XNYS:AHC A H Belo Corp Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

       For the quarterly period ended: March 31, 2012

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-33741

A. H. Belo Corporation

(Exact name of registrant as specified in its charter)

 

  Delaware   38-3765318
  (State or other jurisdiction of   (I.R.S. employer
  incorporation or organization)   identification no.)
   
  P. O. Box 224866  
  Dallas, Texas   75222-4866
  (Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (214) 977-8200

Former name, former address and former fiscal year, if changed since last report.

None

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

    Large accelerated filer ¨   Accelerated filer þ   Non-accelerated filer ¨   Smaller reporting company ¨
    (Do not check if a smaller reporting company)  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at April 26, 2012

Common Stock, $.01 par value

  21,842,529*

 

*

Consisting of 19,440,808 shares of Series A Common Stock and 2,401,721 shares of Series B Common Stock.

 

 

 


Table of Contents

A. H. BELO CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

             Page  

PART I

 

 

FINANCIAL INFORMATION

  

Item 1.

   

Financial Statements

     3   

Item 2.

   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     15   

Item 3.

   

Quantitative and Qualitative Disclosures About Market Risk

     22   

Item 4.

   

Controls and Procedures

     22   

PART II

 

 

OTHER INFORMATION

  

Item 1.

   

Legal Proceedings

     23   

Item 1A.

   

Risk Factors

     23   

Item 2.

   

Unregistered Sales of Equity Securities and Use of Proceeds

     23   

Item 3.

   

Defaults Upon Senior Securities

     23   

Item 4.

   

Mine Safety Disclosures

     23   

Item 5.

   

Other Information

     23   

Item 6.

   

Exhibits

     24   

Signatures

     27   


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements

A. H. Belo Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

 

December 31, 2011 December 31, 2011
     Three Months Ended March 31,  
In thousands, except per share amounts (unaudited)    2012     2011  

Net Operating Revenues

    

Advertising

   $ 60,077      $ 67,936   

Circulation

     34,655        35,052   

Printing and distribution

     10,102        9,187   
  

 

 

   

 

 

 

Total net operating revenues

     104,834        112,175   

Operating Costs and Expenses

    

Salaries, wages and employee benefits

     46,005        50,495   

Other production, distribution and operating costs

     40,696        45,652   

Newsprint, ink and other supplies

     13,972        14,502   

Depreciation

     7,113        7,583   

Amortization

     1,310        1,310   
  

 

 

   

 

 

 

Total operating costs and expenses

     109,096        119,542   
  

 

 

   

 

 

 

Loss from operations

     (4,262     (7,367

Other (Expense) Income, Net

    

Interest expense

     (136     (207

Other (expense) income, net

     907        1,267   
  

 

 

   

 

 

 

Total other (expense) income, net

     771        1,060   
  

 

 

   

 

 

 

Loss before income taxes

     (3,491     (6,307

Income tax expense

     402        420   
  

 

 

   

 

 

 

Net loss

   $ (3,893   $ (6,727
  

 

 

   

 

 

 

Net loss per share:

    

Basic and diluted

   $ (0.18   $ (0.31

Weighted average shares outstanding:

    

Basic and diluted

     21,688        21,383   

See accompanying Notes to Condensed Consolidated Financial Statements.

 

3


Table of Contents

A. H. Belo Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

 

December 31, 2011 December 31, 2011
    Three Months Ended March 31,  
In thousands (unaudited)   2012     2011  

Net loss

  $ (3,893   $ (6,727

Other comprehensive loss, net of tax

   

Amortization of actuarial gains/losses of defined benefit pension plans

    175        -     

Amortization of curtailment and other gains/losses of other post-retirement benefit plans

    (165     (154
 

 

 

   

 

 

 

Other comprehensive income (loss)

    10        (154
 

 

 

   

 

 

 

Total comprehensive loss

  $ (3,883   $ (6,881
 

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

4


Table of Contents

A. H. Belo Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

December 31, 2011 December 31, 2011
In thousands, except share amounts (unaudited)    March 31, 2012     December 31, 2011  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 55,701      $ 57,440   

Accounts receivable (net of allowance of $2,799 and $2,921 at
March 31, 2012 and December 31, 2011, respectively)

     37,377        50,533   

Inventories

     11,267        9,918   

Deferred income taxes, net

     1,379        1,380   

Assets held for sale

     2,396        2,396   

Prepaids and other current assets

     9,253        6,531   
  

 

 

   

 

 

 

Total current assets

     117,373        128,198   

Property, plant and equipment at cost:

    

Land

     36,588        36,602   

Buildings and improvements

     192,814        192,810   

Publishing equipment

     277,154        276,792   

Other

     132,438        131,874   

Construction in process

     2,405        2,005   
  

 

 

   

 

 

 

Total property, plant and equipment

     641,399        640,083   

Less accumulated depreciation

           (483,362           (476,665
  

 

 

   

 

 

 

Property, plant and equipment, net

     158,037        163,418   

Intangible assets, net

     15,640        16,950   

Goodwill

     24,582        24,582   

Investments

     6,463        6,112   

Deferred income taxes, net

     1,417        1,452   

Other assets

     3,406        4,376   
  

 

 

   

 

 

 

Total assets

   $ 326,918      $ 345,088   
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

5


Table of Contents

A. H. Belo Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (continued)

 

 

Condensed Consolidated Balance Sheets (continued)
December 31, 2011 December 31, 2011
In thousands, except share amounts (unaudited)    March 31, 2012     December 31, 2011  

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 13,687      $ 18,062   

Accrued compensation and benefits

     15,264        18,007   

Other accrued expenses

     10,369        12,160   

Advance subscription payments

     24,181        22,491   
  

 

 

   

 

 

 

Total current liabilities

     63,501        70,720   

Long-term pension liabilities

     140,270        145,980   

Other post-employment benefits

     3,104        3,115   

Other liabilities

     2,935        3,794   

Commitments and contingent liabilities

    

Shareholders’ equity:

    

Preferred stock, $.01 par value; Authorized 2,000,000 shares; none issued

     -        -   

Common stock, $.01 par value; Authorized 125,000,000 shares

    

 Series A: issued 19,440,608 and 19,182,236 shares at
              March 31, 2012 and December 31, 2011, respectively

     194        192   

 Series B: issued 2,401,921 and 2,398,017 shares at
              March 31, 2012 and December 31, 2011, respectively

     24        24   

Additional paid-in capital

     494,640        493,773   

Accumulated other comprehensive loss

     (63,059     (63,069

Accumulated deficit

               (314,691               (309,441
  

 

 

   

 

 

 

Total shareholders’ equity

     117,108        121,479   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 326,918      $ 345,088   
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

6


Table of Contents

A. H. Belo Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

 

In thousands, except share amounts (unaudited)                                     
                           

Accumulated

Other

Comprehensive

Income/(Loss)

             
    Common Stock    

Additional

Paid-in

Capital

               
   

Shares

Series A

   

Shares

Series B

             

