Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - DEX ONE Corp | d410684d8k.htm |
 Lender
Discussion Material September 18, 2012
Exhibit 99.1 |
 2
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 One”) will be submitted to the respective
stockholders of SuperMedia and Dex One. In connection with the proposed
transaction, Newdex, Inc., a subsidiary of Dex One (“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 One to solicit the required approval of their
stockholders and that also constitutes a prospectus of Newdex.
INVESTORS AND SECURITY HOLDERS OF SUPERMEDIA AND DEX ONE 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
One
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
One
with
the
SEC
from
the
SEC’s
website
at
www.sec.gov.
Copies
of
the
documents
filed
by
SuperMedia
with
the
SEC
will
be
available
free
of
charge
on
SuperMedia’s
website
at
www.supermedia.com
under
the
tab
“Investors”
or
by
contacting SuperMedia’s Investor Relations Department at (877)
343-3272. Copies of the documents filed by Dex One with the SEC will be available
free
of
charge
on
Dex
One’s
website
at
www.dexone.com
under
the
tab
“Investors”
or
by
contacting
Dex
One’s
Investor
Relations
Department
at
(800) 497-6329.
SuperMedia
and
Dex
One
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 SuperMedia’s proxy statement relating to its 2012 Annual Meeting of
Shareholders and Dex One’s 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. |
 3
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 One, SuperMedia, the combined company or their respective
management, have been used to identify such forward-looking statements.
All forward-looking statements reflect only Dex One’s and SuperMedia’s current beliefs and assumptions with respect to future business
plans, prospects, decisions and results, and are based on information currently
available to Dex One and SuperMedia. Accordingly, the statements are subject
to significant risks, uncertainties and contingencies, which could cause Dex One’s, SuperMedia’s or the combined company’s 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
Dex
One’s
and
SuperMedia’s publicly available reports filed with the SEC, which contain
discussions of various factors that may affect the business or financial
results of Dex One, SuperMedia or the combined company. Such risks and other
factors, which in some instances are beyond either company’s 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
respective
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 One 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 One or SuperMedia; failure to receive the approval of the
stockholders of either Dex One or SuperMedia for the transaction; and
difficulties in connection with the process of integrating Dex One 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 joint 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 One, SuperMedia or the combined company is
responsible for updating the information contained in this presentation beyond the
presentation date. |
 4
Transaction Overview |
 5
Transaction Objective
•
Improve Positioning for Growth
–
National scale and scope
–
Greater market share
•
Improve Quality and Productivity
–
Achieve a complete suite of social, mobile and local solutions
–
Capture marketing consultant expertise and best practices
–
Apply best technology systems and platforms, operating processes, tools and client
care techniques
•
Strengthen the Balance Sheet
–
Expense synergies
–
Efficient use of tax assets
–
Enhance cash flow
–
Extend runway for payment of senior debt
Accelerate the Transformation of the Companies |
 6
Summary Transaction Terms
Structure
Stock for stock merger in which SuperMedia stockholders exchange existing shares for shares in
the new combined company, Dex Media
Implement 1-5 reverse split
Exchange Ratio /
Ownership Split
40% SuperMedia / 60% Dex One
Name
Dex Media, Inc. (publicly-traded successor to Dex One)
Governance
11 member board
5 appointed by SuperMedia
5 appointed by Dex One
1 independent to be selected jointly
Chairman
Alan Schultz (Dex One)
Management
CEO: Peter McDonald (SuperMedia)
CFO: Dee Jones (SuperMedia)
Remaining management to be determined by representatives of each board and Peter McDonald
Estimated Synergies
$150–175MM of annual run-rate expense synergies
$175–225MM of cash flow due to preservation of Dex One tax attributes
Loan Modifications to be
Sought
SuperMedia lenders agree to extend maturity by one year from December 31, 2015 to December 31,
2016, as well as modify certain other provisions
Dex One lenders at all 3 silos agree to extend maturities by 26 months from October 24, 2014 to
December 31, 2016, as well as modify certain covenants, amortization requirements and certain
other provisions
Tax Sharing
The SuperMedia silo will have the ability to utilize savings resulting from Dex One’s tax
attributes, subject to a tax sharing agreement where the SuperMedia silo will retain 25% of
any tax savings and the Dex One silos will benefit from 75% of the tax savings
Shared Services
New shared services agreement to allocate corporate and other shared services among the
subsidiarie similar to existing Dex One agreement
Trading Restrictions
Trading restrictions for 5% shareholders to preserve tax assets
Restrictions can be removed at the Board’s option and in certain circumstances may be removed
after closing of the merger
|
 7
Condensed Pro Forma Corporate Structure
Dex East, Inc.
2012E Net Debt:
$489MM
2012E EBITDA:
$162MM
2012E PF EBITDA:
$188MM
Net Leverage
Stand-alone:
3.0x
PF East:
2.6x
Dex West, Inc.
2012E Net Debt:
$452MM
2012E EBITDA:
$184MM
2012E PF EBITDA:
$214MM
Net Leverage
Stand-alone:
2.4x
PF West:
2.1x
Dex One Shareholders
RHD, Inc.
2012E Net Debt:
$731MM
2012E EBITDA:
$215MM
2012E PF EBITDA:
$247MM
Net Leverage
Stand-alone:
3.4x
PF RHDI:
3.0x
Illustrative 2012E Pro Forma Corporate Structure Summary
(1)
Dex Media , Inc.
(HoldCo)
2012E Net Debt: $219MM
40% Ownership
60% Ownership
SuperMedia Shareholders
SuperMedia, Inc.
2012E Net Debt:
$1,366MM
2012E EBITDA:
$534MM
2012E PF EBITDA:
$622MM
Net Leverage
Stand-alone:
2.5x
PF SuperMedia:
2.2x
2012E PF Net Debt: $3.3Bn
2012E PF EBITDA: $1.3Bn
2012E PF Net Leverage: 2.6x
Note
1.
Pro forma analysis assumes gross, run-rate synergies as of 2012 and excludes
costs to achieve |
 8
National Presence: Increased Scale & Scope
More Than 3,100 Marketing Consultants Building Trusted Relationships and
Delivering Results to Over 700,000 Local Businesses |
 9
Peter McDonald Background
•
SuperMedia: Sept. 2010-Present, CEO
–
Implementing transformation from a product-focused yellow pages company to a
customer-focused marketing consultant across all local media, including
a complete suite of digital solutions –
Achieved
significant
cost
reductions
resulting
in
a
900bp
EBITDA
margin
improvement
(32%
FY2010
to
41%
in YTD2012).
