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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2021

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file no. 1-33741

A. H. Belo Corporation

(Exact name of registrant as specified in its charter)

Texas

 

38-3765318

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

P. O. Box 224866, Dallas, Texas 75222-4866

 

(214977-7342

(Address of principal executive offices, including zip code)

 

(Registrant’s telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report.

None

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Series A Common Stock, $0.01 par value

AHC

New York Stock Exchange

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ     No ¨ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes þ     No ¨ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer:  ¨

Accelerated Filer:  ¨

Non-Accelerated Filer:  þ

Smaller Reporting Company:  þ

Emerging Growth Company  ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).      Yes ¨     No þ

Shares of Common Stock outstanding at April 22, 2021: 21,410,423 shares (consisting of 18,941,420 shares of Series A Common Stock and 2,469,003 shares of Series B Common Stock).


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A. H. BELO CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

 

Page

PART I

Item 1.

Financial Information

 

PAGE 3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

PAGE 17

Item 4.

Controls and Procedures

 

PAGE 25

 

 

 

 

PART II 

 

 

Item 1.

Legal Proceedings

 

PAGE 26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

PAGE 26

Item 3.

Defaults Upon Senior Securities

 

PAGE 26

Item 4.

Mine Safety Disclosures

 

PAGE 26

Item 5.

Other Information

 

PAGE 26

Item 6.

Exhibits

 

PAGE 27

Signatures

 

PAGE 30

Exhibit Index

 

PAGE 31

A. H. Belo Corporation First Quarter 2021 on Form 10-Q


Table of Contents

PART I

Item 1. Financial Information

A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Operations

Three Months Ended March 31,

In thousands, except share and per share amounts (unaudited)

2021

2020

Net Operating Revenue:

Advertising and marketing services

$

16,769

$

19,327

Circulation

16,022

16,414

Printing, distribution and other

4,024

4,602

Total net operating revenue

36,815

40,343

Operating Costs and Expense:

Employee compensation and benefits

17,947

19,016

Other production, distribution and operating costs

19,090

20,992

Newsprint, ink and other supplies

2,341

3,271

Depreciation

1,074

1,765

Amortization

64

64

Gain on sale/disposal of assets, net

(1)

(5)

Total operating costs and expense

40,515

45,103

Operating loss

(3,700)

(4,760)

Other income, net

1,254

1,352

Loss Before Income Taxes

(2,446)

(3,408)

Income tax provision (benefit)

319

(1,787)

Net Loss

$

(2,765)

$

(1,621)

Per Share Basis

Net loss

Basic and diluted

$

(0.13)

$

(0.08)

Number of common shares used in the per share calculation:

Basic and diluted

21,410,423

21,410,423

See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation First Quarter 2021 on Form 10-Q 3


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A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

In thousands (unaudited)

2021

2020

Net Loss

$

(2,765)

$

(1,621)

Other Comprehensive Income, Net of Tax:

Amortization of actuarial losses

360

219

Total other comprehensive income, net of tax

360

219

Total Comprehensive Loss

$

(2,405)

$

(1,402)

See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation First Quarter 2021 on Form 10-Q 4


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A. H. Belo Corporation and Subsidiaries

Consolidated Balance Sheets

  

March 31,

December 31,

In thousands, except share amounts (unaudited)

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

38,132

$

42,015

Accounts receivable (net of allowance of $863 and $712 at March 31, 2021

and December 31, 2020, respectively)

15,503

16,562

Notes receivable

22,775

22,775

Inventories

2,366

1,974

Prepaids and other current assets

6,312

4,780

Total current assets

85,088

88,106

Property, plant and equipment, at cost

312,578

312,532

Less accumulated depreciation

(301,646)

(300,573)

