Good morning, and welcome to SuperMedia's First Quarter 2012 Earnings Conference Call. With me today are Peter McDonald, Chief Executive Officer; and Dee Jones, Chief Financial Officer. Some statements made by the company today during this call are forward-looking statements. These statements include the company's beliefs and expectations as to future events and trends affecting the company's business, and are subject to risks and uncertainties. The company advises you not to place undue reliance on these forward-looking statements and to consider them in light of the risk factors set forth in the reports filed by SuperMedia with the Securities and Exchange Commission. The company has no obligation to update any forward-looking statements. A replay of the teleconference will be available at (800) 585-8367. International callers can access the replay by calling (404) 537-3406. The replay passcode is 71843958. The replay will be available through May 25, 2012. In addition, a live webcast will be available on SuperMedia's website in the Investor Relations section at www.supermedia.com. At the end of the company's prepared remarks, there will be a question-and-answer session. And now, I'd like to turn the call over to Peter McDonald. Peter?

Thank you, Lyn, and welcome to our first quarter 2012 earnings call. We appreciate your time and your interest. I will share some of my thoughts on events during the quarter and then Dee will review the financials in detail. As I explained when we spoke last quarter, our themes for 2012 are execution and transformation. Both require focus and discipline, and the entire SuperMedia team demonstrated these skills during the first 3 months of the year. The financial results provide a summary perspective of our performance. We continue to reduce expenses and find more efficient ways of operating the business in order to increase productivity. As a result, total expenses decreased by 24.3% compared to Q1 of 2011. On a Q1 2012 to Q1 2011 comparison, adjusted EBITDA declined by 3.9% to $148 million. As the expense control largely offset a 17.1% decline in operating revenue from $438 million to $363 million. Adjusted EBITDA margin improved by 560 basis points to 40.8%. During the first quarter, we also made progress in reducing company debt. The total reduction was $64 million, resulting in a total debt of $1.681 billion at the end of the quarter, down from $1.745 billion at the end of 2011. The reported financials show immediate impact of strong execution on the expense side of the business. What does not translate as immediately to the financials is the progress we have made to transform our business to address top line performance. Let me bring you up-to-date on those efforts. As a reminder, our approach is to transform SuperMedia from a provider of Yellow Pages products to a trusted marketing adviser, helping small- and medium-sized businesses retain and add customers using the full spectrum of digital and traditional media. We characterize this as relationships and results. First, getting…

Thank you, Peter, and good morning, everyone. Before we begin, I would like to mention that the results I will be speaking to this morning are primarily non-GAAP numbers. We have provided a reconciliation of GAAP to non-GAAP results in the Appendix of this presentation. With respect to the first quarter 2012 financial results, first quarter 2012 reported operating revenue was $363 million, a 17.1% decline for the quarter compared to the same period last year. Ad sales for first quarter declined 17.4% compared to 17.3% decline for the same period last year. As I have mentioned on past earnings calls, our ad sales results were impacted by financially distressed single-certified marketing representative and our third-party national sales channel. Of the total 2011 CMR impact of $11 million, $9 million was in Q1 of 2011. Adjusting for the impact, first quarter 2012 ad sales would have declined 19.3% compared to 15.4% in 2011. First quarter 2012 adjusted EBITDA was $148 million, a 3.9% decline compared to the same period last year. Adjusted EBITDA margin was 40.8%, a 560 basis-point improvement compared to the prior year Q1 period of 35.2%. As you can see, we continued with efforts to control cost, to at least partially mitigate the decline in top line revenues. Looking at the expenses for the first quarter, year-over-year total adjusted expenses, excluding depreciation and amortization declined 24.3%. Selling expense declined by 22.4%. Cost of sales declined by 21.8% and G&A expenses declined 32.8%. Across the board, there have been consistent expense reductions due in part to lower headcount, lower print and distribution quantities and bad debt. With respect to bad debt, the provision rate for the quarter was 1.7%. Full year free cash flow was $103 million, consisting of cash from operations of $105 million, less CapEx of $2 million. We continue to manage our debt, taking advantage of opportunities when possible, to reduce our balance. In the first quarter, we repurchased debt at below par, allowing us to delever by $60 million, utilizing $31 million of cash. Also in the first quarter, a true-up cash sweep payment was made for 2011 of $4 million. The first quarter mandatory cash sweep payment of $69 million was made on May 2, resulting in a current debt balance of $1.612 billion. As of March 31, 2012, our cash-on-hand was $157 million which does not reflect the cash sweep payment of $69 million I just mentioned. This concludes the Q1 financial results. We are now ready to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Steve Hasnain with PineBridge Investment.

