Idearc Announces 2008 Results

Idearc Inc. (OTC: IDAR) 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.

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 regarding Idearc’s exploration of alternatives related to its capital structure are forward-looking statements. Statements that include the words "believe,” "will,” "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 inability to successfully implement any potential restructuring through a "pre-packaged”, "pre-negotiated” or similar plan of reorganization under federal bankruptcy laws; (ii) risks related to Idearc’s substantial indebtedness, including covenant compliance; (iii) risks related to Idearc’s declining print revenue, including a reduction in customer spending resulting from the current economic downturn; (iv) limitations on Idearc’s operating and strategic flexibility under the terms of its debt agreements; (v) 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; (vi) declining use of print yellow pages directories; (vii) access to capital markets and changes in credit ratings; (viii) changes in the availability and cost of paper and other raw materials used to print directories and reliance on third-party printers and distributors; (ix) increased credit risk associated with reliance on small- and medium-sized businesses, in particular in the current economic environment; (x) changes in operating performance; (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; and (xv) 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.

IDEARC INC.
Consolidated Statements of Income
Reported (GAAP)
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
		(dollars in millions, except per share amounts)
		Year Ended			Year Ended
Unaudited		12/31/08			12/31/07			% Change
Operating Revenue
Print products		$	2,670		$	2,900		(7.9	)
Internet			300			285		5.3
Other			3			4		(25.0	)
Total Operating Revenue			2,973			3,189		(6.8	)
Operating Expense
Selling			700			726		(3.6	)
Cost of sales (exclusive of depreciation and amortization)			608			628		(3.2	)
General and administrative			436			404		7.9
Impairments			225			-		*
Depreciation and amortization			78			88		(11.4	)
Total Operating Expense			2,047			1,846		10.9
Operating Income			926			1,343		(31.0	)
Interest expense, net			647			676		(4.3	)
Income Before Provision for Income Taxes			279			667		(58.2	)
Provision for income taxes			96			238		(59.7	)
Net Income		$	183		$	429		(57.3	)
Basic and Diluted Earnings per Common Share (1)		$	1.25		$	2.94		(57.5	)
Basic and diluted weighted-average common shares outstanding (in millions)			146			146
Dividends Declared per Common Share		$	0.3425		$	1.37
Prior period amounts presented above and in the following schedules have been reclassified to conform to current period presentation.
Note:
(1) Equity based awards granted in 2008 and 2007 had no material impact on the calculation of diluted earnings per common share.

IDEARC INC.
Consolidated Statements of Income
Reported (GAAP)
Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007
		(dollars in millions, except per share amounts)
		3 Mos. Ended				3 Mos. Ended
Unaudited		12/31/08				12/31/07			% Change
Operating Revenue
Print products		$	632			$	711		(11.1	)
Internet			77				75		2.7
Other			-				1		(100.0	)
Total Operating Revenue			709				787		(9.9	)
Operating Expense
Selling			159				182		(12.6	)
Cost of sales (exclusive of depreciation and amortization)			147				159		(7.5	)
General and administrative			130				113		15.0
Impairments			225				-		*
Depreciation and amortization			19				22		(13.6	)
Total Operating Expense			680				476		42.9
Operating Income			29				311		(90.7	)
Interest expense, net			156				171		(8.8	)
Income (Loss) Before Income Taxes			(127	)			140		*
Provision (benefit) for income taxes			(50	)			40		*
Net Income (Loss)		$	(77	)		$	100		*
Basic and Diluted Earnings (Loss) per Common Share (1)		$	(0.53	)		$	0.68		*
Basic and diluted weighted-average common shares outstanding (in millions)			146				146
Dividends Declared per Common Share		$	-			$	0.3425
Note:
(1) Equity based awards granted in 2008 and 2007 had no material impact on the calculation of diluted earnings per common share.