•
RH Donnelley: 2002-Sept. 2008, President & COO
–
COO from 2004
–
Integrated acquisition of Dex Media ($1.6bn in revenues), generating synergies of
$75 million (~10% of Dex Media’s operating costs).
•
SBC Directory Operations: 2000-2001, $4.5bn in revenues, CEO
–
Replaced SBC CEO, when McDonald’s Ameritech operation was acquired.
–
Integrated SBC, Ameritech, Southern New England Telecom and PacTel
directories •
Ameritech Publishing and Advertising: 1994-2000, $1bn revenues, CEO
–
Launched one of industry’s first internet yellow pages operation in 1994:
Smartpages.com •
Previously, CEO of Dontech (RH Donnelley/Ameritech JV), GM of Donnelley Information
Publishing, AVP Planning & GM of Northeast region of RH Donnelley, GM of
National Telephone Directory Corporation.
More than 35 years of experience in the yellow pages industry and
managed three of the major U.S. directory operations |
 10
Financial Overview |
 11
Pro Forma Financial Summary
•
Declining print revenue and cash flow will continue to depress revenue and EBITDA
over the near-term
•
Synergies mitigate cash flow decline and provide company with time and resources to
grow digital business
•
Combined revenue from digital solutions will represent ~20% of total revenue in
2012 2011A
2012E
2011A
2012E
2011A
2012E
Revenue, net
1,642
1,371
1,481
1,304
3,123
2,675
Expenses
1,034
837
852
744
1,886
1,581
Run-Rate Synergies
(1)
-
-
-
-
(175)
(175)
Expenses
1,034
837
852
744
1,711
1,406
Adj. EBITDA
(2)
608
534
629
560
1,412
1,269
SuperMedia
(3,4)
Dex One
Pro Forma
Notes
Pro forma analysis assumes gross, run-rate synergies as of 2012 and excludes costs to achieve
Adjusted EBITDA is determined by adjusting EBITDA to exclude (i) gain on debt repurchases, (ii)
stock-based compensation expense and long-term incentive program, (iii) impairment
charges and (iv) gain on sale of assets, net and (v) other non-recurring items
SuperMedia EBITDA contains add-back for stock-based compensation expense/LTI expense of $6 and
$5 in 2011A and 2012E, respectively in order to make comparable to Dex One adjusted EBITDA
metric Historical and forecasted digital revenue for SuperMedia include approximately $17
million from a discontinued operation that was divested in August 2012. EBITDA forecasts also
include an offsetting $17 million in expenses
1.
2.
3.
4. |
 12
Pro Forma Projected Financial Performance
Growth (%):
Print:
(18.8)
(20.6)
(18.0)
(18.0)
(18.0)
Digital:
14.0
26.8
24.7
22.1
21.2
Total:
(14.3)
(12.1)
(6.8)
(3.9)
(0.3)
SuperMedia
Dex One
SuperMedia
Dex One
Synergies
1,371
1,186
1,095
1,040
1,023
1,304
1,167
1,098
1,066
1,077
2,675
2,353
2,193
2,107
2,100
0
1,000
2,000
3,000
2012E
2013E
2014E
2015E
2016E
Revenue
$MM
534
427
351
257
560
455
381
316
287
104
175
175
1,094
865
836
782
720
0
250
500
750
1,000
1,250
2012E
2013E
2014E
2015E
2016E
EBITDA
$MM
3,256
2,855
2,406
2,006
1,628
0
700
1,400
2,100
2,800
3,500
2012E
2013E
2014E
2015E
2016E
Debt
$MM
Net
3.0
3.3
2.9
2.6
2.3
0.00
1.00
2.00
3.00
4.00
2012E
2013E
2014E
2015E
2016E
Net Debt/Trailing EBITDA
x
(17)
291 |
 13
Comparison to Stand-Alone
Without Merger
Pro Forma
1,336
1,216
1,122
1,064
1,025
1,366
1,238
1,086
945
841
0
500
1,000
1,500
2012E
2013E
2014E
2015E
2016E
SuperMedia Net Debt
2.5
2.9
3.2
3.7
4.0
2.5
3.0
2.7
2.5
2.4
0.0
1.0
2.0
3.0
4.0
2012E
2013E
2014E
2015E
2016E
SuperMedia Net Debt / Trailing EBITDA Ratio
1,860
1,605
1,401
1,269
1,152
1,885
1,617
1,320
1,060
787
0
500
1,000
1,500
2,000
2012E
2013E
2014E
2015E
2016E
Dex One Net Debt
Without Merger
Pro Forma
3.3
3.5
3.7
4.0
4.0
3.4
3.6
3.0
2.6
2.1
0.0
1.0
2.0
3.0
4.0
2012E
2013E
2014E
2015E
2016E
Dex One Net Debt / Trailing EBITDA Ratio |
 14
Long-Term Revenue Forecasts
•
The long term rate of decline in print revenues is based on an observed secular
trend in the industry over the past 4-5 years
–
The rate of revenue decline was exacerbated during 2008-2009 by the economic
downturn –
2011
reports
by
third
party
industry
observers
forecasted
annual
North
American
print
yellow
page
revenue
declines ranging from 12-16% during the projection period.
Year-to-date 2012 print revenue declines, however, have exceeded
these levels, which will also result in higher decline rates in 2013
–
Based on recent results and the observed longer term secular decline, management
projections contemplate an -18% annual decline in print revenue over
the forecast period •
The long term digital revenue growth forecast anticipates the company slightly
outpacing the overall
digital
media
industry
annual
growth
rate
of
18-21%
(1)
–
Enhancements
to
their
social,
local
and
mobile
digital
solutions
will
enable
the
companies
to
fully
participate
in the growing digital market
–
SuperMedia’s digital growth rate is projected to lag Dex One’s by
9-12 months as SuperMedia’s 2012 initiatives are realized in
revenue –
By 2014 the digital revenue growth rates are projected to converge
2011A
2012E
2013E
2014E
2015E
2016E
2011A
2012E
2013E
2014E
2015E
2016E
2011A
2012E
2013E
2014E
2015E
2016E
Print & Direct Mail
1,320
1,068
841
690
566
466
1,406
1,145
919
754
618
507
2,726
2,213
1,761
1,444
1,184
975
Digital
159
240
334
416
508
615
273
253
291
363
443
537
432
493
625
779
951
1,153
Other
17
11
7
7
7
10
0
0
0
0
0
0
17
11
7
7
7
7
Allowances & Credits
(16)
(14)
(15)
(14)
(14)
(14)
(37)
(27)
(24)
(22)
(21)
(20)
(53)
(41)
(39)
(36)
(35)
(35)
Net Revenue
1,481
1,304
1,167
1,098
1,066
1,077
1,642
1,371
1,186
1,095
1,040
1,023
3,123
2,675
2,353
2,193
2,107
2,100
Year-over-Year Growth Rates
Print & Direct Mail
-19%
-21%
-18%
-18%
-18%
-19%
-20%
-18%
-18%
-18%
-19%
-20%
-18%
-18%
-18%
Digital
51%
39%
25%
22%
21%
-7%
15%
25%
22%
21%
14%
27%
25%
22%
21%
Net Revenue
-12%
-11%
-6%
-3%
1%
-17%
-13%
-8%
-5%
-2%
-14%
-12%
-7%
-4%
0%
Dex One
SuperMedia
Pro Forma Combined
Note
1.
