A. H. Belo Corporation (NYSE:AHC) today reported third quarter 2017
net income attributable to A. H. Belo Corporation (the
“Company”) of $2.6 million, or $0.12 per fully diluted
share. In the third quarter of 2016, the Company reported net loss
attributable to A. H. Belo Corporation of
$(0.5) million, or $(0.02) per share.
In the third quarter of 2017, on a non-GAAP basis,
the Company reported operating income excluding certain items
(“adjusted operating income”) of $4.2 million, an increase of
$1.9 million, or 84.8 percent, when compared to adjusted
operating income of $2.3 million reported in the third quarter
of 2016.
Jim Moroney, chairman, president and Chief
Executive Officer, said, “I am pleased that we continue to see
excellent growth from our investment in DMV, which saw revenue
growth of 20.3 percent compared to the third quarter of 2016.
This quarter, we also made steady progress in building a base of
paid digital subscribers which increased to 22,103 at the end of
the third quarter, a gain of 1,833 subscribers, or
9.0 percent, on a sequential basis, over the total at the end
of the second quarter. On a year-over-year basis, digital
subscribers grew 9,158, or 70.7 percent, when compared to the total
digital subscribers of 12,945 at the end of the third quarter 2016.
These are the two most significant growth opportunities in our
business and we will continue to drive investment in these areas
for the balance of 2017 and into 2018.
“In the third quarter, we closed on the sale of one
of our downtown Dallas parking lots and last week, closed on the
sale of the remaining two parking lots in downtown Dallas. Our
commitment to returning capital to shareholders is a key part of A.
H. Belo's financial strategy. As a result, we are announcing a
special dividend of $0.14 and we will be re-starting our previously
authorized stock repurchase program. The share repurchase authority
allows us to utilize another avenue to return capital to
shareholders as well as take advantage of market conditions from
time to time. In addition to our focus on returning capital to our
shareholders, we are committed in our efforts to de-risk our
pension plans. In the third quarter, we made a voluntary
contribution of $20.0 million and using that contribution with
additional plan assets of $23.5 million, executed a transfer
of $43.5 million in pension liabilities to an insurance company.
This de-risking strategy has reduced the long-term pension
liabilities of the Company. We are very pleased with our ability to
execute on multiple capital allocation strategies over the last two
months.”
Third Quarter Results from Continuing
Operations
Total revenue was $60.6 million in the third
quarter of 2017, a decrease of $4.2 million, or 6.5 percent,
when compared to the third quarter of 2016.
Revenue from advertising and marketing services,
including print and digital revenues, was $34.9 million in the
third quarter of 2017, a decrease of $3.4 million, or
9.0 percent, when compared to the third quarter of 2016. For
the third quarter of 2017, total digital and marketing services
revenue was 39.3 percent of total advertising and marketing
services revenue, reflecting a 270 basis point increase when
compared to the 36.6 percent reported in the third quarter of
2016. Total digital and marketing services revenue was
22.7 percent of total revenue, reflecting a 110 basis
point increase when compared to the 21.6 percent reported in
the third quarter of 2016.
Circulation revenue was $18.8 million, a
decrease of $0.8 million, or 4.0 percent. The decline was
primarily due to a decrease in home delivery revenue. Single copy
revenue also decreased compared to prior year, driven by a decline
in single copy volume, partially offset by an increase in the daily
single copy rate, which we put in place in November 2016.
Printing, distribution and other revenue of
$6.8 million remained flat when compared to the prior year
period, primarily due to a decrease of $0.1 million in revenue
related to events the Company did not host in the third quarter of
2017, offset by an increase in other distribution revenue.
Total consolidated operating expense in the third
quarter of 2017 was $65.6 million, an increase of
$0.3 million, or 0.5 percent, compared to the third
quarter of 2016. The slight increase is primarily due to a noncash
pension settlement charge of $5.9 million, partially offset by
decreases of $1.8 million in employee compensation and
benefits expense, $1.0 million in temporary services expense,
$0.9 million in distribution expense and $0.7 million in
newsprint expense.
In the third quarter of 2017, on a non-GAAP basis,
total consolidated operating expense excluding certain items
(“adjusted operating expense”) was $56.4 million, a decrease
of $6.1 million, or 9.8 percent, compared to
$62.5 million of adjusted operating expense reported in the
third quarter of 2016. The decline is primarily due to decreases in
employee compensation and benefits, temporary services,
distribution and newsprint expense.