Property, plant and equipment, net

10,932

11,959

Operating lease right-of-use assets

19,764

20,406

Intangible assets, net

64

Deferred income taxes, net

91

76

Other assets

2,213

2,604

Total assets

$

118,088

$

123,215

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

7,381

$

7,759

Accrued compensation and benefits

5,557

5,754

Other accrued expense

4,967

5,075

Contract liabilities

13,760

12,896

Total current liabilities

31,665

31,484

Long-term pension liabilities

17,119

18,520

Long-term operating lease liabilities

21,216

21,890

Other post-employment benefits

1,360

1,372

Other liabilities

3,581

3,541

Total liabilities

74,941

76,807

Shareholders’ equity:

Preferred stock, $0.01 par value; Authorized 2,000,000 shares; none issued

Common stock, $0.01 par value; Authorized 125,000,000 shares

Series A: issued 20,855,280 and 20,855,200 shares at March 31, 2021

and December 31, 2020, respectively

209

209

Series B: issued 2,469,003 and 2,469,083 shares at March 31, 2021

and December 31, 2020, respectively

24

24

Treasury stock, Series A, at cost; 1,913,860 shares held at March 31, 2021 and December 31, 2020

(13,443)

(13,443)

Additional paid-in capital

494,389

494,389

Accumulated other comprehensive loss

(32,108)

(32,468)

Accumulated deficit

(405,924)

(402,303)

Total shareholders’ equity

43,147

46,408

Total liabilities and shareholders’ equity

$

118,088

$

123,215

See the accompanying Notes to the Consolidated Financial Statements.


A. H. Belo Corporation First Quarter 2021 on Form 10-Q 5


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A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Three Months Ended March 31, 2021 and 2020

Common Stock

Treasury Stock

In thousands, except share amounts (unaudited)

Shares
Series A

Shares
Series B

Amount

Additional
Paid-in
Capital

Shares
Series A

Amount

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit

Total

Balance at December 31, 2019

20,854,975 

2,469,308 

$

233 

$

494,389 

(1,913,860)

$

(13,443)

$

(32,294)

$

(391,148)

$

57,737 

Net loss

(1,621)

(1,621)

Other comprehensive income

219 

219 

Conversion of Series B to Series A

225 

(225)

Dividends declared ($0.08 per share)

(1,713)

(1,713)

Balance at March 31, 2020

20,855,200 

2,469,083 

$

233 

$

494,389 

(1,913,860)

$

(13,443)

$

(32,075)

$

(394,482)

$

54,622 

Balance at December 31, 2020

20,855,200 

2,469,083 

233 

494,389 

(1,913,860)

(13,443)

(32,468)

(402,303)

46,408 

Net loss

(2,765)

(2,765)

Other comprehensive income

360 

360 

Conversion of Series B to Series A

80 

(80)

Dividends declared ($0.04 per share)

(856)

(856)

Balance at March 31, 2021

20,855,280 

2,469,003 

$

233 

$

494,389 

(1,913,860)

$

(13,443)

$

(32,108)

$

(405,924)

$

43,147 

See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation First Quarter 2021 on Form 10-Q 6


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A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31,

In thousands (unaudited)

2021

2020

Operating Activities

Net loss

$

(2,765)

$

(1,621)

Adjustments to reconcile net loss to net cash used for operating activities:

Depreciation and amortization

1,138

1,829

Net periodic pension and other post-employment benefit

(1,035)

(1,154)

Bad debt expense

211

296

Deferred income taxes

(15)

14

Gain on sale/disposal of assets, net

(1)

(5)

Loss on investment related activity

18

Changes in working capital and other operating assets and liabilities:

Accounts receivable

848

3,199

Inventories, prepaids and other current assets

(1,924)

(4,189)

Other assets

391

(1)

Accounts payable

(378)

(1,114)

Compensation and benefit obligations

(197)

(2,112)

Other accrued expenses

16

78

Contract liabilities

864

2,185

Other post-employment benefits

(18)

(17)

Net cash used for operating activities

(2,865)

(2,594)

Investing Activities

Purchases of assets

(163)

(390)

Sales of assets

1

5

Net cash used for investing activities

(162)