Source: Forrester, BIA/Kelsey, Barclays, Borrell, company estimates
|
 15
•
Consolidate and rationalize G&A
functions
•
Reduce directory printing, paper,
production and distribution costs
•
Rationalize real estate, reduce
locations and adopt most
efficient real estate management
practices
•
Consolidate and rationalize IT
platforms, systems and
operations
•
Rationalize suppliers and
achieve scale discounts
Operations
•
Standardize on single platforms
and tools
•
Apply best IP and solutions to
reduce traffic acquisition costs,
rationalize digital products and
solutions and streamline and
automate digital fulfillment
•
Eliminate duplication in SEM
networks and standardize
agreements with distribution
partners
•
Rationalize suppliers and
partners
•
Rationalize development
resources
•
Eliminate duplicative business
development efforts
Digital Solutions
•
Apply best practices to
consulting approach, recruiting
and training
•
Adopt most effective
segmentation, channel
management and productivity
practices
•
Align compensation plans
•
Rationalize overlapping and
contiguous markets
Go To Market
Expected cumulative gross synergies of $535MM through 2016
Expense Synergies |
 16
Cost to Achieve
Synergies
•
Expense synergies actions will be implemented in 2013 and ~70% of the run rate
synergies are expected to be realized in 2014
•
Total cost to achieve synergies of ~$100-120 million offset by realization of
synergy benefit over the same time period
•
The combined company will benefit from the increased scale and cost
efficiencies. The companies have conservatively not modeled any
revenue synergies Expense Synergies
Cumulative Net Synergies
-17
87
262
437
Cumulative Gross Synergies
60
185
360
535
60
125
175
175
77
21
0
50
100
150
200
2013E
2014E
2015E
2016E
2013E-2016E Expense Synergies Summary |
 17
•
Vast majority of the synergies are associated with overhead and support
functions –
Management expects ~70-80% of the annual synergies will be captured in shared
service cost functions (see Appendix A for additional details on Amended
Shared Services Agreement) •
Alvarez & Marsal Transaction Advisory Group, LLC (“A&M”) was
retained by SuperMedia to evaluate management’s expense synergy
estimates and the one-time costs to achieve. –
After substantial investment of time and resources of both SuperMedia and Dex One,
A&M performed a detailed review of management’s estimates
–
The results of A&M’s review have been considered by management in the
synergy savings and one-time costs to achieve presented herein
Expense Synergies
Category
Low
High
Description
Print Product & Publishing
25
30
Paper, printing and distribution economies of scale & process/vendor
management redundancies
Digital Product Costs
20
25
Traffic acquisition efficiencies & fulfillment redundancies
Sales, Marketing & Advertising
40
45
Channel management redundancies, training efficiencies, expense and
headcount redundancies
IT
20
25
Platform consolidation, vendor consolidation & support efficiencies
Corporate & Operational Overhead
45
50
Headcount and occupancy redundancies, best practices efficiencies,
additional outsourcing opportunities, management redundancies
Total
150
175
|
 18
Tax Asset Utilization
•
Dex One expects to have tax attributes of ~$1.8 billion at 2012 year-end
–
~$900 million net operating losses (NOLs)
–
~$900 million intangible basis
•
Provide $175-225 million of cash flow
–
Transaction preserves Dex One tax attributes and allows them to offset earnings of
the combined company
–
Provides Dex One lenders with incremental cash flow and SuperMedia lenders with a
portion of the overall tax savings
•
Existing Dex One Tax Sharing Agreement will be left in place, with certain
modifications
–
Dex One entities are reimbursed amongst themselves for tax attributes at 50%, no
reimbursement for tax attributes used to offset cancellation of
indebtedness income •
SuperMedia will enter into new Tax Sharing Agreement with Dex One such that:
–
The SuperMedia silo will reimburse the Dex One silos at 75% for tax
attributes –
The SuperMedia silo will retain 25% of the tax savings
•
Merger agreement contemplates trading restrictions for 5% shareholders to preserve
tax attributes |
 19
Shared Digital Strategy
•
Each company expects to achieve approximately the same revenue from digital
products
and
solutions
in
2012
($240
-
$250
million
per
company)
•
Over the past 2½
years, both companies have improved their digital operations
–
Dex One has increased digital revenue by over 60%
–
SuperMedia
has
improved
digital
profit
contribution
(1)
margin
from
approximately
7%
to
32%
•
Over the past 18 months both companies have enhanced their digital
go-to-market strategy
–
Filled out their digital product offerings
–
Re-educated their go-to-market teams to be digital marketing
consultants –
Begun
offering
bundled
solutions
to
provide
digital
presence
and
performance
(leads)
–
Initial focus has been on penetrating existing print client base
Establishing digital relationships with existing and new local business
customers will be the driver for profitable market share growth
Note
1.
Profit contribution is a non-GAAP metric of revenue less direct and indirect
expenses. |
 20
Foundation For Digital Growth
•
The companies will share and employ proven capabilities to improve combined digital
revenue growth and contribution margin to improve cash flow
–
Rationalize and enhance digital products
–
Apply most effective bundling and pricing practices
–
Achieve
quality
and
cost
improvements
in
fulfillment,
operations
and
service
–
Rationalize and enhance operating platforms, customer portals and consultant
analysis, presentation and administrative tools
–
Standardize on the most effective and efficient existing sales channels and
supplement with additional channels
•
Initiatives will focus on profitably increasing digital market share
–
Penetrating the rest of the existing customer base with digital products
–
Leading with digital products to increase new customer relationships
Merger provides ability to leverage digital strengths of each company
|
 21
Historical Digital Trends
•
Dex
One
has
realized
significant
digital
revenue
growth
over
the
past
year
from
a
variety
of
initiatives
–
Enhancements to existing product offerings have led to better fulfillment and
quality scores –
Expanded digital packages have enabled Dex One to better tailor solutions to the
needs of its customers –
Improved
levels
of
digital
expertise
across
their
sales
channels
have
led
to
richer
customer
interactions
–
Reductions in the time to market for new products have been achieved through a
growing partnership network •
SuperMedia rationalized products and channels to focus on profitability
–
In 2009, SuperMedia had significant digital revenue stream but little profit
contribution after including all sales costs, overhead and technology
costs –
In 2010 and 2011, management undertook a comprehensive approach to address the
cost structure and develop a new strategy for digital solutions
•
Underperforming sales channels were closed or divested (Internet-only channel,
reseller channel) •
Low margin products were eliminated or re-designed
–
While revenue declined over the three year period, profit contribution margin was
greatly enhanced Note
1.
