A. H. Belo Corporation (NYSE: AHC) today reported a second quarter
2018 net loss of $0.5 million, or $(0.03) per share. In
the second quarter of 2017, A. H. Belo Corporation (the
“Company”) reported a net loss of $0.8 million, or $(0.04) per
share.
In the second quarter of 2018, on a non-GAAP basis, the Company
reported operating income adjusted for certain items (“adjusted
operating income”) of $2.7 million, a decrease of
$0.1 million, or 3.4 percent, when compared to adjusted
operating income of $2.8 million reported for the second
quarter of 2017.
Robert W. Decherd, chairman, president and Chief Executive
Officer, said, “I am very excited to return the Company as CEO and
am confident A. H. Belo is well-positioned financially to address
the challenges and opportunities in our markets. As a Board member
for many years, I am keenly aware of the exceptional talent of the
Company’s leadership team, which is the most important aspect to
successfully defining A. H. Belo’s future.”
In May, the Company announced the hiring of Susan “Sue” Kerr as
vice president of Print Audience, a newly created position
reporting to Grant Moise, Publisher and President of The Dallas
Morning News. Moise said, “I wanted to make sure we have the best
talent in the industry leading our print audience division. Sue
brings over three decades of customer service and subscription
expertise to our company, and I have a tremendous amount of
confidence that she will substantially improve this important part
of our business. Sue’s customer-centric philosophy fits very well
with what we are building.”
Second Quarter Results
Total revenue was $51.2 million in the second quarter of
2018, a decrease of $11.9 million, or 18.9 percent, when
compared to the second quarter of 2017.
Revenue from advertising and marketing services, including print
and digital revenues, was $26.4 million in the second quarter
of 2018, a decrease of $9.6 million, or 26.7 percent,
when compared to the second quarter of 2017. The Company adopted
the new revenue guidance (Topic 606) as of January 1, 2018, which
requires revenue to be recorded net for certain transactions where
the Company acted as an agent. Prior to adoption, such revenue was
generally recorded gross. As a result of adopting this new
guidance, advertising and marketing services revenue was reduced by
$2.9 million for the three months ended June 30, 2018, with
the offsetting change recorded as a reduction to operating
expense.
Excluding the impact of the new revenue guidance, advertising
and marketing services revenue decreased $6.7 million, or
18.7 percent, when compared to the prior year period. For the
second quarter of 2018, total digital and marketing services
revenue was 40.9 percent of total advertising and marketing
services revenue, up from the 38.5 percent reported in the
second quarter of 2017. Total digital and marketing services
revenue was 22.0 percent of total revenue, flat when compared
to the second quarter of 2017.
Circulation revenue was $17.9 million, a decrease of
$1.2 million, or 6.1 percent, when compared to the second
quarter of 2017. The decline was primarily due to a decrease in
home delivery and single copy volumes, partially offset by single
copy rate increases. Circulation revenue was also affected by the
adoption of the new revenue guidance, including a decline of
$0.3 million related to the grace period for home delivery
subscriptions where the Company records revenue for newspapers
delivered after a subscription expires. Prior to adoption,
non-payment of grace was recorded as bad debt to operating expense;
however, under the new guidance revenue is reduced.
Printing, distribution and other revenue decreased
$1.1 million, or 14.1 percent, to $6.9 million, due
to a $0.6 million decrease related to event sponsorships and a
decrease of $0.4 million in commercial printing revenue.
Total consolidated operating expense in the second quarter of
2018, on a GAAP basis, was $52.5 million, a decrease of
$11.8 million, or 18.4 percent, compared to the second
quarter of 2017. Excluding the expense decrease related to the
adoption of the new revenue guidance, consolidated operating
expense decreased $8.7 million, or 13.4 percent, when
compared to the prior year period. The improvement was primarily
due to decreases of $4.2 million in employee compensation and
benefits expense, $1.6 million in distribution expense,
$1.0 million in advertising and promotion expense,
$0.5 million in newsprint expense and $0.3 million in
temporary services expense.
In the second quarter of 2018, on a non-GAAP basis, total
consolidated operating expense adjusted for certain items
(“adjusted operating expense”) was $51.7 million, an
improvement of $8.6 million, or 14.3 percent, compared to
$60.3 million of adjusted operating expense reported in the
second quarter of 2017. The improvement is primarily due to
decreases in employee compensation and benefits, distribution,
advertising and promotion, newsprint and temporary services
expense.
The Company’s newsprint expense in the second quarter of 2018
was $3.0 million, an improvement of 6.8 percent compared
to the second quarter of 2017, due to lower circulation volumes.
