Newspaper Publisher A. H. Belo Corporation Reports Second Quarter 2010 Financial Results

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Jul 26, 2010, 08:00 ET

DALLAS, July 26 /PRNewswire-FirstCall/ -- Newspaper publisher A. H. Belo Corporation (NYSE: AHC) today reported a net loss of $0.01 per share for the second quarter of 2010 compared to a net loss of $0.34 per share in the second quarter of 2009. Consolidated EBITDA was $11.2 million, an increase of $3.4 million compared to the second quarter of 2009, and includes the following items: a $5.4 million gain on the sale of a parking garage in Providence, Rhode Island; a $1.2 million gain related to the reversal of an accrual for the modification of a service agreement; and a $2.5 million charge related to a legal settlement. Similar to the first quarter of 2010, consolidated EBITDA in the second quarter of 2010 includes an incremental pension charge. The second quarter charge was $5.5 million, and the Company anticipates $2.9 million of pension expense during the remainder of the year. When these four items are excluded, consolidated EBITDA in the second quarter of 2010 was $12.6 million, an increase of $4.8 million compared to the comparable and unadjusted consolidated EBITDA figure in the second quarter of 2009. Second quarter results include $4.6 million of bonus accrual, and the Company anticipates a total bonus expense of $5.0 to $6.0 million in 2010. The Company cancelled most non-sales bonuses in 2009.

Robert W. Decherd, chairman, president and Chief Executive Officer, said, "Second quarter total revenue decreased 4.7 percent compared to 2009. This rate of decline is less than in the first quarter of 2010 and is the lowest year-to-year percent decline in more than two years. Unadjusted consolidated EBITDA increased 43.7 percent compared to the second quarter of 2009. Improvement in the Company's EBITDA was primarily driven by The Dallas Morning News."

"As of June 30, the Company had approximately $60 million of cash and cash equivalents, no borrowings outstanding under its bank credit facility, and remained in compliance with the bank covenants. We continue to manage the business to maximize operating cash flow over the long-term and monetize real estate in transactions that create value for shareholders at appropriate prices," Decherd said.

Operating Results

Total revenue was $121.6 million in the second quarter, a decrease of 4.7 percent compared to the second quarter of 2009. The percent decline in total revenue was lowest at The Dallas Morning News, followed by The Providence Journal and The Press-Enterprise. Advertising revenue, including print and digital revenue, decreased 12.0 percent. Although digital revenue decreased 4.3 percent to $9.3 million, non-classified digital revenue increased 2.5 percent to $4.2 million. Due primarily to circulation pricing actions implemented in Dallas last year, circulation revenue increased 6.6 percent. Other revenue increased 35.0 percent.

Total consolidated operating expenses in the second quarter of 2010 were $126.1 million, a decrease of 4.5 percent compared to 2009. Excluding the impact of pension expense, legal settlement expense and the gain related to the reversal of an accrual, operating expenses in the second quarter of 2010 were $119.3 million, a decrease of 9.6 percent compared to 2009. The Company's newsprint expense in the second quarter of 2010 was $9.2 million, a decrease of 27.1 percent compared to 2009. In the second quarter of 2010, newsprint consumption decreased 3.8 percent and newsprint cost per metric ton decreased 24.3 percent compared to 2009. The average purchase price per metric ton for newsprint increased 1.3 percent in the second quarter of 2010 compared to 2009.

Newspaper EBITDA was $10.1 million in the second quarter, a decrease of $3.0 million compared to the second quarter of 2009. This decrease was primarily attributable to incremental pension, bonus and legal settlement expenses. Excluding pension and legal settlement expenses, newspaper EBITDA was $18.1 million, an increase of 38.2 percent; the newspaper EBITDA margin was 14.9 percent; and the newspaper EBITDA margin was highest at The Providence Journal, followed by The Dallas Morning News and The Press-Enterprise.

