A. H. Belo Corporation (NYSE: AHC) today reported net income for
the second quarter of 2014, highlighted by an increase in total
operating revenue of 0.2 percent, driven by continued growth in
printing and marketing services revenue.
Jim Moroney, chairman, president and Chief Executive Officer,
said, “Our second quarter 2014 operating performance reflects the
Company’s success in leveraging our core competencies in order to
diversify and grow revenue streams, while continuing to focus on
managing expenses.”
“For the first time since the spin-off from our former parent
company in 2008, total revenue reflected year-over-year quarterly
growth, an outstanding accomplishment for the Company. This
improvement was driven by continued growth in marketing services
revenue and increased printing revenues.”
“We are also pleased to have agreed to sell The Providence
Journal newspaper operations to New Media Investment Group, which
represents an important additional step in executing our
Dallas-based strategy.”
Due to the pending sale of the newspaper operations in
Providence, Rhode Island, The Providence Journal
newspaper operations are now 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 operations.
Fully diluted net income from continuing operations was $0.85
per share, an improvement of $0.78 per share compared to the second
quarter of 2013. Second quarter 2014 net income includes an $18.5
million net investment-related gain from the sale of Apartments.com
by Classified Ventures, of which A. H. Belo is a 3.3 percent
owner.
Adjusted EBITDA, or earnings before interest, taxes,
depreciation and amortization (“EBITDA”) from continuing operations
excluding net investment-related gains, was $6.0 million in the
second quarter of 2014, which was flat in the second quarter of
2013.
As of June 30, 2014, cash and cash equivalents were $59.8
million, and the Company had no debt.
Second Quarter Results from Continuing
Operations
Total revenue was $69.3 million in the second quarter of 2014,
an increase of 0.2 percent compared to the prior year period. A
decline in advertising and marketing services revenue was offset by
an increase in printing revenue.
Revenue from advertising and marketing services, including print
and digital revenues, decreased 4.7 percent. Digital revenue, which
comprised 19 percent of advertising and marketing services revenue,
increased 4 percent over the prior year quarter primarily due to
continued growth in marketing services revenue associated with 508
Digital and Speakeasy. Increases in digital revenue were offset by
declines in display, preprint and classified advertising revenues
which decreased 7 percent, 5 percent and 9 percent,
respectively.
Advertising revenue from niche publications, which is a
component of the display, preprint, classified and digital revenues
reported above, was flat in the second quarter of 2014.
Circulation revenue remained flat at $21.2 million in the second
quarter of 2014.
Printing and distribution revenue increased 38 percent to $7.8
million in the second quarter of 2014 due primarily to the impact
of printing the Fort Worth Star-Telegram and additional printing of
local community newspapers.
Total operating expense in the second quarter was $66.9 million,
a 1.3 percent decrease compared to the prior year period as
employee compensation and benefits, newsprint and depreciation
expenses all decreased.
The Company’s newsprint expense in the second quarter was $5.1
million, a decrease of 11 percent compared to the prior year
period. Newsprint consumption dropped 15 percent to approximately
6,100 metric tons. Compared to the prior year period, newsprint
cost per metric ton and the average purchase price per metric ton
for newsprint decreased 2 percent and 1 percent, respectively.
Corporate and non-operating unit expense in the second quarter
was $3.9 million, a decrease of 26 percent compared to the
prior year period as employee related expenses and depreciation
expense decreased.
As of June 30, 2014, A. H. Belo had approximately 1,500
full-time equivalent employees, a decrease of approximately 25
percent compared to the prior year period, primarily due to the
sale of The Press-Enterprise in 2013.
Pension Plans
In the second quarter of 2014, the Company made required
contributions of $2.2 million to its pension plans. In July, the
Company accelerated payment of its remaining 2014 required
contributions to its pension plans and paid $5.8 million. No
further pension contributions will be made in 2014.
Real Estate Holdings
In July 2014, the Company sold its last 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 an
estimated gain of $0.3 million.
In June 2014, the Company amended an agreement with a
third-party related to the sale of 97 acres of undeveloped land in
southern Dallas, Texas. Net sales proceeds of $1.8 million are
expected to be received in the third quarter of 2014, upon the
closing of the transaction, generating an estimated gain of $0.6
million.
Other
As previously announced, on July 22, 2014, The Providence
Journal Company, a wholly-owned subsidiary of A. H. Belo
Corporation, entered into an Asset Purchase Agreement with LMG
Rhode Island Holdings, Inc. ("LMG"), a subsidiary of New Media
Investment Group Inc., for the (i) sale of substantially all of the
assets comprising the newspaper operations of The Providence
Journal and related real property located in Providence, Rhode
Island, and (ii) assumption of certain liabilities by LMG
(collectively, the “Sale”), for $46 million in cash (the “Purchase
Price”). The Purchase Price is subject to adjustment either upward
or downward based upon the net current assets being sold at the
closing of the Sale. The transaction is expected to close in the
third quarter of 2014, subject to customary closing conditions
including receipt of certain third-party consents.
Upon completion of the Sale, the Company will continue to hold
and market for sale certain land and buildings in Providence, Rhode
Island. The Company will also retain the obligation for the A. H.
Belo Pension Plan II, which provides benefits to employees of The
Providence Journal Company.
