A. H. Belo Corporation (NYSE: AHC) today reported full-year 2012
net income of $0.01 per share compared to a net loss of $0.51 per
share in 2011. In the fourth quarter of 2012, the Company’s net
income was $0.11 per share compared to a net income of $0.12 per
share in the fourth quarter of 2011. Fourth quarter 2012 net income
includes non-cash expense of $2.4 million for the impairment of
press-related assets in Southern California and $0.6 million of
costs to cease printing certain commercial products.
Adjusted EBITDA, or earnings before interest, taxes,
depreciation and amortization (“EBITDA”) with pension expense,
impairment expense and net investment-related losses added back,
was $41.8 million for the full-year 2012, reflecting our
investments in new products and marketing. As a result of these
investments Adjusted EBITDA decreased 12 percent compared to the
prior year period. Adjusted EBITDA for the fourth quarter of 2012
was $13.6 million – a decrease of 39 percent compared to the prior
year period.
As of December 31, 2012, cash and cash equivalents were $34.1
million, and the Company had no borrowings under its bank credit
facility. On January 4, 2013, the Company terminated its credit
agreement to provide greater financial and operating flexibility
and eliminate substantial costs related to the credit
agreement.
Robert W. Decherd, chairman, president and Chief Executive
Officer, said, “Our 2012 operating performance reflects the
Company’s success in fulfilling its financial principles, while
continuing to focus on diversifying and stabilizing revenue
streams, managing expenses and generating cash.
“For the first year since the spin-off from Belo Corp. in 2008,
A. H. Belo was net income positive, an outstanding accomplishment
during these transformational times. Thanks to prudent expense
management, the Company delivered 2012 Adjusted EBITDA of $41.8
million, exceeding the high end of our previous guidance. We begin
2013 with a strong balance sheet and the flexibility to deploy cash
in the long-term interests of the Company, its shareholders and
employees.”
Full-Year Results
Total revenue was $440.0 million in 2012, a decrease of 5
percent compared to the prior year. Excluding the impact of
advertising related to the Super Bowl in Dallas during the first
quarter of 2011, total revenue decreased 4 percent compared to
2011. This rate of decline is the lowest year-over-year decline
since the Company’s spin-off from Belo Corp. in 2008. Advertising
revenue, including print and digital revenues, decreased 9 percent
compared to the prior year.
- The smallest percentage decrease came
at The Press-Enterprise, followed by The Dallas Morning News and
The Providence Journal
- Display revenue decreased 15 percent to
$84.6 million
- Preprint revenue decreased 3 percent to
$84.8 million
- Classified revenue decreased 11 percent
to $54.1 million
- Digital revenue decreased 1 percent to
$34.7 million. Excluding the impact of non-recurring revenue
associated with a discontinued digital advertising platform and the
Super Bowl in Dallas, digital revenue increased 8 percent
- In the third quarter of 2011, The
Dallas Morning News discontinued the niche publication Quick. When
Quick’s advertising revenue in 2011 is excluded, advertising
revenue from ongoing niche publications decreased 2 percent to
$22.4 million.
Circulation revenue was $136.5 million in 2012, a decrease of 2
percent compared to 2011. Excluding $2.7 million of year-over-year
increase in circulation revenue resulting from The Providence
Journal’s transition from a carrier to a distributor
circulation model at the end of 2011, total circulation revenue
decreased 4 percent as single copy sales declined, primarily in
Dallas due principally to the impact of the Dallas Mavericks’ NBA
championship in 2011.
Printing and distribution revenue was $45.3 million in 2012, an
increase of 16 percent compared to the prior year due primarily to
expansion of commercial printing and distribution contracts in
Providence and Riverside. However, 27 percent of this increase
pertained to Southern California’s North County Times, whose owners
ceased printing the publication with the Company in October 2012,
well before the expiration of a multi-year contract. The Company is
pursuing multiple remedies to this breach of contract.
Total consolidated operating expense was $440.7 million in 2012.
Excluding the effect of pension and impairment expenses, operating
expense in 2012 was $434.5 million, a 4 percent decrease compared
to the prior year. This decrease was primarily driven by lower
salaries and wages, newsprint, computer, repair and maintenance,
and depreciation expenses.
In 2012, the Company’s newsprint expense was $40.4 million, a
decrease of 5 percent for the full-year. Newsprint consumption
decreased 4 percent to approximately 64,300 metric tons. Compared
to the prior year, newsprint cost per metric ton decreased 1
percent, and the average purchase price per metric ton for
newsprint was flat to prior year.
Excluding the effect of pension and impairment expenses in both
periods, full-year corporate and non-operating unit expenses were
$23.4 million, an 11 percent decrease, as salaries and wages,
computer and communication expenses all decreased.
