Business News

A. H. Belo Corporation Announces Second Quarter 2012 Net Income

Wednesday 01. August 2012 - A. H. Belo Corporation (NYSE: AHC) today reported net income of $0.01 per share for the second quarter of 2012 compared to a net loss of $0.32 per share in the second quarter of 2011. Second quarter 2012 net income includes $1.9 million of increased depreciation on certain production and technology assets.

Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization (“EBITDA”) with pension expense added back, was $11.6 million in the second quarter of 2012, an increase of 14 percent compared to the prior year period.
As of June 30, 2012, cash and cash equivalents were $41.2 million, and the Company had no borrowings under its bank credit facility.
Robert W. Decherd, chairman, president and Chief Executive Officer, said, “Second quarter total revenue decreased 5 percent compared to the prior year, an improvement of almost two percentage points in the rate of decline compared to the first quarter. Year-over-year rates of decline in advertising revenue improved in Dallas and Riverside during the second quarter as well. Second quarter preprint revenue increased in Dallas compared to the prior year quarter due to strength in the food and beverage, furniture and department store categories.
“While we think advertising revenue volatility may continue for the remainder of the year, we expect to achieve our prior full-year 2012 Adjusted EBITDA target of $37 million to $41 million with prudent expense management.”
Second Quarter Results
Total revenue was $109.1 million in the second quarter of 2012, a decrease of 5 percent compared to the prior year period.
Advertising revenue, including print and digital revenues, decreased 8 percent, with the smallest percentage decrease at The Press-Enterprise followed by The Dallas Morning News and The Providence Journal. Display advertising revenue decreased 15 percent to $21.5 million, and preprint revenue decreased 1 percent to $20.3 million. Classified revenue decreased 13 percent to $13.6 million. Digital revenue increased 1 percent to $8.8 million. When the impact of a revenue allocation discontinued in 2012 is excluded, digital revenue increased 8 percent. Digital automotive revenue increased 16 percent year-over-year.
In the third quarter of 2011, The Dallas Morning News discontinued the niche publication Quick. When Quick’s advertising revenue in the second quarter of 2011 is excluded, advertising revenue from ongoing niche publications increased 5 percent in the second quarter of 2012. Advertising revenue from niche publications is a component of the display, preprint, classified and digital revenue figures presented above.
Circulation revenue decreased 3 percent to $33.8 million in the second quarter of 2012 compared to the prior year period as single copy sales declined in Dallas in part due to the impact of the Dallas Mavericks’ championship in 2011. Excluding $0.9 million of circulation revenue resulting from The Providence Journal’s transition from a carrier to a distributor circulation model in 2011, total circulation revenue decreased 6 percent to $32.9 million.
Printing and distribution revenue increased 15 percent to $11.2 million in the second quarter of 2012 due primarily to the impact of new contracts at The Providence Journal and The Press-Enterprise.
Excluding the effect of pension expense in both periods, operating expense in the second quarter was $108.2 million, a 5 percent decrease compared to the prior year period as headcount related expenses, newsprint and advertising expenses all decreased. Second quarter severance and related expenses totaled $0.3 million.
The Company’s newsprint expense in the second quarter was $10.1 million, a decrease of 8 percent compared to the prior year period. Newsprint consumption dropped 4 percent to 16,206 metric tons. Compared to the prior year period, newsprint cost per metric ton dropped 4 percent, and the average purchase price per metric ton for newsprint decreased 1 percent.
Excluding the effect of pension expense in both periods, second quarter corporate and non-operating unit expenses were $5.3 million, a decrease of 9 percent compared to the prior year period.
Capital expenditures totaled $2.3 million in the second quarter. The Company anticipates full-year 2012 capital expenditures of approximately $10 million.
As of June 30, 2012, A. H. Belo had approximately 2,100 full-time equivalent employees, a decrease of approximately 9 percent compared to the prior year period.
Pension Plans
At the start of the second quarter, the Company voluntarily contributed $10 million to its defined benefit pension plans – reducing the Company’s 2012 required contribution by $1.2 million. Provided aggregate discount rates stabilize and investment performance meets or exceeds expectations, the Company does not anticipate making further voluntary contributions to its pension plans in 2012 or 2013.
Through the end of July, the Company has made required contributions totaling approximately $18 million in 2012. The Company expects to make this year’s final contribution of $4.6 million in October.
Real Estate
In June 2012, the Company sold a real estate property in Southern California, generating pre-tax net proceeds of approximately $2.4 million and a small gain.
In July 2012, The Providence Journal and the City of Providence entered into a consent judgment related to past tax assessments of The Providence Journal’s real estate by the City. Under this judgment, The Providence Journal received a $2.5 million credit which The Providence Journal intends to apply against future cash property tax payments.
Acquisition
On July 16, 2012, The Dallas Morning News announced its acquisition of Pegasus News, an online news and information business serving Dallas/Fort Worth, from PanLocal Media, LLC. Pegasus News extends The Morning News’ audience reach and strengthens The Morning News’ ability to provide the latest and most relevant information about places to visit, events, music and restaurants.
Dallas Initiatives
In February 2012, the Company announced its plan to invest approximately $3 million this year into 508 Digital, a new division at The Dallas Morning News that provides digital marketing solutions for underserved small and medium-sized businesses. Currently, the Company expects to invest almost $4 million into 508 Digital this year and projects revenue of up to $1.5 million. The difference in ramp-up speed does not affect the Company’s long-term financial expectations for 508 Digital.
The Company’s plan to invest approximately $4 million into brand advertising and targeted marketing campaigns at The Dallas Morning News during 2012 has also developed at a slower-than-expected pace. Current estimates are for The Morning News to spend $2.0 million to $2.5 million on these marketing campaigns during 2012.
Non-GAAP Financial Measures
Reconciliations of net income (loss) to EBITDA and Adjusted EBITDA are included as exhibits to this release.