Newspaper & Mailroom

A. H. Belo Corporation Announces Full-Year 2012 and Fourth Quarter Net Income

Wednesday 13. February 2013 - A. H. Belo Corporation (NYSE: AHC) today reported full-year 2012 net income of $0.01 per share compared to a net loss of $0.51 per share in 2011. In the fourth quarter of 2012, the Company's net income was $0.11 per share compared to a net income of $0.12 per share in the fourth quarter of 2011.

Fourth quarter 2012 net income includes non-cash expense of $2.4 million for the impairment of press-related assets in Southern California and $0.6 million of costs to cease printing certain commercial products.
Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization (“EBITDA”) with pension expense, impairment expense and net investment-related losses added back, was $41.8 million for the full-year 2012, reflecting our investments in new products and marketing. As a result of these investments Adjusted EBITDA decreased 12 percent compared to the prior year period. Adjusted EBITDA for the fourth quarter of 2012 was $13.6 million – a decrease of 39 percent compared to the prior year period.
As of December 31, 2012, cash and cash equivalents were $34.1 million, and the Company had no borrowings under its bank credit facility. On January 4, 2013, the Company terminated its credit agreement to provide greater financial and operating flexibility and eliminate substantial costs related to the credit agreement.
Robert W. Decherd, chairman, president and Chief Executive Officer, said, “Our 2012 operating performance reflects the Company’s success in fulfilling its financial principles, while continuing to focus on diversifying and stabilizing revenue streams, managing expenses and generating cash.
“For the first year since the spin-off from Belo Corp. in 2008, A. H. Belo was net income positive, an outstanding accomplishment during these transformational times. Thanks to prudent expense management, the Company delivered 2012 Adjusted EBITDA of $41.8 million, exceeding the high end of our previous guidance. We begin 2013 with a strong balance sheet and the flexibility to deploy cash in the long-term interests of the Company, its shareholders and employees.”
Full-Year Results
Total revenue was $440.0 million in 2012, a decrease of 5 percent compared to the prior year. Excluding the impact of advertising related to the Super Bowl in Dallas during the first quarter of 2011, total revenue decreased 4 percent compared to 2011. This rate of decline is the lowest year-over-year decline since the Company’s spin-off from Belo Corp. in 2008. Advertising revenue, including print and digital revenues, decreased 9 percent compared to the prior year.
The smallest percentage decrease came at The Press-Enterprise, followed by The Dallas Morning News and The Providence Journal
Display revenue decreased 15 percent to $84.6 million
Preprint revenue decreased 3 percent to $84.8 million
Classified revenue decreased 11 percent to $54.1 million
Digital revenue decreased 1 percent to $34.7 million. Excluding the impact of non-recurring revenue associated with a discontinued digital advertising platform and the Super Bowl in Dallas, digital revenue increased 8 percent
In the third quarter of 2011, The Dallas Morning News discontinued the niche publication Quick. When Quick’s advertising revenue in 2011 is excluded, advertising revenue from ongoing niche publications decreased 2 percent to $22.4 million.
Circulation revenue was $136.5 million in 2012, a decrease of 2 percent compared to 2011. Excluding $2.7 million of year-over-year increase in circulation revenue resulting from The Providence Journal’s transition from a carrier to a distributor circulation model at the end of 2011, total circulation revenue decreased 4 percent as single copy sales declined, primarily in Dallas due principally to the impact of the Dallas Mavericks’ NBA championship in 2011.
Printing and distribution revenue was $45.3 million in 2012, an increase of 16 percent compared to the prior year due primarily to expansion of commercial printing and distribution contracts in Providence and Riverside. However, 27 percent of this increase pertained to Southern California’s North County Times, whose owners ceased printing the publication with the Company in October 2012, well before the expiration of a multi-year contract. The Company is pursuing multiple remedies to this breach of contract.
Total consolidated operating expense was $440.7 million in 2012. Excluding the effect of pension and impairment expenses, operating expense in 2012 was $434.5 million, a 4 percent decrease compared to the prior year. This decrease was primarily driven by lower salaries and wages, newsprint, computer, repair and maintenance, and depreciation expenses.
In 2012, the Company’s newsprint expense was $40.4 million, a decrease of 5 percent for the full-year. Newsprint consumption decreased 4 percent to approximately 64,300 metric tons. Compared to the prior year, newsprint cost per metric ton decreased 1 percent, and the average purchase price per metric ton for newsprint was flat to prior year.
