Idearc Inc. (NYSE: IAR) today announced financial results for the
second quarter and six months ended June 30, 2008. Scott W. Klein,
the Company�s chief executive officer, said, �As I complete my
first sixty days with Idearc, I see opportunities everywhere. The
future is in our hands and we aren�t going to accept the economy as
an excuse. It is clear that we have not made the leap from
operating as a division of Verizon to being a stand alone public
company. You will see us catch up quickly.� �Our priorities are
accelerating revenue growth; right-sizing expenses; and, creating a
high-performance culture. These priorities can best be achieved by
leveraging our key assets � our customers, our sales force and
employee base and our products. We have already made significant
changes that will improve performance.� Klein continued: �The need
for small and medium sized businesses to connect with buyers is
critical to our success. We have relationships with about 800,000
businesses and while that might sound impressive we have just
scratched the surface. There are more than 12.5 million of these
businesses in the United States and thousands are launched weekly.
We are streamlining cumbersome internal processes and equipping our
sales professionals with new technology to drive sales.� �We are
also changing Idearc�s management structure and focus. By
centralizing and restructuring, we can eliminate complexity,
maximize efficiency, and become easier to do business with. While
the changes we have made and will continue to make will take some
time to be fully realized, I am confident we will succeed.�
Financial Summary Idearc reports financial results on a GAAP basis
and on an adjusted pro forma basis to eliminate the impact of
transition and certain non-recurring costs. The adjusted pro forma
basis measures are described and are reconciled to the
corresponding GAAP measures in the accompanying financial
schedules. On a year-to-date basis, Idearc reported multi-product
revenues of $1,529 million, a 5.1 percent decrease compared to the
same period in 2007. Year-to-date Internet revenue was $148
million, a 5.0 percent increase compared to the same period in
2007. The Company reported second quarter 2008 multi-product
revenues of $759 million, a 5.7 percent decrease compared to the
same period in 2007. The Company reported Internet revenue of $75
million in the second quarter, a 2.7 percent increase compared to
the same period in 2007. The Company reported year-to-date earnings
before interest, taxes, depreciation and amortization (EBITDA) of
$658 million, an 8.4 percent decrease compared to the same period
in 2007. Reported year-to-date EBITDA margins were 43.0 percent,
compared to 44.6 percent in the same period in 2007. On an adjusted
pro forma basis, year-to-date EBITDA was $683 million, an 11.3
percent decrease compared to the same period in 2007. Adjusted pro
forma EBITDA margins were 44.7 percent, compared to 47.8 percent in
the same period in 2007. The company reported second quarter EBITDA
of $299 million, a 17.9 percent decrease compared to the same
period in 2007. The company reported EBITDA margins of 39.4 percent
in the second quarter, compared to 45.2 percent in the same period
2007. On an adjusted pro forma basis, second quarter EBITDA was
$316 million, a 19.2 percent decrease compared to the same period
in 2007. Adjusted pro forma EBITDA margins were 41.6 percent in the
second quarter 2008, compared to 48.6 percent in the same period in
2007. The Company reported year-to-date net income of $187 million,
an 11.8 percent decrease compared to the same period in 2007. On an
adjusted pro forma basis, year-to-date net income was $203 million,
a 17.5 percent decrease versus the same period in 2007. The company
reported net income of $76 million, a decrease of 30.3 percent
versus the same period in 2007 for the second quarter 2008. On an
adjusted pro forma basis, second quarter net income was $87
million, a decrease of 31.5 percent versus the same period in 2007.
Free cash flow for the six months ended June 30, 2008 was $151
million based on cash from operating activities of $176 million,
less capital expenditure of $25 million. Multi-product advertising
sales for the second quarter declined 9.3 percent compared to 2007.
