.”

Fourth Quarter and Year Ended Dec. 31, 2014

$ in millions

GAAP Reporting

4Q’ 14FY ’14
Operating Revenue$433$1,815
Operating (Loss)$(41)$(4)
Net (Loss)$(145)$(371)

Non-GAAP Reporting

4Q’ 14FY ’14

Operating Revenue and Pro forma Operating Revenue1

$433$1,845

Adjusted EBITDA and Adjusted Pro forma EBITDA1

$173$715

Adjusted EBITDA and Adjusted Pro forma EBITDA margin1

40.0%38.8%

Financial Metrics

4Q’ 14FY ’14
Print Ad Sales-24.5%-22.0%
Digital Ad Sales4.8%9.2%
Total-16.7%-13.8%

1 These represent non-GAAP measures. Pro forma Operating
Revenue includes Dex One Corporation (Dex One) and SuperMedia Inc.
(SuperMedia), the predecessor companies, operating revenue as if the
merger had occurred prior to 2012 and excludes the impact of acquisition
accounting, as required by U.S. GAAP. Adjusted and Adjusted Pro forma
EBITDA represents earnings before interest; taxes; depreciation and
amortization; and other nonrecurring items, including adjustments for
reorganization items, merger transaction and integration costs,
severance costs, business transformation costs, long term incentive
compensation, asset write downs, and employee benefit plan amendments.
Adjusted Pro forma EBITDA includes Dex One and SuperMedia EBITDA as if
the merger had occurred prior to 2012; and excludes the impact of
acquisition accounting, as required by U.S. GAAP. Adjusted Pro forma
EBITDA margin is calculated by dividing Adjusted Pro forma EBITDA by Pro
forma Operating Revenue.

Cash provided by operations for the year ended Dec. 31, 2014 was $388
million less $18 million in capital expenditures which resulted in free
cash flow, a non-GAAP measure, of $370 million. The Company had a cash
balance of $171 million as of Dec. 31, 2014.

Acquisition Accounting Statement

On April 30, 2013, the merger of Dex One and SuperMedia was consummated,
with 100% of the equity of SuperMedia being exchanged for equity in Dex
Media. We accounted for the business combination using the acquisition
method of accounting, with Dex One identified as the acquiring entity
for accounting purposes. Prior to the merger with Dex One, SuperMedia
had deferred revenue and deferred directory costs on its consolidated
balance sheet. These amounts represented future revenue and cost that
would have been amortized by SuperMedia from May 2013 through April 2014
that was not recognized by Dex Media. As a result of acquisition
accounting, the fair value of deferred revenue and deferred directory
costs was determined to have no future value, thus were not recognized
in the operating results of Dex Media. The exclusion of these items from
our operating results did not have any impact on the cash flows of Dex
Media. See the attached schedules and our annual report on Form 10-K for
additional information on the merger and the financial impacts on our
results.

Earnings Call and Webcast Information

Dex Media will host an investor call at 10 a.m. EDT today. Individuals
within the United States can access today’s call by dialing
888-603-6873. International participants should dial 973-582-2706. The
pass code for the call is: 92843916. In order to ensure a prompt start
time, please dial into the call by 9:50 a.m. EDT. 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:
92843916. The replay will be available through Apr. 02, 2015. In
addition, a live webcast will be available on Dex Media’s website in the
Investor Relations section at dexyp.wpengine.com.

Basis of Presentation and Non-GAAP Financial Measures

The financial information accompanying this release provides a
reconciliation of GAAP to non-GAAP and adjusted pro forma non-GAAP
results. Dex Media believes that the use of non-GAAP financial measures
provides useful information to investors to gain an overall
understanding of its current financial performance. Specifically, Dex
Media believes the non-GAAP results provide useful information to
management and investors by excluding certain nonrecurring items that
Dex Media 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 Dex Media’s
performance, and Dex Media believes that non-GAAP results provide
investors with financial measures that most closely align to its
internal financial measurement processes.

About Dex Media

Dex Media (NASDAQ: DXM) is a full-service media company offering
integrated marketing solutions that deliver measurable results. As the
marketing department for more than 490,000 small and medium-sized
businesses across the U.S., Dex Media helps them Get Found, Get Chosen
and Get Talked About. The company’s widely used consumer services
include the DexKnows.com®
and Superpages.com®
search portals and applications as well as local print directories. For
more information, visit www.DexMedia.com.

