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20180930 Q3

Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-Q





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

For the quarterly period ended: September 30, 2018 

OR

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

Commission file no. 1-33741





Picture 1



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

 

(214) 977-8222

(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

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      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      No  



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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:  

 

Smaller reporting company:  

 

 

 

 

 

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 



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest possible date.





 

 



 

 



 

Outstanding at

Class

 

October 26, 2018

Common Stock, $.01 par value

 

21,642,727





Total Common Stock consists of 19,173,172 shares of Series A Common Stock and 2,469,555 shares of Series B Common Stock. 

 

 


 

Table of Contents

 



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 19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

PAGE 26

Item 4.

Controls and Procedures

 

PAGE 26

 

 

 

 

PART II 

 

 

Item 1.

Legal Proceedings

 

PAGE 28

Item 1A.

Risk Factors

 

PAGE 28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

PAGE 28

Item 3.

Defaults Upon Senior Securities

 

PAGE 28

Item 4.

Mine Safety Disclosures

 

PAGE 28

Item 5.

Other Information

 

PAGE 28

Item 6.

Exhibits

 

PAGE 29

Signatures

 

PAGE 32

Exhibit Index

 

PAGE 33



 

A. H. Belo Corporation Third Quarter 2018 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 September 30,

 

Nine Months Ended September 30,

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

 

2018

 

2017

 

2018

 

2017

Net Operating Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Advertising and marketing services

 

$

25,260 

 

$

34,875 

 

$

77,398 

 

$

106,101 

Circulation

 

 

17,896 

 

 

18,845 

 

 

53,564 

 

 

57,099 

Printing, distribution and other

 

 

5,896 

 

 

6,839 

 

 

18,712 

 

 

21,349 

Total net operating revenue

 

 

49,052 

 

 

60,559 

 

 

149,674 

 

 

184,549 

Operating Costs and Expense:

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

21,174 

 

 

24,642 

 

 

67,375 

 

 

79,088 

Other production, distribution and operating costs

 

 

20,939 

 

 

27,460 

 

 

66,786 

 

 

85,522 

Newsprint, ink and other supplies

 

 

5,528 

 

 

5,648 

 

 

16,300 

 

 

17,542 

Depreciation

 

 

2,514 

 

 

2,607 

 

 

7,522 

 

 

7,840 

Amortization

 

 

199 

 

 

200 

 

 

599 

 

 

599 

Asset impairments

 

 

 —

 

 

 —

 

 

(22)

 

 

228 

Total operating costs and expense

 

 

50,354 

 

 

60,557 

 

 

158,560 

 

 

190,819 

Operating income (loss)

 

 

(1,302)

 

 

 

 

(8,886)

 

 

(6,270)

Other income, net

 

 

862 

 

 

2,588 

 

 

2,641 

 

 

3,876 

Income (Loss) Before Income Taxes

 

 

(440)

 

 

2,590 

 

 

(6,245)

 

 

(2,394)

Income tax provision (benefit)

 

 

596 

 

 

10 

 

 

(661)

 

 

261 

Net Income (Loss)

 

$

(1,036)

 

$

2,580 

 

$

(5,584)

 

$

(2,655)



 

 

 

 

 

 

 

 

 

 

 

 

Per Share Basis

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.05)

 

$

0.12 

 

$

(0.26)

 

$

(0.13)

Number of common shares used in the per share calculation:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

21,709,557 

 

 

21,753,166 

 

 

21,761,110 

 

 

21,729,212 

Diluted

 

 

21,709,557 

 

 

21,754,627 

 

 

21,761,110 

 

 

21,729,212 



See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     3


 

Table of Contents

 

A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,

 

Nine Months Ended September 30,

In thousands (unaudited)

 

2018

 

2017

 

2018

 

2017

Net Income (Loss)

 

$

(1,036)

 

$

2,580 

 

$

(5,584)

 

$

(2,655)

Other Comprehensive Income (Loss), Net of Tax:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of actuarial losses

 

 

158 

 

 

5,967 

 

 

473 

 

 

6,080 

Actuarial gains

 

 

 —

 

 

3,648 

 

 

 —

 

 

3,648 

Total other comprehensive income, net of tax

 

 

158 

 

 

9,615 

 

 

473 

 

 

9,728 

Total Comprehensive Income (Loss)

 

$

(878)

 

$

12,195 

 

$

(5,111)

 

$

7,073 



See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     4


 

Table of Contents

 