Accumulated

Deficit

       
         Amount           Total  

Balance at December 31, 2010

    18,896,876        2,392,074      $ 212      $ 491,542      $ 2,569      $ (294,450   $ 199,873   

Net loss

    -        -        -        -        -        (6,727     (6,727

Other comprehensive loss

    -        -        -        -        (154     -        (154

Issuance of shares for restricted stock units

    220,661        -        3        (3     -        -        -   

Income tax on stock option activity

    -        -        -        (1     -        -        (1

Share-based compensation

    -        -        -        1,055        -        -        1,055   

Conversion of Series B to Series A shares

    539        (539     -        -        -        -        -   
 

 

 

 

Balance at March 31, 2011

    19,118,076        2,391,535      $ 215      $ 492,593      $ 2,415      $ (301,177   $ 194,046   
 

 

 

 

Balance at December 31, 2011

    19,182,236        2,398,017      $ 216      $ 493,773      $ (63,069   $ (309,441   $ 121,479   

Net loss

    -        -        -        -        -        (3,893     (3,893

Other comprehensive income

    -        -        -        -        10        -        10   

Issuance of shares for restricted stock units

    199,850        -        2        (2     -        -        -   

Issuance of shares from stock option exercises

    57,926        4,500        -        104        -        -        104   

Income tax on stock option activity

    -        -        -        17        -        -        17   

Share-based compensation

    -        -        -        748        -        -        748   

Conversion of Series B to Series A shares

    596        (596     -        -        -        -        -   

Dividends

    -        -        -        -        -        (1,357     (1,357
 

 

 

 

Balance at March 31, 2012

    19,440,608        2,401,921      $ 218      $ 494,640      $ (63,059   $ (314,691   $ 117,108   
 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

7


Table of Contents

A. H. Belo Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

 

000000000 000000000
     Three Months Ended March 31,  
In thousands (unaudited)    2012     2011  

Operating Activities

    

Net loss

   $ (3,893 )     $ (6,727

Adjustments to reconcile net loss to net cash provided by (used in) operations:

    

Depreciation and amortization

     8,423        8,893   

Provision for uncertain tax positions

     13        -     

Gain on disposal of fixed assets

     (492     -     

Earnings on equity method investments

     (351     (279

Gain on recovery of investment

     -          (729

Deferred income taxes

     53        15   

Other comprehensive income (loss)

     10        (154

Share-based compensation

     748        1,055   

Other non-cash items

     -          18   

Assets acquired and held for sale

     -          (2,696

Net changes in operating assets and liabilities:

    

Accounts receivable

     13,156        14,761   

Funds held by Belo Corp. for future pension contributions

     -          3,410   

Inventories

     (1,349     (2,392

Prepaids and other current assets

     (2,722     (2,924

Other, net

     970        741   

Accounts payable

     (4,375     (11,163

Accrued compensation and benefits

     (3,615     1,297   

Pension liabilities

     (5,710     (38,233

Other accrued expenses

     (1,791     (220

Advance subscription payments

     1,690        1,711   

Other post-employment benefits

     (11     (297
  

 

 

   

 

 

 

Net cash provided by (used in) operations

     754        (33,913

Investing Activities

    

Capital expenditures, net

     (1,777     (1,528

Proceeds on the recovery of an impaired investment

     -          729   

Proceeds from sale of fixed assets

     537        -     

Other, net

     -          (13
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,240     (812

Financing Activities

    

Dividends paid

     (1,357     -     

Proceeds from exercise of stock options

     104        -     
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,253     -     
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (1,739         (34,725

Cash and cash equivalents at beginning of period

     57,440        86,291   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $     55,701      $ 51,566   
  

 

 

   

 

 

 

Supplemental Disclosures:

    

Interest paid

   $ 54      $ 72   
  

 

 

   

 

 

 

Income tax paid, net of refunds

   $ 64      $ 4,165   
  

 

 

   

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

8


Table of Contents

A. H. Belo Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies

Description of Business. A. H. Belo Corporation (“A. H. Belo” or the “Company”), headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that owns and operates four metropolitan daily newspapers and several associated websites, with publishing roots that trace to The Galveston Daily News, which began publication in 1842. A. H. Belo publishes The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.providencejournal.com), the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press-Enterprise (www.pe.com) (Riverside, California), serving the Inland Southern California region and winner of one Pulitzer Prize; and The Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, approximately 40 miles north of Dallas. The Company publishes various niche publications targeting specific audiences, and its investments and/or partnerships include Classified Ventures, LLC, owner of cars.com, and the Yahoo! Inc. (“Yahoo!”) Newspaper Consortium. A. H. Belo also owns and operates commercial printing, distribution and direct mail service businesses. In February 2008, the Company’s former parent, Belo Corp. (“Belo”), separated its publishing operations in a spin-off transaction (the “Distribution”) and A. H. Belo became an independent registrant listed on the New York Stock Exchange (trading symbol: AHC). Unless the context requires otherwise, all dollar amounts in this Quarterly Report on Form 10-Q are in thousands, except per share amounts.

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of A. H. Belo and its subsidiaries have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and in accordance with the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Transactions between the companies comprising A. H. Belo have been eliminated in the condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The Company’s operating segments are defined as its newspapers within a given market. The Company has determined that according to the applicable accounting guidance all of its operating segments meet the criteria to be aggregated into one reporting segment.

In the first quarter of 2011, the Company implemented Accounting Standards Update (“ASU”) No. 2011-05 – Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which requires greater prominence in presenting comprehensive income in the consolidated financial statements. Accordingly, the condensed consolidated financial statements now include condensed consolidated statements of comprehensive loss for all periods presented and the condensed consolidated statements of shareholders’ equity no longer present the components of this balance.

In September 2011, the Financial Accounting Standards Board issued ASU No. 2011-08 – Intangibles – Goodwill and Other (Topic 350); Testing Goodwill for Impairment. The purpose of this amendment is to simplify how entities, both public and nonpublic, test goodwill for impairment. ASU No. 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Unless conditions warrant an interim evaluation of goodwill, the Company performs its annual impairment test each December 31. The adoption of this amendment is not anticipated to have a material impact on the Company’s financial condition, results of operations or its liquidity.

