Stockwire.com: Idearc Inc. (OTC: IDAR) just released some important news.

Fri. March 13, 2009; Posted: 11:03 AM

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DALLAS -- Idearc Inc. (OTC: IDAR | Quote | Chart | News | PowerRating) today announced financial results for the fourth quarter and year ended December 31, 2008.

"Idearc's fourth quarter financial results are disappointing as we expected," said Scott W. Klein, chief executive officer of Idearc Inc. "We are making progress on our transformational and cost-cutting initiatives. However, the unprecedented economic challenges this nation is facing are creating never-before-seen obstacles for our clients and, as a result, for us as well."

Financial Summary

Idearc reports financial results on a GAAP basis and on an adjusted basis to eliminate the impact of transition and restructuring costs, impairment charges and certain stock-based compensation. Impairment charges in the fourth quarter of 2008 include non-cash charges of $225 million primarily associated with the write down of intangible assets. The adjusted basis measures are described and are reconciled to the corresponding GAAP measures in the accompanying financial schedules.

For the year ending December 31, 2008, Idearc reported multi-product revenues of $2,973 million, a 6.8 percent decrease compared to the same period in 2007. Annual Internet revenue was $300 million, a 5.3 percent increase compared to the same period in 2007.

The Company reported fourth quarter 2008 multi-product revenues of $709 million, a 9.9 percent decrease compared to the same period in 2007. The Company reported Internet revenue of $77 million in the fourth quarter, a 2.7 percent increase compared to the same period in 2007.

The Company reported 2008 earnings before interest, taxes, depreciation and amortization (EBITDA) of $1,004 million including impairment charges, a 29.8 percent decrease compared to the same period in 2007. Reported 2008 EBITDA margins were 33.8 percent including impairment charges, compared to 44.9 percent in the same period in 2007. On an adjusted basis, 2008 EBITDA was $1,272 million, a 16.2 percent decrease compared to the same period in 2007. Adjusted EBITDA margins were 42.8 percent, compared to 47.6 percent in the same period in 2007.

For 2008, the Company reported fourth quarter EBITDA of $48 million including impairment charges, an 85.6 percent decrease compared to the same period in 2007. The Company reported EBITDA margins of 6.8 percent in the fourth quarter including impairment charges, compared to 42.3 percent in the same period in 2007. On an adjusted basis, fourth quarter EBITDA was $287 million, an 18.0 percent decrease compared to the same period in 2007. Adjusted EBITDA margins were 40.5 percent in the fourth quarter 2008, compared to 44.5 percent in the same period in 2007.

The Company reported 2008 net income of $183 million including impairment charges, a 57.3 percent decrease compared to the same period in 2007. On an adjusted basis, 2008 net income was $353 million, a 27.1 percent decrease versus the same period in 2007.

The Company reported a fourth quarter net loss of $77 million including impairment charges. On an adjusted basis, fourth quarter net income was $74 million, a decrease of 32.7 percent versus the same period in 2007.

Free cash flow for the twelve months ended December 31, 2008 was $307 million based on cash from operating activities of $363 million, less capital expenditures of $56 million.

Multi-product advertising sales for the fourth quarter declined 12.8 percent compared to 2007. On a full year basis, multi-product advertising sales declined 9.8 percent compared to 2007.

Update on Liquidity and Capital Structure

As of December 31, 2008, Idearc had cash and cash equivalents of $510 million. As previously reported, in October 2008, the Company borrowed $247 million under its existing $250 million revolving credit facility.

At December 31, 2008, the Company was in compliance with its quarterly leverage ratio covenant. However, based on current forecasts, the Company anticipates that it may be noncompliant with this covenant sometime in the first half of 2009. Additionally, because the December 31, 2008 financial statements the Company will provide to its lenders includes a report of its independent registered public accounting firm that contains an explanatory paragraph expressing doubt as to Idearc's ability to continue as a going concern, the Company will be noncompliant with a second covenant. Noncompliance with this covenant is considered an event of default under the senior secured facilities thirty days following notice of such default from the lenders. Upon an event of default, absent other potential remedies, the lenders may declare the total secured debt outstanding to be due and payable and upon acceleration, the Company's unsecured notes would also become due and payable.

Idearc has evaluated various options for restructuring its capitalization and debt service obligations to alleviate these covenant issues and to create a capital structure that will permit the Company to remain a going concern. Idearc and its advisors have considered various alternatives to strengthen its balance sheet and financial risk profile. Among these alternatives, the Company is currently considering a restructuring through a "pre-packaged," "pre-negotiated," or similar plan of reorganization under federal bankruptcy laws. Idearc and its advisors continue to work with representatives of holders of both the senior secured facilities and the senior unsecured notes in this regard. If the Company is unable to achieve a "pre-packaged," "pre-negotiated," or similar plan of reorganization, it would likely be necessary that the Company file for reorganization under federal bankruptcy laws in any event.

"Simply stated, restructuring our capitalization and debt obligations to a more appropriate level will provide us with the opportunity to prosper and grow in the years ahead," Klein said. "We are dedicated to implementing an appropriate capital structure to support our new strategic business plans and objectives. A debt restructuring plan that will strengthen Idearc's financial condition will position the Company to compete more effectively in a challenging and rapidly evolving economic environment.

"We would expect the Company to operate as usual throughout the restructuring process and continue to meet its obligations to consumers, clients and employees, just as we do now and have done in the past."

In light of its ongoing review of alternatives for strengthening its balance sheet and financial risk profile, the Company will not host a conference call for investors this quarter and will not be providing an update on earnings guidance for 2009. For a more detailed discussion of the Company's restructuring activities, please see the Company's Annual Report on Form 10-K for the period ended December 31, 2008, filed on March 12, 2009 with the Securities and Exchange Commission and available online on the Idearc website, www.idearc.com, and at www.SEC.gov.

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