This is Steve Hasnain from PineBridge Investments. That's pretty impressive EBITDA performance in light of top line decline. So my question is, as we -- as the company continues to face pretty significant top line declines, how should we think about the cost structure? What percentage of the cost do you think is fixed? And how much is variable? And then as top line's declines continue, how should we model out the EBITDA going forward?

Yes, I mean, we've addressed this question to a degree in the past. With respect to the variability or fixed nature of the expenses, as you can see from the efforts that we've undertaken in the last couple of years, I mean, we view everything as subject to challenge. All cost elements are subject to challenge and subject to finding opportunities to create more efficiencies. So in that regard, you got to view everything -- everything is variable. But from a strict definition of fixed versus variable as to what automatically falls, that's a very difficult proposition to get at specifically in this business. I think to address your question, maybe I think I can speak to it in totality with respect to those margins. You can see that we've closed the quarter at 40.8% EBITDA -- adjusted EBITDA margin on the quarter. Now that debt did include, if you dig into the financials a little bit, you'll see a slight one-off from the balance sheet associated with bad debt. We booked the provision rate at 1.7% versus a 3.5% write-off rate that you'll see when you look at the cash flow statement's aspect of the business. But -- so that one-off enhanced the margins a little bit. But we closed last year in the 36% to 37% range with respect to margins. So as I look forward with respect to this business, we're going to look for every opportunity to get at expenses and enhance that, especially in the face of the declines we're dealing with on the revenue side. As we look to transform the business, so let's say, there may be a slight margin pressure, but to get into those, the mid-to-high-30s-type margins and hold those levels, is certainly an opportunity we're looking to get at as we look to the remainder of the year.

As you have more and more declines, isn't it correct to say that it's going to be difficult to hold margins as the top line continues to cut into your overall profit factor?

Well like I say, for this year I mean, we are looking to a bit, to work to find opportunity to maintain those high 30s -- mid-to-high-30s-type margins. Certainly, as your base shrinks, there's more and more challenge to continue to reduce and cut. But we do believe we still have opportunity to be more efficient, and then more effectively spend. And at the same time, we're looking to transform and hopefully, have an impact with respect to those trends in the top lines.

Great. And just one other question. What percentage of your total sales are digital now?

Yes, we don't separate out the digital versus print as we -- as our policy has been in the past.

Your next question comes from the line of Chad Quinn [ph] with Bennett Management.

I was wondering if you could comment on your current buyback capacity for debt in the market? And if you have anything scheduled near term?

Yes, I mean, when you run the calculations with respect to the cash flow that was generated in the first quarter, we would have capacity -- we have capacity at this point of a little bit over $30 million in cash to utilize in the marketplace under the current terms of the credit agreement. We're presently assessing the opportunity to put that to work, and we'll be making those decisions shortly.

Okay, and what if any cash taxes were paid in the quarter?

The cash taxes for the quarter were 0. If you'll remember, the fourth quarter balance sheet reflected a receivable of a little bit over $25 million, with respect to taxes. That came about as a result of a fourth quarter event where we had a favorable tax treatment associated with a small asset disposition that took place, that allowed us to take a tax deduction relative to that. And that carried into first quarter, so we had 0 cash taxes in the first quarter. We also had a $28 million gain with respect to the buyback that we accomplished in the first quarter. We were also able to accomplish that on a tax-free basis.

Is that -- is the benefit from the -- is the gain with -- in relation to this CODI, is that simply a tax deferral? Or is that a -- permanently absolved from paying those taxes?

No, that's a permanent. Due interest is not reflected as a timing difference, as you may or may not know with respect to the Section 108 deductions that you're able to take. There are some elements to that tax law that require you to make some basis adjustments, certain basis adjustments. But for our tax basis and tax assets, that has a very small impact on us as far as that potential offset. So we look at this as being a permanent tax position.

Your next question comes from the line of William Thompson [ph] with Stone Capital.

My question has to do with CapEx. It looks like you spend about $2 million in the quarter. That seems to me and I certainly don't know what the magic number is, but seems to me to be light. Could you talk about what you've consider to be the ongoing CapEx needs and whether $2 million is what we can expect on a quarterly basis going forward?