 

9


Table of Contents

Note 2: Goodwill and Intangible Assets

The Company has recorded intangible assets consisting of goodwill and subscriber lists from its previous acquisitions. The carrying value of goodwill was $24,582, net of cumulative impairment losses of $439,509, as of March 31, 2012 and December 31, 2011. The remaining goodwill is recorded at The Dallas Morning News reporting unit. The table below sets forth the Company’s identifiable intangible assets, consisting of subscriber lists which are amortized over an 18 year period:

 

     Total
Subscriber
Lists
    The Dallas
Morning
News
    The
Providence
Journal
    The
Press-
Enterprise
 

Gross balance at December 31, 2011

    $         114,824      $         22,896       $         78,698       $         13,230   

Accumulated amortization

     (97,874 )        (22,896     (64,853     (10,125
  

 

 

   

 

 

   

 

 

   

 

 

 

Net balance at December 31, 2011

    $ 16,950      $ -            $ 13,845       $ 3,105   
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Gross balance at March 31, 2012

    $ 114,824      $ 22,896       $ 78,698       $ 13,230   

Accumulated amortization

     (99,184 )        (22,896     (65,946     (10,342
  

 

 

   

 

 

   

 

 

   

 

 

 

Net balance at March 31, 2012

    $ 15,640      $ -            $ 12,752       $ 2,888   
  

 

 

   

 

 

   

 

 

   

 

 

 

Note 3: Investments

The Company owns investment interests in various entities and records these interests under the equity method or cost method of accounting. Under the equity method, the Company records its share of the investee’s earnings or losses each period in other (expense) income, net, in the condensed consolidated statements of operations, and under the cost method, the Company records earnings or losses when the amounts are realized. During the three months ended March 31, 2012 and 2011, the Company recorded $351 and $279, respectively, of earnings from equity investments. The table below sets forth the Company’s investments as of March 31, 2012 and December 31, 2011:

 

     March 31,
2012
     December 31,
2011
 

Equity method investments

    $             5,381         $             5,030    

Cost method investments

     1,082          1,082    
  

 

 

    

 

 

 

Total investments

    $ 6,463         $ 6,112    
  

 

 

    

 

 

 

Investments accounted for under the equity method include the following:

 

   

Classified Ventures, LLC (“Classified Ventures”) - A. H. Belo Corporation and Belo jointly own 6.6 percent of Classified Ventures. The other owners include Gannett Co., Inc., The McClatchy Company, Tribune Company, and The Washington Post Company. The two principal online businesses Classified Ventures operates are cars.com and apartments.com.

 

   

ShopCo Holdings, LLC (“ShopCo”) - The Company owns a 12.5 percent interest in ShopCo. ShopCo owns FindnSave.com, a digital shopping platform where consumers can find national and local retail goods and services for sale. This platform uses the power of local media participation with advanced search and database technology to allow a consumer to view online sales circulars and local advertised offers or search for an item and receive a list of local advertisers and the price and terms offered for the searched item.

Note 4: Share-Based Compensation

On February 8, 2008, A. H. Belo established a long-term incentive plan under which eight million common shares were authorized for equity awards. On the Distribution date, awards under the plan were issued to holders of Belo stock options and restricted stock units (“RSUs”) in connection with the Distribution. Subsequent awards are granted to A. H. Belo employees and outside directors in the form of non-qualified stock options, incentive stock options, restricted shares, RSUs, performance shares, performance units or stock appreciation rights. The Company considers these awards in the calculation of its basic and diluted earnings per share. Anti-dilutive share-based awards excluded from the calculation of earnings per share consisted of 2,187,957 and 3,199,765 stock options and RSUs for the three months ended March 31, 2012 and 2011, respectively.

 

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A. H. Belo Stock Option Activity

The table below sets forth a summary of stock option activity under the A. H. Belo long-term incentive plan for the three months ended March 31, 2012:

 

     Number of
Options
    Weighted-
Average
Exercise Price
 

Outstanding at December 31, 2011

                 1,696,690       $                   16.99    

Exercised

     (62,426 )      $ 1.72    

Canceled

     (13,570 )      $ 21.74    
  

 

 

   

Outstanding at March 31, 2012

     1,620,694       $ 17.54    
  

 

 

   
    
  

 

 

   

Vested and exercisable at March 31, 2012

     1,620,694       $ 17.54    
  

 

 

   

Vested and exercisable weighted average remaining

contractual terms (in years)

     3.5      

A. H. Belo RSU Activity

Under A. H. Belo’s long-term incentive plan, the Board of Directors has awarded RSUs that vest over a period of one to three years. Upon vesting, the RSUs will be redeemed 60 percent in A. H. Belo Series A common stock and 40 percent in cash. A liability is recorded for the portion of the RSUs to be redeemed in cash and as of March 31, 2012, the liability for the cash portion of the redemption was $1,636. During the vesting period, holders of RSUs participate in A. H. Belo dividends declared by receiving payments for dividend equivalents. The RSUs do not have voting rights. The table below sets forth a summary of RSU activity under the A. H. Belo long-term incentive plan for the three months ended March 31, 2012:

 

    Total RSUs     Issuance
of
Common
Stock
    RSUs
Redeemed in
Cash
    Cash
Payments at
Closing
Price of
Stock
    Weighted-
Average Price
on Date of
Grant
 

Non-vested at December 31, 2011

            1,002,230             $             6.01    

Granted

    278,750             $ 5.00    

Vested

    (333,113             199,850                 133,263        $             664        $ 6.86    

Canceled

    (2,424          $ 6.19    
 

 

 

         

Non-vested at March 31, 2012

    945,443             $ 5.41    
 

 

 

         

The table below sets forth compensation expense related to stock awards, which is recorded on a straight-line basis over the vesting period of the award, for the three months ended March 31, 2012 and 2011:

 

     A. H. Belo                
     Equity Awards     

Cash

Awards

    

Belo

Equity

     Total  
     Options      RSUs      Total      for RSUs      Awards      Expense  

2012

    $             -            $             748         $             748         $             742         $               -           $             1,490    

2011

    $ 58         $ 997         $ 1,055         $ 455         $ 72         $ 1,582    

In the first quarter of 2011, all pre-Distribution options and RSUs issued by Belo Corp. to Company employees were fully vested and the Company no longer recognizes expense for these awards.

 

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Note 5: Pension and Other Retirement Plans

The Company sponsors two defined benefit pension plans, A. H. Belo Pension Plans I and II (collectively the “A. H. Belo Pension Plans”). A. H. Belo Pension Plan I provides benefits to certain employees primarily employed with The Dallas Morning News or the A. H. Belo corporate offices and A. H. Belo Pension Plan II provides benefits to certain employees at The Providence Journal. These plans were established as a result of the Company’s withdrawal from The G. B. Dealey Retirement Pension Plan (the “GBD Pension Plan”), which was sponsored by Belo, on January 1, 2011. No additional benefits are accruing under the A. H. Belo Pension Plans, as future benefits were frozen prior to the plans’ establishment.

In the first quarter of 2011, the Company made a required contribution of $8,733 to the GBD Pension Plan, of which $3,410 was offset by amounts held by Belo for future pension plan contributions. Additionally, the Company made a voluntary contribution of $30,000 to the A. H. Belo Pension Plans. Required contributions of $5,435 were made to the A. H. Belo Pension Plans in the first quarter of 2012. In an effort to reduce the pension liability and related funding costs, the Company made a $10,000 voluntary contribution to the A. H. Belo Pension Plans during April 2012 along with required contributions of $8,037. The Company anticipates that required contributions for the remainder of 2012 will approximate $9,200.