A. H. Belo Corporation and Subsidiaries

Consolidated Balance Sheets







 

 

 

 

 

 

  

 

 

 

 

 

 



 

September 30,

 

December 31,

In thousands, except share amounts (unaudited)

 

2018

 

2017

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

58,471 

 

$

57,660 

Accounts receivable (net of allowance of $703 and $1,055 at September 30, 2018

and December 31, 2017, respectively)

 

 

19,759 

 

 

26,740 

Inventories

 

 

4,193 

 

 

3,171 

Prepaids and other current assets

 

 

6,631 

 

 

13,734 

Assets held for sale

 

 

1,089 

 

 

1,089 

Total current assets

 

 

90,143 

 

 

102,394 

Property, plant and equipment, at cost

 

 

421,773 

 

 

418,730 

Less accumulated depreciation

 

 

(394,479)

 

 

(387,024)

Property, plant and equipment, net

 

 

27,294 

 

 

31,706 

Intangible assets, net

 

 

3,474 

 

 

4,073 

Goodwill

 

 

13,973 

 

 

13,973 

Deferred income taxes, net

 

 

6,679 

 

 

5,355 

Other assets

 

 

4,123 

 

 

5,347 

Total assets

 

$

145,686 

 

$

162,848 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

7,064 

 

$

10,303 

Accrued compensation and benefits

 

 

6,460 

 

 

8,243 

Other accrued expense

 

 

5,582 

 

 

4,275 

Advance subscription payments

 

 

11,095 

 

 

11,670 

Total current liabilities

 

 

30,201 

 

 

34,491 

Long-term pension liabilities

 

 

19,746 

 

 

23,038 

Other post-employment benefits

 

 

1,165 

 

 

2,052 

Other liabilities

 

 

7,533 

 

 

5,568 

Total liabilities

 

 

58,645 

 

 

65,149 

Shareholders’ equity:

 

 

 

 

 

 

Preferred stock, $.01 par value; Authorized 2,000,000 shares; none issued

 

 

 —

 

 

 —

Common stock, $.01 par value; Authorized 125,000,000 shares

 

 

 

 

 

 

Series A: issued 20,851,728 and 20,700,292 shares at September 30, 2018

and December 31, 2017, respectively

 

 

209 

 

 

208 

Series B: issued 2,469,555 and 2,469,755 shares at September 30, 2018

and December 31, 2017, respectively

 

 

24 

 

 

24 

Treasury stock, Series A, at cost; 1,641,925 and 1,430,961 shares held at September 30, 2018 and December 31, 2017, respectively

 

 

(12,358)

 

 

(11,302)

Additional paid-in capital

 

 

495,842 

 

 

494,989 

Accumulated other comprehensive loss

 

 

(24,459)

 

 

(24,932)

Accumulated deficit

 

 

(372,217)

 

 

(361,288)

Total shareholders’ equity

 

 

87,041 

 

 

97,699 

Total liabilities and shareholders’ equity

 

$

145,686 

 

$

162,848 



See the accompanying Notes to the Consolidated Financial Statements.

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     5


 

Table of Contents

 

A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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

Noncontrolling
Interests

Total

Balance at December 31, 2016

20,620,461 

2,472,680 

$

231 

$

499,552 

 

(1,416,881)

$

(11,233)

$

(39,308)

$

(361,324)

$

1,234 

$

89,152 

Net loss

 —

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(2,655)

 

 —

 

(2,655)

Other comprehensive income

 —

 —

 

 —

 

 —

 

 —

 

 —

 

9,728

 

 —

 

 —

 

9,728

Distributions to noncontrolling interests

 —

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(118)

 

(118)

Issuance of shares for restricted stock units

76,906 

 —

 

 

(1)

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

Share-based compensation

 —

 —

 

 —

 

775

 

 —

 

 —

 

 —

 

 —

 

 —

 

775

Purchases of noncontrolling interests

 

 

 

 

 

(5,506)

 

 

 

 

 

 

 

 

 

(1,116)

 

(6,622)

Conversion of Series B to Series A

525

(525)

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

Dividends

 —

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(5,324)

 

 —

 

(5,324)

Balance at September 30, 2017

20,697,892

2,472,155

$

232 

$

494,820

 

(1,416,881)

$

(11,233)

$

(29,580)

$

(369,303)

$

 —

$

84,936

Balance at December 31, 2017

20,700,292 

2,469,755 

$

232 

$

494,989 

 

(1,430,961)