The Company’s newsprint expense in the third
quarter of 2017 was $3.0 million, a decrease of
9.1 percent, compared to the third quarter of 2016. Newsprint
consumption declined 13.7 percent to 5,721 metric tons.
Compared to the third quarter of 2016, newsprint cost per metric
ton increased 3.3 percent and the average purchase price per
metric ton for newsprint decreased 0.4 percent.
Real Estate
In the second quarter of 2017, the Company
announced that three parcels of land located in downtown Dallas,
Texas were available for sale. In September, the company completed
the sale of one parcel of land and received net cash proceeds of
$8.3 million, generating a gain of approximately
$5.0 million. In addition, this month the Company completed
the sale of the remaining two parcels of land for net cash proceeds
of $13.0 million, generating a gain of approximately
$7.5 million. The capital gains generated from these sales
will be fully offset by the tax deduction for the pension
contribution.
Special Dividend
The Company’s Board of Directors declared a special
cash dividend of $0.14 per share on October 27, 2017. The
special dividend will be payable on December 1, 2017 to
shareholders of record at the close of business on November 9,
2017.
Stock Repurchase Program
The Company expects to re-start open market stock
repurchases in the fourth quarter of 2017. The Company has
approximately 1,000,000 shares of common stock remaining under its
prior Board-approved stock repurchase authority.
Pension Plans
In the third quarter, the Company made a voluntary
contribution of $20.0 million to the pension plans and using
the contribution, in addition to liquidating $23.5 million of
plan assets, transferred $43.5 million of pension
liabilities to an insurance company. As a result of this de-risking
action, the Company not only reduced the number of participants in
the Company sponsored pension plans by 796,
or 36.0 percent, but also reduced the Pension Benefit
Guaranty Corporation annual fees by $0.5 million, or
38.0 percent. Based on these actions, and holding constant the
discount rate and the rate of return on pension assets, the Company
does not expect to have a mandatory contribution until 2023, and
that payment would be $3.0 million.
Non-GAAP Financial Measures
A reconciliation of operating income (loss) to
adjusted operating income and of total operating costs and expense
to adjusted operating expense is included in the exhibits to this
release.
Financial Results Conference
Call
A. H. Belo Corporation will conduct a conference
call on Tuesday, October 31, 2017, at 9:00 a.m. CDT
to discuss financial results. The conference call will be available
via webcast by accessing the Company’s website at
www.ahbelo.com/invest. An archive of the webcast will be available
at www.ahbelo.com in the Investor Relations section.
To access the listen-only conference call, dial
1-800-230-1951 (USA) or 612-338-9017 (International). A replay line
will be available at 1-800-475-6701 (USA) or 320-365-3844
(International) from 11:00 a.m. CDT on October 31, 2017 until
11:59 p.m. CST on November 7, 2017. The access code for the replay
is 431356.
About A. H. Belo Corporation
A. H. Belo Corporation is a leading local news and
information publishing company with commercial printing,
distribution and direct mail capabilities, as well as expertise in
emerging media and digital marketing. With a continued focus on
extending the Company’s media platform, A. H. Belo Corporation
delivers news and information in innovative ways to a broad
spectrum of audiences with diverse interests and lifestyles. For
additional information, visit www.ahbelo.com or email
invest@ahbelo.com.
Statements in this communication concerning A. H.
Belo Corporation’s business outlook or future economic performance,
anticipated profitability, revenues, expenses, dividends, capital
expenditures, investments, dispositions, impairments, business
initiatives, acquisitions, pension plan contributions and
obligations, real estate sales, working capital, 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, trends and uncertainties are, in most
instances, beyond the Company’s control, and include changes in
advertising demand and other economic conditions; consumers’
tastes; newsprint prices; program costs; labor relations;
technology obsolescence; as well as other risks described in the
Company’s Annual Report on Form 10-K and in the Company’s other
public disclosures and filings with the Securities and Exchange
Commission. Forward-looking statements, which are as of the date of
this filing, are not updated to reflect events or circumstances
after the date of the statement.