Corporate

In the second quarter of 2010, corporate and non-operating expenses, net of costs allocated to operating units, were $5.8 million, an increase of 2.6 percent compared to the second quarter of 2009.

Non-GAAP Financial Measures

Reconciliations of consolidated and newspaper EBITDA to net loss are included as exhibits to this release.

Financial Results Conference Call

AHC will conduct a conference call today at 1:00 p.m. CDT to discuss financial results. The conference call will be available via Webcast by accessing the Company's Web site (www.ahbelo.com/invest) or by dialing 1-800-230-1096 (USA) or 612-332-0418 (International). A replay line will be available at 800-475-6701 (USA) or 320-365-3844 (International) from 3:00 p.m. CDT on July 26 until 11:59 p.m. CDT on August 2, 2010. The access code for the replay is 163974.

About A. H. Belo Corporation

A. H. Belo Corporation (NYSE: AHC), headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that owns and operates four daily newspapers and a diverse group of Web sites. A. H. Belo publishes The Dallas Morning News, Texas' leading newspaper and winner of nine Pulitzer Prizes since 1986; The Providence Journal, the oldest continuously-published daily newspaper in the U.S. and winner of four Pulitzer Prizes; The Press-Enterprise (Riverside, CA), serving southern California's Inland Empire region and winner of one Pulitzer Prize; and the Denton Record-Chronicle. The Company publishes various specialty publications targeting niche audiences, and its partnerships and/or investments include the Yahoo! Newspaper Consortium and Classified Ventures, owner of cars.com. A. H. Belo also owns direct mail and commercial printing businesses. Additional information is available at www.ahbelo.com or by contacting David A. Gross, vice president/Investor Relations and Strategic Analysis, at 214-977-4810.

Statements in this communication concerning A. H. Belo Corporation's (the "Company's") business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, impairments, pension plan contributions, real estate sales, future financings, and other financial and non-financial items that are not historical facts, are "forward-looking statements" as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements.

Such risks, uncertainties and factors include, but are not limited to, changes in capital market conditions and prospects, and other factors such as changes in advertising demand and newsprint prices; newspaper circulation trends and other circulation matters, including changes in readership methods, patterns and demography, and audits and related actions by the Audit Bureau of Circulations; challenges in achieving expense reduction goals, and on schedule, and the resulting potential effects on operations; technological changes; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; regulatory, tax and legal changes; adoption of new accounting standards or changes in existing accounting standards by the Financial Accounting Standards Board or other accounting standard-setting bodies or authorities; the effects of Company acquisitions, dispositions, co-owned ventures, and investments; pension plan matters; general economic conditions and changes in interest rates; significant armed conflict; and other factors beyond our control, as well as other risks described in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and other public disclosures and filings with the Securities and Exchange Commission.

A. H. Belo Corporation
Consolidated Statements of Operations

				Three months ended				Six months ended
				June 30,				June 30,
In thousands, except per share amounts (unaudited)			2010			2009		2010			2009

Net operating revenues
	Advertising		$	77,004	$	87,492	$		149,190	$		176,823
	Circulation			35,456		33,266			71,042			64,980
	Other			9,110		6,746			17,097			14,195
		Total net operating revenues		121,570		127,504			237,329			255,998

Operating Costs and Expenses
	Salaries, wages and employee benefits			56,817		51,720			113,071			114,614
	Other production, distribution and operating costs			47,034		50,867			93,066			106,734
	Newsprint, ink and other supplies			12,492		16,425			23,713			36,043
	Asset impairment			-		1,749			-			82,689
	Depreciation			8,441		9,662			17,605			20,198
	Amortization			1,310		1,625			2,620			3,249
		Total operating costs and expenses		126,094		132,048			250,075			363,527

		Loss from operations		(4,524)		(4,544)			(12,746)			(107,529)

Other income and expense
	Interest expense			(203)		(291)			(406)			(591)
	Other income, net			5,967		(702)			5,992			120
		Total other (expense) income		5,764		(993)			5,586			(471)