(385)

Financing Activities

Dividends paid

(856)

(1,713)

Net cash used for financing activities

(856)

(1,713)

Net decrease in cash and cash equivalents

(3,883)

(4,692)

Cash and cash equivalents, beginning of period

42,015

48,626

Cash and cash equivalents, end of period

$

38,132

$

43,934

Supplemental Disclosures

Income tax paid, net

$

8

$

5

Noncash investing and financing activities:

Dividends payable

856

1,713

See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation First Quarter 2021 on Form 10-Q 7


Table of Contents

A. H. Belo Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

 

Note 1: Basis of Presentation and Recently Issued Accounting Standards

Description of Business.    A. H. Belo Corporation and subsidiaries are referred to collectively herein as “A. H. Belo” or the “Company.” The Company, headquartered in Dallas, Texas, is the leading local news and information publishing company in Texas. The Company has a growing presence in emerging media and digital marketing, and maintains capabilities related to commercial printing, distribution and direct mail. A. H. Belo delivers news and information in innovative ways to a broad range of audiences with diverse interests and lifestyles.

The Company publishes The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes, and various niche publications targeting specific audiences. Its newspaper operations also provide commercial printing and distribution services to several large national newspapers. In addition, the Company has the capabilities of a full-service strategy, creative and media agency that focuses on strategic and digital marketing, and data intelligence that provide a measurable return on investment to its clients.

COVID-19 Pandemic.    Currently, the rapid spread of coronavirus (COVID-19 pandemic) globally has resulted in increased travel restrictions, and disruption and shutdown of businesses. The outbreak and any preventative or protective actions that the Company has taken and may continue to take, or may be imposed on the Company by governmental intervention, in respect of the pandemic may result in a period of disruption to the Company’s financial reporting capabilities, its printing operations, and its operations generally. COVID-19 is impacting, and may continue to impact, the Company’s customers, distribution partners, advertisers, production facilities, and third parties, and could result in additional loss of advertising revenue or supply chain disruption. The Company has been following the recommendations of local government and health authorities to minimize exposure risk for employees, including the temporary closure of some of the Company’s offices and having employees work remotely. Employees, including financial reporting staff, have been working remotely since on or about March 10, 2020, even as the stay-at-home orders were lifted in Texas. If the pandemic were to affect a significant number of the workforce employed in printing operations, the Company may experience delays or be unable to produce, print and deliver its publications and other third-party print publications on a timely basis. The extent to which the coronavirus impacts the Company’s results will depend on future developments, which are highly uncertain and include the actions taken by governments and private businesses to contain the coronavirus. The coronavirus is likely to continue to have an adverse impact on the Company’s business, results of operations and financial condition at least for the near term.

Media was designated an essential business, therefore the Company’s operations have continued throughout the pandemic. The Company is experiencing an increase in digital subscriptions, which currently does not offset the loss of advertising revenue. On April 6, 2020, the Company announced that it was taking several actions in response to the financial impact of COVID-19. The Company reduced operating and capital expenditures, and lowered the quarterly dividend rate to $0.04 per share for dividends declared. Beginning with the 2020 annual meeting of shareholders, the board of directors’ compensation was reduced and the board was reduced in size by two. In addition, employees’ base compensation was reduced Company-wide, and the annual bonus tied to financial metrics for eligible employees was not achieved. In August 2020, the Company began to restore base salaries and by October, the Company restored base salaries prospectively for all employees, with the exception of the executive officers that report to the Chief Executive Officer. The executive officers’ base salaries were restored effective January 1, 2021. The Company continues to evaluate the future material impacts on its consolidated financial statements that may result from the actions taken by the Company and its customers in respect of the pandemic.

Basis of Presentation.    The interim consolidated financial statements included herein are unaudited; however, they include adjustments of a normal recurring nature which, in the Company’s opinion, are necessary to present fairly the consolidated financial information as of and for the periods indicated in conformity with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim periods. All intercompany balances and transactions have been eliminated in consolidation. The Company consolidates its majority owned subsidiaries over which the Company exercises control. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. All dollar amounts presented herein, except share and per share amounts, are in thousands, unless the context indicates otherwise.