Dex
One
digital
revenue
in
2010
pro
forma
for
the
disposition
of
Business.com
285
273
253
147
159
240
0
50
100
150
200
250
300
2010A
2011A
2012E
Digital Revenue
(1)
SuperMedia
Dex One
$MM |
 22
Amendment Overview |
 23
Credit Agreement Amendments Approach
•
The proposed merger and the maturity extension allows both companies to improve
cash flow and reduce leverage relative to their stand-alone
prospects –
The lenders at EACH credit silo receive MORE cumulative cash from interest,
mandatory amortization
and
mandatory
sweep
under
the
proposed
loan
amendments
than
they
would
on a stand-alone basis
–
Despite
distressed
levels
of
both
companies’
debt,
NO
proposed
principal
or
interest
reduction as part of the merger
–
Significant operational and financial synergies which can be used to efficiently
de-leverage •
The combined companies requires the runway to transform and achieve synergies
without risk of triggering a default due to a covenant breach, mandatory
amortization or maturity
–
The merger will require significant management effort to reduce expenses and
headcount •
In order to achieve the merger benefits, the necessary components of the credit
agreement amendments include:
–
Modest extension of maturity
–
Reset financial covenants to provide operating flexibility
–
Reduction in Dex One’s mandatory amortization and shift to a quarterly cash
sweep –
Ability to use the borrower’s portion of cash flow in market-based tender
for debt |
 24
Credit Agreement Amendments Approach
•
This approach is not new, as the proposed amendments mirror the approach taken in
the existing SuperMedia credit agreement
–
SuperMedia has used all of its free cash flow to return ~$1 billion to its lenders
since emergence from bankruptcy through June 2012
–
~$625 million of principal reduction through mandatory cash sweep and the balance
returned to lenders using the borrower’s portion of cash flow to
tender for debt •
Both the Dex One and SuperMedia management teams and the Boards of the
respective companies support the proposed merger and believe that all stakeholders
benefit relative to the stand-alone prospects of these
stakeholders |
 25
Credit Agreement Amendments Overview
•
Extends maturity to December 31, 2016
–
All loans under the various credit agreements mature before the Senior
Subordinated Notes due 2017 •
Revised interest rate economics
–
Increased
LIBOR
spread
for
RHDI
and
Dex
West
lenders
through
the
extension
period
–
Implement LIBOR floor for Dex East lenders to equalize floor across all credit
silos at 3.0% –
Increased LIBOR spread for Dex East during the extension period
•
Adjusts
mandatory
amortization
and
cash
sweep
levels
at
RHDI
and
Dex
East
to
accommodate projected financial performance and volatility of cash flow during
transition period
–
Annual mandatory amortization of approximately $20 million for each Dex One credit
silo –
Compensating upward adjustment in cash flow sweep to re-capture any
incremental cash flow in 2013 and 2014
•
Provides the combined company with ability to make discounted tender offers through
maturity with borrower’s portion of excess cash flow
–
Market-based opportunity for borrowers to efficiently de-leverage
–
Liquidity for market participants
–
Improves debt trading dynamics |
 26
RHDI Credit Agreement Amendment
Current
Proposed Amendment
Maturity
October 24, 2014
December 31, 2016
Interest Rate
2013 –
2014
L+600bps
(1)
(3.0% floor)
L+625 bps (3.0% Floor)
2015 –
2016
N/A
L+650 bps (3.0% Floor)
Mandatory Amortization
2013 –
2014
$10.8 million per quarter
$5.0 million per quarter
2015 –
2016
N/A
$5.0 million per quarter
Cash Flow Sweep
2013 –
2014
50% -
60% of ECF
(2)
, annually
90.0% of ECF for first $25.9 million,
50.0% thereafter, quarterly
2015 –
2016
N/A
50.0% of ECF, quarterly
Discount Tender Opportunity
Borrower’s portion of ECF through 12/31/13
Borrower’s portion of ECF through maturity
Leverage Covenant
2013 –
2014
4.25x in 2013 & 4.00x in 2014
6.0x
2015 –
2016
N/A
6.0x
Interest Coverage Covenant
2013 –
2014
1.90x in 2013 & 2.00x in 2014
1.0x
2015 –
2016
N/A
1.0x
Other
Maintain existing $5 million annual RP basket and allow pull-forward of future
basket amounts through maturity into current year, extend discounted
voluntary prepayments, permit borrower’s portion of excess cash flow
basket to roll-over and permit certain other affiliate transactions.
Notes
1.
Actual LIBOR spread based on grid pricing. Proposed amendment eliminated
grid-based pricing. 2.
Actual excess cash sweep percentage based on leverage ratio grid.
|
 27
RHDI Pro Forma Metrics
Without Merger
Pro Forma
215
174
143
118
105
215
170
162
150
136
0
100
200
300
2012E
2013E
2014E
2015E
2016E
EBITDA
721
541
729
282
0
200
400
600
800
2012E
2016E
Net Debt
(1)
Note:
1.
3.4
5.2
3.4
2.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2012E
2016E
Net Debt/Trailing EBITDA
(1)
For purposes of this analysis, borrower’s portion of excess cash flow is assumed to be used to
retire debt through a tender or voluntary repayment. The analysis above assumes a market
price of 100% for all bank debt tenders. |
 28
RHDI Pro Forma Lender Economics
2013E
2014E
2015E
2016E
Total
2013E
2014E
2015E
2016E
Total
Leveraged Free Cash Flow
(1)
82
56
28
14
180
107
126
105
112
450
Amortization
43
43
-
-
86
20
20
20
20
80
Cash Sweep
26
11
28
14
79
58
67
45
48
218
Principal Payments
69
54
28
14
165
78
87
65
68
298
Cash Interest
64
58
57
55
234
65
54
45
34
198
Cash Returned to Lenders
133
112
85
69
399
143
141
110
102
496
Company Portion of Cash Flow
(2)
13
2
-
-
15
29
39
40
43
151
Cash Including Company Portion
146
114
85
69
414
172
180
150
145
647
Stand-Alone
(3)
Pro Forma
Notes
1.