The Company estimates net periodic pension expense based on the expected return on plan assets, the interest on projected pension obligations and the amortization of actuarial gains and losses in accumulated other comprehensive loss. The table below sets forth components of net periodic pension expense for the three months ended March 31, 2012 and 2011:

 

     Three Months Ended March 31,  
     2012     2011  

Interest cost

    $             4,325       $             4,675   

Estimated return on plan assets

     (4,600 )       (4,175

Amortization of actuarial losses

     175        -        
  

 

 

   

 

 

 

Net periodic expense (benefit)

    $ (100 )      $ 500   
  

 

 

   

 

 

 

Other Defined Contribution Plans. In 2011, the Company resumed matching employee 401(k) contributions during the first and second quarters at 1.5 percent of eligible base salary. Effective January 1, 2012, the Company provides an ongoing dollar-for-dollar match up to 1.5 percent of each eligible participant's contribution on a per-pay-period basis. During the three months ended March 31, 2012 and 2011, the Company recorded expense of $357 and $421, respectively, for its matching contributions under this 401(k) plan.

The Company provides transition benefits to A. H. Belo employees affected by the curtailment of the GBD Pension Plan in 2007, consisting of supplemental contributions for a period of up to five years to the A. H. Belo Transition Supplement Plan, a defined contribution plan established by the Company. The Company anticipates contributions to this plan based on eligible earnings of participants through the first quarter of 2013. Contributions of $4,508 and $5,318 were made in the first quarters of 2012 and 2011, respectively, for the prior year’s eligible earnings of participants. Expense associated with the A. H. Belo Transition Supplement Plan was $1,136 and $1,185 for the three months ended March 31, 2012 and 2011, respectively.

Note 6: Long-term Debt

The Company operates with a credit agreement (“Credit Agreement”) that has a total commitment of $25,000. The Credit Agreement is subject to a borrowing base comprised of eligible accounts receivable and inventory, which determines the available borrowing capacity. If borrowing availability falls below $7,500, a fixed charge coverage ratio covenant of 1:1 will apply.

At March 31, 2012 and December 31, 2011, the Company had eligible collateral to secure borrowings under the Credit Agreement of $28,667 and $38,680 respectively, resulting in a borrowing base of $25,000 for both dates. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $21,207 and $19,970 of borrowing capacity available under the Credit Agreement as of March 31, 2012 and December 31, 2011, respectively. The Company had no borrowings under the Credit Agreement during 2011 or 2012.

 

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Note 7: Contingencies

On October 24, 2006, 18 former employees of The Dallas Morning News filed a lawsuit against various A. H. Belo-related parties in the United States District Court for the Northern District of Texas. The plaintiffs’ lawsuit mainly consists of claims of unlawful discrimination and ERISA violations. On March 28, 2011, the Court granted defendants summary judgment and dismissed all claims. Plaintiffs moved for reconsideration, which motion was denied by the United States Magistrate. On July 15, 2011, the plaintiffs appealed the decision to the United States Court of Appeals for the Fifth Circuit. The Company believes the lawsuit is without merit and is vigorously defending against it.

In addition to the proceeding described above, a number of other legal proceedings are pending against the Company. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on the Company’s results of operations, liquidity, or financial condition.

Note 8: Fair Value Measurements

On March 3, 2011, the Company completed the purchase of the personal residence of a Company officer pursuant to a retention and relocation arrangement. The residence was initially recorded at an estimated fair value of $2,696, based on a purchase price of $3,096 and net of anticipated holding and selling costs of $400. The table below sets forth the assets and liabilities by major categories that are measured at fair value on a nonrecurring basis as required by Accounting Standards Codification No. 820, Fair Value Measurements.

 

          Fair Value Measurements Using  
    Three Months Ended
March 31, 2011
    Quoted Price in
Active Markets
for Identical Assets

(Level I)
    Significant Other
Observable Inputs
(Level II)
    Significant
Unobservable Inputs

(Level III)
    Total Gains (Losses)  

Assets held for sale

   $         2,696        $         -            $         -            $         2,696        $         (400 )  

Subsequent to the first quarter of 2011, the Company reassessed the holding and selling costs of the residence and recorded an additional $300 of expense, resulting in a carrying value of $2,396 at March 31, 2012.

The three levels of inputs to valuation techniques in the hierarchy used to measure fair value are:

Level I – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.

Level II – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level III – Prices or valuations that require inputs which are significant to the valuation and are unobservable.

Note 9: Dividends

On March 2, 2012, the Company paid a dividend of $0.06 per share, or $1,357, to its shareholders of record and to holders of outstanding RSU awards at the close of business on February 10, 2012. On March 8, 2012, the Company declared a dividend of $0.06 per share payable June 1, 2012 to shareholders of record and to holders of outstanding RSU awards at the close of business on May 11, 2012. The Company did not declare or pay any dividends during the three months ended March 31, 2011.

Note 10: Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss contains actuarial gains and losses associated with the A. H. Belo Pension Plans and gains and losses resulting from negative plan amendments and other actuarial experience related to other post-employment benefit plans. The Company records amortization of accumulated other comprehensive loss in salaries, wages and employee benefits in the consolidated statements of operations. Gains and losses associated with the A. H. Belo Pension Plans are amortized over the weighted average remaining life expectancy of the participants, currently estimated to be 24 years. Gains and losses associated with the Company’s other post-employment benefit plans are amortized over periods ranging between from four to 12 years.

 

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The table below sets forth the changes in accumulated other comprehensive loss as presented in the Company's condensed consolidated financial statements:

 

     Three Months Ended March 31,  
     2012     2011  
     Total     Defined
Benefit
Pension Plans
    Other Post-
Employment
Benefit Plans
    Total     Defined
Benefit
Pension Plans
     Other Post-
Employment
Benefit Plans
 

Balance, beginning of period

    $         63,069       $         65,019       $         (1,950 )      $         (2,569 )      $     -            $         (2,569 )  

Amortization

     (10     (175 )       165        154        -             154   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance, end of period

    $ 63,059       $ 64,844       $ (1,785 )      $ (2,415 )      $ -            $ (2,415 )  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Note 11: Income Taxes

Income taxes are recorded using the liability method in accordance with applicable accounting guidance. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted by any discrete events, which are reported in the period in which they occur. This estimate is re-evaluated each quarter based on the Company’s estimated tax expense for the year.

The Company recognized income tax expense of approximately $402 and $420 for the three months ended March 31, 2012 and 2011, respectively, representing effective income tax rates of (11.5) percent and (6.7) percent, respectively. The tax expense for 2012 and 2011 is primarily attributable to the Texas margin tax and changes in the valuation allowance on deferred taxes.

The Company evaluates uncertain tax positions and recognizes a liability for the tax benefit associated with an uncertain position only if it is more likely than not the position will not be sustained on examination by taxing authorities, based on the technical merits of the position. As of March 31, 2012 and December 31, 2011, the Company recorded $331 and $333 in reserves and $70 and $55 in interest and penalties, respectively, for uncertain tax positions. The Company recognizes interest and penalties related to these reserves in interest expense.

The Company currently projects taxable losses for the year 2012 for federal income tax purposes and in certain state income tax jurisdictions. Net operating losses can be carried forward to offset future taxable income. The Company’s net operating loss carryforwards begin to expire in the year 2016 if not utilized.

 

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Table of Contents

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Unless the context requires otherwise, all dollar amounts in the Quarterly Report on Form 10-Q are in thousands, except per share amounts.)

