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A. H. Belo Corp. Series A Reports Operating Results (10-Q)

November 03, 2010 | About:
10qk

10qk

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A. H. Belo Corp. Series A (AHC) filed Quarterly Report for the period ended 2010-09-30.

A. H. Belo Corp. Series A has a market cap of $144.9 million; its shares were traded at around $7.67 with a P/E ratio of 78.2 and P/S ratio of 0.3. AHC is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

For the three months ended September 30, 2010, when compared to the same period last year, the Companys operating costs and expenses decreased $28,227 or 19.6 percent due to decreases in all operating expense categories except newsprint, ink and other supplies. This decrease in operating expense reflects the Companys ongoing cost reduction and management strategy. Salaries, wages and employee benefits decreased $2,346 primarily due to lower headcount and decreased benefit costs attributable to favorable claims history, partially offset by incremental pension expense of $1,571 and incremental bonus expense of $1,089. Other production, distribution and operating costs decreased $5,640 primarily due to decreases in outside services of $3,387 related to termination of an

IT outsourcing contract, communications expense and other cost containment measures. Newsprint, ink and other supplies increased $978. This increase is related to an increase in newsprint consumed and cost per metric ton. During the three months ended September 30, 2010, the Companys publishing operations used approximately 17,544 metric tons of newsprint at an average cost of $578 per metric ton. Consumption of newsprint for the same period in 2009 was approximately 17,108, at an average cost per metric ton of $536 per ton. The increase in newsprint consumption is related to increased commercial printing contracts. Asset impairment decreased $19,143, reflecting the South Plant impairment recorded in 2009. Depreciation expense decreased $1,761 due to lower depreciable assets in service. Amortization expense decreased $315 due to the subscriber lists at The Dallas Morning News being fully amortized at December 31, 2009.

For the nine months ended September 30, 2010, when compared to the same period last year, the Companys operating costs and expenses decreased $141,677 or 27.9 percent due to decreases in all operating expense categories. Salaries, wages and employee benefits decreased $3,889 due to a decrease in headcount and decreases in salaries and benefits. Other production, distribution and operating costs decreased $19,311 primarily due to decreases in distribution expense, communications expense and bad debt expense and continued cost containment measures. The decrease in distribution expense is realization of the positive impact of from the Companys realignment of its distribution channel in 2009. Newsprint, ink and other supplies decreased $11,351. This decrease is related to a decrease in newsprint consumed and the price per metric ton. During the nine months ended September 30, 2010, the Companys publishing operations used approximately 50,571 metric tons of newsprint at an average cost of $550 per metric ton. Consumption of newsprint for the same period in 2009 was approximately 57,178, at an average cost of $656 per metric ton. Asset impairment decreased $101,827, reflecting goodwill impairment and impairment recorded on the South Plant recorded in 2009. Depreciation expense decreased $4,355 due to lower depreciable assets in service. Amortization expense decreased $944 due to the subscriber lists at The Dallas Morning News being fully amortized at December 31, 2009.

Other income, net increased $1,565 and $7,436 for the three and nine months ended September 30, 2010, respectively compared to the same periods in 2009. The increase for the three month period reflects a gain on sale of fixed assets of $1,169, including $1,357 related to the sale of the land adjacent to the North Plant. The increase for the three month period also reflects income of $645 from investments accounted for using the equity method of accounting. The increase for the nine month period reflects an increase in non-operating gain on sale of fixed assets of $6,454 including a gain recorded in June 2010 of approximately $5,373, related to the sale of a parking garage in Providence, Rhode Island. The increase for the nine month period also reflects income of $1,358 for the nine months ended September 30, 2010, from investments accounted for using the equity method of accounting. The increase for the nine months ended September 30, 2010 is partially offset by the effect of The Dallas Morning News receipt of a sales tax refund during the first nine months of 2009.

Net cash flows provided by investing activities were $2,082 for the nine months ended September 30, 2010 compared to net cash flows used for investing activities of $4,994 for the same period in 2009. Cash flows provided by investing activities for the nine months ended September 30, 2010, reflect the sale of property, plant and equipment totaling $9,728, including a parking garage in Providence, Rhode Island, 8.2 acres and a 32,682 square foot building located in Plano, Texas and 4.59 acres and a 76,345 square foot building located in Arlington, Texas. During the nine months ended September 30, 2010, the Company had capital expenditures of $6,479 compared to capital spending of $7,833 for the same period in 2009. The decrease in capital spending is primarily due to timing differences in spending between 2009 and 2010.

On December 3, 2009, the Company entered into the Second Amendment (Second Amendment) to the Amended and Restated Credit Agreement (the Amended and Restated Credit Agreement as so amended, the Credit Agreement). Among other matters, the Second Amendment to the Credit Agreement extended the maturity date of the credit facility from April 30, 2011 to September 30, 2012, reduced the total commitment amount from $50,000 to $25,000, and released certain real property securing the facility. The amended facility remains subject to a borrowing base. If borrowing capacity under the Credit Agreement becomes less than $17,500, then a fixed charge coverage ratio covenant of 1:1 will apply. The Second Amendment also makes certain minor administrative amendments to the Amended and Restated Pledge and Security Agreement dated as of January 30, 2009. The decrease in the Companys revolving credit facility from $50,000 to $25,000 was a decision made by management. Management concluded that based on estimated future borrowing needs, the cost of the revolving credit facility, and borrowing base availability, $25,000 was sufficient to meet the Companys borrowing needs. The borrowing base is calculated using eligible accounts receivable and inventory, as defined in the Credit Agreement. A decrease in the borrowing base could potentially limit the Companys borrowing capacity. At September 30, 2010, the Company had eligible collateral to secure the Credit Agreement of $33,321 resulting in a borrowing base of $25,000. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $19,147 of borrowing capacity available under the credit facility. At December 31, 2009, the Company had eligible collateral to secure the Credit Agreement of $44,202, resulting in a borrowing base of $25,000. When letters of credit and other required reserves

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