The Company’s full-year severance and related expenses totaled
$1.6 million.
As of December 31, 2012, A. H. Belo had approximately 2,000
full-time equivalent employees, a decrease of approximately 4
percent compared to the prior year.
Fourth Quarter Results
Total revenue was $117.2 million in the fourth quarter of 2012,
a decrease of 6 percent compared to the prior year period.
Advertising revenue, including print and digital revenues,
decreased 10 percent compared to the prior year period.
- The smallest percentage decrease came
at The Press-Enterprise, followed by The Dallas Morning News and
The Providence Journal
- Display revenue decreased 19 percent to
$23.4 million
- Preprint revenue decreased 3 percent to
$25.9 million
- Classified revenue decreased 13 percent
to $13.1 million
- Digital revenue increased 4 percent to
$9.4 million. When the impact of non-recurring revenue associated
with a discontinued digital advertising platform is excluded,
digital revenue increased 15 percent, primarily due to increased
automotive digital revenue at The Dallas Morning News and marketing
services revenue associated with 508 Digital
- Advertising revenue from niche
publications, which is a component of the display, preprint,
classified and digital revenues reported above, decreased 16
percent to $6.0 million, due primarily to weakness in department
stores, financial and healthcare categories.
Circulation revenue was $33.9 million in the fourth quarter, a
decrease of 4 percent compared to the prior year period. This
decrease is primarily driven by a single copy sales decline at The
Dallas Morning News.
Printing and distribution revenue was $11.5 million in the
fourth quarter, an increase of 14 percent compared to the prior
year period due primarily to the expansion of printing and
distribution contracts at The Providence Journal.
Total consolidated operating expense in the fourth quarter was
$115.0 million. Excluding the effect of pension and impairment
expenses in both periods, operating expense in the fourth quarter
was $111.7 million, flat to prior year period.
The Company’s newsprint expense in the fourth quarter was $10.5
million, a decrease of 3 percent compared to the prior year period.
Newsprint consumption dropped 3 percent to approximately 16,700
metric tons. Compared to the prior year period, newsprint cost per
metric ton was flat, and the average purchase price per metric ton
for newsprint increased 2 percent.
Excluding the effect of pension and impairment expenses in both
periods, fourth quarter corporate and non-operating unit expenses
were $5.0 million in the fourth quarter, a 24 percent decrease, as
salaries and wages, computer and depreciation expenses all
declined.
Fourth quarter severance and related expenses totaled $0.8
million.
Pension Plans
The Company continued its efforts to address pension plan
underfunding and reduce the cost of operating the Company’s frozen
plans. On October 3, 2012, Company-sponsored pension plans offered
buyouts to 1,433 participants. A total of 889 participants accepted
the offer which is expected to reduce the projected benefit
obligation by $14.5 million. As of December 31, 2012, approximately
93 percent of plans participants accepting the offer were paid a
total of $9.8 million from the plans’ assets.
At the end of 2012, A. H. Belo recorded a $10.6 million charge
to its accumulated other comprehensive loss account on the balance
sheet due to a decline in the composite discount rate of the
Company’s defined benefit pension plans. On December 31, 2012, the
composite discount rate for the plans was 3.7 percent, a 50 basis
point decrease from December 31, 2011.
As a result of favorable investment performance and other
factors, the pension plans had a net underfunded balance of $122.8
million as of December 31, 2012 versus $146.0 million at the end of
2011.
Investments
The Company received a $2.4 million dividend in December 2012
from its equity interest in Classified Ventures, owner of Cars.com
and Apartments.com.
In December 2012, DMNmedia, the marketing solutions group of The
Dallas Morning News, Inc., announced the acquisition of the assets
of DG Publishing, Inc., a magazine publisher of high-end resource
guides including Design Guide Texas and The Texas Wedding Guide.
The purchase further strengthens The Morning News’ media portfolio
in the luxury magazine segment and will complement FD Luxe, a
premium lifestyle magazine targeting affluent consumers in North
Texas.
In January 2013, the Company sold a real estate property in
Southern California, generating a gain and pre-tax net proceeds of
approximately $0.2 million.
Non-GAAP Financial
Measures
Reconciliations of net income (loss) to EBITDA and Adjusted
EBITDA are included as exhibits to this release.
Financial Results Conference
Call
A. H. Belo will conduct a conference call on Tuesday, February
12 at 1:00 p.m. CST 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 1-877-531-2988 (USA)
or 612-332-0634 (International). A replay line will be available at
1-800-475-6701 (USA) or 320-365-3844 (International) from 3:00 p.m.
CST on February 12 until 11:59 p.m. CST on February 26, 2012. The
access code for the replay is 281510.