Forward-Looking Statements

Some statements included in this release 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, as they are not guarantees of future performance.
Forward-looking statements provide current expectations with respect to
our financial performance and future events with respect to our business
and industry in general. Forward-looking statements are based on certain
assumptions and include any statement that does not directly relate to
any historical or current fact. 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 ability to provide assurance for the long-term continued
viability of our business; our ability to comply with the financial
covenants and other restrictive covenants in our credit facilities;
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 facilities; limited access to
capital markets and increased borrowing costs resulting from our
leveraged capital structure and debt ratings; our ability to obtain
additional financing or refinance our existing indebtedness on
satisfactory terms or at all; our ability to accurately report our
financial results due to a material weakness in our internal control
over financial reporting; possible changes in our credit rating; changes
in our operating performance; our ability to implement our business
transformation program as planned; our ability to realize the
anticipated benefits in the amounts and at the times expected from the
business transformation program; the risk that the amount of costs
associated with our business transformation program will exceed
estimates; reduced advertising spending and increased contract
cancellations by our clients, which causes reduced revenue; declining
use of print yellow page directories by consumers; our ability to
collect trade receivables from clients to whom we extend credit; credit
risk associated with our reliance on small and medium sized businesses
as clients; our ability to anticipate or respond to changes in
technology and user preferences; our ability to maintain agreements with
major Internet search and local media companies; competition from other
yellow page directory publishers and other traditional and new media
including increased competition from existing and emerging digital
technologies; 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; 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 impacting our businesses; the outcome of pending or
future litigation and other claims; and other events beyond our control
that may result in unexpected adverse operating results.

The foregoing factors should not be construed as exhaustive and should
be read together with the other cautionary statements included in this
and other periodic reports we file with the Securities and Exchange
Commission “SEC”, including the information in “Item 1A. Risk Factors”
in Part I of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2013, which is incorporated herein by reference. 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 the foregoing cautionary statements. You
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof or, in the case of
statements incorporated by reference, on the date of the document
incorporated by reference 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.

Dex Media, Inc.Schedule A
Consolidated Statements of Comprehensive Loss
Reported (GAAP)
(dollars in millions, except per share amounts)
Year EndedYear Ended
Unaudited12/31/1412/31/13% Change
Operating Revenue$1,815$1,44425.7
Operating Expenses
Selling43638313.8
Cost of service (exclusive of depreciation and amortization)57647920.3
General and administrative164209(21.5)
Depreciation and amortization643765(15.9)
Impairment charge458(100.0)
Total Operating Expenses1,8192,294(20.7)
Operating (Loss)(4)(850)(99.5)
Interest expense, net35631612.7
(Loss) Before Reorganization Items, Gains on Early
Extinguishment of Debt and Provision (Benefit) for Income Taxes(360)(1,166)(69.1)
Reorganization items38(100.0)
Gains on early extinguishment of debt29(77.8)
(Loss) Before Provision (Benefit) for Income Taxes(358)(1,195)(70.0)
Provision (benefit) for income taxes13(376)NM
Net (Loss)$(371)$(819)(54.7)
Other Comprehensive Income (Loss)
Adjustments for pension and other post-employment benefits, net of
taxes
(51)10NM
Comprehensive (Loss)$(422)$(809)(47.8)
Basic and Diluted (Loss) per Common Share$(21.43)$(54.89)(61.0)
Basic and diluted weighted-average common shares outstanding17.314.9
Dex Media, Inc.Schedule B
Consolidated Statements of Comprehensive Loss
Reported (GAAP)
(dollars in millions, except per share amounts)
Three Mos. EndedThree Mos. Ended
Unaudited12/31/1412/31/13% Change
Operating Revenue$433$4290.9
Operating Expenses
Selling103110(6.4)
Cost of service (exclusive of depreciation and amortization)136141(3.5)
General and administrative755536.4
Depreciation and amortization160241(33.6)
Impairment charge458(100.0)
Total Operating Expenses4741,005(52.8)
Operating (Loss)(41)(576)(92.9)
Interest expense, net8795(8.4)
(Loss) Before Reorganization Items, Gains on Early
Extinguishment of Debt and Provision (Benefit) for Income Taxes(128)(671)(80.9)
Reorganization items1(100.0)
Gains on early extinguishment of debt9(100.0)
(Loss) Before Provision (Benefit) for Income Taxes(128)(663)(80.7)
Provision (benefit) for income taxes17(107)NM
Net (Loss)$(145)$(556)(73.9)
Other Comprehensive (Loss)
Adjustments for pension and other post-employment benefits, net of
taxes
(60)20NM
Comprehensive (Loss)$(205)$(536)(61.8)
Basic and Diluted (Loss) per Common Share$(8.35)$(32.29)(74.1)
Basic and diluted weighted-average common shares outstanding17.417.2
Dex Media, Inc.Schedule C
Reconciliation of Non-GAAP Measures
(dollars in millions)
Year EndedYear Ended
Unaudited12/31/1412/31/13
Net (Loss) – GAAP$(371)$(819)
Add/(subtract) non-operating items:
Provision (benefit) for income taxes13(376)
Interest expense, net356316