The following information should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and related Notes filed as part of this report.

Overview

A. H. Belo, headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that owns and operates four metropolitan daily newspapers and several associated websites, with publishing roots that trace to The Galveston Daily News, which began publication in 1842. A. H. Belo publishes The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.providencejournal.com), the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press-Enterprise (www.pe.com) (Riverside, California), serving the Inland Southern California region and winner of one Pulitzer Prize; and The Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, approximately 40 miles north of Dallas. The Company publishes various niche publications targeting specific audiences, and its investments and/or partnerships include Classified Ventures, LLC, owner of cars.com, and the Yahoo! Newspaper Consortium. A. H. Belo also owns and operates commercial printing, distribution and direct mail service businesses.

A. H. Belo intends for the discussion of its financial condition and results of operations that follows to provide information that will assist in understanding its financial statements, the changes in certain key items in those statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies, and estimates affect its financial statements. Certain prior year amounts have been reclassified to conform to current year presentation.

Overview of Significant Activity in the First Quarter of 2012

 

   

The Company’s revenues related to its core newspapers declined due to weaker advertising revenues, which decreased 11.6 percent for the three months ended March 31, 2012 when compared to the three months ended March 31, 2011. Operating expenses decreased 8.7 percent, reflecting lower expenses in all reported categories, except amortization.

 

   

On March 2, 2012, the Company paid a dividend of $0.06 per share, or $1,357, to its shareholders of record and to holders of outstanding RSU awards as of the close of business on February 10, 2012. On March 8, 2012, the Company declared a dividend of $0.06 per share payable June 1, 2012 to shareholders of record and to holders of outstanding RSU awards at the close of business on May 11, 2012.

 

   

The Dallas Morning News and its marketing solutions group, DMNmedia, reached an agreement with LocalEdge, Hearst Corporation's full service Internet marketing business, to resell LocalEdge's digital solutions to small and medium businesses under the name 508 Digital in the Dallas/Fort Worth area. These solutions include website development and maintenance, video, search engine marketing, search engine optimization, mobile advertising and email marketing. The Dallas Morning News will also offer advertising analytics and online reputation management services.

 

   

During January 2012, the Company made a required contribution of $5,435 to the A. H. Belo Pension Plans.

 

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Table of Contents

Results of Operations

 

     Three Months Ended March 31,  
      2012     Percentage
Change
     2011  

Net operating revenues

   $   104,834        (6.5)%       $   112,175   

Operating costs and expenses

     109,096        (8.7)%         119,542   

Other (expense) income, net

     771        (27.3)%         1,060   
  

 

 

      

 

 

 

Loss before income taxes

     (3,491 )       (44.7)%         (6,307 )  

Income tax expense

     402        (4.3)%         420   
  

 

 

      

 

 

 

Net loss

   $ (3,893 )       (42.1)%       $ (6,727 )  
  

 

 

      

 

 

 

Newspaper Revenues

The Dallas Morning News

The table below sets forth the components of The Dallas Morning News’ net operating revenues for the three months ended March 31, 2012 and 2011:

 

    Three Months Ended March 31,  
     2012     Percent
of Total
Revenues
    Percentage
Change
    2011     Percent
of Total
Revenues
 

Advertising

  $   39,203          58.4     (12.2)%      $   44,673          60.6

Display

    14,497          (18.8)%        17,860     

Classified

    6,729          (9.3)%        7,419     

Preprints

    13,112          (4.4)%        13,719     

Digital

    4,865          (14.3)%        5,675     

Circulation

    22,648          33.7     (3.6)%        23,502          31.8

Printing and distribution

    5,329            7.9     (5.5)%        5,642            7.6
 

 

 

   

 

 

     

 

 

   

 

 

 
  $   67,180        100.0     (9.0)%      $   73,817        100.0
 

 

 

   

 

 

     

 

 

   

 

 

 

Display advertising revenues decreased as a result of declines in retail and general advertising. Approximately $1,076 of this decline is attributable to non-recurring advertisements associated with the Super Bowl game which was held in the Dallas area in 2011.

Classified advertising revenues decreased due to declines in automotive, employment, real estate and other categories.

Preprint advertising revenues decreased due to declines in newspaper inserts and were partially offset by increased preprint home delivery advertisements. The decline in preprint advertisements is consistent with the declines in circulation volumes for inserts.

Digital advertising revenues decreased and display advertising revenues increased by $563 in 2012 as the Company discontinued allocating revenue to a digital advertising platform. Digital advertising revenues also decreased by $420 as a result of non-recurring revenues associated with the Super Bowl game which was held in the Dallas area in 2011. These declines were offset by higher auto, real estate and employment classified advertising.

Advertising revenues from The Dallas Morning News niche publications were $5,098 and $5,320, for the three months ended March 31, 2012 and 2011, respectively. The decrease in 2012 is primarily due to Quick not being published after August 4, 2011. These revenues are a component of total display, classified, preprint and digital revenues of The Dallas Morning News discussed above.

 

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Table of Contents

Circulation revenues decreased due to declines in print home delivery and single copy sales. These declines were partially offset by a price increase related to digital online delivery. The Dallas Morning News continues to assess and adjust its digital consumer content strategy. As of March 2012, approximately 91,000 unique digital accounts have been activated. Retention rates among customers who have activated their digital accounts are at least 50 percent higher than non-activated accounts. During 2012, The Dallas Mornings News will continue to focus on building high-quality print and digital audiences by improving and expanding its digital product portfolio and completing new subscriber price elasticity studies.

Printing and distribution revenues decreased due to a decline in commercial printing volumes, as the Company focused on larger and more profitable customers.

The Providence Journal

The table below sets forth the components of The Providence Journal net operating revenues for the three months ended March 31, 2012 and 2011:

 

    Three Months Ended March 31,  
     2012     Percent
of Total
Revenues
    Percentage
Change
    2011     Percent
of Total
Revenues
 

Advertising

  $ 11,226        49.5     (9.6)%       $ 12,413          56.4

Display

    2,594          (12.8)%        2,973     

Classified

    4,320          (8.8)%        4,739     

Preprints

    2,808          (8.7)%        3,077     

Digital

    1,504          (7.4)%        1,624     

Circulation

    8,602        38.0     5.7%         8,136          36.9

Printing and distribution

    2,843        12.5     92.9%         1,474            6.7
 

 

 

   

 

 

     

 

 

   

 

 

 
  $   22,671        100.0     2.9%       $   22,023        100.0
 

 

 

   

 

 

     

 

 

   

 

 

 

Display advertising revenues decreased as a result of declines in retail and general advertising.

Classified advertising revenues decreased due to declines in automotive partially offset by increases in other categories.

Preprint advertising revenues decreased due to declines in newspaper insert volumes and were partially offset by increased preprint home delivery revenue.

Digital advertising revenues decreased due to lower volumes in retail display advertising, partially offset by higher classified advertising.

