AHC A H Belo Corporation

A. H. Belo Corporation (NYSE: AHC) today reported net income of $0.06 per diluted share for the third quarter of 2012 compared to a net loss of $0.01 per diluted share in the third quarter of 2011. Third quarter 2012 net income includes a credit of $2.5 million for a consent judgment related to past tax assessments of real estate by the City of Providence.

Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization (“EBITDA”) with pension expense added back, was $10.5 million in the third quarter of 2012, a decrease of 3 percent compared to the prior year period. As of September 30, 2012, cash and cash equivalents were $41 million, and the Company had no borrowings under its bank credit facility.

Robert W. Decherd, chairman, president and Chief Executive Officer, said, “Third quarter total revenue decreased 1 percent compared to the prior year quarter. This rate of decline is the lowest since our spin-off from Belo Corp. in 2008 and was driven by advertising revenue performance at The Dallas Morning News and increased printing and distribution revenues in Providence and Riverside.

“We are very pleased with our results thus far in 2012. While advertising revenues are difficult to predict, we remain confident in the Company’s ability to deliver Adjusted EBITDA and generate cash. We continue to expect full-year 2012 Adjusted EBITDA of $37 to $41 million.”

Third Quarter Results

Total revenue was $108.9 million in the third quarter of 2012, a decrease of 1 percent compared to the prior year period.

Advertising and marketing services revenue, including print and digital revenues, decreased 5 percent, with the smallest percentage decrease at The Dallas Morning News followed by The Press-Enterprise and The Providence Journal. Display advertising revenue decreased 5 percent to $20.3 million, and preprint revenue decreased 4 percent to $19.7 million. Classified revenue decreased 8 percent to $13.5 million. Digital revenue increased 1 percent to $8.7 million. When the impact of non-recurring revenue associated with a discontinued digital advertising platform is excluded, digital revenue increased 7 percent, primarily due to increased automotive digital revenue at The Dallas Morning News.

In the third quarter of 2011, The Dallas Morning News discontinued the niche publication Quick. When Quick’s advertising revenue in the third quarter of 2011 is excluded, advertising revenue from ongoing niche publications increased 4 percent in the third quarter of 2012. This increase primarily resulted from higher advertising revenue at The Morning News' Spanish-language publication Al Día. Advertising revenue from niche publications is a component of the display, preprint, classified and digital revenue figures presented above.

Circulation revenue decreased 1.5 percent to $34.2 million in the third quarter of 2012 compared to the prior year period. Excluding $0.9 million of circulation revenue resulting from The Providence Journal’s transition from a carrier model to a distributor circulation model in 2011, total circulation revenue decreased 4 percent to $33.3 million. This decrease is primarily driven by the single copy sales decline at The Dallas Morning News.

Printing and distribution revenue increased 25 percent to $12.5 million in the third quarter of 2012 due mostly to the impact of new contracts at The Providence Journal and The Press-Enterprise. The Company was notified in October 2012 that the new owners of the North County Times would cease printing that publication in the Riverside (Press Enterprise) productions facility on October 15, well before the expiration of a multi-year contract. The Company is pursuing multiple remedies.

Excluding the effect of pension expense in both periods, operating expense in the third quarter was $106.6 million, a 2 percent decrease compared to the prior year period as headcount related expenses, computer and depreciation expenses all decreased. Third quarter severance and related expenses totaled $0.3 million.

The Company’s newsprint expense in the third quarter was $10.3 million, an increase of 1 percent compared to the prior year period. Newsprint consumption increased 1 percent to 16,348 metric tons. Compared to the prior year period, newsprint cost per metric ton dropped slightly, and the average purchase price per metric ton for newsprint decreased 2.3 percent.

Excluding the effect of pension expense in both periods, third quarter corporate and non-operating unit expenses were $5.4 million, a decrease of 2 percent compared to the prior year period.

Capital expenditures totaled $2.7 million in the third quarter. The Company anticipates full-year 2012 capital expenditures of approximately $10 million.

As of September 30, A. H. Belo had approximately 2,100 full-time equivalent employees, a decrease of 4 percent compared to the prior year period.

Dallas Initiatives

On September 10, The Dallas Morning News announced the formation of Speakeasy, a social content marketing agency that will develop, manage and execute turnkey social campaigns and promotions for both local and national businesses. The Company is majority owner of Speakeasy.

The Company moved forward with marketing campaigns at The Dallas Morning News during the third quarter. The Morning News anticipates investments in these marketing efforts will total $3.0 to $4.0 million this year.

Non-GAAP Financial Measures

Reconciliations of EBITDA and Adjusted EBITDA are included as exhibits to this release.

Conference Call

A. H. Belo will conduct a conference call on Monday, October 29 at 1:30 p.m. CDT to discuss financial results. The conference call will be available via webcast by accessing the Company's website (www.ahbelo.com/invest) or by dialing 1-800-288-8961 (USA) or 612-332-0107 (International). A replay line will be available at 1-800-475-6701 (USA) or 320-365-3844 (International) from approximately 3:30 p.m. CDT on October 29 until 11:59 p.m. CST on November 5, 2012. The access code for the replay is 259648.

