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A. H. Belo Corporation Announces Second Quarter 2019 Financial Results

1065 Days ago

DALLAS, July 29, 2019 (GLOBE NEWSWIRE) -- A. H. Belo Corporation (NYSE: AHC) today reported second quarter 2019 net income of $16.9 million, or $0.78 per fully diluted share. In the second quarter of 2018, the Company reported a net loss of $0.5 million, or $(0.03) per share. Second quarter 2019 net income was driven by $28.0 million in proceeds from the sale of real estate previously used as the Company’s headquarters, resulting in a pretax gain of $25.9 million which for tax purposes is fully offset by net operating loss carryforwards.

For the second quarter of 2019, on a non-GAAP basis, A. H. Belo reported operating income adjusted for certain items (“adjusted operating income”) of $0.2 million, a decline of $1.5 million, or 87.5 percent, from $1.8 million reported in the second quarter of 2018. The decline was primarily due to $1.9 million of expense related to a strategy review with an outside consulting firm.

On July 18, the Company established a single operations decision-making structure to include Belo + Company, beginning a leadership transition that results in Tim Storer, Belo + Company's president, assuming an advisory role at this time and departing A. H. Belo at the end of the year.

Robert W. Decherd, chairman, president and Chief Executive Officer, said, “The Company’s operating results in the second quarter are encouraging on several levels. The Dallas Morning News is finding its footing in pursuing its digital subscription objectives and is well along in its plan to launch a new website on the Arc platform in September. The creation of a single decision-making structure for all of the Company’s operations under Grant Moise, including digital marketing services, gives additional lift to these initiatives. I want to thank Tim Storer for everything he has done over the past five years to establish a dynamic digital marketing services capability for our Company and for the extraordinarily constructive role he has played on our Management Committee.

“The Board and I have worked closely with a leading global management consulting firm over the past year to deepen our understanding of A. H. Belo’s highest potential in the competitive digital media world that will define the Company’s future. I am optimistic that we are heading in the right direction and that over the course of the next several years, we can achieve a sustainable and profitable operating model that well serves shareholders, consumers of our content, and customers.”

Second Quarter Results

Total revenue for the second quarter of 2019 was $47.7 million, a decrease of $3.4 million, or 6.7 percent, when compared to the second quarter of 2018.

Revenue from advertising and marketing services, including print and digital revenues, was $25.9 million in the second quarter of 2019, a decrease of $0.5 million, or 1.8 percent, when compared to $26.4 million reported for the second quarter of 2018.

Circulation revenue was $17.0 million, a decrease of $0.9 million, or 5.1 percent, when compared to the second quarter of 2018. 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 26.3 percent, in digital-only subscription revenue.

Printing, distribution and other revenue decreased $2.0 million, or 29.9 percent, to $4.8 million, primarily due to a decrease of $1.5 million related to restructuring the Company’s brokered and commercial printing business in the first quarter of 2019, and a decrease of $0.6 million related to event sponsorships.

Total consolidated operating expense in the second quarter of 2019, on a GAAP basis, was $24.9 million, a decrease of $27.6 million or 52.5 percent, compared to the second quarter of 2018. Excluding the gain of $25.9 million from the real estate sale, the improvement was primarily due to decreases of $1.7 million in employee compensation and benefits expense and $1.4 million in newsprint, ink and other supplies expense, partially offset by an increase of $1.9 million of expense related to the consulting engagement.

In the second quarter of 2019, on a non-GAAP basis, total consolidated operating expense adjusted for certain items (“adjusted operating expense”) was $50.1 million, an improvement of $2.5 million, or 4.7 percent, compared to $52.6 million of adjusted operating expense in the second quarter of 2018. The improvement is primarily due to decreases in employee compensation and benefits expense and newsprint expense.

As of June 30, 2019, the Company had 879 employees, a decrease of 151 or 14.7 percent compared to the prior year period. Cash and cash equivalents were $52.0 million and the Company had no debt.

Non-GAAP Financial Measures

Reconciliations of operating income (loss) to adjusted operating income (loss), 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 Tuesday, July 30, 2019, 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 1-800-230-1093 (USA) or 612-288-0329 (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 July 30, 2019 until 11:59 p.m. CDT on August 6, 2019. The access code for the replay is 470064.