IDEARC INC.
Consolidated Statements of Income
Adjusted (Non-GAAP)(1)
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
		(dollars in millions, except per share amounts)
		Year Ended			Year Ended
Unaudited		12/31/08			12/31/07			% Change
Operating Revenue
Print products		$	2,670		$	2,900		(7.9	)
Internet			300			285		5.3
Other			3			4		(25.0	)
Total Operating Revenue			2,973			3,189		(6.8	)
Operating Expense
Selling			700			726		(3.6	)
Cost of sales (exclusive of depreciation and amortization)			608			628		(3.2	)
General and administrative			393			317		24.0
Impairments			-			-		*
Depreciation and amortization			78			88		(11.4	)
Total Operating Expense			1,779			1,759		1.1
Operating Income			1,194			1,430		(16.5	)
Interest expense, net			647			676		(4.3	)
Income Before Provision for Income Taxes			547			754		(27.5	)
Provision for income taxes			194			270		(28.1	)
Net Income		$	353		$	484		(27.1	)
Basic and Diluted Earnings per Common Share (2)		$	2.42		$	3.32		(27.1	)
Basic and diluted weighted-average common shares outstanding (in millions)			146			146
Notes:
(1) These consolidated statements of income provide a comparison of the year ended December 31, 2008 adjusted results to the year ended December 31, 2007 adjusted results. The following schedules provide reconciliations from our reported GAAP results to adjusted non-GAAP results for the periods shown above.
(2) Equity based awards granted in 2008 and 2007 had no material impact on the calculation of diluted earnings per common share.

IDEARC INC.
Consolidated Statements of Income
Adjusted (Non-GAAP)(1)
Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007
		(dollars in millions, except per share amounts)
		3 Mos. Ended			3 Mos. Ended
Unaudited		12/31/08			12/31/07			% Change
Operating Revenue
Print products		$	632		$	711		(11.1	)
Internet			77			75		2.7
Other			-			1		(100.0	)
Total Operating Revenue			709			787		(9.9	)
Operating Expense
Selling			159			182		(12.6	)
Cost of sales (exclusive of depreciation and amortization)			147			159		(7.5	)
General and administrative			116			96		20.8
Impairments			-			-		*
Depreciation and amortization			19			22		(13.6	)
Total Operating Expense			441			459		(3.9	)
Operating Income			268			328		(18.3	)
Interest expense, net			156			171		(8.8	)
Income Before Provision for Income Taxes			112			157		(28.7	)
Provision for income taxes			38			47		(19.1	)
Net Income		$	74		$	110		(32.7	)
Basic and Diluted Earnings per Common Share (2)		$	0.51		$	0.75		(32.0	)
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 December 31, 2008 adjusted results to the three months ended December 31, 2007 adjusted results. The following schedules provide reconciliations from our reported GAAP results to adjusted non-GAAP results for the periods shown above.
(2) Equity based awards granted in 2008 and 2007 had no material impact on the calculation of diluted earnings per common share.

IDEARC INC.
Consolidated Statements of Income
Reported (GAAP)
Three Months Ended December 31, 2008 Compared to Three Months Ended September 30, 2008
		(dollars in millions, except per share amounts)
		3 Mos. Ended				3 Mos. Ended
Unaudited		12/31/08				9/30/08			% Change
Operating Revenue
Print products		$	632			$	659		(4.1	)
Internet			77				75		2.7
Other			-				1		(100.0	)
Total Operating Revenue			709				735		(3.5	)
Operating Expense
Selling			159				176		(9.7	)
Cost of sales (exclusive of depreciation and amortization)			147				151		(2.6	)
General and administrative			130				110		18.2
Impairments			225				-		*
Depreciation and amortization			19				19		-
Total Operating Expense			680				456		49.1
Operating Income			29				279		(89.6	)
Interest expense, net			156				162		(3.7	)
Income (Loss) Before Income Taxes			(127	)			117		*
Provision (benefit) for income taxes			(50	)			44		*
Net Income (Loss)		$	(77	)		$	73		*
Basic and Diluted Earnings (Loss) per Common Share (1)		$	(0.53	)		$	0.50		*
Basic and diluted weighted-average common shares outstanding (in millions)			146				146
Note:
(1) Equity based awards granted in 2008 and 2007 had no material impact on the calculation of diluted earnings per common share.