$

(11,302)

$

(24,932)

$

(361,288)

$

 —

$

97,699 

Net loss

 —

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(5,584)

 

 —

 

(5,584)

Other comprehensive income

 —

 —

 

 —

 

 —

 

 —

 

 —

 

473

 

 —

 

 —

 

473

Treasury stock purchases

 —

 —

 

 —

 

 —

 

(210,964)

 

(1,056)

 

 —

 

 —

 

 —

 

(1,056)

Issuance of shares for restricted stock units

151,236

 —

 

 1

 

(1)

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

Share-based compensation

 —

 —

 

 —

 

854

 

 —

 

 —

 

 —

 

 —

 

 —

 

854

Conversion of Series B to Series A

200

(200)

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

Dividends

 —

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(5,345)

 

 —

 

(5,345)

Balance at September 30, 2018

20,851,728

2,469,555

$

233

$

495,842

 

(1,641,925)

$

(12,358)

$

(24,459)

$

(372,217)

$

 —

$

87,041



See the accompanying Notes to the Consolidated Financial Statements.

 

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     6


 

Table of Contents

 

A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Cash Flows







 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended September 30,

In thousands (unaudited)

 

2018

 

2017

Operating Activities

 

 

 

 

 

 

Net loss

 

$

(5,584)

 

$

(2,655)

Adjustments to reconcile net loss to net cash provided by (used for) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

8,121 

 

 

8,439 

Net periodic benefit and contributions related to employment benefit plans

 

 

(2,791)

 

 

(16,667)

Share-based compensation

 

 

854 

 

 

775 

Deferred income taxes

 

 

(1,324)

 

 

 —

Loss on investment related activity

 

 

 —

 

 

250 

(Gain) loss on disposal of fixed assets

 

 

212 

 

 

(7,118)

Asset impairments

 

 

(22)

 

 

228 

Changes in working capital and other operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

6,981 

 

 

3,200 

Inventories, prepaids and other current assets

 

 

6,081 

 

 

(663)

Other assets

 

 

1,224 

 

 

568 

Accounts payable

 

 

(3,239)

 

 

85 

Compensation and benefit obligations

 

 

(1,872)

 

 

(932)

Other accrued expenses

 

 

4,396 

 

 

(62)

Advance subscription payments

 

 

(575)

 

 

(1,064)

Other post-employment benefits

 

 

(915)

 

 

(174)

Net cash provided by (used for) operating activities

 

 

11,547 

 

 

(15,790)

Investing Activities

 

 

 

 

 

 

Purchases of assets

 

 

(4,344)

 

 

(7,837)

Sales of assets

 

 

 —

 

 

8,252 

Purchases of investments

 

 

 —

 

 

(18)

Net cash provided by (used for) investing activities

 

 

(4,344)

 

 

397 

Financing Activities

 

 

 

 

 

 

Purchases of noncontrolling interests

 

 

 —

 

 

(9,231)

Dividends paid

 

 

(5,336)

 

 

(5,313)

Distributions to noncontrolling interests

 

 

 —

 

 

(179)

Purchases of treasury stock

 

 

(1,056)

 

 

 —

Net cash used for financing activities

 

 

(6,392)

 

 

(14,723)

Net increase (decrease) in cash and cash equivalents

 

 

811 

 

 

(30,116)

Cash and cash equivalents, beginning of period

 

 

57,660 

 

 

80,071 

Cash and cash equivalents, end of period

 

$

58,471 

 

$

49,955 



 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

Income tax paid, net (refund)

 

$

(6,408)

 

$

1,200 

Noncash investing and financing activities:

 

 

 

 

 

 

Investments in property, plant and equipment payable

 

 

97 

 

 

228 

Dividends payable

 

 

1,783 

 

 

1,775 



See the accompanying Notes to the Consolidated Financial Statements.

 



 

A. H. Belo Corporation Third Quarter 2018 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 with commercial printing, distribution and direct mail capabilities, as well as a presence in emerging media and digital marketing. While focusing on extending the Company’s media platforms, A. H. Belo delivers news and information in innovative ways to a broad spectrum 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.  In December 2017, the Company completed the sale of the Denton Record-Chronicle and the Company no longer owns newspaper operations in Denton, Texas.



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 interim consolidated financial information as of and for the periods indicated. All significant intercompany balances and transactions have been eliminated in consolidation. 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, 2017. All dollar amounts presented herein, except share and per share amounts, are in thousands, unless the context indicates otherwise.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 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.