In July 2014, the Company settled a lawsuit regarding a dispute
over a commercial printing contract related to its former printing
operation in southern California. Under the settlement agreement,
the Company will receive two cash payments totaling $0.5 million,
of which the first payment of $0.25 million was received in July
2014.
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 Tuesday, July 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
1-800-230-1059 (USA) or 651-224-7497 (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 July 29 until 11:59 p.m. CDT
on August 5, 2014. The access code for the replay is 330585.
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 Ended June 30,
Six Months Ended June 30, In thousands, except
share and per share amounts (unaudited)
2014 2013
2014 2013 Net
Operating Revenue Advertising and marketing services $ 40,251 $
42,223 $ 77,977 $ 81,886 Circulation 21,227 21,257 42,239 42,237
Printing and distribution 7,783 5,643
13,437 11,106 Total net operating
revenue 69,261 69,123 133,653 135,229
Operating Costs and
Expense Employee compensation and benefits 25,722 26,702 53,886
56,538 Other production, distribution and operating costs 29,640
28,436 58,084 57,129 Newsprint, ink and other supplies 8,114 8,592
16,102 17,114 Depreciation 3,348 3,964 6,758 7,843 Amortization
30 30 60
60 Total operating costs and expense 66,854
67,724 134,890 138,684
Income (Loss) from operations 2,407 1,399 (1,237 ) (3,455 )
Other Income (Expense), Net Gains on equity method
investments, net 18,567 546 18,159 1,095 Interest expense — (8 ) —
(419 ) Other income (loss), net 141 68
258 (36 ) Total other income, net
18,708 606 18,417 640
Income (Loss) from Continuing Operations Before Income
Taxes 21,115 2,005 17,180 (2,815 ) Income tax provision
1,428 500 2,319 989
Income (Loss) from Continuing Operations
19,687 1,505 14,861
(3,804 ) Income (loss) from discontinued operations 2,146 (452 )
3,123 (3,289 ) Gain (loss) related to the divestiture of
discontinued operations, net 153 — (25 ) — Tax expense (benefit)
from discontinued operations 30 (63 )
46 (133 )
Gain (Loss) from Discontinued
Operations, Net 2,269 (389 ) 3,052
(3,156 )
Net Income (Loss) 21,956 1,116 17,913
(6,960 ) Net loss attributable to noncontrolling interests
(24 ) (65 ) (30 ) (119 )
Net Income (Loss)
Attributable to A. H. Belo Corporation $ 21,980 $ 1,181
$ 17,943 $ (6,841 )
Per Share Basis
Basic Continuing operations $ 0.86 $ 0.07 $ 0.64 $ (0.17 )
Discontinued operations 0.10 (0.02 )
0.14 (0.14 ) Net income (loss) attributable to A. H.
Belo Corporation $ 0.96 $ 0.05 $ 0.78 $ (0.31
)
Diluted Continuing operations $ 0.85 $ 0.07 $ 0.64
$ (0.17 ) Discontinued operations 0.10 (0.02 )
0.14 (0.14 ) Net income (loss) attributable to
A. H. Belo Corporation $ 0.95 $ 0.05 $ 0.78 $
(0.31 )
Weighted average shares outstanding Basic
22,014,125 22,041,414 21,946,256 22,037,132 Diluted 22,121,695
22,135,162 22,064,339 22,037,132
A. H. Belo
Corporation Condensed Consolidated Balance Sheets
June 30,
December 31, In thousands (unaudited)
2014 2013 Assets Current assets: Cash and cash
equivalents $ 59,754 $ 82,193 Accounts receivable, net 28,399
32,270 Other current assets 18,796 11,246 Assets of discontinued
operations 36,658 42,716 Total current assets 143,607
168,425 Property, plant and equipment, net 68,308 74,863 Intangible
assets, net 25,136 24,823 Other assets 12,839 11,107
Total assets $ 249,890 $ 279,218
Liabilities and Shareholders’
Equity Current liabilities: Accounts payable $ 12,575 $ 13,717
Accrued expenses 13,064 14,275 Advance subscription payments 14,555
14,842 Liabilities of discontinued operations 9,489
11,538 Total current liabilities 49,683 54,372 Long-term pension
liabilities 44,187 50,082 Other liabilities 6,831 5,988 Total
shareholders’ equity 149,189 168,776 Total
liabilities and shareholders’ equity $ 249,890 $ 279,218
A. H. Belo Corporation Reconciliation of Net Loss
to EBITDA and Adjusted EBITDA from Continuing Operations
Three Months Ended June
30, Six Months Ended June 30, In
thousands (unaudited) 2014
2013 2014
2013 Net Loss Attributable to A. H. Belo
Corporation $ 21,980 $ 1,181 $ 17,943 $ (6,841 ) Less: Gain
(loss) from discontinued operations, net 2,269 (389 ) 3,052 (3,156
) Plus: Net loss attributable to noncontrolling interests
(24 ) (65 ) (30 ) (119 ) Income (Loss) from
Continuing Operations 19,687 1,505 14,861 (3,804 ) Depreciation and
amortization 3,378 3,994 6,818 7,903 Interest expense — 8 — 419
Income tax provision 1,428 500
2,319 989
EBITDA from Continuing
Operations 24,493 6,007
23,998 5,507 Addback: Net investment-related
gains (18,532 ) — (17,598 ) —
Adjusted EBITDA from Continuing Operations $ 5,961
$ 6,007 $ 6,400 $ 5,507
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 losses.
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 Officer
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