A. H. Belo Corporation and
Subsidiaries |
|
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|
|
|
|
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|
Consolidated
Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
In thousands, except share and per share amounts
(unaudited) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Net Operating
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing services |
|
$ |
34,875 |
|
|
$ |
38,304 |
|
|
$ |
106,101 |
|
|
$ |
111,581 |
|
Circulation |
|
|
18,845 |
|
|
|
19,633 |
|
|
|
57,099 |
|
|
|
59,806 |
|
Printing,
distribution and other |
|
|
6,839 |
|
|
|
6,843 |
|
|
|
21,349 |
|
|
|
22,502 |
|
Total net
operating revenue |
|
|
60,559 |
|
|
|
64,780 |
|
|
|
184,549 |
|
|
|
193,889 |
|
Operating Costs
and Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee
compensation and benefits |
|
|
29,693 |
|
|
|
25,626 |
|
|
|
82,421 |
|
|
|
77,417 |
|
Other
production, distribution and operating costs |
|
|
27,460 |
|
|
|
30,615 |
|
|
|
85,522 |
|
|
|
88,844 |
|
Newsprint, ink and other supplies |
|
|
5,648 |
|
|
|
6,315 |
|
|
|
17,542 |
|
|
|
18,834 |
|
Depreciation |
|
|
2,607 |
|
|
|
2,488 |
|
|
|
7,840 |
|
|
|
7,725 |
|
Amortization |
|
|
200 |
|
|
|
225 |
|
|
|
599 |
|
|
|
680 |
|
Goodwill
impairment |
|
|
— |
|
|
|
— |
|
|
|
228 |
|
|
|
— |
|
Total
operating costs and expense |
|
|
65,608 |
|
|
|
65,269 |
|
|
|
194,152 |
|
|
|
193,500 |
|
Operating
income (loss) |
|
|
(5,049 |
) |
|
|
(489 |
) |
|
|
(9,603 |
) |
|
|
389 |
|
Other
income, net |
|
|
7,639 |
|
|
|
114 |
|
|
|
7,209 |
|
|
|
601 |
|
Income (Loss)
from Continuing Operations Before Income Taxes |
|
|
2,590 |
|
|
|
(375 |
) |
|
|
(2,394 |
) |
|
|
990 |
|
Income
tax provision |
|
|
10 |
|
|
|
77 |
|
|
|
261 |
|
|
|
1,361 |
|
Net Income
(Loss) |
|
|
2,580 |
|
|
|
(452 |
) |
|
|
(2,655 |
) |
|
|
(371 |
) |
Net
income attributable to noncontrolling interests |
|
|
— |
|
|
|
45 |
|
|
|
— |
|
|
|
65 |
|
Net Income
(Loss) Attributable to A. H. Belo
Corporation |
|
$ |
2,580 |
|
|
$ |
(497 |
) |
|
$ |
(2,655 |
) |
|
$ |
(436 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
Basis |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to A. H. Belo Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
0.12 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.02 |
) |
Number of
common shares used in the per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
21,753,166 |
|
|
|
21,676,260 |
|
|
|
21,729,212 |
|
|
|
21,601,828 |
|
Diluted |
|
|
21,754,627 |
|
|
|
21,676,260 |
|
|
|
21,729,212 |
|
|
|
21,601,828 |
|
|
|
|
|
|
|
|
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A. H. Belo Corporation and
Subsidiaries |
|
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Consolidated
Balance Sheets |
|
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|
|
|
|
|
|
September 30, |
|
December 31, |
In thousands (unaudited) |
|
2017 |
|
2016 |
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
49,955 |
|
$ |
80,071 |
Accounts
receivable, net |
|
|
25,914 |
|
|
29,114 |
Assets
held for sale |
|
|
5,510 |
|
|
— |
Other
current assets |
|
|
13,602 |
|
|
12,939 |
Total
current assets |
|
|
94,981 |
|
|
122,124 |
Property,
plant and equipment, net |
|
|
33,591 |
|
|
43,759 |
Intangible assets, net |
|
|
4,273 |
|
|
4,872 |
Goodwill |
|
|
13,973 |
|
|
14,201 |
Other
assets |
|
|
6,975 |
|
|
7,775 |
Total
assets |
|
$ |
153,793 |
|
$ |
192,731 |
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
9,121 |
|
$ |
9,036 |
Accrued
compensation and other current liabilities |
|
|
13,036 |
|
|
14,975 |
Advance
subscription payments |
|
|
12,179 |
|
|
13,243 |
Total
current liabilities |
|
|
34,336 |
|
|
37,254 |
Long-term
pension liabilities |
|
|
28,413 |
|
|
54,843 |
Other
liabilities |
|
|
6,108 |
|
|
8,812 |
Total
liabilities |
|
|
68,857 |
|
|
100,909 |
Noncontrolling interest - redeemable |
|
|
— |
|
|
2,670 |
Total
shareholders’ equity attributable to A. H. Belo Corporation |
|
|
84,936 |
|
|
87,918 |
Noncontrolling interests |
|
|
— |
|
|
1,234 |
Total
shareholders' equity |
|
|
84,936 |
|
|
89,152 |
Total
liabilities and shareholders’ equity |
|
$ |
153,793 |
|
$ |
192,731 |
|
|
|
|
|
|
|
A.