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’s investments include
Classified Ventures, owner of Cars.com, and Wanderful Media, owner
of Find n Save. A. H. Belo offers digital marketing solutions
through 508 Digital and Speakeasy and 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, business
initiative, pension plan contributions and obligations, 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 Alliance for Audited Media;
challenges implementing increased subscription pricing and new
pricing structures; challenges in achieving expense reduction goals
in a timely manner, 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; consumer acceptance of
new products and business initiatives; 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, and in the Company’s other public disclosures
and filings with the Securities and Exchange Commission.
A. H. Belo Corporation
Consolidated Statements of Operations
Three months ended Twelve
months ended December 31, December 31, In
thousands, except per share amounts (unaudited)
2012 2011 2012 2011 Net Operating
Revenues Advertising and marketing services $ 71,850 $ 79,587 $
258,223 $ 282,621 Circulation 33,851 35,192 136,506 139,892
Printing and distribution 11,487 10,073
45,317 38,990 Total net operating
revenues 117,188 124,852 440,046 461,503
Operating Costs and
Expenses Salaries, wages and employee benefits 45,078 44,186
177,070 187,738 Other production, distribution and operating costs
44,297 44,066 167,132 174,942 Newsprint, ink and other supplies
16,073 15,890 61,315 60,081 Depreciation 5,798 7,202 27,478 30,427
Amortization 1,310 1,309 5,239 5,239 Asset impairments 2,444 6,500
2,444 6,500 Pension plan withdrawal — —
— 1,988 Total operating costs and
expenses 115,000 119,153 440,678 466,915 Net income (loss) from
operations 2,188 5,699 (632 ) (5,412 )
Other Income (Expense),
Net Other income (expense), net 991 (2,318 ) 3,413 159 Interest
expense (124 ) (158 ) (630 ) (669 )
Total other income (expense), net 867 (2,476 )
2,783 (510 )
Income (Loss) Before Income
Taxes 3,055 3,223 2,151 (5,922 ) Income tax expense 446
472 1,732 5,011
Net Income (Loss) 2,609 2,751 419 (10,933 ) Net loss
attributable to noncontrolling interests (65 ) —
(107 ) —
Net Income (Loss)
Attributable to A. H. Belo Corporation $ 2,674 $ 2,751
$ 526 $ (10,933 )
Per Share Basis Net
income (loss) attributable to A. H. Belo Corporation Basic $ 0.11
$ 0.12 $ 0.01 $ (0.51 ) Diluted $ 0.11
$ 0.12 $ 0.01 $ (0.51 ) Weighted average shares
outstanding Basic
22,000
22,570
21,948
21,496
Diluted
22,101
22,740
22,066
21,496
A. H. Belo Corporation
Condensed Consolidated Balance Sheets
December 31, In thousands (unaudited)
2012 2011 Assets Current assets: Cash and cash
equivalents $ 34,094 $ 57,440 Accounts receivable, net 46,964
50,533 Other current assets 18,079 20,225 Total
current assets 99,137 128,198 Property, plant and equipment, net
144,609 163,418 Intangible assets, net 36,293 41,532 Other assets
11,900 11,940 Total assets $ 291,939 $ 345,088
Liabilities and Shareholders’ Equity Current liabilities:
Accounts payable $ 15,178 $ 18,062 Accrued expenses 26,012 30,167
Advance subscription payments 20,708 22,491 Total
current liabilities 61,898 70,720 Long-term pension liabilities
122,821 145,980 Other liabilities 5,160 6,909 Total shareholders’
equity 102,060 121,479 Total liabilities and
shareholders’ equity $ 291,939 $ 345,088
A. H.
Belo Corporation
Reconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA
Three
months ended Twelve months ended December
31, December 31, In thousands (unaudited)
2012 2011 2012 2011
Net income (loss) attributable to A. H. Belo Corporation $
2,674 $
2,751
$ 526 $ (10,933 ) Depreciation and amortization 7,108
8,511
32,717 35,666 Interest expense 124
158
630 669 Income tax expense 446
472
1,732 5,011
EBITDA 10,352
11,892
35,605 30,413 Addback: Pension expense 849
1,248
3,746 8,161 Impairments 2,444 6,500 2,444 6,500 Net
investment-related losses —
2,634
— 2,634
Adjusted EBITDA $ 13,645 $
22,274
$ 41,795 $ 47,708
EBITDA is calculated by adding depreciation and amortization,
interest expense and income tax expense recorded to net income
(loss). 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 generally accepted accounting principles
(“GAAP”). Management uses EBITDA, Adjusted EBITDA and similar
measures in internal analyses as a supplemental measure of the
Company’s financial performance and to assist with determining
bonus achievement, performance comparisons against its peer group
of companies, as well as capital spending and other investing
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.
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