Reorganization items (3)

38

Gains on early extinguishment of debt (4)

(2)(9)
Operating (Loss) – GAAP(4)(850)
Depreciation and amortization643765
EBITDA (non-GAAP) (1)639(85)
Adjustments and pro forma items:

Adjustments for SuperMedia acquisition accounting (5)

21428

Merger transaction costs (6)

37

Merger integration costs (7)

4155

Business transformation costs (8)

43
Severance (9)3

Employee benefit plan amendments (10)

(42)(38)

Long term incentive compensation (11)

1011
Asset write downs (12)38

Impairment charge (13)

458
Adjusted Pro Forma EBITDA (non-GAAP) (2)$715$877
Operating Revenue – GAAP$1,815$1,444

SuperMedia revenue excluded from GAAP revenue (14)

30740
Pro Forma Operating Revenue (non-GAAP)$1,845$2,184

Operating (loss) margin (15)

-0.2%-58.9%
Impact of depreciation and amortization35.4%53.0%
EBITDA margin (non-GAAP) (16)35.2%-5.9%
Impact of adjustments and pro forma Items3.6%46.1%
Adjusted Pro Forma EBITDA margin (non-GAAP) (17)38.8%40.2%
Year EndedYear Ended
Unaudited12/31/1412/31/13
Net cash provided by operating activities – GAAP$388$360
SuperMedia operating cash flow excluded from GAAP results55
Adjustment for merger transaction cash costs36
Net cash provided by operating activities – GAAP and Adjusted Pro
Forma net cash provided by operating activities (non-GAAP)
$388$451
Less: Additions to fixed assets and capitalized software – GAAP(18)(24)

Less: SuperMedia additions to fixed assets and capitalized
software not included in GAAP results

(6)
Additions to fixed assets and capitalized software – GAAP and Pro
Forma additions to fixed assets and capitalized software (non-GAAP)
(18)(30)
Free Cash Flow (non-GAAP) and Adjusted Pro Forma Free Cash Flow
(non-GAAP)
(18)
$370$421
Note: Please see accompanying reconciliation end notes.
Dex Media, Inc.Schedule D
Reconciliation of Non-GAAP Measures
(dollars in millions)
Unaudited

Three Mos. Ended
12/31/14

Three Mos. Ended
12/31/13

Net (Loss) – GAAP$(145)$(556)
Add/(subtract) non-operating items:
Provision (benefit) for income taxes17(107)
Interest expense, net8795

Reorganization items (3)

1

Gains on early extinguishment of debt (4)

(9)
Operating (Loss) – GAAP(41)(576)
Depreciation and amortization160241
EBITDA (non-GAAP) (1)119(335)
Adjustments and pro forma items:

Adjustments for SuperMedia acquisition accounting (5)

62

Merger transaction costs (6)

1

Merger integration costs (7)

813

Business transformation costs (8)

43

Long term incentive compensation (11)

33
Asset write downs (12)8

Impairment charge (13)

458
Adjusted EBITDA (non-GAAP) and Adjusted Pro Forma EBITDA
(non-GAAP)
(2)
$173$210
Operating Revenue – GAAP$433$429

SuperMedia revenue excluded from GAAP revenue (14)

84
Operating Revenue – GAAP and Pro Forma Operating Revenue
(non-GAAP)
$433$513

Operating (loss) margin (15)