About A. H. Belo Corporation

A. H. Belo Corporation is the leading local news and information publishing company in Texas. The Company has 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 June 30,   Six Months Ended June 30,
In thousands, except share and per share amounts (unaudited)   2019     2018     2019     2018  
Net Operating Revenue:                        
Advertising and marketing services   $  25,920     $  26,397     $  49,961     $  52,138  
Circulation      17,013        17,921        34,286        35,668  
Printing, distribution and other      4,802        6,851        10,077        12,816  
Total net operating revenue      47,735        51,169        94,324        100,622  
Operating Costs and Expense:                        
Employee compensation and benefits      19,828        21,529        40,952        46,201  
Other production, distribution and operating costs      24,465        22,833        46,649        45,847  
Newsprint, ink and other supplies      4,022        5,461        8,769        10,772  
Depreciation      2,333        2,535        4,719        5,008  
Amortization      200        200        400        400  
Gain on sale of assets, net      (25,908 )      —        (25,908 )      —  
Asset impairments      —        (22 )      —        (22 )
Total operating costs and expense      24,940        52,536        75,581        108,206  
Operating income (loss)      22,795        (1,367 )      18,743        (7,584 )
Other income, net      1,161        891        2,058        1,779  
Income (Loss) Before Income Taxes      23,956        (476 )      20,801        (5,805 )
Income tax provision (benefit)      7,095        58        6,952        (1,257 )
Net Income (Loss)   $  16,861     $  (534 )   $  13,849     $  (4,548 )
Per Share Basis                        
Net income (loss)                        
Basic and diluted   $  0.78     $  (0.03 )   $  0.64     $  (0.21 )
Number of common shares used in the per share calculation:                        
Basic and diluted      21,525,971        21,738,545        21,578,014        21,756,678  

A. H. Belo Corporation and Subsidiaries
Consolidated Balance Sheets

    June 30,   December 31,
In thousands (unaudited)   2019   2018
Current assets:            
Cash and cash equivalents   $  52,017   $  55,313
Accounts receivable, net      20,468      22,057
Assets held for sale      —      1,089
Other current assets      9,262      8,935
Total current assets      81,747      87,394
Property, plant and equipment, net      21,996      26,261
Operating lease right-of-use assets (a)      22,222      —
Intangible assets, net      3,384      3,274
Goodwill      15,566      13,973
Deferred income taxes, net      —      6,417
Long-term note receivable (b)      22,400      —
Other assets      3,675      5,029
Total assets   $  170,990   $  142,348
Liabilities and Shareholders’ Equity            
Current liabilities:            
Accounts payable   $  6,062   $  6,334
Accrued compensation and other current liabilities      11,914      13,880
Advance subscription payments      12,844      11,449
Total current liabilities      30,820      31,663
Long-term pension liabilities      30,105      31,889
Long-term operating lease liabilities (a)      23,631      —
Other liabilities      5,837      8,210
Total liabilities      90,393      71,762
Total shareholders' equity      80,597      70,586
Total liabilities and shareholders’ equity   $  170,990   $  142,348

(a) The Company adopted the new lease guidance (Topic 842) using the modified retrospective approach as of January 1, 2019, which requires a right-of-use asset and a lease liability be recorded for substantially all leases. Prior periods were not restated.

(b) As a result of the real estate sale in the second quarter of 2019, the Company acquired a promissory note of $22.4 million.

A. H. Belo Corporation - Non-GAAP Financial Measures
Reconciliation of Operating Income (Loss) to Adjusted Operating Income (Loss)

    Three Months Ended June 30,   Six Months Ended June 30,
In thousands (unaudited)   2019     2018     2019     2018  
Total net operating revenue   $  47,735     $  51,169     $  94,324     $  100,622  
Total operating costs and expense      24,940        52,536        75,581        108,206  
Operating Income (Loss)   $  22,795     $  (1,367 )   $  18,743     $  (7,584 )
Total net operating revenue   $  47,735     $  51,169     $  94,324     $  100,622  
Advertising contra revenue      2,464        2,906        5,116        5,759  
Circulation contra revenue      145        269        320        527  
Adjusted Operating Revenue   $  50,344     $  54,344     $  99,760     $  106,908  
Total operating costs and expense   $  24,940     $  52,536     $  75,581     $  108,206  
Advertising contra expense      2,464        2,906        5,116        5,759  
Circulation contra expense      145        269        320        527  
Depreciation      2,333        2,535        4,719        5,008  
Amortization      200        200        400        400  
Severance expense      800        411        1,401        534  
Gain on sale of assets, net      (25,908 )      —        (25,908 )      —  
Asset impairments      —        (22 )      —        (22 )
Adjusted Operating Expense   $  50,124     $  52,587     $  100,405     $  108,572  
Adjusted operating revenue   $  50,344     $  54,344     $  99,760     $  106,908  
Adjusted operating expense      50,124        52,587        100,405        108,572  
Adjusted Operating Income (Loss)   $  220     $  1,757     $  (645 )   $  (1,664 )

The Company calculates adjusted operating income (loss) by adjusting operating income (loss) to exclude depreciation, amortization, severance expense, gain on sale of assets 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.

The Company adopted the new revenue guidance (Topic 606) using the modified retrospective approach as of January 1, 2018. While the Company adjusts operating revenue and expense for non-GAAP presentation, these adjustments have no effect on adjusted operating income (loss). Additionally, the Company adopted the new retirement benefits guidance (Topic 715) retrospectively 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 of January 1, 2019, the Company determined pension and post-employment expense (benefit) would no longer be an addback in the calculation of adjusted operating expense. As a result of this change, adjusted operating expense increased and adjusted operating income (loss) decreased $931 and $1,861 for the three and six months ended June 30, 2018, respectively.

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.

Katy Murray

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