Idearc Reiterates Guidance for Full Year Idearc is reiterating 2008
guidance, as of July 29, noting mid single digit decline in
amortized multi-product revenues and some operating margin
contraction. Webcast Information Idearc welcomes investors, media
and other interested parties to join Scott Klein, Idearc CEO, and
Samuel D. (Dee) Jones, acting chief financial officer, in a
discussion via a webcast and teleconference beginning today at
10:00 a.m. (Eastern). Individuals within the United States can
access the earnings call by dialing 888-603-6873. International
participants should dial 973-582-2706. The pass code for the call
is: 52261634. In order to ensure a prompt start time, please dial
in to the call by 9:50 a.m. (Eastern). A replay of the
teleconference will be available at 800-642-1687. International
callers can access the replay by calling 706-645-9291. The replay
pass code is 52261634. The replay will be available through August
12. In addition, a live webcast will be available on Idearc's Web
site at www.idearc.com, under the Investor Relations tab. Certain
statements included in this press release and the hyperlinked
materials constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements reflect Idearc management's current
views with respect to Idearc's financial performance and future
events with respect to its business and industry in general.
Statements that include the words "believe," "anticipate,"
"foresee," and similar expressions identify forward-looking
statements. Idearc cautions you not to place undue reliance on
these forward-looking statements. The following important factors
could affect future results and could cause those results to differ
materially from those expressed in the forward-looking statements:
(i) risks related to Idearc's substantial indebtedness; (ii) risks
related to Idearc's declining print revenue; (iii) limitations on
Idearc's operating and strategic flexibility under the terms of its
debt agreements; (iv) changes in Idearc's competitive position due
to competition from other yellow pages directories publishers and
other traditional and new media and its ability to anticipate or
respond to changes in technology and user preferences; (v)
declining use of print yellow pages directories; (vi) access to
capital markets and changes in credit ratings; (vii) changes in the
availability and cost of paper and other raw materials used to
print directories and reliance on third-party printers and
distributors; (viii) increased credit risk associated with reliance
on small- and medium-sized businesses; (ix) changes in operating
performance; (x) increased demands on management as a result of
operating as an independent company; (xi) Idearc's ability to
attract and retain qualified executives; (xii) Idearc's ability to
maintain good relations with its unionized employees; (xiii)
changes in U.S. labor, business, political and/or economic
conditions; (xiv) changes in governmental regulations and policies
and actions of regulatory bodies; (xv) risks inherent in Idearc's
spin-off from its former parent corporation, Verizon Communications
Inc., including increased costs and reduced profitability
associated with operating as an independent company; and (xvi)
risks associated with Idearc's obligations under agreements entered
into with Verizon in connection with the spin-off. For a discussion
of these and other risks and uncertainties, see Idearc Inc.'s
periodic filings with the Securities and Exchange Commission, which
you may view at www.sec.gov, and in particular, Idearc Inc.'s
Annual Report on Form 10-K for the year ended December 31, 2007. �
IDEARC INC. � � Consolidated Statements of Income � Reported (GAAP)
Six Months Ended June 30, 2008 Compared to Six Months Ended June
30, 2007 (dollars in millions, except per share amounts) � � � 6
Mos. Ended 6 Mos. Ended Unaudited � 6/30/08 � 6/30/07 % Change �
Operating Revenue Print products $ 1,379 $ 1,468 (6.1) Internet 148