Recently Adopted Accounting Pronouncements.



In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09Revenue from Contracts with Customers (Topic 606). This guidance prescribes a single comprehensive model for entities to use in the accounting of revenue arising from contracts with customers. The core principle contemplated by this new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount reflecting the consideration the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. Since May 2014, the FASB issued clarifying updates to the new standard specifically to address certain core principles including the identification of performance obligations, licensing guidance, the assessment of the collectability criterion, the presentation of taxes collected from customers, noncash considerations, contract modifications, and completed contracts at transition. The new guidance will supersede virtually all existing revenue guidance under GAAP and is effective for fiscal years beginning after December 15, 2017. There are two transition options available to entities, the full retrospective approach, in which the Company would restate prior periods, or the modified retrospective approach. The Company adopted ASU 2014-09 using the modified retrospective approach as of January 1, 2018;  see Note 3 – Revenue.



In March 2017, the FASB issued ASU 2017-07 – Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This update clarifies the presentation and classification of the components of net periodic benefit cost in the Consolidated Statement of Operations. Specifically, this standard requires the service cost component of net periodic benefit cost to be recorded in the same income statement line as other employee compensation costs and all other components of net periodic benefit cost must be presented as non-operating items. The Company adopted this standard retrospectively as of January 1, 2018. The Company’s defined benefit plans have been frozen, so the Company is no longer incurring service costs related to the plans. Therefore, the entire net periodic pension and other post-employment expense (benefit) will be presented in the Consolidated Statements of Operations in other income, net.



As a result of adopting this guidance, total operating costs and expense decreased $5,051 and $3,333 for the three and nine months ended September 30, 2017, respectively, with the offsetting change recorded to other income, net.  There was no impact to net income (loss), retained earnings and earnings per share. In the third quarter of 2017, the Company completed a de-risking transaction to reduce the Company’s pension liability, which resulted in a charge to pension expense of $5,911; see Note 8 – Pension and Other Retirement Plans.

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     8


 

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New Accounting Pronouncements.    The FASB issued the following accounting pronouncements and guidance, which may be applicable to the Company but have not yet become effective.



In February 2016, the FASB issued ASU 2016-02Leases (Topic 842). This update requires an entity to recognize a right-of-use asset and a lease liability for virtually all of its leases. The liability will be equal to the present value of lease payments. The asset will generally be based on the liability. For income statement purposes operating leases will result in straight-line expense and finance leases will result in expenses similar to current capital leases. The guidance also requires additional disclosures to enable users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases. Since February 2016, the FASB issued clarifying updates to the new standard that did not change the core principle of ASU 2016-02. The new guidance will supersede virtually all existing lease guidance under GAAP and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.



The Company currently anticipates adopting ASU 2016-02 on January 1, 2019, using the modified retrospective approach and expects to elect certain available transitional practical expedients.  The Company is reviewing its various lease agreements and in the third quarter of 2018, implemented new lease management software. Based on progress to date, the Company believes it will have a significant impact related to how it accounts for real estate operating leases. Upon adoption, the Company expects to record additional assets and liabilities related to leases, but has not yet quantified its impact on the Company's consolidated financial statements. The Company is continuing to assess the potential impact of adopting the new standard and expects the assessment to be completed in the fourth quarter of 2018.



In August 2018, the FASB issued ASU 2018-14Compensation – Retirement Benefits  Defined Benefit PlansGeneral (Subtopic 715-20): Disclosure Framework  Changes to the Disclosure Requirements for Defined Benefit Plans. This update modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that are no longer considered cost beneficial, clarifying the specific requirements of disclosures and adding disclosure requirements identified as relevant. The guidance will be effective for fiscal years ending after December 15, 2020. 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 financial statement disclosures.



In August 2018, the FASB issued ASU 2018-15IntangiblesGoodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This update clarifies the accounting for implementation costs incurred in a cloud computing arrangement, or hosting arrangement, that is a service contract. Costs for implementation activities incurred during the application development stage will be capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages will be expensed as the activities are performed. The capitalized implementation costs will be expensed over the term of the hosting arrangement. The guidance will be effective for fiscal years beginning after December 15, 2019, 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:  Segment Reporting



The Company identified two reportable segments based on reporting structure and the go-to-market for the Company’s service and product offerings. The two reportable segments are Publishing and Marketing Services.