Excluding the effect of pension and impairment expenses in both periods, full-year corporate and non-operating unit expenses were $23.4 million, an 11 percent decrease, as salaries and wages, computer and communication expenses all decreased.
The Company’s full-year severance and related expenses totaled $1.6 million.
As of December 31, 2012, A. H. Belo had approximately 2,000 full-time equivalent employees, a decrease of approximately 4 percent compared to the prior year.
Fourth Quarter Results
Total revenue was $117.2 million in the fourth quarter of 2012, a decrease of 6 percent compared to the prior year period. Advertising revenue, including print and digital revenues, decreased 10 percent compared to the prior year period.
The smallest percentage decrease came at The Press-Enterprise, followed by The Dallas Morning News and The Providence Journal
Display revenue decreased 19 percent to $23.4 million
Preprint revenue decreased 3 percent to $25.9 million
Classified revenue decreased 13 percent to $13.1 million
Digital revenue increased 4 percent to $9.4 million. When the impact of non-recurring revenue associated with a discontinued digital advertising platform is excluded, digital revenue increased 15 percent, primarily due to increased automotive digital revenue at The Dallas Morning News and marketing services revenue associated with 508 Digital
Advertising revenue from niche publications, which is a component of the display, preprint, classified and digital revenues reported above, decreased 16 percent to $6.0 million, due primarily to weakness in department stores, financial and healthcare categories.
Circulation revenue was $33.9 million in the fourth quarter, a decrease of 4 percent compared to the prior year period. This decrease is primarily driven by a single copy sales decline at The Dallas Morning News.
Printing and distribution revenue was $11.5 million in the fourth quarter, an increase of 14 percent compared to the prior year period due primarily to the expansion of printing and distribution contracts at The Providence Journal.
Total consolidated operating expense in the fourth quarter was $115.0 million. Excluding the effect of pension and impairment expenses in both periods, operating expense in the fourth quarter was $111.7 million, flat to prior year period.
The Company’s newsprint expense in the fourth quarter was $10.5 million, a decrease of 3 percent compared to the prior year period. Newsprint consumption dropped 3 percent to approximately 16,700 metric tons. Compared to the prior year period, newsprint cost per metric ton was flat, and the average purchase price per metric ton for newsprint increased 2 percent.
Excluding the effect of pension and impairment expenses in both periods, fourth quarter corporate and non-operating unit expenses were $5.0 million in the fourth quarter, a 24 percent decrease, as salaries and wages, computer and depreciation expenses all declined.
Fourth quarter severance and related expenses totaled $0.8 million.
Pension Plans
The Company continued its efforts to address pension plan underfunding and reduce the cost of operating the Company’s frozen plans. On October 3, 2012, Company-sponsored pension plans offered buyouts to 1,433 participants. A total of 889 participants accepted the offer which is expected to reduce the projected benefit obligation by $14.5 million. As of December 31, 2012, approximately 93 percent of plans participants accepting the offer were paid a total of $9.8 million from the plans’ assets.
At the end of 2012, A. H. Belo recorded a $10.6 million charge to its accumulated other comprehensive loss account on the balance sheet due to a decline in the composite discount rate of the Company’s defined benefit pension plans. On December 31, 2012, the composite discount rate for the plans was 3.7 percent, a 50 basis point decrease from December 31, 2011.
As a result of favorable investment performance and other factors, the pension plans had a net underfunded balance of $122.8 million as of December 31, 2012 versus $146.0 million at the end of 2011.
Investments
The Company received a $2.4 million dividend in December 2012 from its equity interest in Classified Ventures, owner of Cars.com and Apartments.com.
In December 2012, DMNmedia, the marketing solutions group of The Dallas Morning News, Inc., announced the acquisition of the assets of DG Publishing, Inc., a magazine publisher of high-end resource guides including Design Guide Texas and The Texas Wedding Guide. The purchase further strengthens The Morning News’ media portfolio in the luxury magazine segment and will complement FD Luxe, a premium lifestyle magazine targeting affluent consumers in North Texas.
In January 2013, the Company sold a real estate property in Southern California, generating a gain and pre-tax net proceeds of approximately $0.2 million.
Non-GAAP Financial Measures
Reconciliations of net income (loss) to EBITDA and Adjusted EBITDA are included as exhibits to this release.