141 5.0 Other � 2 � 2 - Total Operating Revenue � 1,529 � 1,611
(5.1) � Operating Expense Selling 370 376 (1.6) Cost of sales
(exclusive of depreciation and amortization) 304 314 (3.2) General
and administrative 197 203 (3.0) Depreciation and amortization � 40
� 44 (9.1) Total Operating Expense 911 937 (2.8) � Operating Income
618 674 (8.3) Interest expense, net � 329 � 337 (2.4) Income Before
Provision for Income Taxes � 289 337 (14.2) Provision for income
taxes � 102 � 125 (18.4) Net Income $ 187 $ 212 (11.8) � Basic and
Diluted Earnings per Common Share (1) $ 1.28 $ 1.45 (11.7) Basic
and diluted weighted-average common shares outstanding (in
millions) 146 146 � Dividends Declared per Common Share $ .3425 $
.6850 � Prior period amounts presented above and in the following
schedules have been reclassified to conform to current year
presentation. � Note: � (1) Equity based awards granted in 2007 and
2008 had no material impact on the calculation of diluted earnings
per common share. � � � � � � � � IDEARC INC. Consolidated
Statements of Income � Reported (GAAP) Three Months Ended June 30,
2008 Compared to Three Months Ended June 30, 2007 (dollars in
millions, except per share amounts) � � � 3 Mos. Ended 3 Mos. Ended
Unaudited � 6/30/08 � 6/30/07 % Change � � Operating Revenue Print
products $ 683 $ 731 (6.6 ) Internet 75 73 2.7 Other � 1 � 1 -
Total Operating Revenue � 759 � 805 (5.7 ) � Operating Expense
Selling 185 188 (1.6 ) Cost of sales (exclusive of depreciation and
amortization) 157 156 0.6 General and administrative 118 97 21.6
Depreciation and amortization � 20 � 22 (9.1 ) Total Operating
Expense 480 463 3.7 � Operating Income 279 342 (18.4 ) Interest
expense, net � 163 � 167 (2.4 ) Income Before Provision for Income
Taxes � 116 175 (33.7 ) Provision for income taxes � 40 � 66 (39.4
) Net Income $ 76 $ 109 (30.3 ) � Basic and Diluted Earnings per
Common Share (1) $ .52 $ .75 (30.7 ) Basic and diluted
weighted-average common shares outstanding (in millions) 146 146 �
Dividends Declared per Common Share $ - $ .3425 � Note: � (1)
Equity based awards granted in 2007 and 2008 had no material impact
on the calculation of diluted earnings per common share. � � � � �
� � � IDEARC INC. Consolidated Statements of Income � Adjusted Pro
Forma (Non-GAAP)(1) Six Months Ended June 30, 2008 Compared to Six
Months Ended June 30, 2007 (dollars in millions, except per share
amounts) � � � 6 Mos. Ended 6 Mos. Ended Unaudited � 6/30/08 �
6/30/07 % Change � � Operating Revenue Print products $ 1,379 $
1,468 (6.1 ) Internet 148 141 5.0 Other � 2 � 2 - Total Operating
Revenue � 1,529 � 1,611 (5.1 ) � Operating Expense Selling 370 376
(1.6 ) Cost of sales (exclusive of depreciation and amortization)
304 314 (3.2 ) General and administrative 172 151 13.9 Depreciation
and amortization � 40 � 44 (9.1 ) Total Operating Expense 886 885
0.1 � Operating Income 643 726 (11.4 ) Interest expense, net � 329
� 337 (2.4 ) Income Before Provision for Income Taxes � 314 389
(19.3 ) Provision for income taxes � 111 � 143 (22.4 ) Net Income $
203 $ 246 (17.5 ) � Basic and Diluted Earnings per Common Share (2)
$ 1.39 $ 1.69 (17.8 ) Basic and diluted weighted-average common
shares outstanding (in millions) 146 146 � � � Notes: � (1) These
consolidated statements of income provide a comparison of the six
months ended June 30, 2008 adjusted pro forma results to the six
months ended June 30, 2007 adjusted pro forma results. The
following schedules provide reconciliations from our reported GAAP
results to adjusted pro forma non-GAAP results for the periods
shown above. � (2) Equity based awards granted in 2007 and 2008 had
no material impact on the calculation of diluted earnings per
common share. � � � � � � � � IDEARC INC. Consolidated Statements
of Income � Adjusted Pro Forma (Non-GAAP)(1) Three Months Ended
June 30, 2008 Compared to Three Months Ended June 30, 2007 (dollars
in millions, except per share amounts) � � � 3 Mos. Ended 3 Mos.