IDEARC INC.
Consolidated Statements of Income
Adjusted (Non-GAAP)(1)
Three Months Ended December 31, 2008 Compared to Three Months Ended September 30, 2008
		(dollars in millions, except per share amounts)
		3 Mos. Ended			3 Mos. Ended
Unaudited		12/31/08			9/30/08			% Change
Operating Revenue
Print products		$	632		$	659		(4.1	)
Internet			77			75		2.7
Other			-			1		(100.0	)
Total Operating Revenue			709			735		(3.5	)
Operating Expense
Selling			159			176		(9.7	)
Cost of sales (exclusive of depreciation and amortization)			147			151		(2.6	)
General and administrative			116			106		9.4
Impairments			-			-		*
Depreciation and amortization			19			19		-
Total Operating Expense			441			452		(2.4	)
Operating Income			268			283		(5.3	)
Interest expense, net			156			162		(3.7	)
Income Before Provision for Income Taxes			112			121		(7.4	)
Provision for income taxes			38			45		(15.6	)
Net Income		$	74		$	76		(2.6	)
Basic and Diluted Earnings per Common Share (2)		$	0.51		$	0.52		(1.9	)
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 December 31, 2008 adjusted results to the three months ended September 30, 2008 adjusted results. The following schedules provide reconciliations from our reported GAAP results to adjusted non-GAAP results for the periods shown above.
(2) Equity based awards granted in 2008 and 2007 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 (Non-GAAP)
Year Ended December 31, 2008
		(dollars in millions, except per share amounts)
						Adjustments
Unaudited		Year Ended 12/31/08 Reported (GAAP)				Stock-Based Compensation(3)				Separation Costs (4)				Restructuring Costs (5)				Impairment Charges (6)				Year Ended 12/31/08 Adjusted (Non-GAAP)
Operating Revenue
Print products		$	2,670			$	-			$	-			$	-			$	-			$	2,670
Internet			300				-				-				-				-				300
Other			3				-				-				-				-				3
Total Operating Revenue			2,973				-				-				-				-				2,973
Operating Expense
Selling			700				-				-				-				-				700
Cost of sales (exclusive of depreciation and amortization)			608				-				-				-				-				608
General and administrative			436				(5	)			(15	)			(23	)			-				393
Impairments			225				-				-				-				(225	)			-
Depreciation and amortization			78				-				-				-				-				78
Total Operating Expense			2,047				(5	)			(15	)			(23	)			(225	)			1,779
Operating Income			926				5				15				23				225				1,194
Interest expense, net			647				-				-				-				-				647
Income Before Provision for Income Taxes			279				5				15				23				225				547
Provision for income taxes			96				1				5				9				83				194
Net Income		$	183			$	4			$	10			$	14			$	142			$	353
Basic and Diluted Earnings per Common Share		$	1.25			$	0.03			$	0.07			$	0.10			$	0.97			$	2.42
Operating Income		$	926			$	5			$	15			$	23			$	225			$	1,194
Depreciation and Amortization			78				-				-				-				-				78
EBITDA (non-GAAP) (1)		$	1,004			$	5			$	15			$	23			$	225			$	1,272
Operating Income margin (2)			31.2	%																			40.2	%
Impact of depreciation and amortization			2.6	%																			2.6	%
EBITDA margin (non-GAAP) (1)			33.8	%																			42.8	%
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) 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 initiatives.
(6) Impairment charges are non-cash costs associated with the write down of certain intangible assets and other assets.

IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted (Non-GAAP)
Three Months Ended December 31, 2008
		(dollars in millions, except per share amounts)
						Adjustments
Unaudited		3 Mos. Ended 12/31/08 Reported (GAAP)				Stock-Based Compensation(3)				Separation Costs (4)				Restructuring Costs (5)				Impairment Charges (6)				3 Mos. Ended 12/31/08 Adjusted (Non-GAAP)
Operating Revenue
Print products		$	632			$	-			$	-			$	-			$	-			$	632
Internet			77				-				-				-				-				77
Other			-				-				-				-				-				-
Total Operating Revenue			709				-				-				-				-				709
Operating Expense
Selling			159				-				-				-				-				159
Cost of sales (exclusive of depreciation and amortization)			147				-				-				-				-				147
General and administrative			130				(1	)			(1	)			(12	)			-				116
Impairments			225				-				-				-				(225	)			-
Depreciation and amortization			19				-				-				-				-				19
Total Operating Expense			680				(1	)			(1	)			(12	)			(225	)			441
Operating Income			29				1				1				12				225				268
Interest expense, net			156				-				-				-				-				156
Income (Loss) Before Income Taxes			(127	)			1				1				12				225				112
Provision (benefit) for income taxes			(50	)			-				-				5				83				38
Net Income (Loss)		$	(77	)		$	1			$	1			$	7			$	142			$	74
Basic and Diluted Earnings (Loss) per Common Share		$	(0.53	)		$	0.01			$	0.01			$	0.05			$	0.97			$	0.51
Operating Income		$	29			$	1			$	1			$	12			$	225			$	268
Depreciation and Amortization			19				-				-				-				-				19
EBITDA (non-GAAP) (1)		$	48			$	1			$	1			$	12			$	225			$	287
Operating Income margin (2)			4.1	%																			37.8	%
Impact of depreciation and amortization			2.7	%																			2.7	%
EBITDA margin (non-GAAP) (1)			6.8	%																			40.5	%
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 costs relate to a one-time incentive compensation award granted to most of the Company's employees in January 2007.
(4) Separation costs are 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 initiatives.
(6) Impairment charges are non-cash costs associated with the write down of certain intangible assets and other assets.

IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted (Non-GAAP)
Three Months Ended September 30, 2008
		(dollars in millions, except per share amounts)
						Adjustments
Unaudited		3 Mos. Ended 9/30/08 Reported (GAAP)				Restructuring Costs (3)				3 Mos. Ended 9/30/08 Adjusted (Non-GAAP)
Operating Revenue
Print products		$	659			$	-			$	659
Internet			75				-				75
Other			1				-				1
Total Operating Revenue			735				-				735
Operating Expense
Selling			176				-				176
Cost of sales (exclusive of depreciation and amortization)			151				-				151
General and administrative			110				(4	)			106
Impairments			-				-				-
Depreciation and amortization			19				-				19
Total Operating Expense			456				(4	)			452
Operating Income			279				4				283
Interest expense, net			162				-				162
Income Before Provision for Income Taxes			117				4				121
Provision for income taxes			44				1				45
Net Income		$	73			$	3			$	76
Basic and Diluted Earnings per Common Share		$	0.50			$	0.02			$	0.52
Operating Income		$	279			$	4			$	283
Depreciation and Amortization			19				-				19
EBITDA (non-GAAP) (1)		$	298			$	4			$	302
Operating Income margin (2)			37.9	%							38.5	%
Impact of depreciation and amortization			2.6	%							2.6	%
EBITDA margin (non-GAAP) (1)			40.5	%							41.1	%
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) Restructuring costs are associated with strategic organizational realignment and market exit initiatives.

IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted (Non-GAAP)
Year Ended December 31, 2007
		(dollars in millions, except per share amounts)
						Adjustments
Unaudited		Year Ended 12/31/07 Reported (GAAP)				Stock-Based Compensation(3)				Separation Costs (4)				Year Ended 12/31/07 Adjusted (Non-GAAP)
Operating Revenue
Print products		$	2,900			$	-			$	-			$	2,900
Internet			285				-				-				285
Other			4				-				-				4
Total Operating Revenue			3,189				-				-				3,189
Operating Expense
Selling			726				-				-				726
Cost of sales (exclusive of depreciation and amortization)			628				-				-				628
General and administrative			404				(19	)			(68	)			317
Depreciation and amortization			88				-				-				88
Total Operating Expense			1,846				(19	)			(68	)			1,759
Operating Income			1,343				19				68				1,430
Interest expense, net			676				-				-				676
Income Before Provision for Income Taxes			667				19				68				754
Provision for income taxes			238				7				25				270
Net Income		$	429			$	12			$	43			$	484
Basic and Diluted Earnings per Common Share		$	2.94			$	0.08			$	0.30			$	3.32
Operating Income		$	1,343			$	19			$	68			$	1,430
Depreciation and Amortization			88				-				-				88
EBITDA (non-GAAP) (1)		$	1,431			$	19			$	68			$	1,518
Operating Income margin (2)			42.1	%											44.8	%
Impact of depreciation and amortization			2.8	%											2.8	%
EBITDA margin (non-GAAP) (1)			44.9	%											47.6	%
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) 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 (Non-GAAP)
Three Months Ended December 31, 2007
		(dollars in millions, except per share amounts)
						Adjustments
Unaudited		3 Mos. Ended 12/31/07 Reported (GAAP)				Stock-Based Compensation(3)				Separation Costs (4)				3 Mos. Ended 12/31/07 Adjusted (Non-GAAP)
Operating Revenue
Print products		$	711			$	-			$	-			$	711
Internet			75				-				-				75
Other			1				-				-				1
Total Operating Revenue			787				-				-				787
Operating Expense
Selling			182				-				-				182
Cost of sales (exclusive of depreciation and amortization)			159				-				-				159
General and administrative			113				2				(19	)			96
Depreciation and amortization			22				-				-				22
Total Operating Expense			476				2				(19	)			459
Operating Income			311				(2	)			19				328
Interest expense, net			171				-				-				171
Income Before Provision for Income Taxes			140				(2	)			19				157
Provision for income taxes			40				(1	)			8				47
Net Income		$	100			$	(1	)		$	11			$	110
Basic and Diluted Earnings per Common Share		$	0.68			$	(0.01	)		$	0.08			$	0.75
Operating Income		$	311			$	(2	)		$	19			$	328
Depreciation and Amortization			22				-				-				22
EBITDA (non-GAAP) (1)		$	333			$	(2	)		$	19			$	350
Operating Income margin (2)			39.5	%											41.7	%
Impact of depreciation and amortization			2.8	%											2.8	%
EBITDA margin (non-GAAP) (1)			42.3	%											44.5	%
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 costs relate to a one-time incentive compensation award granted to most of the Company's employees in January 2007.
(4) Separation costs are 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 December 31, 2008 and December 31, 2007
		(dollars in millions)
Unaudited		12/31/2008				12/31/2007				$ Change
Assets
Current assets:
Cash and cash equivalents		$	510			$	48			$	462
Accounts receivable, net of allowances of $108 and $77			366				423				(57	)
Deferred directory costs			282				312				(30	)
Debt issuance costs			75				-				75
Deferred tax assets			49				-				49
Prepaid expenses and other			18				10				8
Total current assets			1,300				793				507
Property, plant and equipment			475				471				4
Less: accumulated depreciation			373				356				17
			102				115				(13	)
Goodwill			73				73				-
Intangible assets, net			66				303				(237	)
Pension assets			147				171				(24	)
Non-current deferred tax assets			126				124				2
Long-term debt issuance costs			-				86				(86	)
Other non-current assets			1				2				(1	)
Total Assets		$	1,815			$	1,667			$	148
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current maturities of long-term debt		$	9,267			$	48			$	9,219
Derivative liabilities			248				-				248
Accounts payable and accrued liabilities			242				272				(30	)
Deferred revenue			155				209				(54	)
Deferred taxes			-				28				(28	)
Other			21				31				(10	)
Total current liabilities			9,933				588				9,345
Long-term debt			-				9,020				(9,020	)
Employee benefit obligations			287				327				(40	)
Unrecognized tax benefits			85				109				(24	)
Other liabilities			1				223				(222	)
Stockholders' equity (deficit):
Common stock ($.01 par value; 225 million shares authorized, 148,262,447 and 146,795,971 shares issued and outstanding in 2008 and 2007, respectively)			1				1				-
Additional paid-in capital (deficit)			(8,764	)			(8,776	)			12
Retained earnings			494				361				133
Accumulated other comprehensive loss			(222	)			(186	)			(36	)
Total stockholders' equity (deficit)			(8,491	)			(8,600	)			109
Total Liabilities and Stockholders' Equity (Deficit)		$	1,815			$	1,667			$	148

