Business News
Newspaper Publisher A. H. Belo Corporation Reports Fourth Quarter and Full Year 2008 Financial Results
Wednesday 18. February 2009 - Newspaper publisher A. H. Belo Corporation (NYSE:AHC) reported fourth quarter and full year 2008 revenues of $160.0 million and $637.3 million, respectively, and net losses per share of ($1.62) and ($3.04) for the fourth quarter and full year 2008 respectively.
The fourth quarter results include a charge of $1.5 million or $0.05 per share related to a reduction-in-force; $14.1 million or $0.48 per share in non-cash goodwill impairment at The Press-Enterprise; and $14.0 million or $0.47 per share in non-cash future pension obligations. Additionally, full year results include charges of $11.1 million or $0.37 per share for the Company’s voluntary severance program in the third quarter, and $4.5 million or $0.15 per share related to the impairment of a 26-year-old printing press. The voluntary severance program and reduction-in-force are part of the Company’s ongoing expense reduction initiatives.
The Company generated $5.9 million and $6.1 million in consolidated EBITDA for the fourth quarter and full year 2008, respectively, excluding the $14.0 million non-cash pension obligation. The aggregate newspaper EBITDA margin excluding all special charges mentioned above was 13 percent in the fourth quarter and 10 percent for the full year. EBITDA margins in the fourth quarter and for the full year 2008 were highest at The Providence Journal, followed by The Dallas Morning News.
The Company’s borrowings of $10 million as of December 31, 2008 were unchanged from the third quarter, when the bank line was first utilized to fund costs associated with the voluntary severance program. The Company announced on January 30, 2009 that it amended its credit facility to become a $50 million asset-based revolving credit facility secured by all personal property assets of the Company and its subsidiaries and certain specified real property.
Robert W. Decherd, chairman, president and Chief Executive Officer, said, “A. H. Belo and all advertising-based businesses faced an unexpectedly difficult business environment in 2008. By realigning our expense structure to meet rapidly changing revenue conditions, A. H. Belo was able to stabilize EBITDA. The combined efforts of our corporate management team, operating company leadership, and every A. H. Belo employee enabled the Company to reduce on-going cash operating expenses by $45 million in 2008 versus 2007, despite significant increases in newsprint prices. While the challenges facing the newspaper industry are well chronicled, we believe that A. H. Belo’s distinguishing characteristics, which we have described in the months before and since the spin-off, are significant attributes as the Company moves forward.”
Fourth Quarter Highlights
Total revenue decreased 15 percent in the fourth quarter versus the prior year.
Advertising revenue, including print and Internet revenue, was down 22 percent, driven primarily by declines in classified revenue at The Dallas Morning News. AHC’s Internet revenues accounted for 6.9 percent of total revenues in the quarter. Internet revenues were $11.1 million, 16 percent below the same period last year.
The Company continues its ongoing efforts to focus on quality and value-added circulation for its advertisers. In the fourth quarter, circulation revenue rose 12 percent primarily due to increased prices for The Dallas Morning News.
Despite the $1.5 million cost of the reduction-in-force and the one-time $14.0 million non-cash pension obligation, AHC’s total consolidated operating expenses in the fourth quarter were $167.5 million or 0.7 percent less than the same period last year. This decrease was driven by declines in direct compensation and outside services. Newsprint expense increased slightly in the fourth quarter.
Full Year Highlights
Total revenue declined 14 percent for the full year 2008 versus the prior year.
Advertising revenue, including print and Internet revenue, decreased 19 percent, driven primarily by declines in classified revenue at The Dallas Morning News. AHC’s Internet revenues accounted for 7.4 percent of total revenues for the year. Internet revenues were $47 million, 12 percent below the prior year.
In 2008, the Company focused on strengthening the brand equity of its print and online publications and driving quality circulation Company-wide. AHC’s circulation revenue increased 9.5 percent versus the prior year.
For the full year, expense reduction initiatives resulted in a 2.7 percent or $18 million decrease in A. H. Belo’s operating expenses, despite $12.6 million in voluntary severance and reduction-in-force costs and $14.0 million for the pension charge. Expenses at the operating unit level declined $6.9 million or 1.1 percent in 2008 versus the prior year in spite of these charges. Even though newsprint prices increased during 2008, newsprint expense declined 7.1 percent primarily as a result of reductions in page volume.
AHC’s voluntary severance program and reduction-in-force in 2008 will result in annualized savings of approximately $29 million. As of December 31, 2008, A. H. Belo had approximately 2,950 full-time and 400 part-time employees.
Corporate & Non-Operating Company Results
Corporate and non-operating expenses declined by $4.3 million and $11 million, respectively, for the fourth quarter and full year 2008 versus the prior year, primarily due to a decline in outside services. 2007 corporate and non-operating expenses are based on an estimate of allocated amounts since AHC did not become a separate public company until February 8, 2008 when it was spun off from Belo Corp. AHC’s 2007 historical financial information reflects allocations for services historically provided by Belo Corp., and these allocated costs may be different from the actual costs AHC will incur for these services in the future as a separate public company, including with respect to actual services provided to AHC by Belo Corp. under a services agreement and other agreements. In some instances, the costs incurred for these services as a separate public company may be higher than the share of total Belo Corp. expenses allocated to AHC historically.
Non-GAAP Financial Measures
Reconciliations of consolidated and newspaper EBITDA to net loss are included as exhibits to this release.