Leveraged Free Cash represents EBITDA less working capital, capital expenditures,
cash interest, taxes and restricted payments. 2.
For purposes of this analysis, borrower’s portion of excess cash flow is
assumed to be used to retire debt through a tender (at 100%) or voluntary repayment.
3.
In the stand-alone projection, all cash flow after the original maturity is
presented as reducing debt as a cash flow sweep. •
Lenders will realize improved cash returns due to incremental cash flow
from synergies and tax sharing benefits
•
The proposed amendment adjusts the mandatory amortization to a level
that provides sufficient liquidity and operating flexibility during the integration
period
•
The cash sweep starts at 90% for the first $25.9 million to allow the lenders
to recapture all of the cash flow generated up to the current amortization
schedule through 2014 |
 29
Dex East Credit Agreement Amendment
Current
Proposed Amendment
Maturity
October 24, 2014
December 31, 2016
Interest Rate
2013 –
2014
L+250bps
(no floor)
L+250 bps (3.0% floor)
2015 –
2016
N/A
L+300 bps (3.0% floor)
Mandatory Amortization
2013 –
2014
$29 million per quarter
$5.0 million per quarter
2015 –
2016
N/A
$5.0 million per quarter
Cash Flow Sweep
2013 –
2014
50% -
65% of ECF
, annually
90.0% of ECF, quarterly
2015 –
2016
N/A
50.0% of ECF, quarterly
Discount Tender Opportunity
Borrower’s portion of ECF through 12/31/13
Borrower’s portion of ECF through maturity
Leverage Covenant
2013 –
2014
5.00x
6.0x
2015 –
2016
N/A
6.0x
Interest Coverage Covenant
2013 –
2014
N/A
1.0x
2015 –
2016
N/A
1.0x
Other
Maintain existing $5 million annual RP basket and allow pull-forward of future
basket amounts through maturity into current year, extend discounted
voluntary prepayments, permit borrower’s portion of excess cash flow
basket to roll-over and permit certain other affiliate transactions.
Notes
1.
Actual LIBOR spread based on grid pricing. Proposed amendment eliminated
grid-based pricing. 2.
Actual excess cash sweep percentage based on leverage ratio grid.
2
1 |
 30
Dex East Pro Forma Metrics
Without Merger
Pro Forma
162
131
112
93
86
162
128
127
119
112
0
100
200
2012E
2013E
2014E
2015E
2016E
EBITDA
478
214
487
174
0
200
400
600
2012E
2016E
Net Debt
(1)
3.0
2.5
3.0
1.6
0.0
1.0
2.0
3.0
4.0
2012E
2016E
Net Debt/Trailing EBITDA
(1)
Note
1.
For purposes of this analysis, borrower’s portion of excess cash flow is assumed to be used to
retire debt through a tender or voluntary repayment. The analysis above assumes a
market price of 100% for all bank debt tenders. |
 31
Dex East Lender Economics
•
Based on the projected cash flow, it is not feasible for Dex East to service its
current amortization schedule on a stand-alone basis
•
The proposed amendment adjusts the mandatory amortization to a level that
provides sufficient liquidity and operating flexibility during the integration
period •
The lenders still capture the cash flow of Dex East through the 90% cash sweep
though 2014
•
Lenders improve their overall economics through the interest rate increase and
retain the vast majority of the cash flow generated through the revised
amortization schedule and the cash sweep
2013E
2014E
2015E
2016E
Total
2013E
2014E
2015E
2016E
Total
Leveraged Free Cash Flow
(1)
88
77
49
50
264
81
82
71
80
314
Amortization
88
77
-
-
165
20
20
20
20
80
Cash Sweep
-
-
49
50
99
59
61
28
33
181
Principal Payments
88
77
49
50
264
79
81
48
53
261
Cash Interest
20
17
26
23
86
32
28
25
21
106
Cash Returned to Lenders
108
94
75
73
350
111
109
73
74
367
Company Portion of Cash Flow
(2)
-
-
-
-
-
2
1
23
27
53
Cash Including Company Portion
108
94
75
73
350
113
110
96
101
420
Stand-Alone
(3)
Pro Forma
Notes
1.
Leveraged Free Cash represents EBITDA less working capital, capital expenditures,
cash interest, taxes and restricted payments. 2.
For purposes of this analysis, borrower’s portion of excess cash flow is
assumed to be used to retire debt through a tender (at 100%) or voluntary repayment.
3.
In the stand-alone projection, all cash flow after the original maturity is
presented as reducing debt as a cash flow sweep. |
 32
Dex West Credit Agreement Amendment
Current
Proposed Amendment
Maturity
October 24, 2014
December 31, 2016
Interest Rate
2013 –
2014
L+400 bps
(1)
(3.0% floor)
L+425 bps (3.0% floor)
2015 –
2016
N/A
L+450 bps (3.0% floor)
Mandatory Amortization
2013 –
2014
$4.832 million per quarter
$4.832 million per quarter
2015 –
2016
N/A
$4.832 million per quarter
Cash Flow Sweep
2013 –
2014
50% of ECF
(2)
, annually
50.0% of ECF, quarterly
2015 –
2016
N/A
50.0% of ECF, quarterly
Discount Tender Opportunity
Borrower’s portion of ECF through 12/31/13
Borrower’s portion of ECF through maturity
Leverage Covenant
2013 –
2014
3.00x
6.0x
2015 –
2016
N/A
6.0x
Interest Coverage Covenant
2013 –
2014
1.35x
1.0x
2015 –
2016
N/A
1.0x
Other
Maintain existing $5 million annual RP basket and allow pull-forward of future
basket amounts through maturity into current year, extend discounted
voluntary prepayments, permit borrower’s portion of excess cash flow
basket to roll-over, permit certain other affiliate transactions and eliminate
ability to loan funds to Dex East and the senior secured leverage ratio
covenant. Notes
1.
Actual LIBOR spread based on grid pricing and leverage is expected to fall below
2.50x in 2012. Proposed amendment eliminates grid-based pricing.
2.
Actual cash sweep percentage based on leverage ratio grid and leverage is expected
to fall below 2.50x in 2012 resulting in a 50% ECF sweep this year. |
 33
Dex West Pro Forma Financial Profile
Without Merger
Pro Forma
184
150
126
104
97
184
148
143
133
126
0
100
200
2012E
2013E
2014E
2015E
2016E
EBITDA
442
174
451
109
0
200
400
600
2012E
2016E
Net Debt
(1)
2.4
1.8
2.4
0.9
0.0
1.0
2.0
3.0
2012E
2016E
Net Debt/Trailing EBITDA
(1)
Note
1.
