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A. H. Belo Corporation Announces Dividend, Amended Credit Facility and First Quarter 2011 Financial Results

Tuesday 03. May 2011 - A. H. Belo Corporation (NYSE: AHC) announced today that the Company’s Board of Directors declared a quarterly cash dividend of $0.06 per share, payable on June 3, 2011 to shareholders of record at the close of business on May 16, 2011.

The Board authorized the dividend in conjunction with the Company and its banks amending the Company’s revolving credit facility effective May 2, 2011. The amendment permits dividends without restriction as long as there is no outstanding balance on the facility.
The Company also reported a net loss of $6.7 million, or $0.31 per share, for the first quarter of 2011 compared to a net loss of $9.1 million, or $0.44 per share, in the first quarter of 2010. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $2.8 million, an increase of $0.5 million or 22.7 percent compared to the first quarter of 2010. First quarter 2011 EBITDA includes a $0.9 million bonus accrual; a $0.7 million gain on the sale of Ancestry.com Inc. (“Ancestry”) stock; and $0.6 million of sales tax recoveries.
When pension charges are added back to EBITDA (“Adjusted EBITDA”) in both periods, the resulting Adjusted EBITDA in the first quarter was $4.5 million, a decrease of $3.1 million compared to the prior year. Higher newsprint and marketing expenses offset decreased pension expense related to the Company’s move from multi-employer to single-employer defined benefit accounting effective January 1, 2011.
Robert W. Decherd, chairman, president and Chief Executive Officer, said, “The amended credit facility enables us to execute the next step in our financial strategy – reinstating a quarterly dividend. The dividend rate will be $0.06 per share or $0.24 per share on an annualized basis; our goal is to hold this rate for the foreseeable future.
“First quarter total revenue decreased 3.1 percent compared to 2010. This decline is smaller than the decline in the fourth quarter of 2010 and the smallest decline since the Company’s spin-off in 2008. The Dallas Morning News’ total revenue decreased only 0.4 percent, and its digital revenue increased 14.9 percent. We anticipate full-year 2011 Adjusted EBITDA will be in the $45 to $50 million range, and this range assumes no gains from real estate dispositions. The Company’s 2010 Adjusted EBITDA was $56.5 million and included $7.1 million of real estate gains.”
As of March 31, 2011, the Company had approximately $52 million of cash and cash equivalents, had no borrowings outstanding under its bank credit facility, and remained in compliance with bank covenants. During the first quarter, the Company made required contributions of $14.0 million to defined benefit pension and pension transition supplement plans. This $14.0 million consists of $8.7 million related to the Company’s defined benefit pension plans and $5.3 million related to the Company’s pension transition supplement plan. The Company’s former parent, Belo Corp., applied $3.4 million that it held on behalf of the Company towards the $8.7 million, and the Company funded the remaining $10.6 million for the defined benefit pension and pension transition supplement plans. The Company also made the previously announced additional contribution of $30 million to its defined benefit pension plans.
Dividends and Amended Revolving Credit Facility
Under the dividend policy approved by the Board of Directors on May 2, 2011, the Company intends to pay a regular quarterly cash dividend of $0.06 per share, or $0.24 per share on an annualized basis.
The first quarterly dividend of $0.06 per share will be paid on June 3, 2011 to shareholders of record at the close of business on May 16, 2011. The Company anticipates three quarterly dividends of $0.06 per share in calendar year 2011. As is customary at dividend-paying companies, the two remaining anticipated dividends for 2011 and all future dividends are each subject to Board approval.
In conjunction with the announced dividend policy, the Company and its banks amended the Company’s revolving credit facility effective May 2, 2011. The amendment permits dividends and share repurchases without restriction as long as there is no outstanding balance on the facility. The amendment also eliminates restrictions on capital expenditures, reduces administrative requirements, and extends the facility’s maturity date from September 30, 2012 to September 30, 2014. If borrowing capacity under the amended facility is less than $7.5 million, a fixed charge coverage ratio of 1:1 will apply. Other usual and customary covenants were carried forward.
First Quarter Results
Total revenue was $112.2 million in the first quarter of 2011, a decrease of 3.1 percent compared to the prior year. Advertising revenue, including print and digital revenues, decreased 5.9 percent, with the smallest decrease at The Dallas Morning News followed by The Press-Enterprise and The Providence Journal. Display advertising revenue decreased 11.1 percent to $24.9 million, and preprint revenue increased 0.3 percent to $20.1 million. Classified revenue decreased 10.5 percent to $14.1 million. Digital revenue was $8.8 million, an increase of 5.4 percent. Advertising revenue from niche publications, which is included in the display, preprint, classified and digital revenue figures above, increased 17.6 percent to $5.3 million as Briefing, The Morning News’ free, home-delivered condensed print news product, increased advertising revenue 32.2 percent to $3.3 million. Circulation revenue decreased 1.5 percent to $35.1 million. Printing and distribution revenue increased 15.0 percent to $9.2 million due primarily to increases in distribution and printing revenues in Providence and Riverside.
Total consolidated operating expense in the first quarter was $119.5 million. Excluding the effect of pension expense in both periods, operating expense in the first quarter was $117.9 million, a 0.7 percent decrease compared to the prior year.
The Company’s newsprint expense in the first quarter was $10.8 million, an increase of 27.4 percent compared to the prior year. Newsprint consumption increased 4.9 percent to 16,935 metric tons due to increased demand for commercial printing services and advertising in Briefing and The Press-Enterprise. Newsprint cost per metric ton increased 21.4 percent. The average purchase price per metric ton for newsprint increased 19.4 percent.
Corporate and non-operating unit expenses in the first quarter, net of costs allocated to operating units, were $8.4 million, an increase of 1.4 percent compared to the prior year. Excluding the effect of pension expense in both periods, corporate and non-operating unit expenses were $8.3 million, a 5.5 percent increase, as lower salaries and wages were offset by increases in legal and depreciation expenses.
Other Items
In September 2010, Ancestry announced a definitive agreement to acquire iArchives, Inc. (“iArchives”). In October 2010, Ancestry completed the acquisition. A. H. Belo subsequently received Ancestry stock with usual and customary sales restrictions in exchange for the Company’s iArchives stock. The Company sold most of its Ancestry shares in January 2011 and generated pre-tax proceeds of $0.7 million.
In March 2011, the Company received an anticipated $3.5 million tax refund related to A. H. Belo and Belo Corp.’s prior agreement, pursuant to their Tax Matters Agreement, for Belo Corp. to carry back A. H. Belo’s 2009 taxable net operating loss to a previous tax year.
As of March 31, 2011, A. H. Belo had approximately 2,350 full-time equivalents, a decrease of 5 percent compared to the prior year.