IDEARC INC.
Consolidated Statements of Cash Flows
Reported (GAAP)
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
		(dollars in millions)
Unaudited		Year Ended 12/31/08				Year Ended 12/31/07				$ Change
Cash Flows from Operating Activities
Net Income		$	183			$	429			$	(246	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			78				88				(10	)
Employee retirement benefits			-				(5	)			5
Deferred income taxes			(73	)			(21	)			(52	)
Provision for uncollectible accounts			206				159				47
Impairments			225				-				225
Stock-based compensation			6				27				(21	)
Changes in current assets and liabilities
Accounts receivable			(150	)			(253	)			103
Deferred directory costs			30				(18	)			48
Other current assets			(8	)			(2	)			(6	)
Accounts payable and accrued liabilities			(99	)			(8	)			(91	)
Other, net			(35	)			(27	)			(8	)
Net cash provided by operating activities			363				369				(6	)
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)			(56	)			(46	)			(10	)
Acquisitions			-				(230	)			230
Proceeds from sale of assets			6				26				(20	)
Other, net			-				4				(4	)
Net cash used in investing activities			(50	)			(246	)			196
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt			247				-				247
Repayment of long-term debt			(48	)			(47	)			(1	)
Dividends paid to Idearc stockholders			(50	)			(200	)			150
Net cash provided by (used in) financing activities			149				(247	)			396
Increase (decrease) in cash and cash equivalents			462				(124	)			586
Cash and cash equivalents, beginning of year			48				172				(124	)
Cash and cash equivalents, end of year		$	510			$	48			$	462

IDEARC INC.
Multi-Product Advertising Sales
		(dollars in millions)
		3 Mos. Ended				3 Mos. Ended				3 Mos. Ended				Year Ended				Year Ended				Year Ended
Unaudited		12/31/08				12/31/07				12/31/06				12/31/08				12/31/07				12/31/06
Net Print Products Sales(1)		$	634			$	740			$	784			$	2,436			$	2,749			$	2,867
% Change year-over-year			(14.3	%)			(5.6	%)							(11.4	%)			(4.1	%)
Net Internet Sales(2)			77				75				63				300				285				230
% Change year-over-year			2.7	%			19.0	%							5.3	%			23.9	%
Net Multi-Product Advertising Sales(3)		$	711			$	815			$	847			$	2,736			$	3,034			$	3,097
% Change year-over-year			(12.8	%)			(3.8	%)							(9.8	%)			(2.0	%)
Notes:
(1) Net print products sales represents the total sales 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 sales 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 an operating measure used by the Company to compare advertising sales for current advertising publications and products to sales for previous advertising publications and products. 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. (OTC:IDAR) delivers products on multiple platforms to help consumers find the information they want, wherever they are. Idearc’s multi-platform of advertising solutions includes, but is not limited to, Idearc®, Idearc Media®, the Idearc logo, the Idearc Media logo, Verizon® Yellow Pages, Verizon® White Pages, Verizon® Yellow Pages Companion Directories, FairPoint® Yellow Pages, FairPoint® Yellow Pages Companion Directories, Superpages®, Superpages.com®, Switchboard®, Switchboard.com™, LocalSearch.com^SM, Superpages Mobile^SM, Solutions on the Move™, SolutionsDirect™, Solutions Direct Exclusive Mailer™ and SuperGuarantee^SM. For more information, visit www.idearc.com.

(IDAR-G)