Earnings
	Income (loss) before income taxes			1,240		(5,537)			(7,160)			(108,000)
	Income tax expense (benefit)			1,411		1,534			2,139			(222)

		Net loss	$	(171)	$	(7,071)	$		(9,299)	$		(107,778)

Net loss per share
	Basic and diluted		$	(0.01)	$	(0.34)	$		(0.45)	$		(5.25)

Average shares outstanding
	Basic and diluted			20,950		20,537			20,860			20,521

A. H. Belo Corporation
Condensed Consolidated Balance Sheets


				June 30,		December 31,
In thousands				2010		2009
				(unaudited)
Assets
	Current assets
		Cash and cash equivalents	$	60,009	$	24,503
		Accounts receivable, net		47,025		62,977
		Other current assets		32,304		34,464
	Total current assets			139,338		121,944

	Property, plant and equipment, net			185,551		203,329
	Intangible assets, net			49,390		52,009
	Other assets			26,465		27,145

Total assets			$	400,744	$	404,427


Liabilities and Shareholders' Equity
	Current liabilities
		Accounts payable	$	16,395	$	19,191
		Accrued expenses		37,768		29,788
		Advance subscription payments		24,211		26,713
	Total current liabilities			78,374		75,692

	Deferred income taxes			1,366		223
	Other liabilities			6,915		6,915
	Total shareholders' equity			314,089		321,597

Total liabilities and shareholders' equity			$	400,744	$	404,427

A. H. Belo Corporation
Consolidated EBITDA


		Three months ended				Six months ended
		June 30,				June 30,
In thousands (unaudited)		2010		2009		2010		2009


Consolidated EBITDA (1)	$	11,194	$	7,790	$	13,471	$	(1,273)
Asset impairment		-		(1,749)		-		(82,689)
Depreciation and Amortization		(9,751)		(11,287)		(20,225)		(23,447)
Interest Expense		(203)		(291)		(406)		(591)
Income Tax Benefit (Expense)		(1,411)		(1,534)		(2,139)		222
Net Loss	$	(171)	$	(7,071)	$	(9,299)	$	(107,778)

A. H. Belo Corporation
Newspaper EBITDA


		Three months ended				Six months ended
		June 30,				June 30,
In thousands (unaudited)		2010		2009		2010		2009


Newspaper EBITDA (1)	$	10,094	$	13,126	$	19,527	$	10,807
Corporate & Non-Operating Company Expenses		(4,867)		(4,633)		(12,048)		(12,200)
Other income, net		5,967		(702)		5,992		120
Asset impairment		-		(1,749)		-		(82,689)
Depreciation and Amortization		(9,751)		(11,287)		(20,225)		(23,447)
Interest Expense		(203)		(291)		(406)		(591)
Income Tax Benefit (Expense)		(1,411)		(1,534)		(2,139)		222
Net Loss	$	(171)	$	(7,071)	$	(9,299)	$	(107,778)

(1) The Company defines Consolidated EBITDA as net earnings before interest expense, income taxes, goodwill impairment, depreciation and amortization and Newspaper EBITDA as net earnings before corporate and non-operating company expenses, other income net, interest expense, income taxes, goodwill impairment, depreciation and amortization. Neither Consolidated EBITDA nor Newspaper EBITDA is a measure of financial performance under accounting principles generally accepted in the United States. Management uses both measures in internal analyses as a supplemental measure of the financial performance of the Company to assist it with determining bonus achievement, performance comparisons against its peer group of companies, as well as capital spending and other investing decisions. They are also common alternative measures of performance used by investors, financial analysts, and rating agencies to evaluate financial performance. Neither Consolidated EBITDA nor Newspaper EBITDA should be considered in isolation or as a substitute for cash flows provided by operating activities or other income or cash flow data prepared in accordance with U.S. GAAP and this non-GAAP measure may not be comparable to similarly titled measures of other companies.