Dex One addresses bankruptcy filing, SuperMedia merger; company cuts debt by $525 million in 2012

By Lisa Kerner

Charlotte, N.C., March 18 - Dex One Corp. remains on track to complete its merger with SuperMedia, Inc. within 45 days to 60 days, despite the fact that both companies voluntarily filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware to implement prepackaged plans of reorganization.

Alfred Mockett, chief executive officer of Dex One, said the company is using the bankruptcy as a process to complete the merger. Stockholders of both Dex One and SuperMedia approved the merger on March 13.

The filings do not reflect the financial health of the companies, according to Mockett.

"All bank debt balances remain on the books," said Mockett during the Dex One fourth-quarter and full-year earnings call on Monday.

"We reduced debt by $525 million in 2012 and have retired $1.9 billion of debt since the company emerged from bankruptcy in 2010," Mockett said.

The $525 million debt reduction was achieved through "a combination of scheduled payments, voluntary prepayments and below-market repurchases," said chief financial officer Greg Freiberg on the call.

"These were made possible by successfully negotiating credit agreement amendments and executing on four tranches of below-market repurchases during the first and second quarters," Freiberg said.

The Cary, N.C.-based marketing services provider ended the year with adjusted net debt of about $1.9 billion.

Dex One reduced its bad debt to 2.5% of revenue "by actively managing less creditworthy customers out of the system," said Freiberg, noting that this level is believed to be sustainable.

The company reported adjusted free cash flow of $88 million for the quarter and $335 million for the year.

"We generated adjusted EBITDA of $133 million in the fourth quarter and $561 million for the year," Mockett said.

"We achieved our financial guidance for full-year 2012 and came in at or above the midpoint of our guidance range in all areas," Freiberg said.

Net loss and cash flow from operations in the fourth quarter were $35 million and $87 million, respectively.

Dex One's net income, cash flow from operations and total debt for full-year 2012 were $62 million, $348 million and about $2 billion, respectively.

Freiberg noted that Dex One has appealed a notice from the New York Stock Exchange that the company is below the minimum market capitalization standard and expects its shares to continue trading on the NYSE.

Also, Dex One is not providing first-quarter or full-year 2013 guidance due to the pending merger.

Print declines

According to Mockett, "2012 was about delivering on promises made.

"The transformational journey we embarked on in 2011 is delivering positive financial and operational results."

Mockett said print is "still the engine of our cash flow," although print was down 23% for the year.

"Digital bookings increased 29% compared to the fourth quarter last year," said Mockett, and were up 34% for the year.

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