Circulation revenues increased due to a change from a buy-sell arrangement with home delivery carriers to a fee-for-delivery arrangement. Under this new arrangement, higher revenues are recognized which are offset by higher distribution expenses.

Printing and distribution revenues increased due to The Providence Journal’s continued expansion of single copy distribution services for national and local newspapers. The Providence Journal has also increased its commercial printing services to existing customers and added a regional newspaper customer, contributing to the growth.

 

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Table of Contents

The Press-Enterprise

The table below sets forth the components of The Press-Enterprise net operating revenues for the three months ended March 31, 2012 and 2011:

 

    Three Months Ended March 31,  
     2012     Percent
of Total
Revenues
    Percentage
Change
    2011     Percent
of Total
Revenues
 

Advertising

  $ 9,648        64.4     (11.1)%      $ 10,850        66.4

Display

    2,326          (16.4)%        2,783     

Classified

    2,876          (12.2)%        3,275     

Preprints

    3,009          (8.6)%        3,293     

Digital

    1,437          (4.1)%        1,499     

Circulation

    3,405        22.7     (0.3)%        3,414        20.9

Printing and distribution

    1,930        12.9     (6.8)%        2,071        12.7
 

 

 

   

 

 

     

 

 

   

 

 

 
  $     14,983        100.0     (8.3)%      $     16,335        100.0
 

 

 

   

 

 

     

 

 

   

 

 

 

Display advertising revenues decreased as a result of declines in retail and general advertising due to reduced volumes in national accounts.

Classified advertising revenues decreased due to declines in legal, automotive, employment and other categories.

Preprint advertising revenues decreased due to declines in newspaper insert and delivery advertisements.

Digital advertising revenues decreased primarily due to lower banner advertising and real estate classified advertisements, partially offset by higher automotive and employment classified advertisements.

Circulation revenues were flat compared to the same quarter last year.

Printing and distribution revenues decreased due to a discontinued contract from a significant commercial printing customer.

 

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Table of Contents

Operating Costs and Expenses

The table below sets forth the components of the Company’s operating costs and expenses for the three months ended March 31, 2012 and 2011:

 

     Three Months Ended March 31,  
             Percentage         
   2012      Change      2011  

Salaries, wages and employee benefits

   $ 46,005         (8.9)%       $ 50,495   

Other production, distribution and operating costs

     40,696         (10.9)%         45,652   

Newsprint, ink and other supplies

     13,972         (3.7)%         14,502   

Depreciation

     7,113         (6.2)%         7,583   

Amortization

     1,310         -               1,310   
  

 

 

       

 

 

 

Total operating costs and expenses

   $     109,096         (8.7)%       $     119,542   
  

 

 

       

 

 

 

Salaries, wages and employee benefits decreased due to lower salaries, share-based compensation, and employee medical expense primarily resulting from lower employee headcount, and also due to reduced pension expense.

Other production, distribution and operating costs decreased due to continued cost control measures. These decreases include declines in outside services, including legal and consulting costs, lower promotional costs and lower information systems expense.

The change in newsprint, ink and other supplies is a function of prices paid and volumes consumed, primarily of newsprint. Newsprint consumption has decreased due to lower printed pages resulting in consumption of approximately 15,041 and 16,800 and metric tons in 2012 and 2011, respectively. Average cost per metric ton of newsprint in 2012 and 2011 was $634 and $641, respectively.

Depreciation expense decreased due to lower levels of depreciable assets.

Interest expense decreased due to lower fees on the Company’s credit facility.

Other (expense) income, net, decreased due to the receipt of $729 in the first quarter of 2011 related to the sale of an investment that had been previously written off. This decrease was partially offset by an increase in the revenue recorded from equity investments and gains on the disposal of assets.

 

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Table of Contents

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization

In addition to the Company’s analysis of net income, the Company also evaluates earnings after adjusting for depreciation, amortization, interest and taxes (“EBITDA”) after adding back pension expense, non-cash impairment expense and net investment-related losses (“Adjusted EBITDA”). Adjusted EBITDA increased by 36.3 percent in 2012 as a result of lower operating expenses. The table below sets forth the Company’s EBITDA and Adjusted EBITDA:

 

    Three Months Ended March 31,  
     2012     2011  

Net loss

  $ (3,893   $ (6,727

Depreciation and amortization

    8,423        8,893   

Interest expense

    136        207   

Income tax expense

    402        420   
 

 

 

   

 

 

 

EBITDA

    5,068        2,793   

Addback:

   

Pension expense

    1,036        1,685   
 

 

 

   

 

 

 

Adjusted EBITDA

  $     6,104      $     4,478   
 

 

 

   

 

 

 

Neither EBITDA nor Adjusted EBITDA is a measure of financial performance under GAAP. Management uses EBITDA, Adjusted EBITDA and similar measures in internal analyses as supplemental measures of the Company’s financial performance and to assist with performance comparisons against its peer group of companies and other decisions. EBITDA or similar measures are also common alternative measures of performance used by investors, financial analysts and rating agencies to evaluate financial performance. 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.

Liquidity and Capital Resources

The Company believes it has sufficient access to liquidity from several sources, such as operations, existing liquid assets and from unused borrowing capacity under its Credit Agreement, to meet its foreseeable liquidity needs. The table below sets forth the Company’s sources of liquidity:

 

Sources of Liquidity        

     March 31, 2012    

Cash and cash equivalents

   $ 55,701   

Accounts receivable, net

     37,377   
  

 

 

 
   $ 93,078   
  

 

 

 

Unused borrowing capacity

   $     21,207   
  

 

 

 

The Company operates with a $25,000 Credit Agreement, which expires in September 2014. The Credit Agreement serves as a working capital facility and is subject to a borrowing base and other covenants and restrictions, including maintenance of defined financial ratios, restrictions on capital expenditures and dividends, and limitations on indebtedness, liens, and asset sales. The borrowing base is calculated using eligible accounts receivable and inventory, as defined in the Credit Agreement. A decrease in the borrowing base could limit the Company’s borrowing capacity. At March 31, 2012 and December 31, 2011, the Company had eligible collateral to secure the Credit Agreement of $28,667 and $38,680, respectively, resulting in a borrowing base of $25,000 at both dates. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $21,207 and $19,970 of borrowing capacity available under the Credit Agreement as of March 31, 2012 and December 31, 2011, respectively. There were no borrowings outstanding under the Credit Agreement at any time during 2012 or 2011.

 

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On March 2, 2012, the Company paid the dividend declared in the fourth quarter of 2011, and on March 8, 2012, the Company declared a dividend of $0.06 per share on outstanding Series A and Series B common stock and to holders of outstanding RSUs, to be paid on June 1, 2012 to shareholders of record on May 11, 2012.