Newsprint consumption declined 15.3 percent to 5,014 metric
tons. Compared to the second quarter of 2017, newsprint cost per
metric ton increased 14.9 percent and the average purchase
price per metric ton for newsprint increased 20.3 percent.
Non-GAAP Financial Measures
Reconciliations of operating loss to adjusted operating income,
total net operating revenue to adjusted operating revenue and total
operating costs and expense to adjusted operating expense are
included in the exhibits to this release.
Financial Results Conference Call
A. H. Belo Corporation will conduct a conference call on
Thursday, August 9, 2018, 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 1-800-230-1085
(USA) or 612-234-9960 (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 August 9, 2018 until 11:59 p.m. CDT on
August 16, 2018. The access code for the replay is 452076.
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
SubsidiariesConsolidated Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
In thousands, except share and per share amounts
(unaudited) |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net Operating
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing services |
|
$ |
26,397 |
|
|
$ |
36,022 |
|
|
$ |
52,138 |
|
|
$ |
71,226 |
|
Circulation |
|
|
17,921 |
|
|
|
19,088 |
|
|
|
35,668 |
|
|
|
38,254 |
|
Printing,
distribution and other |
|
|
6,851 |
|
|
|
7,979 |
|
|
|
12,816 |
|
|
|
14,510 |
|
Total net
operating revenue |
|
|
51,169 |
|
|
|
63,089 |
|
|
|
100,622 |
|
|
|
123,990 |
|
Operating Costs
and Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee
compensation and benefits |
|
|
21,529 |
|
|
|
25,712 |
|
|
|
46,201 |
|
|
|
54,446 |
|
Other
production, distribution and operating costs |
|
|
22,833 |
|
|
|
29,736 |
|
|
|
45,847 |
|
|
|
58,062 |
|
Newsprint, ink and other supplies |
|
|
5,461 |
|
|
|
5,993 |
|
|
|
10,772 |
|
|
|
11,894 |
|
Depreciation |
|
|
2,535 |
|
|
|
2,727 |
|
|
|
5,008 |
|
|
|
5,233 |
|
Amortization |
|
|
200 |
|
|
|
199 |
|
|
|
400 |
|
|
|
399 |
|
Asset
impairments |
|
|
(22 |
) |
|
|
— |
|
|
|
(22 |
) |
|
|
228 |
|
Total
operating costs and expense |
|
|
52,536 |
|
|
|
64,367 |
|
|
|
108,206 |
|
|
|
130,262 |
|
Operating
loss |
|
|
(1,367 |
) |
|
|
(1,278 |
) |
|
|
(7,584 |
) |
|
|
(6,272 |
) |
Other
income, net |
|
|
891 |
|
|
|
766 |
|
|
|
1,779 |
|
|
|
1,288 |
|
Loss Before
Income Taxes |
|
|
(476 |
) |
|
|
(512 |
) |
|
|
(5,805 |
) |
|
|
(4,984 |
) |
Income
tax provision (benefit) |
|
|
58 |
|
|
|
293 |
|
|
|
(1,257 |
) |
|
|
251 |
|
Net
Loss |
|
$ |
(534 |
) |
|
$ |
(805 |
) |
|
$ |
(4,548 |
) |
|
$ |
(5,235 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
Basis |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.24 |
) |
Number of
common shares used in the per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
21,738,545 |
|
|
|
21,743,390 |
|
|
|
21,756,678 |
|
|
|
21,717,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. H. Belo Corporation and
SubsidiariesConsolidated Balance
Sheets
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
In thousands (unaudited) |
|
2018 |
|
2017 |
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
56,751 |
|
$ |
57,660 |
Accounts
receivable, net |
|
|
19,931 |
|
|
26,740 |
Assets
held for sale |
|
|
1,089 |
|
|
1,089 |
Other
current assets |
|
|
14,616 |
|
|
16,905 |
Total
current assets |
|
|
92,387 |
|
|
102,394 |
Property,
plant and equipment, net |
|
|
29,239 |
|
|
31,706 |
Intangible assets, net |
|
|
3,673 |
|
|
4,073 |
Goodwill |
|
|
13,973 |
|
|
13,973 |
Deferred
income taxes, net |
|
|
7,051 |
|
|
5,355 |
Other
assets |
|
|
4,311 |
|
|
5,347 |
Total
assets |
|
$ |
150,634 |
|
$ |
162,848 |
Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
7,254 |
|
$ |
10,303 |
Accrued
compensation and other current liabilities |
|
|
13,133 |
|
|
12,518 |
Advance
subscription payments |
|
|
11,525 |
|
|
11,670 |
Total
current liabilities |
|
|
31,912 |
|
|
34,491 |
Long-term
pension liabilities |
|
|
20,844 |
|
|