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 related websites. A. H. Belo publishes The Dallas Morning News, Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal, the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press-Enterprise (Riverside, CA), serving the Inland Southern California region and winner of one Pulitzer Prize; and the Denton Record-Chronicle. The Company publishes niche publications targeting specific audiences, and its investments and/or partnerships include Classified Ventures, owner of Cars.com, and the Yahoo! Newspaper Consortium. A. H. Belo also owns and operates commercial printing, distribution and direct mail service businesses. Additional information is available at www.ahbelo.com or by contacting Alison K. Engel, Senior Vice President/Chief Financial Officer, at 214-977-2248.

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 implementing increased subscription pricing and new pricing structures; 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 existing and new competitors and suppliers; labor relations; 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, 2011, and other public disclosures and filings with the Securities and Exchange Commission.

  A. H. Belo Corporation Condensed Consolidated Statements of Operations             Three Months Ended Nine Months Ended         September 30, September 30, In thousands, except per share amounts (unaudited)     2012   2011 2012   2011   Net operating revenues Advertising and marketing services $ 62,123 $ 65,229 $ 186,373 $ 203,034 Circulation 34,243 34,749 102,655 104,699 Printing and distribution   12,515   10,012   33,830   28,918 Total net operating revenues 108,881 109,990 322,858 336,651   Operating costs and expenses Salaries, wages and employee benefits 43,364 44,958 131,992 143,552 Other production, distribution and operating costs 40,614 41,996 122,835 130,875 Newsprint, ink and other supplies 15,899 14,618 45,242 44,192 Depreciation 6,219 7,386 21,680 23,225 Amortization 1,309 1,310 3,929 3,930 Pension plan withdrawal   -   -   -   1,988 Total operating costs and expenses 107,405 110,268 325,678 347,762   Income (loss) from operations 1,476 (278) (2,820) (11,111)   Other income (expense), net Other income, net 594 764 2,422 2,475 Interest expense   (128)   (132)   (506)   (510) Total other income (expense), net   466   632   1,916   1,965   Earnings Income (loss) before income taxes 1,942 354 (904) (9,146) Income tax expense   501   489   1,286   4,538 Net income (loss) 1,441 (135) (2,190) (13,684) Net loss attributable to noncontrolling interests (42)   -   (42)   -   Net income (loss) attributable to A. H. Belo Corporation $ 1,483 $ (135) $ (2,148) $ (13,684)   Net income (loss) per share attributable to A. H. Belo Corporation Basic $ 0.07 $ (0.01) $ (0.10) $ (0.64) Diluted $ 0.06 $ (0.01) $ (0.10) $ (0.64)   Average shares outstanding: Basic 22,807 21,534 21,850 21,477 Diluted 22,928 21,534 21,850 21,477       A. H. Belo Corporation Condensed Consolidated Balance Sheets                       September 30, 2012 December 31, In thousands       (unaudited)   2011   Assets Current assets Cash and cash equivalents $ 41,008 $ 57,440 Accounts receivable, net 40,573 50,533 Other current assets   19,476   20,225 Total current assets 101,057 128,198   Property, plant and equipment, net 148,278 163,418 Intangible assets, net 37,603 41,532 Other assets   12,939   11,940   Total assets $ 299,877 $ 345,088     Liabilities Current liabilities Accounts payable $ 11,985 $ 18,062 Accrued expenses 28,067 30,167 Advance subscription payments   20,520   22,491 Total current liabilities 60,572 70,720 Pension liabilities 117,083 145,980 Other liabilities 5,597 6,909   Shareholders' Equity A. H. Belo Corporation 116,540 121,479 Noncontrolling interests   85   -   Total liabilities and shareholders' equity $ 299,877 $ 345,088           A. H. Belo Corporation Reconciliation of EBITDA and Adjusted EBITDA     Three months ended Nine months ended       September 30, September 30, In thousands (unaudited)     2012     2011 2012   2011   Net income (loss) attributable to A. H. Belo Corporation $ 1,483 $ (135) $ (2,148) $ (13,684) Addback: Depreciation and amortization 7,528 8,696 25,609 27,155 Interest expense 128 132 506 510 Income tax expense   501   489   1,286   4,538 EBITDA (1)   9,640   9,182   25,253   18,519 Addback: Pension expense   849   1,598   2,897  

6,912

Adjusted EBITDA (1) $ 10,489 $ 10,780 $ 28,150 $

25,431

 

(1)

EBITDA is calculated by adding depreciation and amortization, interest expense and income tax expense recorded to net income (loss) attributable to A. H. Belo Corporation. Adjusted EBITDA is calculated by adding pension expense, non-cash impairment expense and net investment-related losses recorded to EBITDA.

  Neither EBITDA nor Adjusted EBITDA is a measure of financial performance under GAAP. Management uses EBITDA, Adjusted EBITDA and similar measures in internal analyses as supplemental measures of the Company’s financial performance and to assist with performance comparisons against its peer group of companies and for operating decisions. EBITDA or similar measures are also common alternative measures of performance used by investors, financial analysts and rating agencies to evaluate financial performance. Neither EBITDA nor Adjusted 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 GAAP, and these non-GAAP measures may not be comparable to similarly-titled measures of other companies.