A.H. Belo Corporation (AHC)

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A.H. Belo Corporation (AHC)

Q4 2008 Earnings Call

February 17, 2009 1:30 pm ET


Maribel Correa – Director IR

Robert Decherd – President & CEO

Alison Engel – SVP & CFO

James Moroney – EVP

Skip Cass – EVP


Jim Rummel – Unspecified Analyst

Barry Lucas – Gabelli & Company
Jack Ripstein - Potrero Capital Research



Ladies and gentlemen, thank you for standing by and welcome to A.H. Belo Corporation’s fourth quarter and full year financial results conference call. (Operator’s instructions) I would now like to turn the conference over to our host, Ms. Maribel Correa, Director, Investor Relations; please go ahead.

Maribel Correa

Good afternoon and thank you for joining AHC’s fourth quarter and full year conference call. We issued a press release today announcing the company’s fourth quarter and full year 2008 financial results. This release has been posted on our web site at ahbelo.com. Robert Decherd, our Chief Executive Officer and Ali Engel, our Chief Financial Officer will lead today’s call. Executive Vice Presidents Jim Moroney and Skip Cass are available for Q and A.

Before we begin, let me note that our discussion will include forward-looking statements. Forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those statements. Additional information about these factors is detailed in the company’s press releases and publicly available filings with the FCC.

Also we mention non-GAAP financial measures during the conference call. AHC management believes that non-GAAP financial measures provide useful supplemental information to assist in determining performance comparison’s to our peers. Reconciliation to the most directly comparable financial measures presented in accordance with GAAP, are provided on our web site at ahbelo.com under the Investor Relations section.

I would like to now introduce Robert Decherd.

Robert Decherd

Thank you Maribel and good afternoon everyone, 2008 was a year full of change and challenges for the newspaper industry driven by the economic environment not seen in modern times. Despite these conditions the combined efforts of our corporate management team, operating company leadership and every AHC employee enabled A.H. Belo to make significant strides in expense management while increasing the reach of our products to advertisers.

Expense reductions enabled us to stabilize EBITDA and expanding the reach of AHC’s products allowed us to provide advertisers more options to influence valuable audiences as they adapted to changing consumer needs. We previously stated that our goal was to implement $50 million in expense reductions by the first quarter of 2009.

Excluding special items that include costs related to the 2008 voluntary severance program, reduction in force, and noncash future pension obligations, operating expense declined $45 million for the full year 2008 versus the prior year. We have streamlined the business and are now converting fixed costs to variable costs wherever possible.

A.H. Belo diversified its product offerings in 2008 with several niche products, in August The Dallas Morning News launched Briefing, a free home delivered condensed print news product that leverages existing resources and targets non-subscriber families who are interested in local news and information.

Briefing added $1.2 million in incremental revenue in the fourth quarter and $1.7 million for the full year 2008. Briefing’s lower then expected single-digit opt out rates are encouraging in the early going of this product launch. The Dallas Morning News uses [FD Lux] a high-end fashion and lifestyle publication experienced growth in the fourth quarter and for the full year of 2008.

Advertising revenue for FD Lux increased 15% in the fourth quarter and 16% for the full year. The Dallas Morning News tripled the distribution of its free Spanish language newspaper, Al Dia, on Wednesdays and Saturdays to increase effectiveness for preprint advertisers and we recently eliminated the other four publication days.

La Prensa, the equivalent of Al Dia in Riverside, experienced a revenue increase of 26% in the fourth quarter and 13% for the full year. During 2008 AHC added printing and/or distribution contracts in all three of its locations. We have print and/or distribution contracts with companies such as The New York Times, USA Today, and The Wall Street Journal. These contracts contributed more then $12 million in revenue in 2008.

AHC’s circulation revenue increased 12% in the fourth quarter and 9.5% for the full year compared to the prior year. The increase in circulation revenue in the fourth quarter is primarily due to home delivery price increases in Dallas. In 2008 single copy prices increased in all three properties. The Dallas Morning News increased the single copy price of its Monday through Saturday editions from $0.75 to $1.00 earlier this month and we continue to monitor both home delivery and single copy pricing as price elasticity studies will help us determine further price changes in 2009.

We continue to tighten the distribution footprints of our newspapers and improve circulation quality for our advertisers by reducing non-value added circulation like third party and bonus days. As of the September 2008 publishers statement, third party and bonus days accounted for only about one-half of one percent for both our weekday and Sunday circulation and we continue to reevaluate distribution footprints.

For example in Riverside, The Press-Enterprise eliminated distribution to Palm Springs in the second quarter which improved EBITDA performance by approximately $600,000 for 2008. The Dallas Morning News and The Fort Worth Star Telegram have entered into a joint distribution agreement as of September to maximize operating efficiencies and improve delivery time in certain parts of each newspapers’ distribution area.

Read the rest of this transcript for free on seekingalpha.com