A. H. Belo Corporation (NYSE: AHC) today reported third quarter
2014 net income from continuing operations of $2.3 million, or
$0.10 per share, compared to net income from continuing operations
of $0.5 million, or $0.02 per share, in the third quarter of 2013.
Third quarter 2014 net income from continuing and discontinued
operations of $18.4 million includes a $17.1 million gain related
to the sale of The Providence Journal newspaper operations and $3.5
million of income for an economic parity payment in conjunction
with the dissolution of the partnership which held the Company’s
membership interest in Classified Ventures.
Jim Moroney, chairman, president and Chief Executive Officer,
said, “We are pleased with progress made towards our Dallas-based
strategy in the third quarter of 2014. The completion of the sales
of The Providence Journal in the third quarter and Classified
Ventures in the fourth quarter are key components in the successful
execution of this strategy.
“The Board and management continue to focus on capital
allocation, including potential investments and acquisitions in the
advertising and marketing services arena, as we consider deployment
of the cash proceeds from these and other transactions. We are
optimistic about opportunities to diversify and grow revenues and
EBITDA and reduce our reliance on core print advertising revenue
which remain challenged.”
In conjunction with the completed sale of the newspaper
operations in Providence, Rhode Island, The Providence
Journal newspaper operations are reported as discontinued
operations in the Company’s financial statements (see further
discussion below). Accordingly, the results from continuing
operations consist primarily of The Dallas Morning News and
corporate activities.
Adjusted EBITDA, or earnings before interest, taxes,
depreciation and amortization ("EBITDA") from continuing
operations, excluding investment-related gains, was $4.2 million in
the third quarter of 2014, compared to $4.4 million in the prior
period.
As of September 30, 2014, cash and cash equivalents were $108.1
million, and the Company had no debt.
Third Quarter Results from Continuing
Operations
Total revenue was $65.9 million in the third quarter of 2014, a
decrease of 2.3 percent compared to the prior year period. Declines
in print advertising and circulation revenue were offset by
increases in commercial printing and digital revenue.
Revenue from advertising and marketing services, including print
and digital revenues, decreased 8.6 percent. Digital revenue, which
comprised 22.0 percent of advertising and marketing services
revenue, increased 9.6 percent over the prior year quarter
primarily due to continued growth in marketing services revenue
associated with Speakeasy. Increases in digital revenue were offset
by declines in print display, preprint and classified advertising
revenues which decreased 19.2 percent, 8.1 percent and 8.1 percent,
respectively.
Advertising revenue from niche publications, which is a
component of the display, preprint, classified and digital revenues
reported above, decreased slightly in the third quarter of
2014.
Circulation revenue decreased 2.6 percent to $21.2 million in
the third quarter of 2014. Single copy revenue increased during
this period due to higher rates, offset by lower home delivery
revenue resulting from reduced volumes.
Commercial printing and distribution revenue increased 46.9
percent to $7.8 million in the third quarter of 2014 due primarily
to the impact of printing the Fort Worth Star-Telegram and
additional printing of two local community newspapers.
Total operating expense in the third quarter was $65.4 million,
a 3.3 percent decrease compared to the prior year period as
employee compensation and benefits, technology, newsprint and
depreciation expenses all decreased.
The Company’s newsprint expense in the third quarter was $4.7
million, a decrease of 8.7 percent compared to the prior year
period. Newsprint consumption dropped 9.2 percent to approximately
7,970 metric tons. Compared to the prior year period, newsprint
cost per metric ton remained flat while the average purchase price
per metric ton for newsprint increased 2 percent.
Corporate and non-operating expense in the third quarter was
$3.6 million, an increase of 11 percent compared to the prior
year period due to higher technology expenses.
As of September 30, 2014, A. H. Belo had approximately 1,300
full-time equivalent employees, a decrease of approximately 33
percent compared to the prior year period, primarily due to the
sale of The Providence Journal during the quarter and the sale of
The Press-Enterprise in the fourth quarter of 2013.
Discontinued Operations
In the third quarter of 2014, the Company completed the sale of
substantially all of the assets comprising the newspaper operations
of The Providence Journal and related real property located in
Providence, Rhode Island. The purchase price consisted of $46.0
million plus a preliminary working capital adjustment of $2.7
million. Closing costs of $0.1 million and estimated selling and
exit costs of $3.7 million were recognized in the third quarter of
2014. Proceeds of $48.0 million were received in September 2014 and
settlement of the working capital adjustment is anticipated in the
fourth quarter of 2014. The Company recorded a pretax gain on the
sale of $17.1 million in the third quarter of 2014.