Ended Unaudited � 6/30/08 � 6/30/07 % Change � � Operating Revenue
Print products $ 683 $ 731 (6.6 ) Internet 75 73 2.7 Other � 1 � 1
- Total Operating Revenue � 759 � 805 (5.7 ) � Operating Expense
Selling 185 188 (1.6 ) Cost of sales (exclusive of depreciation and
amortization) 157 156 0.6 General and administrative 101 70 44.3
Depreciation and amortization � 20 � 22 (9.1 ) Total Operating
Expense 463 436 6.2 � Operating Income 296 369 (19.8 ) Interest
expense, net � 163 � 167 (2.4 ) Income Before Provision for Income
Taxes � 133 202 (34.2 ) Provision for income taxes � 46 � 75 (38.7
) Net Income $ 87 $ 127 (31.5 ) � Basic and Diluted Earnings per
Common Share (2) $ .60 $ .87 (31.0 ) Basic and diluted
weighted-average common shares outstanding (in millions) 146 146 �
� � Notes: � (1) These consolidated statements of income provide a
comparison of the three months ended June 30, 2008 adjusted pro
forma results to the three months ended June 30, 2007 adjusted pro
forma results. The following schedules provide reconciliations from
our reported GAAP results to adjusted pro forma non-GAAP results
for the periods shown above. � (2) Equity based awards granted in
2007 and 2008 had no material impact on the calculation of diluted
earnings per common share. � IDEARC INC. Consolidated Statements of
Income � Reconciliation from Reported (GAAP) to Adjusted Pro Forma
(Non-GAAP) Six Months Ended June 30, 2008 (dollars in millions,
except per share amounts) � � Non-Recurring Items 6 Mos. Ended
6/30/08 Stock-Based Compensation(3) Separation Costs (4)
Restructuring Costs (5) 6 Mos. Ended 6/30/08 Unaudited Reported
(GAAP) � � Adjusted Pro Forma (Non-GAAP) Operating Revenue Print
products $ 1,379 $ - $ - $ - $ 1,379 Internet 148 - - - 148 Other �
2 � � - � � - � � - � � 2 � Total Operating Revenue � 1,529 � � - �
� - � � - � � 1,529 � � Operating Expense Selling 370 - - - 370
Cost of sales (exclusive of depreciation and amortization) 304 - -
- 304 General and administrative 197 (4 ) (14 ) (7 ) 172
Depreciation and amortization � 40 � � - � � - � � - � � 40 � Total
Operating Expense � 911 � � (4 ) � (14 ) � (7 ) � 886 � � Operating
Income 618 4 14 7 643 Interest expense, net � 329 � � - � � - � � -
� � 329 � Income Before Provision for Income Taxes 289 4 14 7 314
Provision for income taxes � 102 � � 1 � � 5 � � 3 � � 111 � Net
Income $ 187 � $ 3 � $ 9 � $ 4 � $ 203 � � � Basic and Diluted
Earnings per Common Share $ 1.28 $ .02 $ .06 $ .03 $ 1.39 � �
Operating Income $ 618 $ 4 $ 14 $ 7 $ 643 Depreciation and
Amortization � 40 � � - � � - � � - � � 40 � EBITDA (non-GAAP) (1)
$ 658 � $ 4 � $ 14 � $ 7 � $ 683 � � � Operating Income margin (2)
40.4 % 42.1 % Impact of depreciation and amortization � 2.6 % � � �
� 2.6 % EBITDA margin (non-GAAP) (1) � 43.0 % � � � � 44.7 % �
Notes: � (1) EBITDA is a non-GAAP measure that represents earnings
before interest, taxes, depreciation, and amortization. EBITDA
margin is a non-GAAP measure calculated by dividing EBITDA by total
operating revenue. � (2) Operating income margin is calculated by
dividing operating income by total operating revenue. � (3) The
stock-based compensation reflects costs associated with a one-time
incentive compensation award granted to most of the Company's
employees in January 2007. � (4) Separation costs reflects costs
associated with becoming a stand-alone entity as a result of the
spin-off from Verizon. � (5) Restructuring costs are associated
with strategic organizational realignment and market exit
activities. � � � � � � IDEARC INC. Consolidated Statements of
Income � Reconciliation from Reported (GAAP) to Adjusted Pro Forma
(Non-GAAP) Three Months Ended June 30, 2008 (dollars in millions,
except per share amounts) � � Non-Recurring Items 3 Mos. Ended
6/30/08 Stock Based Compensation(3) Separation Costs (4)
Restructuring Costs (5) 3 Mos. Ended 6/30/08 Unaudited Reported
(GAAP) � � Adjusted Pro Forma (Non-GAAP) Operating Revenue Print
products $ 683 $ - $ - $ - $ 683 Internet 75 - - - 75 Other � 1 � �
- � � - � � - � � 1 � Total Operating Revenue � 759 � � - � � - � �
