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AHC > SEC Filings for AHC > Form 10-Q on 30-Jul-2013All Recent SEC Filings

Show all filings for A. H. BELO CORP | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for A. H. BELO CORP


30-Jul-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with the Company's Condensed Consolidated Financial Statements and related Notes filed as part of this report. All dollar amounts are presented in thousands, except per share amounts, unless the context requires otherwise.
OVERVIEW
A. H. Belo Corporation ("A. H. Belo" or the "Company"), 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 (www.dallasnews.com), Texas' leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.providencejournal.com), the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press?Enterprise (www.pe.com), serving the Inland Southern California region and winner of one Pulitzer Prize; and the Denton Record?Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, approximately 40 miles north of Dallas. The Company's newspapers also publish various niche publications targeting specific audiences and own and operate commercial printing, distribution and direct mail service businesses. A. H. Belo offers digital marketing solutions through 508 Digital and Your Speakeasy, LLC and also owns investments in Classified Ventures, LLC, owner of Cars.com, and Wanderful Media, LLC, owner of Find&Save®.
A. H. Belo intends for the discussion of its results of operations and financial condition that follows to provide information that will assist in understanding its financial statements, the changes in certain key items in those statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect its financial statements.
Overview
During 2013, the Company was influenced by several significant transactions and events. In the first quarter, the Company voluntarily terminated its Credit Agreement, which had not been drawn upon since 2009. This agreement contained various terms restricting the Company's ability to acquire investments, divest assets, make voluntary pension contributions and return capital to shareholders as described in Liquidity and Capital Resources below. Additionally, the Company executed various sales agreements for real estate and other assets that were not fully utilized in the Company's operations, including a five-story office building in Riverside, California which served as the administrative headquarters for The Press?Enterprise, a public parking lot in downtown Providence, Rhode Island, and various equipment and other assets. These strategic sales transactions are all expected to be completed in third quarter of 2013, providing net sales proceeds approximating $29,500 and resulting in gains totaling approximately $4,500 to $5,500. The net carrying value of the assets of $24,467 was transferred from non-current assets to Assets held for sale as of June 30, 2013. As a result of the sale of its administrative headquarters, The Press?Enterprise executed a five-year lease, commencing December 2013, for office space in Riverside, California with two five-year renewal options. See Note 12 - Subsequent Events to the condensed consolidated financial statements.
Also in June 2013, The Providence Journal executed an agreement allowing it to effectively assume the distribution of various national and regional newspapers and magazines previously managed by a third-party distributor. The agreement also allows the settlement of claims and disputes between The Providence Journal and the third-party distributor. Under the agreement, The Providence Journal will pay the third-party distributor approximately $1,330 over a two-year period for the acquisition of business and settlement of claims. The Company anticipates profits from the distribution contracts to well exceed the amounts paid under the agreement. The Company allocated approximately one-half of the cost of the agreement as a loss on the settlement of claims. As the settlement amounts were determinable and probable, the Company recorded a loss of $665 in the second quarter of 2013. The remaining amounts to be paid will be treated as contract acquisition costs and will be amortized to earnings over three years starting in July 2013, consistent with the contract terms between The Providence Journal and the newspaper and magazine publishers.

PAGE 14 A. H. Belo Corporation Second Quarter 2013 on Form 10-Q


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In June 2013, the Company announced Robert W. Decherd will retire as the Company's Chairman, President and Chief Executive Officer effective September 11, 2013. Mr. Decherd will be succeeded by James M. ("Jim") Moroney
III. Mr. Moroney served as the Company's Executive Vice-President since December 2007 and as Publisher and Chief Executive Officer of The Dallas Morning News since June 2001. Mr. Decherd will become Vice Chairman of the Board of Directors and continue to serve as a member of the Board of Directors and Mr. Moroney will be elected to the Board of Directors, and to be Chairman of the Board at its September 2013 meeting. Second quarter and year-to-date results for 2013 compared to 2012 reflect a decrease in total revenue of 4.2 percent and 4.8 percent, respectively, due to a decline in all categories. Advertising and marketing services revenue decreased by 3.7 percent and 3.8 percent, respectively, for the three and six months ended June 30, 2013, as compared to 2012. These rates of revenue loss represent the lowest year-over-year quarterly declines in advertising and marketing services revenue since the Company's spin-off from its former parent company in 2008. The improvement of this performance measurement was primarily due to marketing services revenue recorded by The Dallas Morning News for 508 Digital and Speakeasy, which commenced operations in the second and third quarters of 2012, respectively, and due to continued growth in the newspaper's internet classified advertising. The Company's second quarter and year-to-date circulation revenue for 2013 compared to 2012 decreased by 2.3 percent and 4.8 percent, respectively, due to a continued volume decline in home delivery and single copy sales at all newspapers. Printing and distribution revenue was also down by 13.4 percent and 10.3 percent, respectively, for the same periods, primarily due to The Press?Enterprise no longer printing certain commercial products that were unprofitable. The Company continues to monitor and control its operating costs according to changes in revenue. After adjusting for costs associated with the Company's marketing services initiatives for the second quarter and year-to-date, labor related costs declined by 5.2 percent and 5.0 percent, respectively, and non-labor related operating costs declined by 7.5 percent and 6.3 percent, respectively. In addition to the above, the following significant transactions and events affected A. H. Belo's results of operations and financial position during the second quarter of 2013:

•         Required contributions of $1,940 were made to the A. H. Belo Pension
          Plans in the second quarter of 2013, reflecting a decrease from the
          $18,037 of required and voluntary contributions made in the second
          quarter of 2012.


•         The Company completed funding of contributions to the A. H. Belo
          Pension Transition Supplement Plan (the "PTS Plan"). A contribution of
          $1,090 related to the final obligation was paid in the second quarter
          of 2013.


•         In May 2013, a dividend of $0.06 per share, or $1,368, was recorded and
          paid to shareholders of record and to holders of RSU awards as of
          May 17, 2013. The Company also announced in May 2013 an increased
          dividend of $0.08 per share payable on September 6, 2013, to
          shareholders of record and to holders of outstanding RSU awards on
          August 16, 2013.


•         The Company purchased 121,982 of its Series A common shares during the
          quarter through open market transactions for $767.

A. H. Belo Corporation Second Quarter 2013 on Form 10-Q PAGE 15


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