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A. H. Belo Corp. Series A Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 14, 2009 06:18PM
A. H. Belo Corp. Series A (AHC) filed Quarterly Report for the period ended 2009-06-30. A. H. Belo Corporation headquartered in Dallas Texas is a distinguished newspaper publishing and local news and information company that owns and operates four daily newspapers and a diverse group of Web sites. . H. Belo publishes The Dallas Morning News Texas\' leading newspaper and winner of eight Pulitzer Prizes since 1986; The Providence Journal the oldest continuously-published daily newspaper in the U.S. and winner of four Pulitzer Prizes; The Press-Enterprise (Riverside CA) serving southern California\'s Inland Empire region and winner of one Pulitzer Prize; and the Denton Record-Chronicle. The Company publishes various specialty publications targeting niche audiences and its partnerships and/or investments include the Yahoo! Newspaper Consortium and Classified Ventures owner of cars.com. A. H. Belo also owns direct mail and commercial printing businesses. A. H. Belo Corp. Series A has a market cap of $53.8 million; its shares were traded at around $2.97 with and P/S ratio of 0.1.
Highlight of Business Operations:
The Companys operating costs and expenses decreased $35,314 or 21.1 percent, and increased $24,099 or 7.1 percent for the three and six months ended June 30, 2009, compared to the same period in the prior year. The decrease for the three months ended June 30, 2009 was due to decreases in all operating expense categories except asset impairment and the increase for the six months ended June 30, 2009 was due to the goodwill impairment charge recorded at The Providence Journal of $80,940 and asset impairment charge of $1,749, partially offset by decreases in all other operating expense categories. The decrease in salaries, wages and employee benefits of $17,120 and $28,491 is the result of the restructuring initiatives undertaken during 2008 and the first quarter of 2009 that included headcount reductions. Other production, distribution and operation costs decreased $10,081 and $15,180 for the three and six months ended June 30, 2009, respectively, when compared to the same period in 2008. This decrease is related to decreases in distribution expense, outside services and outside solicitation expense. Newsprint, ink and other supplies decreased $7,313 and $10,664 for the
three and six months ended June 30, 2009, respectively, when compared to the same period in 2008. This decrease is related to a decrease in newsprint consumed. During the three and six months ended June 30, 2009, the Companys publishing operations used approximately 17,373 and 38,460 metric tons of newsprint, respectively, at an average cost of $738 and $737 per ton, respectively. Consumption of newsprint for the same period in 2008 was approximately 28,964 and 59,099 metric tons, respectively, at an average cost of $684 and $650 per metric ton, respectively. Depreciation expense decreased $2,549 and $4,254 for the three and six months ended June 30, 2009, respectively, when compared to the same period in 2008. This decrease is primarily due to lower depreciable assets in service.
Other income, net decreased $1,007 and $1,142 for the three and six months ended June 30, 2009 compared to the same period in 2008. This is primarily related to a write down of investments for $500 and $1,000 and increased losses from partnership investments, which is partially offset by a decrease in share-based compensation for A. H. Belo employees holding Belo RSUs.
Income tax expense increased approximately $2,304 and $8,179 for the three and six months ended June 30, 2009 compared to the same period in 2008. The tax expense for the three and six months ended June 30, 2009, is primarily attributable to tax expense incurred related to the Texas margins tax and Rhode Island state income tax. Net operating losses can be carried forward to offset future taxable income. The Companys net operating loss carry forwards will begin to expire in the years 2029 and 2030 if not utilized. Statement of Financial Accounting Standards (SFAS) 109 Accounting for Income Taxes, places a threshold for recognition of deferred tax assets. Based on the criteria established by SFAS 109, the Company established a valuation allowance against the deferred tax assets originating in the three and six months ended June 30, 2009, as it is more likely than not that the benefit resulting from these net operating loss carry forwards will not be realized. The factors used to assess the likelihood of realization of the deferred tax asset include reversal of future deferred tax liabilities, available tax planning strategies, and future taxable income. Any reversal relating to the valuation allowance will be recorded as a reduction of income tax expense.
Net cash flows used for investing activities were $2,607 for the six months ended June 30, 2009 compared to $8,495 for the same period in 2008. The decrease reflects capital spending of $4,796 for the first six months of 2009 compared to $8,808 during the same period of 2008. This decrease in capital spending is primarily due to lower capital expenditures, as part the Companys overall cost reduction initiatives and cash management program. Investing activates also include proceeds received from the sale of real property and capital distributions from two investments.
On January 30, 2009, the Company entered into an amendment and restatement of its existing Credit Agreement dated as of February 4, 2008 with JP Morgan Chase Bank, N.A., J.P. Morgan Securities Inc., Banc of America Securities LLC, Bank of America, N.A. and certain other lenders party thereto (the Amended and Restated Credit Agreement). The Amended and Restated Credit Agreement was effective as of January 30, 2009 and matures April 30, 2011. The Amended and Restated Credit Agreement provides for a $50,000 working capital facility that is subject to a borrowing base. Among other matters, the Amended and Restated Credit Agreement creates an asset-based revolving credit facility secured by the Companys accounts receivable, inventory, specified real property and other assets; sets pricing at LIBOR plus 375 basis points; establishes minimum quarterly adjusted EBITDA covenant requirements in 2009; establishes a fixed charge coverage ratio in 2010 of 1.0 to 1.0; allows capital expenditures and investments of up to $16,000 per year in total; allows the Company to pay dividends when the Companys fixed charge coverage ratio exceeds 1.2 to 1.0 and the aggregate availability under the credit facility exceeds $15,000; and contains other covenants and restrictions, including those which have limitations on indebtedness, liens, and asset sales. Adjusted EBITDA means, for any period, net income for such period plus (a) without duplication and to the extent deducted in determining net income for such period, the sum of (i) interest expense for such period, (ii) income tax expense for such period, (iii) all amounts attributable to depreciation and amortization expense for such period, (iv) any extraordinary or non-recurring non-cash charges or expenses for such period, (v) any other non-cash charges for such period including, without limitation, any non-cash stock-based compensation expenses for such period, and (vi) restructuring costs in an amount not to exceed $10,000 minus (b) without duplication and to the extent included in net income, (i) any cash payments made during such period in respect of non-cash charges described in clause (a)(v) taken in a prior period and (ii) any extraordinary gains and any non-cash items of income for such period, all calculated for the Company and its subsidiaries on a consolidated basis in accordance with GAAP. In connection with the Amended and Restated Credit Agreement, the Company and each of specified subsidiaries entered into an Amended and Restated Pledge and Security Agreement granting a security interest in all personal property and other assets now owned or thereafter acquired. In addition, the Amended and Restated Credit Agreement requires certain of the Companys subsidiaries to enter into mortgages or deeds of trust granting liens on certain specified real property.
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