H. Belo Corporation - Non-GAAP Financial Measures |
Reconciliation of Operating Income (Loss) to Adjusted
Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
In thousands (unaudited) |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
Total net
operating revenue |
|
$ |
60,559 |
|
|
$ |
64,780 |
|
|
$ |
184,549 |
|
|
$ |
193,889 |
Total
operating costs and expense |
|
|
65,608 |
|
|
|
65,269 |
|
|
|
194,152 |
|
|
|
193,500 |
Operating
Income (Loss) |
|
$ |
(5,049 |
) |
|
$ |
(489 |
) |
|
$ |
(9,603 |
) |
|
$ |
389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating costs and expense |
|
$ |
65,608 |
|
|
$ |
65,269 |
|
|
$ |
194,152 |
|
|
$ |
193,500 |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
2,607 |
|
|
|
2,488 |
|
|
|
7,840 |
|
|
|
7,725 |
Amortization |
|
|
200 |
|
|
|
225 |
|
|
|
599 |
|
|
|
680 |
Severance
expense |
|
|
531 |
|
|
|
49 |
|
|
|
1,175 |
|
|
|
1,049 |
Pension
plan settlement loss |
|
|
5,911 |
|
|
|
— |
|
|
|
5,911 |
|
|
|
— |
Goodwill
impairment |
|
|
— |
|
|
|
— |
|
|
|
228 |
|
|
|
— |
Adjusted
Operating Expense |
|
$ |
56,359 |
|
|
$ |
62,507 |
|
|
$ |
178,399 |
|
|
$ |
184,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
operating revenue |
|
$ |
60,559 |
|
|
$ |
64,780 |
|
|
$ |
184,549 |
|
|
$ |
193,889 |
Adjusted
operating expense |
|
|
56,359 |
|
|
|
62,507 |
|
|
|
178,399 |
|
|
|
184,046 |
Adjusted
Operating Income |
|
$ |
4,200 |
|
|
$ |
2,273 |
|
|
$ |
6,150 |
|
|
$ |
9,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company calculates adjusted operating income by adjusting
operating income (loss) to exclude depreciation, amortization,
severance expense, pension plan settlement loss and goodwill
impairment (“adjusted operating income”). The Company believes that
inclusion of certain noncash expenses and other items in the
results makes for more difficult comparisons between years and with
peer group companies.
Adjusted operating income is not a measure of financial
performance under generally accepted accounting principles
(“GAAP”). Management uses adjusted operating income and similar
measures in internal analyses as supplemental measures of the
Company’s financial performance, and for performance comparisons
against its peer group of companies. Management uses this non-GAAP
financial measure for the purposes of evaluating consolidated
Company performance. The Company therefore believes that the
non-GAAP measure presented provides useful information to investors
by allowing them to view the Company’s business through the eyes of
management and the Board of Directors, facilitating comparison of
results across historical periods and providing a focus on the
underlying ongoing operating performance of its business. Adjusted
operating income should not be considered in isolation or as a
substitute for net income (loss) from continuing operations, cash
flows provided by (used for) operating activities or other
comparable measures prepared in accordance with GAAP. Additionally,
this non-GAAP measure may not be comparable to similarly-titled
measures of other companies.
Contact: Katy Murray 214-977-8869
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