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A. H. Belo Corporation Announces Fourth Quarter and Full Year 2018 Financial Results

DALLAS, March 08, 2019 (GLOBE NEWSWIRE) -- A. H. Belo Corporation (AHC) today reported fourth quarter 2018 net income of $0.2 million, or $0.01 per fully diluted share. In the fourth quarter of 2017, the Company reported net income of $12.8 million, or $0.58 per fully diluted share, primarily driven by the sale of real estate.

For the fourth quarter of 2018, on a non-GAAP basis, A. H. Belo reported operating income adjusted for certain items (“adjusted operating income”) of $2.6 million, a decrease of $2.9 million, or 52.6 percent, when compared to adjusted operating income of $5.5 million reported for the fourth quarter of 2017.

For the full year 2018, the Company reported a net loss of $5.4 million, or $(0.26) per share. For the full year 2017, the Company reported net income of $10.2 million, or $0.46 per fully diluted share. Full year 2017 income was driven by the sale of real estate.

For the full year 2018, on a non-GAAP basis, the Company reported adjusted operating income of $5.4 million, a decrease of $6.3 million, or 53.9 percent, compared to adjusted operating income of $11.7 million reported for the full year 2017.

Robert W. Decherd, chairman, president and Chief Executive Officer, said, “2018 was a challenging year for newspapers across the country as print advertising declined steeply across all categories. The Dallas Morning News felt this impact beginning early in the first quarter. Meanwhile, the loss of three key accounts at the end of 2017 interrupted revenue growth at Belo + Company until the fourth quarter, when new business filled the gaps and momentum was reestablished.

“The Board and Management Committee devoted the last half of 2018 to addressing the secular changes in the newspaper business and ensuring that Belo + Company has the resources needed to grow consistently over time. This work continues in 2019. Several specific actions have been taken, including a significant product repositioning at The Dallas Morning News; a shift of internal resources at The News to support a range of subscriber initiatives; enhancements to The News’ commercial printing business; refinements to Belo + Company’s sales organization and expansion of creative services capabilities; and, streamlining of the corporate and operating unit financial organization.

“2019 is off to a good start across the Company and we are encouraged that the efforts undertaken over the past year will yield important benefits. The implementation of the Arc platform at The Dallas Morning News in the third quarter of 2019 will be the culmination of work throughout the newspaper to launch a new digital product design that complements changes made to the print product in January 2019, further emphasizing the importance of subscriber revenue.

“The Company’s balance sheet continues to be an advantage in many ways and we are fully re-engaged in the process of monetizing the former headquarters campus in downtown Dallas.”

Full Year Results

Total revenue was $202.3 million for the full year of 2018, a decrease of $46.3 million, or 18.6 percent, when compared to the prior year period.

Revenue from advertising and marketing services, including print and digital revenues, was $105.4 million in 2018, a decrease of $37.8 million, or 26.4 percent, when compared to the $143.2 million reported for the full year of 2017. The Company adopted the new revenue standard (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 $11.7 million for the year ended December 31, 2018, with the offsetting change recorded as a reduction to operating expense.

Circulation revenue was $71.9 million, a decrease of $5.0 million, or 6.5 percent, when compared to the prior year period, primarily due to lower home delivery and single copy volumes, partially offset by rate increases and an increase of $1.2 million, or 42.9 percent, in digital-only subscription revenue. Circulation revenue was also affected by the adoption of the new revenue guidance, including a decline of $1.0 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; under the new guidance, revenue is directly reduced.

Printing, distribution and other revenue decreased $3.6 million, or 12.5 percent, to $24.9 million for the full year of 2018, primarily due to a decrease in commercial printing revenue of $1.4 million and a decrease of $1.9 million in event-related and other revenue.

Total consolidated operating expense for the full year of 2018, on a GAAP basis, was $212.2 million, a decrease of $44.0 million, or 17.2 percent, compared to full year 2017. Excluding the expense decrease related to the adoption of the new revenue guidance, consolidated operating expense decreased $31.3 million, or 12.2 percent, when compared to the prior year period, primarily due to expense reductions in employee compensation and benefits of $14.2 million, $6.1 million in distribution, $3.4 million in revenue-related expenses, $1.9 million in advertising and promotion, $1.5 million in newsprint, ink, and other supplies, and $1.1 million in temporary services. In addition, in 2017 the Company recorded asset impairment charges of $3.3 million.