-9.5%-134.3%
Impact of depreciation and amortization37.0%56.2%
EBITDA margin (non-GAAP) (16)27.5%-78.1%
Impact of adjustments and pro forma Items12.5%119.0%
Adjusted EBITDA (non-GAAP) and Adjusted Pro Forma EBITDA margin
(non-GAAP)
(17)
40.0%40.9%
Note: Please see accompanying reconciliation end notes.
Dex Media, Inc.Schedule E
Consolidated Balance Sheets
Reported (GAAP)
(dollars in millions)
UnauditedDecember 31, 2014December 31, 2013
Assets
Current assets
Cash and cash equivalents$171$156
Accounts receivable, net of allowances of $30 and $26151218
Deferred directory costs161183
Deferred tax assets9
Prepaid expenses and other1427
Assets held for sale16
Total current assets497609
Fixed assets and capitalized software, net64106
Goodwill315315
Intangible assets, net7941,381
Pension assets4541
Other non-current assets712
Total Assets$1,722$2,464
Liabilities and Shareholders’ (Deficit)
Current liabilities
Current maturities of long-term debt$124$154
Accounts payable and accrued liabilities167166
Accrued interest2020
Deferred revenue93126
Total current liabilities404466
Long-term debt2,2722,521
Employee benefit obligations127132
Deferred tax liabilities3028
Unrecognized tax benefits1119
Other liabilities1
Stockholders’ (deficit):

Common stock, par value $.001 per share, authorized – 300,000,000
shares: issued and outstanding – 17,608,580 at December 31, 2014
and 17,601,520 at December 31, 2013

Additional paid-in capital1,5541,551
Retained (deficit)(2,591)(2,220)
Accumulated other comprehensive (loss)(85)(34)
Total shareholders’ (deficit)(1,122)(703)
Total Liabilities and Shareholders’ (Deficit)$1,722$2,464
Dex Media, Inc.Schedule F
Consolidated Statements of Cash Flows
Reported (GAAP) and Non-GAAP Financial Reconciliation – Free Cash
Flow

(dollars in millions)

Year EndedYear Ended
Unaudited12/31/1412/31/13

$ Change

Cash Flows from Operating Activities
Net (loss)$(371)$(819)$448
Reconciliation of net (loss) to net cash provided by operating
activities:
Depreciation and amortization643765(122)
Provision for deferred income taxes11(351)362
Provision for unrecognized tax benefits(8)(32)24
Provision for bad debts26233
Non-cash interest expense936924
Stock-based compensation expense44
Impairment charge458(458)
Employee retiree benefits(8)(3)(5)
Employee benefit plan amendments(42)(42)
Gains on early extinguishment of debt(2)(9)7
Non-cash reorganization items32(32)
Changes in assets and liabilities:
Accounts receivable41291(250)
Deferred directory costs26(46)72
Other current assets1111
Accounts payable and accrued liabilities(27)(32)5
Other items, net(9)(1)(8)
Net cash provided by operating activities38836028
Cash Flows from Investing Activities
Additions to fixed assets and capitalized software(18)(24)6
Cash acquired in acquisition154(154)
Proceeds from sale of building1313
Net cash provided by (used in) investing activities(5)130(135)
Cash Flows from Financing Activities
Debt repayments(367)(505)138
Debt issuance costs and other financing items, net(1)(1)
Net cash (used in) financing activities(368)(506)138
Increase (decrease) in cash and cash equivalents15(16)31
Cash and cash equivalents, beginning of year156172(16)
Cash and cash equivalents, end of period$171$156$15
Year EndedYear Ended
Non-GAAP Financial Reconciliation – Free Cash Flow12/31/1412/31/13

$ Change

Unaudited
Net cash provided by operating activities – GAAP$388$360$28
Less: Additions to fixed assets and capitalized software(18)(24)6
Free Cash Flow (non-GAAP)$370$336$34
Dex Media, Inc.Schedule G
Metrics
Advertising SalesThree Mos. EndedThree Mos. EndedYear EndedYear Ended
Unaudited12/31/1412/31/1312/31/1412/31/13
Print Products Sales
% Change year-over-year(24.5%)(18.9%)(22.0%)(20.8%)
Digital Sales
% Change year-over-year4.8%5.1%9.2%5.9%
Total Advertising Sales(1)
% Change year-over-year(16.7%)(13.8%)(13.8%)(15.1%)

Notes:

(1) Advertising sales is an operating measure which represents
the annual contract value of print directories published and
digital contracts sold. It is important to distinguish advertising
sales from revenue, which under GAAP are recognized under the
deferral and amortization method. Advertising sales are a leading
indicator of revenue recognition and are presented on a combined
basis, including both Dex One and SuperMedia, for all periods
presented.