The Publishing segment includes the Company’s core print and digital operations associated with its newspapers, niche publications and related websites and apps. These operations generate revenue from sales of advertising within its newspaper and digital platforms, subscription and retail sales of its newspapers, commercial printing and distribution services, primarily related to national and regional newspapers, and preprint advertisers. Businesses within the Publishing segment leverage the production facilities, subscriber and advertiser base, and digital news platforms to provide additional contribution margin. The Company evaluates Publishing operations based on operating profit and cash flows from operating activities.



The Marketing Services segment includes the operations of DMV Digital Holdings Company (“DMV Holdings”),  Your Speakeasy, LLC (“Speakeasy”) and digital advertising through Connect (programmatic advertising). The Company operates this integrated portfolio of assets within its Marketing Services segment as separate businesses that sell digital marketing and advertising through different channels, including programmatic advertising and content marketing within the social media environment.



Based on the organization of the Company’s structure and organizational chart, the Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. As of May 17, 2018, Robert W. Decherd became the CODM upon Jim Moroney’s retirement. The CODM allocates resources and capital to the Publishing and Marketing Services segments at the segment level.

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     9


 

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The tables below set forth summarized financial information for the Company’s reportable segments.







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,

 

Nine Months Ended September 30,



 

2018

 

2017

 

2018

 

2017

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Publishing

 

$

43,719 

 

$

52,603 

 

$

133,251 

 

$

160,916 

Marketing Services

 

 

5,333 

 

 

7,956 

 

 

16,423 

 

 

23,633 

Total

 

$

49,052 

 

$

60,559 

 

$

149,674 

 

$

184,549 



 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

Publishing

 

$

(1,554)

 

$

(834)

 

$

(9,434)

 

$

(8,485)

Marketing Services

 

 

252 

 

 

836 

 

 

548 

 

 

2,215 

Total

 

$

(1,302)

 

$

 

$

(8,886)

 

$

(6,270)



 

 

 

 

 

 

 

 

 

 

 

 

Noncash Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Publishing

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

$

2,455 

 

$

2,565 

 

$

7,389 

 

$

7,762 

Asset impairments

 

 

 —

 

 

 —

 

 

(22)

 

 

228 

Pension settlement

 

 

 —

 

 

5,911 

 

 

 

 

 

5,911 

Total

 

$

2,455 

 

$

8,476 

 

$

7,367 

 

$

13,901 



 

 

 

 

 

 

 

 

 

 

 

 

Marketing Services

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

$

59 

 

$

42 

 

$

133 

 

$

78 

Amortization

 

 

199 

 

 

200 

 

 

599 

 

 

599 

Total

 

$

258 

 

$

242 

 

$

732 

 

$

677 







 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017

Total Assets

 

 

 

 

 

 

Publishing

 

$

124,199 

 

$

137,409 

Marketing Services

 

 

21,487 

 

 

25,439 

Total

 

$

145,686 

 

$

162,848 



Net periodic pension and other post-employment expense (benefit) is now included in other income, net in the Consolidated Statements of Operations; see Note 1 – Basis of Presentation and Recently Issued Accounting Standards.  As a result of adopting this guidance,  Publishing operating costs and operating loss decreased $5,051 and $3,333 for the three and nine months ended September 30, 2017, respectively. In the third quarter of 2017, the Company completed a de-risking transaction to reduce the Company’s pension liability, which resulted in a charge to pension expense of $5,911; see Note 8 – Pension and Other Retirement Plans.



A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     10


 

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Note 3:  Revenue



Adoption of ASU 2014-09 – Revenue from Contracts with Customers (Topic 606)



On January 1, 2018, the Company adopted ASU 2014-09 using the modified retrospective approach applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented in accordance with the new guidance under ASU 2014-09, while prior period amounts are not restated.



The table below sets forth the impact on the Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2018, due to the adoption of the new revenue guidance. There was no impact to opening retained earnings.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30, 2018

 

Nine Months Ended September 30, 2018



 

As Reported

 

Balances Without Adoption

 

Effect of Change (Decrease)

 

As Reported

 

Balances Without Adoption

 

Effect of Change (Decrease)

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising and marketing services

 

$

25,260 

 

$

28,278 

 

$

(3,018)

 

$

77,398 

 

$

86,175 

 

$

(8,777)

Circulation

 

 

17,896 

 

 

18,158 

 

 

(262)

 

 

53,564 

 

 

54,353 

 

 

(789)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other production, distribution and operating costs

 

$

20,939 

 

$

24,219 

 

$

(3,280)

 

$

66,786 

 

$

76,352 

 

$

(9,566)



The impact to advertising and marketing services revenue was related to digital advertising placed on third-party websites where the Company acted as an agent. Prior to adoption, such revenue was generally recorded gross, but under the new standard this revenue is recorded net. The impact to circulation revenue was related to home delivery subscriptions where the Company recorded revenue for the grace period of newspapers delivered after a subscription expires. Prior to adoption, any non-payment of grace was recorded as bad debt expense, but under the new standard this is considered variable consideration and revenue is directly reduced for the non-payment.