- � � 759 � � Operating Expense Selling 185 - - - 185 Cost of sales
(exclusive of depreciation and amortization) 157 - - - 157 General
and administrative 118 (3 ) (7 ) (7 ) 101 Depreciation and
amortization � 20 � � - � � - � � - � � 20 � Total Operating
Expense � 480 � � (3 ) � (7 ) � (7 ) � 463 � � Operating Income 279
3 7 7 296 Interest expense, net � 163 � � - � � - � � - � � 163 �
Income Before Provision for Income Taxes 116 3 7 7 133 Provision
for income taxes � 40 � � 1 � � 2 � � 3 � � 46 � Net Income $ 76 �
$ 2 � $ 5 � $ 4 � $ 87 � � � Basic and Diluted Earnings per Common
Share $ .52 $ .01 $ .04 $ .03 $ .60 � � Operating Income $ 279 $ 3
$ 7 $ 7 $ 296 Depreciation and Amortization � 20 � � - � � - � � -
� � 20 � EBITDA (non-GAAP) (1) $ 299 � $ 3 � $ 7 � $ 7 � $ 316 � �
� Operating Income margin (2) 36.8 % 39.0 % Impact of depreciation
and amortization � 2.6 % � � � � 2.6 % EBITDA margin (non-GAAP) (1)
� 39.4 % � � � � 41.6 % � � Notes: � (1) EBITDA is a non-GAAP
measure that represents earnings before interest, taxes,
depreciation, and amortization. EBITDA margin is a non-GAAP measure
calculated by dividing EBITDA by total operating revenue. � (2)
Operating income margin is calculated by dividing operating income
by total operating revenue. � (3) The stock-based compensation
reflects costs associated with a one-time incentive compensation
award granted to most of the Company's employees in January 2007. �
(4) Separation costs reflects costs associated with becoming a
stand-alone entity as a result of the spin-off from Verizon. � (5)
Restructuring costs are associated with strategic organizational
realignment and market exit activities. � � � � � � � � IDEARC INC.
Consolidated Statements of Income � Reconciliation from Reported
(GAAP) to Adjusted Pro Forma (Non-GAAP) Six Months Ended June 30,
2007 (dollars in millions, except per share amounts) � �
Non-Recurring Items 6 Mos. Ended 6/30/07 Stock-Based
Compensation(3) Separation Costs (4) 6 Mos. Ended 6/30/07 Unaudited
Reported (GAAP) � � Adjusted Pro Forma (Non-GAAP) Operating Revenue
Print products $ 1,468 $ - $ - $ 1,468 Internet 141 - - 141 Other �
2 � � - � � - � � 2 � Total Operating Revenue � 1,611 � � - � � - �
� 1,611 � � Operating Expense Selling 376 - - 376 Cost of sales
(exclusive of depreciation and amortization) 314 - - 314 General
and administrative 203 (17 ) (35 ) 151 Depreciation and
amortization � 44 � � - � � - � � 44 � Total Operating Expense �
937 � � (17 ) � (35 ) � 885 � � Operating Income 674 17 35 726
Interest expense, net � 337 � � - � � - � � 337 � Income Before
Provision for Income Taxes 337 17 35 389 Provision for income taxes
� 125 � � 6 � � 12 � � 143 � Net Income $ 212 � $ 11 � $ 23 � $ 246
� � � Basic and Diluted Earnings per Common Share $ 1.45 $ .08 $
.16 $ 1.69 � � Operating Income $ 674 $ 17 $ 35 $ 726 Depreciation
and Amortization � 44 � � - � � - � � 44 � EBITDA (non-GAAP) (1) $
718 � $ 17 � $ 35 � $ 770 � � � Operating Income margin (2) 41.9 %
45.1 % Impact of depreciation and amortization � 2.7 % � � � 2.7 %
EBITDA margin (non-GAAP) (1) � 44.6 % � � � 47.8 % � Notes: � (1)
EBITDA is a non-GAAP measure that represents earnings before
interest, taxes, depreciation, and amortization. EBITDA margin is a
non-GAAP measure calculated by dividing EBITDA by total operating
revenue. � (2) Operating income margin is calculated by dividing
operating income by total operating revenue. � (3) The stock-based
compensation reflects costs associated with a one-time incentive
compensation award granted to most of the Company's employees in
January 2007. � (4) Separation costs reflects costs associated with
becoming a stand-alone entity as a result of the spin-off from
Verizon. � � � � � � � IDEARC INC. Consolidated Statements of
Income � Reconciliation from Reported (GAAP) to Adjusted Pro Forma
(Non-GAAP) Three Months Ended June 30, 2007 (dollars in millions,
except per share amounts) � � Non-Recurring Items 3 Mos. Ended
6/30/07 Stock Based Compensation(3) Separation Costs (4) 3 Mos.