23,038 |
Other
liabilities |
|
|
8,081 |
|
|
7,620 |
Total
liabilities |
|
|
60,837 |
|
|
65,149 |
Total
shareholders' equity |
|
|
89,797 |
|
|
97,699 |
Total liabilities and shareholders’ equity |
|
$ |
150,634 |
|
$ |
162,848 |
|
A. H. Belo Corporation - Non-GAAP Financial
MeasuresReconciliation of Operating Loss to
Adjusted Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
In thousands (unaudited) |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Total net
operating revenue |
|
$ |
51,169 |
|
|
$ |
63,089 |
|
|
$ |
100,622 |
|
|
$ |
123,990 |
|
Total
operating costs and expense |
|
|
52,536 |
|
|
|
64,367 |
|
|
|
108,206 |
|
|
|
130,262 |
|
Operating
Loss |
|
$ |
(1,367 |
) |
|
$ |
(1,278 |
) |
|
|
(7,584 |
) |
|
|
(6,272 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net
operating revenue |
|
$ |
51,169 |
|
|
$ |
63,089 |
|
|
|
100,622 |
|
|
|
123,990 |
|
Addback: |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising contra revenue |
|
|
2,906 |
|
|
|
— |
|
|
|
5,759 |
|
|
|
— |
|
Circulation contra revenue |
|
|
269 |
|
|
|
— |
|
|
|
527 |
|
|
|
— |
|
Adjusted
Operating Revenue |
|
$ |
54,344 |
|
|
$ |
63,089 |
|
|
$ |
106,908 |
|
|
$ |
123,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating costs and expense |
|
$ |
52,536 |
|
|
$ |
64,367 |
|
|
$ |
108,206 |
|
|
$ |
130,262 |
|
Addback: |
|
|
|
|
|
|
|
|
|
|
|
|
Advertising contra expense |
|
|
2,906 |
|
|
|
— |
|
|
|
5,759 |
|
|
|
— |
|
Circulation contra expense |
|
|
269 |
|
|
|
— |
|
|
|
527 |
|
|
|
— |
|
Pension
and post-employment benefit |
|
|
(931 |
) |
|
|
(859 |
) |
|
|
(1,861 |
) |
|
|
(1,718 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
2,535 |
|
|
|
2,727 |
|
|
|
5,008 |
|
|
|
5,233 |
|
Amortization |
|
|
200 |
|
|
|
199 |
|
|
|
400 |
|
|
|
399 |
|
Severance
expense |
|
|
411 |
|
|
|
277 |
|
|
|
534 |
|
|
|
644 |
|
Asset
impairments |
|
|
(22 |
) |
|
|
— |
|
|
|
(22 |
) |
|
|
228 |
|
Adjusted
Operating Expense |
|
$ |
51,656 |
|
|
$ |
60,305 |
|
|
$ |
106,711 |
|
|
$ |
122,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating revenue |
|
$ |
54,344 |
|
|
$ |
63,089 |
|
|
$ |
106,908 |
|
|
$ |
123,990 |
|
Adjusted
operating expense |
|
|
51,656 |
|
|
|
60,305 |
|
|
|
106,711 |
|
|
|
122,040 |
|
Adjusted
Operating Income |
|
$ |
2,688 |
|
|
$ |
2,784 |
|
|
$ |
197 |
|
|
$ |
1,950 |
|
|
The Company adopted the new revenue guidance (Topic 606) using
the modified retrospective approach as of January 1, 2018. Results
for reporting periods beginning after January 1, 2018, are
presented in accordance with the new guidance, while prior period
amounts are not restated. While the Company adjusts operating
revenue and expense, for comparative purposes, these adjustments
have no effect on adjusted operating income (loss). In addition,
the Company adopted the new retirement benefits guidance (Topic
715) as of January 1, 2018, which requires net periodic pension and
other post-employment expense (benefit) to be included in
non-operating income (expense). As a result of adopting this new
guidance, total operating costs and expense increased $931 and
$1,861 for the three and six months ended June 30, 2018,
respectively, and $859 and $1,718 for the three and six months
ended June 30, 2017, respectively.
The Company calculates adjusted operating income (loss) by
adjusting operating income (loss) to include pension and
post-employment benefit and exclude depreciation, amortization,
severance expense and asset impairments (“adjusted operating income
(loss)”). 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 (loss) is not a measure of financial performance
under generally accepted accounting principles (“GAAP”). Management
uses adjusted operating income (loss) 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 (loss) should not be considered in isolation or as
a substitute for net income (loss), 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 Murray214-977-8869
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