Use of Estimates.    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net operating revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information

A. H. Belo Corporation First Quarter 2021 on Form 10-Q 8


Table of Contents

not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

The COVID-19 pandemic has caused increased uncertainty in management’s estimates and assumptions affecting these interim consolidated financial statements. Areas where significant estimates are used include pension and other post-employment benefit obligation assumptions, income taxes, leases, self-insured liabilities, and long-lived assets impairment review.

Segment Presentation.    Based on the Company’s structure and organizational chart, the Company’s chief operating decision-maker (the “CODM”) is its Chief Executive Officer, Robert W. Decherd. Based on how the Company’s CODM makes decisions about allocating resources and assessing performance, the Company determined it has one reportable segment.

New Accounting Pronouncements. The Financial Accounting Standards Board (“FASB”) issued the following accounting pronouncements and guidance, which may be applicable to the Company but have not yet become effective.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance will be effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements.

Note 2: Revenue

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. This occurs when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, typically at contract price or determined by stand-alone selling price. The Company has an estimated allowance for credits, refunds and similar obligations. Sales tax collected concurrent with revenue-producing activities are excluded from revenue.

Accounts receivable are reported net of a valuation reserve that represents an estimate of amounts considered uncollectible. The Company estimates the allowance for doubtful accounts based on historical write-off experience and the Company’s knowledge of the customers’ ability to pay amounts due. Accounts are written-off after all collection efforts fail; generally, after one year has expired. Expense for such uncollectible amounts is included in other production, distribution and operating costs. Credit terms are customary.

The table below sets forth revenue disaggregated by revenue source.

Three Months Ended March 31,

2021

2020

Advertising and Marketing Services

Print advertising

$

11,226

$

12,799

Digital advertising and marketing services

5,543

6,528

Total

$

16,769

$

19,327

Circulation

Print circulation

$

13,976

$

15,017

Digital circulation

2,046

1,397

Total

$

16,022

$

16,414

Printing, Distribution and Other

$

4,024

$

4,602

Total Revenue

$

36,815

$

40,343

A. H. Belo Corporation First Quarter 2021 on Form 10-Q 9


Table of Contents

Advertising and Marketing Services

Print advertising revenue represents sales of advertising space within the Company’s core and niche newspapers, as well as preprinted advertisements inserted into the Company’s core newspapers and niche publications or distributed to non-subscribers through the mail.

Digital advertising and marketing services revenue consists of strategic marketing management, consulting, creative services, targeted and multi-channel (programmatic) advertising placed on third-party websites, digital sales of banner, classified and native advertisements on the Company’s news and entertainment-related websites and mobile apps, social media management, search optimization, direct mail and the sale of promotional materials.

Advertising and marketing services revenue is primarily recognized at a point in time when the ad or service is complete and delivered, based on the customers’ contract price. Barter advertising transactions are recognized at estimated fair value based on the negotiated contract price and the range of prices for similar advertising from customers unrelated to the barter transaction. The Company expenses barter costs as incurred, which is independent from the timing of revenue recognition. In addition, certain digital advertising revenue related to website access is recognized over time, based on the customers’ monthly rate. The Company typically extends credit to advertising and marketing services customers, although for certain advertising campaigns the customer may pay in advance.

For ads placed on certain third-party websites, the Company must evaluate whether it is acting as the principal, where revenue is reported on a gross basis, or acting as the agent, where revenue is reported on a net basis. Generally, the Company reports advertising revenue for ads placed on third-party websites on a net basis, meaning the amount recorded to revenue is the amount billed to the customer net of amounts paid to the publisher of the third-party website. The Company is acting as the agent because the publisher controls the advertising inventory.

Circulation

Print circulation revenue is gener