Ended 6/30/07 Unaudited Reported (GAAP) � � Adjusted Pro Forma
(Non-GAAP) Operating Revenue Print products $ 731 $ - $ - $ 731
Internet 73 - - 73 Other � 1 � � - � � - � � 1 � Total Operating
Revenue � 805 � � - � � - � � 805 � � Operating Expense Selling 188
- - 188 Cost of sales (exclusive of depreciation and amortization)
156 - - 156 General and administrative 97 (8 ) (19 ) 70
Depreciation and amortization � 22 � � - � � - � � 22 � Total
Operating Expense � 463 � � (8 ) � (19 ) � 436 � � Operating Income
342 8 19 369 Interest expense, net � 167 � � - � � - � � 167 �
Income Before Provision for Income Taxes 175 8 19 202 Provision for
income taxes � 66 � � 3 � � 6 � � 75 � Net Income $ 109 � $ 5 � $
13 � $ 127 � � � Basic and Diluted Earnings per Common Share $ .75
$ .03 $ .09 $ .87 � � Operating Income $ 342 $ 8 $ 19 $ 369
Depreciation and Amortization � 22 � � - � � - � � 22 � EBITDA
(non-GAAP) (1) $ 364 � $ 8 � $ 19 � $ 391 � � � Operating Income
margin (2) 42.5 % 45.9 % Impact of depreciation and amortization �
2.7 % � � � 2.7 % EBITDA margin (non-GAAP) (1) � 45.2 % � � � 48.6
% � Notes: � (1) EBITDA is a non-GAAP measure that represents
earnings before interest, taxes, depreciation, and amortization.
EBITDA margin is a non-GAAP measure calculated by dividing EBITDA
by total operating revenue. � (2) Operating income margin is
calculated by dividing operating income by total operating revenue.
� (3) The stock-based compensation reflects costs associated with a
one-time incentive compensation award granted to most of the
Company's employees in January 2007. � (4) Separation costs
reflects costs associated with becoming a stand-alone entity as a
result of the spin-off from Verizon. � � � � � � IDEARC INC. �
Consolidated Balance Sheets � Reported (GAAP) As of June 30, 2008
and December 31, 2007 � � � � (dollars in millions) � � � Unaudited
� 6/30/2008 � � � 12/31/2007 � � � Assets Current assets: Cash and
cash equivalents $ 127 $ 48 Accounts receivable, net of allowances
of $83 and $77 408 423 Deferred directory costs 312 312 Prepaid
expenses and other � 5 � � � 10 � � Total current assets � 852 � �
� 793 � � Property, plant and equipment 476 471 Less: accumulated
depreciation � 368 � � � 356 � � � 108 � � � 115 � � Goodwill 73 73
Intangible assets, net 295 303 Pension assets 182 171 Non-current
deferred tax assets 84 124 Debt issuance costs 81 86 Other
non-current assets � 3 � � � 2 � � Total Assets $ 1,678 � � $ 1,667
� � � � Liabilities and Stockholders' Equity (Deficit) Current
liabilities: Accounts payable and accrued liabilities $ 233 $ 272
Deferred revenue 197 209 Current maturities of long-term debt 85 48
Current deferred taxes 23 28 Other � 25 � � � 31 � � Total current
liabilities � 563 � � � 588 � � Long-term debt 8,959 9,020 Employee
benefit obligations 316 327 Unrecognized tax benefits 87 109 Other
liabilities 185 223 � Stockholders' equity (deficit): Common stock
($.01 par value; 225 million shares authorized, 147,776,287 and
146,795,971 shares issued and outstanding in 2008 and 2007,
respectively) � 1 1 Additional paid-in capital (deficit) (8,769 )
(8,776 ) Retained earnings 498 361 Accumulated other comprehensive
loss � (162 ) � � (186 ) � Total stockholders' equity (deficit) �
(8,432 ) � � (8,600 ) � Total Liabilities and Stockholders' Equity
(Deficit) $ 1,678 � � $ 1,667 � � � � � � � � IDEARC INC.