Yes, if you look back, Q1 is a, traditionally, a fairly light quarter for us with respect to CapEx. I believe last year's first quarter was approximately $3 million versus the $2 million that was spent in this -- in the first quarter of this year. We're certainly looking to control those costs and that expenditure, as we do with all of our cash cost. CapEx I would say, first quarter is relatively light with respect to what we might anticipate for the full year. Last year, we closed, I believe, in the $15 million to $20 million range for a full year CapEx program, and I would expect to be that -- be in that range again, as we get towards the end of this year.

Great. One other quick question. This one's probably difficult to answer. But I understand how the complete package of media solutions or advertising solutions differentiates you from your digital competitors, but I keep running into new entrants in the digital space. I just happened to run across Pitney Bowes recently and they seem to be trying to do a similar thing as you are. And then Intuit just bought Demandforce, which is another online advertising solution company. Can you characterize how you differentiate yourself in the digital space from your digital competitors?

I think the way to think about this is it's really about the relationships. And we have been in this space helping spawn medium-sized businesses for decades. And I think that our brand, when we go enter coming from Verizon and having those type of trusted brands in the marketplace differentiate us, as well as we've had a sales force that's been established for decades out there. And so, I think this is kind of a relationship that's been built over years that really makes a differentiator.

Okay, feet on the ground, so to speak?

Correct.

Your next question comes from the line of Colin Murphy with Longacre.

Can you give us an overview of your new initiative into the reputation management product?

The -- our initiative here is really to try and to help the small, medium-sized businesses in an area where they are totally confused. And really what we've got is a team that's put together a kind of a complete package for small- and medium-sized businesses. So that we control their content as it goes across possible platforms. And really, they don't have the time or the expertise to do this and to have our in-house people manage this with outside vendors is a great solution for those businesses.

Can you disclose what margin you're receiving on that product?

No, we don't isolate margins on a product-specific basis.

I think the way to keep thinking about this is we are really transforming from a product environment to a service environment. And small businesses are looking for someone to help them with this service, as they really don't have the time and they're really not interested in learning.

Okay, that's helpful. Can you disclose what percent of total sales are represented by bundled sales in Q1?

No, I mean we don't isolate with respect to that. I mean, I think all of our solutions that we offer in the marketplace, we look to provide a multimedia solution, a multi-platform solution to those advertisers. Some measure of those clients will take just a single platform, just print or just digital or those pieces. But the solution in there and the approach in the marketplace, and as we see this businesses evolve, I think you're going to see more and more multimedia opportunities. It's about selling leads and service and advertising. It's simply the print or the Internet or the digital space, is simply a platform across which you're delivering those solutions. But we would expect that as this business evolves, over the course of the next few years actually, to see more and more of the folks looking at multimedia solutions.

Sure, and as it relates to the slide which highlights SuperMedia being the overall winner in an independent test of business listings data accuracy, over what period of time did that independent test measure? Is that an LTM business basis? Is that over just a quarter?

I'm not -- I think this was a test that they did. I'm not sure over what period of time, but I'm sure you can go on there and get the test. But it tested multiple different categories and across those categories, they can show the results. But I don't know the time period.

[Operator Instructions] Your next question comes from the line of Joe Rodbard with Providence.

I just wanted to follow up on the bad debt expense. Looks like it was down about $11 million year-over-year, $9 million sequentially, any uniques this quarter? Or is this kind of the new run rate going forward?

No. As I mentioned earlier in the Q&A session, we provisioned that a 1.7% rate in the quarter, that's a little bit favorable to our actual write-off experience rate of 3.5%. Based on where days sales outstanding had moved and where actual write-offs had moved over the course of the quarter. It was appropriate for us to make a small balance sheet adjustment that contributed to the favorability between those 2 rates. But we're looking to continue to manage the bad debt expense on both sides of that equation. But the 3.5% write-off rate, we're pleased to how that has trended over the last couple of years actually. And we look to see where that moves in the future. But the 1.7% did include a small one-off balance sheet adjustment.

Got it. And should we expect that GAAP and cash restructuring for the year to be comparable to last year?

I'm sorry. Could you repeat that?

The amount of cash restructuring, if it's still going to be as modest as it was last year?

Yes, the adjustment that we made, I think we had a $2 million adjustment for severance-related costs in the first quarter and I'm not anticipating major restructuring charges as we look forward.

[Operator Instructions]

Operator, it looks like we've covered all the questions at this point, so if you would close this out?