For purposes of this analysis, borrower’s portion of excess cash flow is assumed to be used to
retire debt through a tender or voluntary repayment. The analysis above assumes a market
price of 100% for all bank debt tenders. |
 34
Dex West Lender Economics
•
The current amortization schedule for Dex West is the lowest among the Dex One
credit silos
•
Based on the projected cash flow, the proposed amendment does not require a
change to the mandatory amortization and extends it at the current levels through
December 31, 2016
•
Incremental
cash
flow
from
synergies
and
increased
interest
rate
starting
in
2013
provides the lenders with improved overall economics
2013E
2014E
2015E
2016E
Total
2013E
2014E
2015E
2016E
Total
Leveraged Free Cash Flow
(1)
86
71
57
55
269
87
89
84
83
343
Amortization
19
19
19
19
77
19
19
19
19
77
Cash Sweep
46
29
21
21
117
36
37
35
34
142
Principal Payments
65
48
40
40
194
55
56
54
53
219
Cash Interest
33
28
23
19
103
32
26
20
14
92
Cash Returned to Lenders
98
76
63
59
297
87
82
74
67
311
Company Portion of Cash Flow
(2)
20
24
16
16
76
32
33
30
30
124
Cash Including Company Portion
118
100
79
75
373
119
115
104
97
435
Stand-Alone
(3)
Pro Forma
Notes
1.
Leveraged Free Cash represents EBITDA less working capital, capital expenditures,
cash interest, taxes and restricted payments. 2.
For purposes of this analysis, borrower’s portion of excess cash flow is
assumed to be used to retire debt through a tender (at 100%) or voluntary repayment.
3.
In
the
stand-alone
projection,
analysis
assumes
existing
amortization
schedule
is
continued
in
2015
and
2016. |
 35
SuperMedia Credit Agreement Amendment
Current
Proposed Amendment
Maturity
December 31, 2015
December 31, 2016
Interest Rate
2013 –
2015
L+800 bps (3% Floor)
L+800 bps (3% Floor)
2016
N/A
L+800 bps (3% Floor)
Mandatory Amortization
2013 –
2015
None
None
2016
N/A
None
Cash Flow Sweep
2013 –
2015
67.5% of FCF, quarterly
50.0% of FCF, quarterly
2016
N/A
50.0% of FCF, quarterly
Discount Tender Opportunity
Borrower’s portion of FCF through 12/31/13
Borrower’s portion of FCF through maturity
Leverage Covenant
2013 –
2015
7.5x
7.5x
2016
N/A
7.5x
Interest Coverage Covenant
2013 –
2015
1.10x
1.10x
2016
N/A
1.10x
Other
Refresh disposition and investment baskets, provide limited restricted payment,
allow borrower to enter into intercompany operating agreements, permit
below par loan repurchases out of borrower’s portion of cash flow and
permit certain other affiliate transactions. |
 36
SuperMedia Pro Forma Financial Profile
Without Merger
Pro Forma
534
427
351
291
257
534
419
403
379
344
0
200
400
600
2012E
2013E
2014E
2015E
2016E
EBITDA
1,336
1,025
1,361
841
0
500
1,000
1,500
2012E
2016E
Net Debt
(1)
2.5
4.0
2.5
2.4
0.0
1.0
2.0
3.0
4.0
5.0
2012E
2016E
Net Debt/Trailing EBITDA
(1)
Note
1.
For purposes of this analysis, borrower’s portion of excess cash flow is assumed to be used to
retire debt through a tender or voluntary repayment. The analysis above assumes a market
price of 100% for all bank debt tenders. |
 37
SuperMedia Lender Economics
•
Lenders will realize improved cash returns due to incremental cash flow
•
Pro forma cash sweep under proposed amendment will exceed the cash
sweep in the stand-alone projections
2013E
2014E
2015E
2016E
Total
2013E
2014E
2015E
2016E
Total
Leveraged Free Cash Flow
(1)
120
94
58
39
311
128
153
140
105
526
Amortization
-
-
-
-
-
-
-
-
-
-
Cash Sweep
81
64
39
26
210
64
76
70
52
262
Principal Payments
81
64
39
26
210
64
76
70
52
262
Cash Interest
154
142
134
129
559
154
138
122
109
523
Cash Returned to Lenders
235
206
173
155
769
218
214
192
161
785
Company Portion of Cash Flow
(2)
39
31
19
13
101
64
76
70
52
262
Cash Including Company Portion
274
237
192
167
870
282
291
262
213
1,048
Stand-Alone
(3)
Pro Forma
Notes
1.
Leveraged Free Cash represents EBITDA less working capital, capital expenditures,
cash interest, taxes and restricted payments. 2.
For purposes of this analysis, borrower’s portion of cash flow is assumed to
be used to retire debt through a tender (at 100%) or voluntary repayment.
3.
