A.H. Belo Corporation (AHC)

AHC 
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A. H. Belo Corporation (AHC)

Q2 2008 Earnings Call Transcript

July 28, 2008 2:00 pm ET

Executives

Maribel Correa – Director, IR, Communications and Financial Planning and Analysis

Robert Decherd – Chairman, President and CEO

Ali Engel – SVP, CFO and Treasurer

Jim Moroney – EVP, A. H. Belo Corporation; Publisher and CEO, The Dallas Morning News

Analysts

Peter Appert – Goldman Sachs

David Cohen – Athena Capital Management

Barry Lucas – Gabelli & Company

Operator

Ladies and gentlemen, thank you for standing by. AH Belo Corporation welcomes you to the second quarter financial results conference call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session. The instructions will be given at that time. (Operator instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Ms. Maribel Correa, Director Investor Relations. Please go ahead.

Maribel Correa

Thank you, Lorrie. Good afternoon and thank you for joining AHC's second quarter conference call. We issued a press release today announcing the company's second quarter 2008 financial results. This release has been posted on our Web site at ahbelo.com. A letter to shareholders and a letter to colleagues were sent today by Robert Decherd and can be accessed at ahbelo.com/invest.

Please note that Briefing, a new product to be published by the Dallas Morning News, will be launched on August 27, rather than August 22. Robert Decherd, our Chief Executive Officer; and Ali Engel, our Chief Financial Officer, will lead today's call. Executive Vice President, Jim Moroney; and Skip Cass are available for Q&A.

Before we begin, let me note that our discussion will include forward looking statements. Forward looking statements are subject to risks, 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 release and publicly available filings with the SEC. Also we'll mention non-GAAP financial measures during this conference call. A.H. management believes that non-GAAP financial measures provide useful supplemental information to assist in determining performance comparisons to our peers. Reconciliations 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. A.H. Belo Corporation continues to make progress in evolving its business model and executing related strategies. For example, next month, we'll launch Briefing, a new product published by the Dallas Morning News that builds on AHC's strength of providing local news and information while leveraging existing news resources and assets. This niche product responds to the untapped needs of a younger demographic seeking a condensed print news format.

We used results from the Morning News' customer value management system along with advertiser input to create Briefing. As a result of this collaboration, Briefing has already closed more than a dozen multi week commitments from a diverse group of advertisers including some high profile retailers.

A.H. Belo's commitment to superior journalism while meeting changing consumer media habits is highlighted by dallasnews.com being recognized by the Radio-Television News Directors Association, with the 2008 National Edward R. Murrow award for best Web site non-broadcast affiliated. This accomplishment was made possible because of the morning news' ability to provide robust content drilled down to the community level and by aggressive use of locally shot and edited video.

Summarizing the comments of one Murrow award judge, "The depth of content and obvious connection to the communities it serves makes dallasnews.com valuable to its users."

AHC also continues to build partnerships that broaden and further diversify its revenue streams. The company recently entered into a multiyear agreement to resell ResponseLogix's Internet based lead management system to automotive advertisers, and we made a minority investment in ResponseLogix's Inc. The ResponseLogix technology allows AHC to provide meaningful solution to our automotive advertisers. This strategic investment can also provide financial opportunity to A. H. Belo as ResponseLogix grows.

While these and other initiatives broaden AHC's reach going forward, today we and all newspaper companies are encountering unprecedented cyclical and secular pressures. This macro economic and industry conditions are unlikely to improve substantially in the near term which make it necessary to realign AHC's expense structure to match revenue patterns.

I sent a letter today to AHC shareholders discussing current operating conditions and the restructuring of the company's newspaper operations. The restructuring further focuses AHC's newspapers while accelerating the allocation of resources to promising new products both in print and online. These initiatives are being undertaken after careful consideration of the positive impact on advertisers, consumers, our brand equity, and AHC's long term revenue generation strategy.

The Board of Directors and management committee, along with AHC's entire senior management team, believe that with these changes we're creating the solid foundation essential to A.H. Belo's future success. We have diverse markets, extensive local and national advertiser relationships and talented leaders and employees who will be even more focused on local content creation and sales.

As mentioned in my letter to shareholders, we plan to eliminate $50 million of ongoing costs by the end of the first quarter of 2009 exclusive of newsprint price fluctuations, while at the same time investing in revenue generating initiatives. Specific cost reductions include reducing operating unit FTEs by approximately 500 employees or 14% from July 2008 levels. This reduction is in addition to the approximately 170 FTEs already eliminated this year through attrition and disciplined hiring practices.

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