A. H. Belo continues to own and market for sale the 75 Fountain
Street headquarters building, the downtown parking lots and the
former Rhode Island Monthly / Sunday inserting building. The
Company also retains the obligation for the A. H. Belo Pension Plan
II, which provides defined pension benefits to former employees of
The Providence Journal Company.
Total third quarter gain from discontinued operations, including
the 2014 gain on the sale of The Providence Journal and the 2013
gain on the sales of the headquarters building and printing press
of The Press-Enterprise, was $16.1 million and $4.8 million, net of
tax, in 2014 and 2013, respectively.
Pension Plans
In the third quarter of 2014, the Company made required
contributions of $5.8 million to its pension plans, which included
the acceleration of the scheduled fourth quarter pension payment.
No further pension contributions are required in 2014.
Real Estate Holdings
During the third quarter of 2014, the Company sold its remaining
real estate in Riverside, California, comprised of land and a
building that formerly served as a commercial printing operation.
The Company received net sales proceeds of $1.6 million, generating
a gain of $0.3 million.
The Company also sold 97 acres of undeveloped land in southern
Dallas, Texas during the third quarter of 2014. Net sales proceeds
of $1.8 million were received upon closing of the transaction,
generating a gain of $0.6 million.
Other
As previously announced, on October 1, 2014, the Company
completed the sale of its interest in Classified Ventures to
Gannett Co. Inc. and received pre-tax cash proceeds, net of selling
costs and funds held in escrow, of $77.8 million.
In September of 2014, the Company concluded the transition
services provided to Freedom Communications Holdings, Inc. in
relation to the sale of The Press-Enterprise completed in 2013.
Accordingly, there are no further amounts due from Freedom
Communications Holdings, Inc. associated with this transaction.
Non-GAAP Financial
Measures
Reconciliations of net income to EBITDA and Adjusted EBITDA from
continuing operations are included as exhibits to this release.
Financial Results Conference
Call
A. H. Belo will conduct a conference call on Wednesday, October
29 at 10:00 a.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 1-800-230-1766 (USA) or 612-332-0107 (International). A
replay line will be available at 1-800-475-6701 (USA) or
320-365-3844 (International) from 12:00 p.m. CDT on October 29
until 11:59 p.m. CST on November 5, 2014. The access code for the
replay is 338424.
About A. H. Belo
Corporation
A. H. Belo Corporation (NYSE: AHC) is a leading local news and
information publishing company with commercial printing,
distribution and direct mail capabilities, as well as businesses
with expertise in emerging media and digital marketing. With a
continued focus on extending our media platform, we are able to
deliver news and information in innovative ways to new audiences
with diverse interests and lifestyles. For additional information,
visit ahbelo.com, email invest@ahbelo.com.
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, dispositions,
impairments, business initiatives, acquisitions, pension plan
contributions and obligations, real estate sales, working capital,
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; challenges in consummating asset acquisitions or
dispositions upon acceptable terms; 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; acts of
terrorism; 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
Condensed Consolidated Statements of Operations
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
In thousands, except share and per share amounts (unaudited)
2014 2013 2014
2013 Net Operating Revenue Advertising
and marketing services $ 36,941 $ 40,402 $ 114,918 $ 122,288
Circulation 21,219 21,787 63,458 64,024 Printing and distribution
7,763 5,284 21,200
16,390 Total net operating revenue 65,923 67,473 199,576
202,702
Operating Costs and Expense Employee compensation
and benefits 24,265 27,070 78,151 83,608 Other production,
distribution and operating costs 29,846 28,511 87,930 85,640
Newsprint, ink and other supplies 7,910 8,370 24,012 25,484
Depreciation 3,341 3,661 10,099 11,504 Amortization 61
29 121 89
Total operating costs and expense 65,423
67,641 200,313 206,325
Income (loss) from operations 500 (168 ) (737 ) (3,623 )
Other
Income (Expense), Net Gains (losses) on equity method
investments, net (953 ) 723 17,206 1,818 Interest income (expense)
— 108 — (311 ) Other income, net 3,878 152