Operating Cash Flows and Liquidity

Net cash flows from operations were $754 and $(33,913) in 2012, and 2011, respectively. The increase in cash flows from operations is due to the Company making a one-time $30,000 voluntary contribution to the A. H. Belo Pension Plans in 2011. Additionally, a final contribution of $8,711 was made to the GBD Pension Plan in 2011 to settle the Company’s obligations resulting from its withdrawal from this plan on January 1, 2011. Funding of this contribution was offset by $3,410 of amounts due from Belo for future pension payments. Required contributions to the A. H. Belo Pension Plans increased by $5,435 in the first quarter of 2012 as no contribution was required to the plans in the first quarter of 2011. Pension Transition Supplement Plan contributions decreased by $810 in the first quarter of 2012 as a result of lower eligible wages in the 2011 plan year due to headcount reductions.

Investing Cash Flows

Net cash flows from investing activities were $(1,240) and $(812) in 2012 and 2011, respectively. In 2012, the Company received proceeds of $537 primarily from the sale of fixed assets, and in 2011, the Company received $729 from the recovery of a previous impaired investment.

Financing Cash Flows

Net cash flows from financing activities were $(1,253) and $0 in 2012 and 2011, respectively. The decrease in cash flows from 2011 to 2012 is primarily due to dividend payments of $1,357 in 2012.

Contractual Obligations

During January 2012, the Company made a required contribution of $5,435 to the A. H. Belo Pension Plans. In an effort to reduce the pension liability and related funding costs, the Company made a $10,000 voluntary contribution to the A. H. Belo Pension Plans during April 2012 along with required contributions of $8,037. The Company anticipates that required contributions for the remainder of 2012 will approximate $9,200.

Additional information related to the Company’s contractual obligations is available in Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 12, 2012, with the Securities and Exchange Commission.

Critical Accounting and Policies and Estimates

No material changes have been made to our critical accounting policies as set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2011.

Forward-Looking Statements

Statements in this communication concerning A. H. Belo Corporation’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, impairments, business initiatives, pension plan contributions and obligations, real estate sales, 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, interest rates and newsprint prices; newspaper circulation trends and other circulation matters, including changes in readership patterns and demography, and audits and related actions by the Audit Bureau of Circulations; challenges in achieving expense reduction goals in a timely manner, and the resulting potential effect on operations; technological changes; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; consumer acceptance of new products and business initiatives; regulatory, tax and legal changes; adoption of new accounting

 

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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 and co-owned ventures and investments; returns and discount rates on pension plan assets; general economic conditions; significant armed conflict; and other factors beyond our control, as well as other risks described elsewhere in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and in the Company’s other public disclosures, and filings with the Securities and Exchange Commission.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Other than as disclosed, there have been no material changes in A. H. Belo Corporation’s exposure to market risk from the disclosure included in the Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4.    Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of the Company’s disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

(b) Changes in internal controls. There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

 

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PART II — OTHER INFORMATION

Item 1.    Legal Proceedings

On October 24, 2006, 18 former employees of The Dallas Morning News filed a lawsuit against various A. H. Belo-related parties in the United States District Court for the Northern District of Texas. The plaintiffs’ lawsuit mainly consists of claims of unlawful discrimination and ERISA violations. On March 28, 2011, the Court granted defendants summary judgment and dismissed all claims. Plaintiffs moved for reconsideration, which motion was denied by the United States Magistrate. On July 15, 2011, the plaintiffs appealed the decision to the United States Court of Appeals for the Fifth Circuit. The Company believes the lawsuit is without merit and is vigorously defending against it.

In addition to the proceeding described above, a number of other legal proceedings are pending against A. H. Belo. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on A. H. Belo Corporation’s results of operations, liquidity, or financial condition.

Item 1A.    Risk Factors

There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A of the Company’s 2011 Annual Report on Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

There have been no unregistered sales of the Company’s equity securities during the period covered by this report. In addition, there have been no Company purchases of securities during the period covered by this report.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

None.

 

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Item 6.    Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by A. H. Belo Corporation with the Securities and Exchange Commission, as indicated. All other documents are filed with this report. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

 

Exhibit Number    Description

2.1

  

*

  

Separation and Distribution Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 2.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2008 (Securities and Exchange Commission File No. 001-33741) (the “February 12, 2008 Form 8-K”))

3.1

  

*

  

Amended and Restated Certificate of Incorporation of A. H. Belo Corporation (Exhibit 3.1 to Amendment No. 3 to A. H. Belo Corporation’s Form 10 dated January 18, 2008 (Securities and Exchange Commission File No. 001-33741) (the “Third Amendment to Form 10”))

3.2

  

*

  

Certificate of Designations of Series A Junior Participating Preferred Stock of A. H. Belo Corporation dated January 11, 2008 (Exhibit 3.2 to Post-Effective Amendment No. 1 to Form 10 dated January 31, 2008 (Securities and Exchange Commission File No. 001-33741))

3.3

  

*

  

Amended and Restated Bylaws of A. H. Belo Corporation, effective January 11, 2008 (Exhibit 3.3 to the Third Amendment to Form 10)

4.1

  

*

  

Certain rights of the holders of A. H. Belo Corporation’s Common Stock are set forth in Exhibits 3.1-3.3 above

4.2

  

*

  

Specimen Form of Certificate representing shares of A. H. Belo Corporation’s Series A Common Stock (Exhibit 4.2 to the Third Amendment to Form 10)

4.3

  

*

  

Specimen Form of Certificate representing shares of A. H. Belo Corporation’s Series B Common Stock (Exhibit 4.3 to the Third Amendment to Form 10)

4.4

  

*

  

Rights Agreement dated as of January 11, 2008 between A. H. Belo Corporation and Mellon Investor Services LLC (Exhibit 4.4 to the Third Amendment to Form 10)

10.1  

     

Financing agreements:

     

(1)

  

*

  

Amended and Restated Credit Agreement dated as of January 30, 2009 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 2, 2009 (Securities and Exchange Commission File No. 001-33741) (the “February 2, 2009 Form 8-K”))

     

(2)

  

*

  

Amended and Restated Pledge and Security Agreement dated as of January 30, 2009 (Exhibit 10.2 to the February 2, 2009 Form 8-K)

     

(a)

  

*

  

First Amendment to Amended and Restated Security Agreement dated as of May 2, 2011 (Exhibit 10.1(9) to A. H. Belo Corporation’s Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2011 (Securities and Exchange Commission File No. 001-33741))

     

(3)

  

*

  

First Amendment to the Amended and Restated Credit Agreement dated as of August 18, 2009 (Exhibit 10.1(5) to A. H. Belo Corporation’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2009 (Securities and Exchange Commission File No. 001-33741))

     

(4)

  

*

  

Second Amendment to the Amended and Restated Credit Agreement dated as of December 3, 2009 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 4, 2009 (Securities and Exchange Commission File No. 001-33741))

     

(5)

  

*

  

Fourth Amendment to the Amended and Restated Credit Agreement dated as of March 10, 2011 (Exhibit 10.1(8) to A. H. Belo Corporation’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2011 (Securities and Exchange Commission File No. 001-33741))

     

(6)

  

*

  

Fifth Amendment to the Amended and Restated Credit Agreement and First Amendment to Amended and Restated Security Agreement dated as of May 2, 2011 (Exhibit 10.1(9) to A. H. Belo Corporation’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2011 (Securities and Exchange Commission File No. 001-33741))

 

24


Table of Contents
        (7)      