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 we expect to be entitled to in exchange for those goods or services. 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.



The table below sets forth revenue disaggregated by revenue source. As stated above, prior period amounts have not been restated under the modified retrospective approach.





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,

 

Nine Months Ended September 30,



 

2018

 

2017

 

 

2018

 

2017

Advertising revenue

 

$

19,927 

 

$

26,919 

 

$

60,975 

 

$

82,468 

Digital services

 

 

4,191 

 

 

6,194 

 

 

12,740 

 

 

19,902 

Other services

 

 

1,142 

 

 

1,762 

 

 

3,683 

 

 

3,731 

Advertising and marketing services

 

25,260 

 

 

34,875 

 

 

77,398 

 

 

106,101 

Circulation

 

 

17,896 

 

 

18,845 

 

 

53,564 

 

 

57,099 

Printing, distribution and other

 

 

5,896 

 

 

6,839 

 

 

18,712 

 

 

21,349 

Total Revenue

 

$

49,052 

 

$

60,559 

 

$

149,674 

 

$

184,549 



Advertising and Marketing Services Revenue



Advertising revenue, included in the Publishing segment results, is generated by selling print and digital advertising products. 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 is generated by selling banner and real estate classified advertising on The Dallas Morning News’ website

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     11


 

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dallasnews.com, online employment and obituary classified advertising on third-party websites sold under a print/digital bundle package and sales of online automotive classifieds on the cars.com platform.



Digital services and other services revenues are included in the Marketing Services segment results. Digital services revenue includes targeted and multi-channel (programmatic) advertising placed on third-party websites, content development, social media management, search optimization, and other consulting. Other services revenue is primarily generated from the sale of promotional merchandise.



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. In addition, certain digital advertising revenue related to website access is recognized over time, based on the customers’ monthly rate.



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



Circulation revenue, included in the Publishing segment results, is generated primarily by selling home delivery and digital subscriptions, as well as single copy sales to non-subscribers. Home delivery and single copy revenue is recognized at a point in time when the paper is delivered or purchased. Digital subscriptions are recognized over time, based on the customers’ monthly rate.



Printing, Distribution and Other



Printing, distribution and other revenue, included in the Publishing segment results, is primarily generated from printing and distribution of other newspapers, as well as production of preprinted advertisements for other newspapers. Printing, distribution and other revenue is recognized at a point in time when the product or service is delivered.



Remaining Performance Obligations



The Company has various Publishing advertising contracts and Marketing Services digital services contracts that range from 13 months to 36 months. The Company recognizes revenue on the advertising contracts over the term of the agreement at a point in time when the service or product is delivered. The Company recognizes revenue on the digital services contracts over time, based on the customers’ monthly rate. At September 30, 2018, the remaining performance obligation was $2,105. The Company expects to recognize $542 over the remainder of 2018 and $1,563 thereafter.



Deferred Revenue



Deferred revenue is recorded when cash payments are received in advance of the Company’s performance, including amounts which are refundable. The short-term and long-term deferred revenue balance as of September 30, 2018, was $11,376. In the nine months ended September 30, 2018, the balance increased  $33,  primarily driven by cash payments received in advance of satisfying our performance obligations, offset by $9,545 of revenue recognized that was included in the deferred revenue balance as of December 31, 2017.



Practical Expedients and Exemptions



The Company generally expenses sales commissions and circulation acquisition costs when incurred because the amortization period would have been one year or less. These costs are recorded within employee compensation and benefits expense and other production, distribution and operating costs expense, respectively.



The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts for which revenue is recognized at the amount invoiced for services performed.