For the full year 2018, on a non-GAAP basis, total consolidated operating expense adjusted for certain items (“adjusted operating expense”) was $209.6 million, a decrease of $27.3 million, or 11.5 percent, compared to $237.0 million of adjusted operating expense reported for full year 2017. The decrease in adjusted operating expense is a result of the Company’s continued focus on operating efficiency, which was reflected by the expense reductions in employee compensation and benefits, distribution, advertising and promotion, newsprint and temporary services.

As of December 31, 2018, the Company had 982 employees, a decrease of 108, or 9.9 percent, compared to the prior year period. Cash and cash equivalents were $55.3 million and the Company had no debt.

Fourth Quarter Results

Total revenue was $52.6 million in the fourth quarter of 2018, a decrease of $11.5 million, or 17.9 percent, when compared to the fourth quarter of 2017.

Revenue from advertising and marketing services, including print and digital revenues, was $28.0 million in the fourth quarter of 2018, a decrease of $9.1 million, or 24.5 percent, when compared to the $37.1 million reported for the fourth quarter of 2017. As a result of adopting the new revenue guidance, advertising and marketing services revenue was reduced by $2.9 million for the three months ended December 31, 2018, with the offsetting change recorded as a reduction to operating expense.

Circulation revenue was $18.4 million, a decrease of $1.4 million, or 7.2 percent, when compared to the fourth quarter of 2017. The decline was primarily due to a decrease in home delivery and single copy volumes, partially offset by rate increases and an increase of $0.3 million, or 36.7 percent, in digital-only subscription revenue. Circulation revenue was also affected by the adoption of the new revenue guidance, including a decline of $0.2 million related to the grace period for home delivery subscriptions.

Printing, distribution and other revenue decreased $0.9 million, or 12.8 percent, to $6.2 million, primarily due to decreases of $0.3 million in commercial printing revenue and $0.6 million in event-related and other revenue.

Total consolidated operating expense in the fourth quarter of 2018, on a GAAP basis, was $53.6 million, a decrease of $11.8 million, or 18.0 percent, compared to the fourth quarter of 2017. Excluding the expense decrease related to the adoption of the new revenue guidance, consolidated operating expense decreased $8.6 million, or 13.2 percent, when compared to the prior year period. The improvement was primarily due to decreases of $2.5 million in employee compensation and benefits expense, $1.2 million in distribution expense, $0.6 million in revenue-related expenses, $0.3 million in temporary services expense, and $0.3 million in newsprint, ink and other supplies expense. In addition, in the fourth quarter of 2017 the Company recorded an asset impairment charge of $3.1 million.

In the fourth quarter of 2018, on a non-GAAP basis, adjusted operating expense was $53.2 million, an improvement of $5.4 million, or 9.2 percent, compared to $58.6 million of adjusted operating expense reported in the fourth quarter of 2017. The improvement is primarily due to expense decreases in employee compensation and benefits, distribution, revenue-related expenses, temporary services, newsprint, and reductions from continued management of discretionary spending.

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 Friday, March 8, 2019, at 10:00 a.m. CST 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 1-800-230-1059 (USA) or 612-234-9960 (International). A replay line will be available at 1-800-475-6701 (USA) or 320-365-3844 (International) from 12:00 p.m. CST on March 8, 2019 until 11:59 p.m. CDT on March 15, 2019. The access code for the replay is 464458.

About A. H. Belo Corporation

A. H. Belo Corporation is the leading local news and information publishing company in Texas with commercial printing, distribution and direct mail capabilities, as well as a presence in emerging media and digital marketing. While focusing on extending the Company’s media platforms, A. H. Belo delivers news and information in innovative ways to a broad range 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
Consolidated Statements of Operations
                         
    Three Months Ended December 31,   Twelve Months Ended December 31,
In thousands, except share and per share amounts (unaudited)   2018
  2017
  2018
  2017
Net Operating Revenue:                        
Advertising and marketing services   $ 28,030     $ 37,146     $ 105,428     $ 143,247  
Circulation     18,355       19,785       71,919       76,884  
Printing, distribution and other     6,228       7,146       24,940       28,495  
Total net operating revenue     52,613       64,077       202,287       248,626  
Operating Costs and Expense:                        
Employee compensation and benefits     21,929       24,407       89,304       103,495  
Other production, distribution and operating costs     23,381       29,072       90,167       114,594  
Newsprint, ink and other supplies     5,726       6,019       22,026       23,561  
Depreciation     2,380       2,575       9,902       10,415  
Amortization     200       200       799       799  
Asset impairments           3,116       (22 )     3,344  
Total operating costs and expense     53,616       65,389       212,176       256,208  
Operating loss     (1,003 )     (1,312 )     (9,889 )     (7,582 )
Other income, net     1,250       7,607       3,891       11,483  
Income (Loss) Before Income Taxes     247       6,295       (5,998 )     3,901  
Income tax provision (benefit)     96       (6,521 )     (565 )     (6,260 )
Net Income (Loss)   $ 151     $ 12,816     $ (5,433 )   $ 10,161  
                         