In the stand-alone projection, all cash flow after the original maturity is
presented as reducing debt as a cash flow sweep. |
 38
Next Steps and Timeline |
 39
Transaction Anticipated to be Completed by
End of 2012
Lender Steering Committee Formed/
FTI Due Diligence Process
August 2012
Finalize Amendments with Various
Lender Groups and Receive
Requisite Lender Consents
October 2012
Shareholder Approval and Closing
November 2012
Meeting With Lenders
September 2012 |
 40
Appendix
A
Shared
Service
Agreement
Details |
 41
•
Dex One currently uses a Shared Services Agreement to allocate overhead and
co- mingled back-office costs between the three operating
companies –
Shared expenses include:
•
General and Administration Services: Executive, Finance, Human Resources,
Legal, Information Technology, Corporate Facilities, Publishing and
Communications •
Operations Support Services: Marketing and Advertising, Print & Delivery,
Management, Customer Service, Billing, Credit and Operations Facilities
•
Sales Leadership and Effectiveness Services: Sales Leadership Team, Sales
Reporting, Training, Sales Office Support, Sales Compensation Analysis and
National Sales •
Digital Operations Services: Digital Information Technology: Digital Leadership
Team, Non-Print Product Development and Digital Reporting
–
Allocation of expense is based on prior year revenue and adjusted annually
•
The amended Shared Services Agreement will pool the combined shared services of
both SuperMedia and Dex One and then, similar to the existing Dex One
agreement, allocate the cost pool based on prior year revenue
–
The 2012 expense allocation will be 53%/47% for SuperMedia and Dex One,
respectively, based on 2011 revenue
–
The 2013 allocation will be based on 2012 revenue, currently forecast to be
51%/49% for SuperMedia and Dex One, respectively
–
Dex One Service will continue to allocate its portion of the shared service
expense to Dex East,
Dex
West,
RHDI
and
Dex
One
in
accordance
with
the
existing
allocation
methodology
(prior year’s revenue)
Shared Services Agreement |
 42
Shared Services Agreement
SuperMedia
Dex One
Total
SuperMedia
Dex One
Total
SuperMedia
Dex One
2011A
288
247
535
283
252
535
(5)
5
YTD 6/30/12A
123
105
228
120
108
228
(3)
3
Actual Expense
Shared Service
Shared Service Agreement
Illustrative Result of
Difference from Actual
Allows senior management to be agnostic to where the synergy is realized (i.e. it does not
matter economically whether SuperMedia or Dex One eliminates the cost) as the overall
reduction is captured in the cost pool •
Agreement provides flexibility to implement common management platforms and
ultimately consolidate the cost structure
Costs will be tracked on detailed basis and billed / settled between SuperMedia
and Dex One every month
Vast majority of the synergies are derived from the shared service pool
(70-80% based on the year)
•
The proposed agreement was evaluated on a historical basis and management
determined that the methodology would have produced results within 2% of the
actual results |
 43
Appendix
B
Dex
One
Silo
Comparison |
 44
Dex West
Dex East
RHDI
Market Tier Split
2012 Ad Sales
Major Metro
Markets
Seattle, Portland, Phoenix, Salt Lake
City
Minneapolis, Denver
Las Vegas, Chicago, Orlando
(partial)
Revenue & EBITDA
LTM Q2 2012
Revenue (% of Total)
EBITDA (% of Total)
EBITDA Margin
32%
33%
45%
Revenue (% of Total)
EBITDA (% of Total)
EBITDA Margin
27%
29%
47%
Revenue (% of Total)
EBITDA (% of Total)
EBITDA Margin
41%
38%
41%
Silo Overview
•
Dex
One
management
primarily
operates
the
business
on
a
regional
and
consolidated
basis
-
rather
than
at
the
silo
level
–
while
recognizing
the
unique
credit
circumstances
facing
each
silo
•
Management believes its product offerings, training, and execution are similar
across all regions –
Differences
in
silo
performance
relate
to
the
markets
themselves
rather
than
factors
under
direct
management control
–
The proposed merger will preserve underlying silo operating characteristics and
the relative performance differences
Major
Metro
Market
42%
Large
Market
13%
Mid
Market
33%
Small
Market
12%
Major
Metro
Market
30%
Large
Market
25%
Mid
Market
29%
Small
Market
16%
Major
Metro
Market
40%
Large
Market
10%
Mid
Market
34%
Small
Market
16% |
 45
Silo Historical Revenue Performance
•
Each of the Dex One silos has experienced differing revenue and cost trends over
time •
Market size has been the biggest driver of print ad sales / revenue decline with
major metros declining at a faster rate than small/ rural markets
–
Dex West includes major metro markets that suffer from a set of challenges unique
to those areas –
Due
to
the
historical
declines
already
incurred,
each
silo
has
a
similar
revenue
exposure
to
major
metro and large markets
–
Digital penetration (digital revenue as % of total revenue) is similar across all
silos Revenue Index
(Indexed with its Q1 2010 value set at 100)
Digital Revenue (as % of Total)
(32%)
(26%)
(22%)
65%
70%
75%
80%
85%
90%
95%
100%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
17%
21%
18%
5%
7%
9%
11%
13%
15%
17%
19%
21%
23%
25%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Dex West
Dex East
RHDI |
 46
Silo Historical EBITDA Performance
•
Historically,
RHDI
margins
have
been
lower
than
Dex
West
and
Dex
East
–
However, from a trending perspective, relative EBITDA performance varies from
period to period –
Examples
of
differences
that
impact
margin
include
the
timing
of
initiatives
such
as
print/paper
optimization,
distribution
initiatives,
re-scoping markets and centralizing telesales
•
Key underlying operating differences at each silo level include:
–
Bad Debt:
RHDI markets have exhibited worse bad debt trends as a result of economic
factors. –
Sales & Sales Support Costs:
Vary by silo due to population density. For example, RHDI regions are spread over
greater distances, resulting in higher headcount and sales person/manager
costs –
Print Cost of Sales:
Smaller markets (RHDI has the greatest proportion) have a higher cost per
directory than large markets due to scale
–
Digital
Cost
of
Sales:
RHDI
markets
have
less
organic
traffic
on
Dexknows.com
than
Dex
One
markets
(likely
due
to
less
name
brand
recognition
in
non-Dex
One
markets),
driving
a
higher
level
of
purchased
traffic
to
support
the
IYP
product
–
G&A:
Dex West continues to have higher state and local taxes due to the Washington
Business and Occupancy tax EBITDA Margin
EBITDA Index
(Indexed with its Q1 2010 value set at 100) |
 47
Appendix
C
Financial
Projection
Details
EBITDA and Adjusted EBITDA are not measurements of operating performance computed in
accordance with GAAP and should not be considered as a substitute for net income (loss)
prepared in conformity with GAAP. In addition, EBITDA and Adjusted EBITDA may not be
comparable to similarly titled measures of other companies. Management believes that these
non-GAAP financial measures are important indicators of our operations because they
exclude items that may not be indicative of, or related to, our core operating results, and
provide a better baseline for analyzing our underlying business. Adjusted EBITDA is
determined by adjusting EBITDA for (i) gain on debt repurchases, (ii) stock-based compensation
expense and long-term incentive program, (iii) impairment charges and (iv) gain on sale
of assets, net and (v) other non-recurring items. Leveraged free cash flow is not a measurement of operating performance computed in accordance
with GAAP and should not be considered as a substitute for cash flow from operations
prepared in conformity with GAAP. In addition, leveraged free cash flow may not be comparable to a similarly titled measure of other companies. Management believes
that this cash flow measure provides investors and stockholders with a relevant measure of
liquidity and a useful basis for assessing the Company's ability to fund its activities and
obligations.
|
 48
Consolidated Pro Forma Detail
Notes
1.
Projections reflect proposed amendments and estimated synergies
2.