4,136 116 Total other income,
net 2,925 983 21,342
1,623
Income (Loss) from Continuing Operations
Before Income Taxes 3,425 815 20,605 (2,000 ) Income tax
provision 1,156 384 3,475
1,373
Income (Loss) from Continuing Operations
2,269 431 17,130
(3,373 ) Income (loss) from discontinued operations 643 87 3,766
(3,202 ) Gain related to the divestiture of discontinued
operations, net 17,134 4,746 17,109 4,746 Tax expense (benefit)
from discontinued operations 1,652 (5 )
1,698 (138 )
Gain from Discontinued Operations,
Net 16,125 4,838 19,177
1,682
Net Income (Loss) 18,394 5,269
36,307 (1,691 ) Net loss attributable to noncontrolling interests
(50 ) (52 ) (80 ) (171 )
Net Income
(Loss) Attributable to A. H. Belo Corporation $ 18,444 $
5,321 $ 36,387 $ (1,520 )
Per Share
Basis Basic and Diluted Continuing operations $ 0.10 $
0.02 $ 0.74 $ (0.15 ) Discontinued operations 0.74
0.22 0.87 0.07 Net income
(loss) attributable to A. H. Belo Corporation $ 0.84 $ 0.24
$ 1.61 $ (0.08 )
Weighted average shares
outstanding Basic 21,890,754 21,943,876 21,927,920 22,005,705
Diluted 21,991,716 22,069,511 22,039,248 22,005,705
A. H. Belo Corporation Condensed
Consolidated Balance Sheets
September 30, December 31, In thousands
(unaudited) 2014 2013 Assets
Current assets: Cash and cash equivalents $ 108,063 $ 82,193
Accounts receivable, net 25,095 32,270 Other current assets 15,204
11,246 Assets of discontinued operations 875 42,716
Total current assets 149,237 168,425 Property, plant and equipment,
net 66,825 74,863 Intangible assets, net 25,315 24,823 Other assets
11,506 11,107 Total assets $ 252,883 $ 279,218
Liabilities and Shareholders’ Equity Current liabilities:
Accounts payable $ 11,929 $ 13,717 Accrued expenses and other
current liabilities 16,972 14,275 Advance subscription payments
14,416 14,842 Liabilities of discontinued operations 995
11,538 Total current liabilities 44,312 54,372 Long-term
pension liabilities 37,500 50,082 Other liabilities 6,553 5,988
Total shareholders’ equity 164,518 168,776 Total
liabilities and shareholders’ equity $ 252,883 $ 279,218
A. H. Belo Corporation
Reconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA from Continuing Operations
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
In thousands (unaudited) 2014
2013 2014 2013 Net
Income (Loss) Attributable to A. H. Belo Corporation $ 18,444 $
5,321 $ 36,387 $ (1,520 ) Less: Gain from discontinued operations,
net 16,125 4,838 19,177 1,682 Plus: Net loss attributable to
noncontrolling interests (50 ) (52 ) (80 )
(171 ) Income (Loss) from Continuing Operations 2,269 431
17,130 (3,373 ) Depreciation and amortization 3,402 3,690 10,220
11,593 Interest expense (income) —
(108
)
— 311 Income tax provision 1,156 384
3,475 1,373
EBITDA from Continuing
Operations 6,827 4,397
30,825 9,904 Addback: Net investment-related
gains (2,603 ) — (20,148 ) —
Adjusted EBITDA from Continuing Operations $ 4,224
$ 4,397 $ 10,677 $ 9,904
The Company evaluates earnings before interest, taxes,
depreciation and amortization ( “EBITDA”) which is presented for
continuing operations by adjusting for discontinued operations and
losses attributable to noncontrolling interests. Adjusted EBITDA is
calculated, as applicable, by adding back to EBITDA non-cash
impairment expense and net investment-related gains and losses. The
Company adjusted EBITDA for an $18,479 gain on the sale of
apartments.com by Classified Ventures in the second quarter of 2014
and for $3,540 of income associated with an economic parity payment
related to its ownership of Classified Ventures in the third
quarter of 2014, offset by other-than-temporary impairments of $934
and $937 in the first and third quarters of 2014, respectively, for
the Company’s investment in Wanderful Media.
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 supplemental measures of the
Company’s financial performance, and for performance comparisons
against its peer group of companies. Adjusted EBITDA is also used
by management to evaluate the cash flows available for capital
spending, investing, pension contributions (required and
voluntary), dividends and other equity-related transactions.
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.
In previous periods, the Company added back pension expense in
the determination of Adjusted EBITDA. Management reassessed this
measurement and no longer excludes pension expense from Adjusted
EBITDA.
A. H. Belo CorporationAlison K. Engel, 214-977-2248Senior Vice
President/Chief Financial Officerwww.ahbelo.com
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