Other MetricsThree Mos. EndedThree Mos. EndedYear EndedYear Ended
Unaudited12/31/1412/31/1312/31/1412/31/13
% of Revenue Sourced from Digital Solutions32%26%29%24%
As ofAs of
Unaudited12/31/1412/31/13
% Clients with a Digital Relationship38%34%
Dex Media, Inc.Schedule H

Reconciliation of Non-GAAP Measures End 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. Adjusted Pro Forma EBITDA is a non-GAAP
measure that adjusts EBITDA for certain unique costs and pro forma
items.
Adjusted Pro Forma results for 2014 and 2013 reflect the combination
of Dex One and SuperMedia as if the transaction had been consummated
prior to January 1, 2012 and reflect certain other adjustments,
including adjustments to exclude the effects of purchase accounting,
merger transaction and integration costs, business transformation
costs, severance, long term incentive compensation, asset write
downs and employee benefit plan amendments. Pro forma adjusted
results do not necessarily reflect what the underlying operational
or financial performance of Dex Media would have been had the Dex
One / SuperMedia merger transaction been consummated prior to
January 1, 2012.
(3)Reorganization items represent charges that are directly associated
with the process of reorganizing the business under Chapter 11 of
the United States Bankruptcy Code. These costs include a non-cash
charge of $32 million to write off the unamortized debt fair value
adjustment associated with Dex One’s senior secured credit
facilities in the year ended December 31, 2013.
(4)Gains on early extinguishments of debt represents the gains
associated with the purchase of a portion of the Company’s debt
below par value.
(5)This pro forma adjustment represents the EBITDA results of
SuperMedia that as a result of acquisition accounting, were not
included in the GAAP results of Dex Media.
(6)Merger transaction costs represent costs associated with completing
the merger between Dex One and SuperMedia.
(7)Merger integration costs represent costs incurred to achieve
synergies related to the merger of Dex One and SuperMedia.
(8)Business transformation costs represent organizational restructuring
costs incurred to transform the Company by launching virtual sales
offices, enabling the Company to eliminate field sales offices, the
automation of the sales process, integration of systems to eliminate
duplicative systems and workforce reductions.
(9)Severance costs are associated with SuperMedia headcount reductions
in 2013 prior to the merger.
(10)These adjustments for 2014 and 2013 include credits to expense
related to pretax gains associated with employee benefit plan
amendments.
(11)Long term incentives include stock based compensation, other long
term incentive compensation and the value creation program.
(12)Asset write downs represent the write down of a building and the
write down of certain fixed assets and capitalized software.
(13)Represents a non-cash impairment charge associated with the write
down of goodwill and intangible assets.
(14)This pro forma adjustment represents the revenue results of
SuperMedia that as a result of acquisition accounting, was not
included in the GAAP results of Dex Media.
(15)Operating income (loss) margin is calculated by dividing operating
income (loss) by operating revenue.
(16)EBITDA margin (non-GAAP) is calculated by dividing EBITDA (non-GAAP)
by GAAP operating revenue.
(17)Adjusted EBITDA margin (non-GAAP) is calculated by dividing Adjusted
EBITDA (non-GAAP) by Pro Forma operating revenue (non-GAAP) or
operating revenue. Adjusted Pro Forma EBITDA margin is calculated by
dividing Adjusted Pro Forma EBITDA (non-GAAP) by Pro Forma operating
revenue (non-GAAP).
(18)Adjusted Pro Forma Free Cash Flow (non-GAAP) is calculated by adding
Dex Media’s cash from operations to the historical SuperMedia cash
from operations less capital expenditures of Dex Media and the
historical capital expenditures of SuperMedia, before operating cash
flow payments for merger transaction costs. As a result of
acquisition accounting, the historical results of SuperMedia prior
to April 30, 2013 were not included in the GAAP operating results of
Dex Media.

Source: Dex Media, Inc.

Dex Media, Inc.
Media Relations:
Suzanne
Keen, 972-453-7875
suzanne.keen@dexmedia.com
or
Investor
Relations:

Cliff Wilson, 972-453-6188
cliff.wilson@dexmedia.com