*

  

Third Amendment to the Amended and Restated Credit Agreement dated as of August 18, 2010 (Exhibit 10.1(7) to A. H. Belo Corporation’s Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2010 (Securities and Exchange Commission File No. 001-33741))

10.2

       

Compensatory plans and arrangements:

      ~ (1)      

*

  

A.H. Belo Savings Plan (Exhibit 10.4 to the February 12, 2008 Form 8-K)

        

*

  

(a)

  

First Amendment to the A. H. Belo Savings Plan dated September 23, 2008 (Exhibit 10(2)(1)(a) to A. H. Belo Corporation’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2008 (Securities and Exchange Commission File No. 001-33741))

        

*

  

(b)

  

Second Amendment to the A. H. Belo Savings Plan effective March 27, 2009 (Exhibit 10.1 to A.  H. Belo Corporation’s Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 2, 2009 (Securities and Exchange Commission File No. 001-33741) (the “April 2, 2009 Form 8-K”))

        

*

  

(c)

  

Third Amendment to the A. H. Belo Savings Plan effective March 31, 2009 (Exhibit 10.2 to the April 2, 2009 Form 8-K)

        

*

  

(d)

  

Fourth Amendment to the A. H. Belo Savings Plan dated September 10, 2009, (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2009 (Securities and Exchange Commission File No. 001-33741))

      ~ (2)      

*

  

A. H. Belo 2008 Incentive Compensation Plan (Exhibit 10.5 to the February 12, 2008 Form 8-K)

        

*

  

(a)

  

First Amendment to A. H. Belo 2008 Incentive Compensation Plan effective July 23, 2008 (Exhibit 10 (2)(a) to A. H. Belo Corporation’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2008 (Securities and Exchange Commission File No. 001-33741))

        

*

  

(b)

  

Form of A. H. Belo 2008 Incentive Compensation Plan Non-Employee Director Evidence of Grant (for Non-Employee Director Awards) (Exhibit 10.2.(2)(b) to A. H. Belo Corporation’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 13, 2010 (Securities and Exchange Commission File No. 001-33741) (the “1st Quarter 2010 Form 10-Q”))

        

*

  

(c)

  

Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Grant (for Employee Awards) (Exhibit 10.2.(2)(C) to the 1st Quarter 2010 Form 10-Q)

        

*

  

(d)

  

Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Grant (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 12, 2012 (Securities and Exchange Commission File No. 001-33741))

        

*

  

(e)

  

Form of A. H. Belo Cash Long-Term Incentive Evidence of Grant (Exhibit 10.2 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 12, 2012 (Securities and Exchange Commission File No. 001-33741))

      ~ (3)      

*

  

A. H. Belo Pension Transition Supplement Restoration Plan effective January 1, 2008 (Exhibit 10.6 to the February 12, 2008 Form 8-K)

        

*

  

(a)

  

First Amendment to the A. H. Belo Corporation Pension Transition Supplement Restoration Plan dated March 31, 2009 (Exhibit 10.4 to the April 2, 2009 Form 8-K)

      ~ (4)      

*

  

A. H. Belo Corporation Change In Control Severance Plan (Exhibit 10.7 to the February 12, 2008 Form 8-K)

        

*

  

(a)

  

Amendment to the A. H. Belo Corporation Change in Control Severance Plan dated March 31, 2009 (Exhibit 10.3 to the April 2, 2009 Form 8-K)

      ~ (5)      

*

  

John C. McKeon Retention and Relocation Agreement effective September 22, 2010 (Exhibit 10.2(5) to A. H. Belo Corporation’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2011 (Securities and Exchange Commission File No. 001-33741))

      ~ (6)      

*

  

John C. McKeon Severance Agreement and General Release effective January 3, 2012 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 19. 2012 (Securities and Exchange Commission File No. 001-33741))

10.3

       

Agreements relating to the Distribution of A. H. Belo Corporation:

        (1)      

*

  

Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.1 to the February 12, 2008 Form 8-K)

        

*

  

(a)

  

First Amendment to Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated September 14, 2009 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2009 (Securities and Exchange Commission file No. 001-33741))

 

25


Table of Contents
          (2)      

*

  

Employee Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.2 to the February 12, 2008 Form 8-K)

        

*

  

(a)

  

Amendment to Employee Matters Agreement as set forth in the Pension Plan Transfer Agreement dated as of October 6, 2010 (Exhibit 10.1 to the October 8, 2010 Form 8-K) (the “October 8, 2010 Form 8-K”))

        (3)      

*

  

Services Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.3 to the February 12, 2008 Form 8-K)

        (4)      

*

  

Separation and Distribution Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (See Exhibit 2.1 to the February 12, 2008 Form 8-K)

        (5)      

*

  

Pension Plan Transfer Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of October 6, 2010 (Exhibit 10.1 to A. H. Belo Corporation’s Report on Form 8-K filed with the Securities and Exchange Commission on October 8, 2010 (Securities and Exchange Commission File No. 001-33741) )

        (6)      

*

  

Agreement among A. H. Belo Corporation, Belo Corp., and The Pension Benefit Guaranty Corporation, effective March 9, 2011 (Exhibit 10.3(6) to A. H. Belo Corporation’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2011 (Securities and Exchange Commission File No. 001-33741))

31.1

  

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32   

   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

    101.INS**

   XBRL Instance Document

    101.SCH**

   XBRL Taxonomy Extension Schema Document

    101.CAL**

   XBRL Taxonomy Extension Calculation Linkbase Document

    101.LAB**

   XBRL Taxonomy Extension Label Linkbase Document

    101.PRE**

   XBRL Taxonomy Extension Presentation Linkbase Document

    101.DEF**

   XBRL Taxonomy Extension Definition Linkbase Document

 

**

In accordance with Regulation S-T, the XBRL-related information in Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

 

26


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

A. H. BELO CORPORATION

 

April 30, 2012

   

By:

 

/s/ Alison K. Engel

 
     

 

 
     

Alison K. Engel

 
     

Senior Vice President/Chief Financial Officer and

 
     

Treasurer (Principal Financial Officer)

 

April 30, 2012

   

By:

 

/s/ Michael N. Lavey

 
     

 

 
     

Michael N. Lavey

 
     

Vice President/Controller

 
     

(Principal Accounting Officer)

 

 

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EXHIBIT INDEX

 

Exhibit Number

  

Description

31.1

   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32   

   Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

    101.INS**

   XBRL Instance Document

    101.SCH**

   XBRL Taxonomy Extension Schema Document

    101.CAL**

   XBRL Taxonomy Extension Calculation Linkbase Document

    101.LAB**

   XBRL Taxonomy Extension Label Linkbase Document

    101.PRE**

   XBRL Taxonomy Extension Presentation Linkbase Document

    101.DEF**

   XBRL Taxonomy Extension Definition Linkbase Document

 

28

XNYS:AHC A H Belo Corp Quarterly Report 10-Q Filling

A H Belo Corp XNYS:AHC Stock - Get Quarterly Report SEC Filing of A H Belo Corp XNYS:AHC stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

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