A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     12


 

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Note 4: Acquisitions



In February 2017, the Company acquired the remaining 30 percent voting interest in Speakeasy for a cash purchase price of $2,111, and in  March 2017, the Company acquired the remaining 20 percent voting interest in DMV Holdings for a cash purchase price of $7,120. The initial purchase of 80 percent voting interest in DMV Holdings occurred in January 2015. DMV Holdings holds all outstanding ownership interests of three Dallas-based businesses, Distribion, Inc., Vertical Nerve, Inc. and CDFX, LLC. These businesses specialize in local marketing automation, search engine marketing, and direct mail and promotional products, respectively. These acquisitions complement the product and service offerings currently available to A. H. Belo clients, thereby strengthening the Company’s diversified product portfolio and allowing for greater penetration in a competitive advertising market. Operating results of the businesses acquired have been included in the Consolidated Statements of Operations from the initial acquisition date forward.



Pro-rata distributions.    In connection with the 2015 acquisition of 80 percent voting interest in DMV Holdings, the shareholder agreement provided for a pro-rata distribution of 50 percent and 100 percent of DMV Holdings’ free cash flow for fiscal years 2016 and 2015, respectively. Free cash flow is defined as earnings before interest, taxes, depreciation and amortization less capital expenditures, debt amortization and interest expense, as applicable. In the nine months ended September 30, 2017, the Company recorded pro-rata distributions to noncontrolling interests of $163 in connection with this agreement based on 2016 free cash flow as defined.



Note 5Goodwill and Intangible Assets



The table below sets forth goodwill and other intangible assets by reportable segment as of September 30, 2018 and December 31, 2017.  In the first quarter of 2017, the Company reorganized reporting units based on reporting structure and the go-to-market for the Company’s service and product offerings. The Company’s Publishing and Marketing Services segments each operate as a single reporting unit.





 

 

 

 

 



 

 

 

 

 



September 30,

 

December 31,



2018

 

2017

Goodwill

 

 

 

 

 

Marketing Services

$

13,973 

 

$

13,973 



 

 

 

 

 

Intangible Assets

 

 

 

 

 

Marketing Services

 

 

 

 

 

Cost

$

6,470 

 

$

6,470 

Accumulated Amortization

 

(2,996)

 

 

(2,397)

Net Carrying Value

$

3,474 

 

$

4,073 



Marketing Services’ intangible assets consist of $4,950 of customer relationships with estimated useful lives of 10 years and $1,520 of developed technology with an estimated useful life of five years. In 2017, the Publishing segment’s fully amortized intangible assets were written-off and had no remaining useful life. Aggregate amortization expense was $199 and $599 for the three and nine months ended September 30, 2018, respectively, and $200 and $599 for the three and nine months ended September 30, 2017, respectively.



As a result of the first quarter 2017 segment reorganization, certain goodwill and intangible assets previously reported in the Marketing Services segment were moved to the Publishing segment, which was fully impaired as of December 31, 2016. Therefore, the Company recorded a noncash goodwill impairment charge of $228 in the first quarter of 2017.



The Company tested the Marketing Services segment’s goodwill for impairment as of December 31, 2017, using a discounted cash flow methodology with a peer-based, risk-adjusted weighted average cost of capital, combined with a market approach using peer-based earnings multiples. The Company believes the use of a discounted cash flow approach, combined with the market approach, is the most reliable indicator of the estimated fair value of the business. Upon completion of the annual test, it was determined the Marketing Services reporting unit’s fair value exceeded its carrying value by approximately 93 percent. Accordingly, no impairment was warranted.

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     13


 

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Note 6Long-term Incentive Plan



A. H. Belo sponsors a long-term incentive plan (the “Plan”) under which 8,000,000 shares of the Company’s Series A and Series B common stock are authorized for equity-based awards. Awards may be granted to A. H. Belo employees and outside directors in the form of non-qualified stock options, incentive stock options, restricted share awards,  restricted stock units (“RSUs”), performance shares, performance units or stock appreciation rights. In addition, stock options may be accompanied by full and limited stock appreciation rights. Rights and limited stock appreciation rights may also be issued without accompanying stock options. Awards under the Plan were also granted to holders of stock options issued by A. H. Belo’s former parent company in connection with the Company’s separation from its former parent in 2008. Due to the expiration of the Plan on February 8, 2018, A. H. Belo implemented, and shareholders approved, a new long-term incentive plan (the “2017 Plan”) under which an additional 8,000,000 shares of the Company’s Series A and Series B common stock are authorized for equity-based awards. Like its predecessor plan, awards under the 2017 Plan may be granted to A. H. Belo employees and outside directors in the form of non-qualified stock options, incentive stock options, restricted share awards, RSUs, performance shares, performance units or stock appreciation rights.