Per Share Basis                        
Net income (loss)                        
Basic and diluted   $ 0.01     $ 0.58     $ (0.26 )   $ 0.46  
Number of common shares used in the per share calculation:                        
Basic     21,661,199       21,740,374       21,747,633       21,721,497  
Diluted     21,661,843       21,741,814       21,747,633       21,723,002  


A. H. Belo Corporation and Subsidiaries
Consolidated Balance Sheets
                 
    December 31,   December 31,
In thousands (unaudited)   2018   2017
Assets                
Current assets:                
Cash and cash equivalents   $ 55,313     $ 57,660  
Accounts receivable, net     22,057       26,740  
Assets held for sale     1,089       1,089  
Other current assets     8,935       16,905  
Total current assets     87,394       102,394  
Property, plant and equipment, net     26,261       31,706  
Intangible assets, net     3,274       4,073  
Goodwill     13,973       13,973  
Deferred income taxes, net     6,417       5,355  
Other assets     5,029       5,347  
Total assets   $ 142,348     $ 162,848  
Liabilities and Shareholders’ Equity                
Current liabilities:                
Accounts payable   $ 6,334     $ 10,303  
Accrued compensation and other current liabilities     13,880       12,518  
Advance subscription payments     11,449       11,670  
Total current liabilities     31,663       34,491  
Long-term pension liabilities     31,889       23,038  
Other liabilities     8,210       7,620  
Total liabilities     71,762       65,149  
Total shareholders' equity     70,586       97,699  
    Total liabilities and shareholders’ equity   $ 142,348     $ 162,848  


A. H. Belo Corporation - Non-GAAP Financial Measures
Reconciliation of Operating Loss to Adjusted Operating Income
                         
    Three Months Ended December 31,   Twelve Months Ended December 31,
In thousands (unaudited)   2018
  2017
  2018
  2017
Total net operating revenue   $ 52,613     $ 64,077     $ 202,287     $ 248,626  
Total operating costs and expense     53,616       65,389       212,176       256,208  
Operating Loss   $  (1,003 )   $  (1,312 )   $  (9,889 )   $  (7,582 )
                         
Total net operating revenue   $ 52,613     $ 64,077     $ 202,287     $ 248,626  
Addback:                        
Advertising contra revenue     2,943             11,720        
Circulation contra revenue     217             1,006        
Adjusted Operating Revenue   $  55,773     $  64,077     $  215,013     $  248,626  
                         
Total operating costs and expense   $ 53,616     $ 65,389     $ 212,176     $ 256,208  
Addback:                        
Advertising contra expense     2,943             11,720        
Circulation contra expense     217             1,006        
Pension and post-employment expense (benefit)     (1,027 )     (862 )     (3,818 )     2,471  
Less:                        
Depreciation     2,380       2,575       9,902       10,415  
Amortization     200       200       799       799  
Severance expense     17       84       773       1,259  
Pension plan settlement loss                       5,911  
Asset impairments           3,116       (22 )     3,344  
Adjusted Operating Expense   $  53,152     $  58,552     $  209,632     $  236,951  
                         
Adjusted operating revenue   $ 55,773     $ 64,077     $ 215,013     $ 248,626  
Adjusted operating expense     53,152       58,552       209,632       236,951  
Adjusted Operating Income   $  2,621     $  5,525     $  5,381     $  11,675  
 

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 guidance, total operating costs and expense increased $1,027 and $3,818 for the three and twelve months ended December 31, 2018, respectively. For the three months ended December 31, 2017, total operating costs and expense increased $862 and for the twelve months ended December 31, 2017, expense decreased $2,471. In the third quarter of 2017, the Company completed a de-risking transaction to reduce the Company’s pension liability, which resulted in a charge to pension expense of $5,911.

The Company calculates adjusted operating income (loss) by adjusting operating income (loss) to include pension and post-employment expense (benefit) and exclude depreciation, amortization, severance expense, pension plan settlement loss, 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 versus 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 Murray
214-977-8869