“Other”
primarily represents capital expenditures, changes in working capital and other
operating cash flow requirements $MM
2012E
2013E
2014E
2015E
2016E
Revenue
2,675
$
2,353
$
2,193
$
2,107
$
2,100
$
Adj EBITDA - Pre Synergies
1,094
882
732
607
544
Synergies, net
-
(17)
104
175
175
Adj EBITDA
(1)
1,094
865
836
782
719
Bank Interest
(316)
(283)
(246)
(212)
(178)
Bond Interest
(22)
(16)
(16)
(16)
(17)
Payments to Hold Co
-
-
-
-
-
Taxes/Tax Sharing
(111)
(66)
(46)
(65)
(60)
Other
(2)
(96)
(82)
(63)
(72)
(71)
Leveraged Free Cash Flow
550
418
465
416
394
Debt, ending
3,467
3,066
2,617
2,218
1,840
Cash, ending
211
211
212
212
212
Net Debt, ending
3,256
2,855
2,406
2,006
1,628
Net Debt/Adj EBITDA
3.0x
3.3x
2.9x
2.6x
2.3x
Dex Media (Combined Companies) |
 49
Pro Forma SuperMedia and Dex One Detail
Notes
1.
Projections reflect proposed amendments and estimated synergies
2.
“Other”
primarily represents capital expenditures, changes in working capital and other
operating cash flow requirements 3.
Historical and forecasted digital revenue for SuperMedia include approximately $17
million from a discontinued operation that was divested in August, 2012. EBITDA
forecasts also include an offsetting $17 million in expenses
$MM
2012E
2013E
2014E
2015E
2016E
2012E
2013E
2014E
2015E
2016E
Revenue
1,371
$
1,186
$
1,095
$
1,040
$
1,023
$
1,304
$
1,167
$
1,098
$
1,066
$
1,077
$
Adj EBITDA - Pre Synergies
534
427
351
291
257
560
455
381
316
287
Synergies, net
(9)
52
88
87
-
(9)
52
88
88
Adj EBITDA
(1)
534
419
403
379
344
560
446
434
403
375
Bank Interest
(174)
(154)
(138)
(122)
(109)
(142)
(130)
(108)
(90)
(69)
Bond Interest
-
-
-
-
-
(22)
(16)
(16)
(16)
(17)
Payments to Hold Co
-
-
-
-
-
-
-
-
-
-
Taxes/Tax Sharing
(96)
(97)
(84)
(83)
(96)
(15)
31
38
18
36
Other
(2)
(23)
(41)
(28)
(33)
(35)
(73)
(42)
(34)
(38)
(36)
Leveraged Free Cash Flow
241
128
153
140
105
309
290
313
276
289
Debt, ending
1,461
1,334
1,181
1,041
936
2,006
1,732
1,436
1,177
904
Cash, ending
95
95
95
95
95
115
115
116
117
117
Net Debt, ending
1,366
1,238
1,086
945
841
1,890
1,617
1,320
1,060
787
Net Debt/Adj EBITDA
2.6x
3.0x
2.7x
2.5x
2.4x
3.4x
3.6x
3.0x
2.6x
2.1x
SuperMedia
(3)
Dex One |
 50
Pro Forma Dex One Credit Silo Detail
Notes
1.
Projections reflect proposed amendments and estimated synergies
2.
“Other”
primarily represents capital expenditures, changes in working capital and other
operating cash flow requirements $MM
2012E
2013E
2014E
2015E
2016E
2012E
2013E
2014E
2015E
2016E
Revenue
541
$
479
$
449
$
437
$
441
$
348
$
308
$
292
$
285
$
288
$
Adj EBITDA - Pre Synergies
215
174
143
118
105
162
131
112
93
86
Synergies, net
-
(3)
20
33
32
-
(2)
15
26
26
Adj EBITDA
(1)
215
170
162
150
136
162
128
127
119
112
Bank Interest
(77)
(65)
(54)
(45)
(34)
(24)
(32)
(28)
(25)
(21)
RP for Bond Interest
(8)
(6)
(6)
(6)
(6)
(6)
(4)
(4)
(4)
(4)
RP Basket
(5)
(5)
(5)
(5)
(5)
(5)
(5)
(5)
(5)
(5)
Taxes/Tax Sharing
5
26
38
21
34
(6)
8
4
0
7
Other
(2)
(60)
(14)
(10)
(11)
(14)
14
(14)
(12)
(13)
(9)
Leveraged Free Cash Flow
69
107
126
105
112
137
81
82
71
80
Debt, ending
755
648
522
417
306
538
458
375
304
224
Cash, ending
24
24
24
24
24
50
50
50
50
50
Net Debt, ending
731
624
498
393
282
489
408
325
255
174
Net Debt/Adj EBITDA
3.4x
3.7x
3.1x
2.6x
2.1x
3.0x
3.2x
2.6x
2.1x
1.6x
RHDI
Dex Media East |
 51
Pro Forma Dex One Credit Silo Detail
Notes
1.
Projections reflect proposed amendments and estimated synergies
2.
“Other”
primarily represents capital expenditures, changes in working capital and other
operating cash flow requirements 3.
Projections
assume
senior
subordinated
note
holders
continue
to
receive
interest
on
existing
terms
(50%
in
cash
and
50%
PIK)
4.
Projections
assume
senior
subordinated
notes
are
repurchased
in
a
market-based
tender
using
cash
at
Hold
Co.
For
purposes
of
the
projections
herein,
the
market-
$MM
2012E
2013E
2014E
2015E
2016E
2012E
2013E
2014E
2015E
2016E
Revenue
411
$
366
$
339
$
325
$
329
$
4
$
14
$
18
$
19
$
19
$
Adj EBITDA - Pre Synergies
184
150
126
104
97
(2)
-
1
1
(0)
Synergies, net
-
(3)
17
29
29
-
-
-
-
-
Adj EBITDA
(1)
184
148
143
133
126
(2)
-
1
1
(0)
Bank Interest
(42)
(32)
(26)
(20)
(14)
-
-
-
-
-
RP for Bond Interest
(8)
(6)
(6)
(6)
(6)
22
16
16
16
17
RP Basket
(5)
(5)
(5)
(5)
(5)
15
15
15
15
15
Taxes/Tax Sharing
(12)
(4)
(4)
(4)
(5)
(1)
-
-
-
-
Bond Interest
-
-
-
-
-
(22)
(16)
(16)
(16)
(17)
Other
(2)
(12)
(14)
(13)
(14)
(13)
(15)
-
-
-
-
Leveraged Free Cash Flow
106
87
89
84
83
(3)
15
16
16
15
Debt, ending
489
402
313
228
145
224
225
226
228
229
Cash, ending
37
37
37
37
37
5
5
6
7
7
Net Debt, ending
452
365
276
192
109
219
220
220
221
223
Net Debt/Adj EBITDA
2.5x
2.5x
1.9x
1.4x
0.9x
n/a
n/a
n/a
n/a
n/a
Dex Media West
Hold Co
(3,4)
based tender is assumed to occur at par, although current indicated prices are
significantly lower |