Consolidated Statements of Cash Flows � Reported (GAAP) Six Months
Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
(dollars in millions) � � � Unaudited 6 Months Ended 6/30/08 6
Months Ended 6/30/07 � Cash Flows from Operating Activities Net
Income $ 187 $ 212 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization 40
44 Employee retirement benefits (1 ) 10 Deferred income taxes 7 1
Provision for uncollectible accounts 87 64 Stock-based compensation
1 28 � Changes in current assets and liabilities Accounts
receivable (72 ) (152 ) Deferred directory costs - (31 ) Other
current assets 5 1 Accounts payable and accrued liabilities (66 )
(25 ) Other, net � (12 ) � � (14 ) � Net cash provided by operating
activities � 176 � � � 138 � � � Cash Flows from Investing
Activities Capital expenditures (including capitalized software)
(25 ) (22 ) Proceeds from sale of assets 2 1 Other, net � - � � � 4
� � Net cash used in investing activities � (23 ) � � (17 ) � �
Cash Flows from Financing Activities Repayment of long-term debt
(24 ) (24 ) Dividends paid to Idearc stockholders � (50 ) � � (100
) � Net cash used in financing activities � (74 ) � � (124 ) �
Increase (decrease) in cash and cash equivalents 79 (3 ) Cash and
cash equivalents, beginning of year � 48 � � � 172 � � Cash and
cash equivalents, end of period $ 127 � � $ 169 � � IDEARC INC.
Mutli-Product Advertising Sales (dollars in millions) � � � � � � 3
Mos. Ended 3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended 6
Mos. Ended Unaudited 6/30/08 6/30/07 6/30/06 6/30/08 6/30/07
6/30/06 � � � Net Print Products Revenue(1) $ 606 $ 678 $ 697 $
1,257 $ 1,383 $ 1,419 % Change year-over-year (10.6%) (2.7%) (9.1%)
(2.5%) � Net Internet Revenue(2) 75 73 55 148 141 107 % Change
year-over-year 2.7% 32.7% 5.0% 31.8% � � � � � � � � Net
Multi-Product Advertising Sales(3) 681 751 752 1,405 1,524 1,526 %
Change year-over-year (9.3%) (0.1%) (7.8%) (0.1%) � � � � � � � �
Notes: � (1) Net print products revenue represents the total
revenue value (less a provision for sales allowances) of
directories published that will be amortized over the life of the
directories, which is typically 12 months. Directories from
preceding periods have been aligned to match the publication
schedule of 2008 publications, allowing for a meaningful comparison
of current publications to previous publications. Previously
reported amounts have been changed to reflect subsequent
adjustments. � (2) Net Internet revenue represents total revenue
for our fixed-fee and performance-based advertising products less a
provision for sales allowances. Fixed-fee advertising includes
advertisement placement on our Superpages.com website, and website
development and hosting for our advertisers. Revenue from fixed-fee
advertisers is recognized monthly over the life of the advertising
service. Performance-based advertising revenue is earned when
consumers connect with our Superpages.com advertisers by a "click"
on their Internet advertising or a phone call to their business.
Revenue from performance-based advertising is recognized when there
is evidence that qualifying transactions have occurred. � (3) Net
multi-product advertising sales is a statistical measure. It is
important to distinguish net multi-product advertising sales from
total operating revenue, which on our financial statements is
recognized under the deferral and amortization method. About Idearc
Inc. Idearc Inc. (NYSE: IAR) delivers products on multiple
platforms to help consumers find the information they want,
wherever they are. Idearc�s multi-platform of advertising solutions
includes Superpages.com�, Superpages MobileSM, Superpages Mobile SM
for BlackBerry�, Switchboard.com, LocalSearch.comSM, Verizon�
Yellow Pages, Verizon� White Pages, smaller-sized portable Verizon�
Yellow Pages Companion Directories, FairPoint� Yellow Pages,
FairPoint� White Pages, FairPoint� Yellow Pages Companion
Directories, reFresh reCharge reNew� magazine, Solutions At Hand�
magazine, and Solutions on the Move� and Solutions Direct� direct
mail packages. For more information, visit www.idearc.com. IAR-G
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