Stock Options.    Stock options granted under the Plan are fully vested and exercisable. No options have been granted since 2009, and all compensation expense associated with stock options has been fully recognized as of September 30, 2018.



The table below sets forth a summary of stock option activity under the Plan.







 

 

 

 



 

 

 

 



Number of
Options

 

Weighted Average
Exercise Price

Outstanding at December 31, 2017

100,344 

 

$

6.46 

Canceled

(97,344)

 

 

6.60 

Outstanding at September 30, 2018

3,000 

 

 

2.05 



As of September 30, 2018, the aggregate intrinsic value of outstanding options was $8 and the weighted average remaining contractual life of the Company’s stock options was less than one year. No options were exercised in the nine months ended September 30, 2018 and 2017.



Restricted Stock Units.    The Company’s RSUs have service and/or performance conditions and, subject to retirement eligibility, vest over a period of up to three years. Vested RSUs are redeemed 60 percent in A. H. Belo Series A common stock and 40 percent in cash over a period of up to three years. As of September 30, 2018, the liability for the portion of the awards to be redeemed in cash was $939, which is included in other liabilities in the Consolidated Balance Sheet.





The table below sets forth a summary of RSU activity under the Company’s long-term incentive plans.





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Total
RSUs

 

Issuance of
Common
Stock

 

RSUs
Redeemed in
Cash

 

Cash
Payments at
Closing Price
of Stock

 

Weighted
Average Price
on Date of
Grant

Non-vested at December 31, 2017

224,053 

 

 

 

 

 

 

 

 

$

6.07 

Granted

348,455 

 

 

 

 

 

 

 

 

 

5.05 

Canceled

(3,711)

 

 

 

 

 

 

 

 

 

6.06 

Vested and outstanding

(184,774)

 

 

 

 

 

 

 

 

 

5.38 

Vested and issued

(114,248)

 

68,543 

 

45,705 

 

$

235 

 

 

6.29 

Non-vested at September 30, 2018

269,775 

 

 

 

 

 

 

 

 

 

5.13 



In the nine months ended September 30, 2018, the Company issued 82,693 shares of Series A common stock and 55,128 shares were redeemed in cash for RSUs that were previously vested as of December 31, 2017. In addition, 337,778 and 290,825 RSUs were vested and outstanding as of September 30, 2018 and December 31, 2017, respectively.



The fair value of RSU grants is determined using the closing trading price of the Company’s Series A common stock on the grant date. As of September 30, 2018, unrecognized compensation expense related to non-vested RSUs totaled $1,193, which is expected to be recognized over a weighted average period of 2.1 years.

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     14


 

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Compensation Expense.     A. H. Belo recognizes compensation expense for awards granted under the Company’s long-term incentive plans over the vesting period of the award. Compensation expense related to granted RSUs is set forth in the table below.





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



RSUs

Redeemable

in Stock

 

RSUs
 Redeemable
 in Cash

 

Total
RSU Awards
 Expense

Three Months Ended September 30,

 

 

 

 

 

 

 

 

2018

$

134 

 

$

112 

 

$

246 

2017

 

149 

 

 

82 

 

 

231 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

2018

$

854 

 

$

424 

 

$

1,278 

2017

 

775 

 

 

399 

 

 

1,174 





Note 7:  Income Taxes



The Company calculates the income tax provision based on the year-to-date pretax loss adjusted for permanent differences and discrete items on a pro-rata basis. Due to the volatility of the newspaper industry, reliable forecasting is unavailable. As such, a discrete tax rate was calculated for the period.



In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for the acceleration of depreciation for certain assets placed into service after September 27, 2017, as well as prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.

 

The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 35 percent to 21 percent, resulting in a $3,570 decrease in income tax benefit for the year ended December 31, 2017.



The Company recognized income tax provision (benefit) of $596 and $10 for the three months ended September 30, 2018 and 2017, respectively, and $(661) and $261 for the nine months ended September 30, 2018 and 2017, respectively. The income tax provision (benefit) was calculated using the newly enacted income tax rate of 21 percent. The change in income tax rate from 35 percent to 21 percent, resulted in a $669 decrease in income tax benefit for the nine months ended September 30, 2018. Effective income tax rates were 10.6 percent and (10.9) percent for the nine months ended September 30, 2018 and 2017, respectively. The effective income tax rate for the nine months ended September 30, 2018, was due to changes in the valuation allowance, an increase in the net operating loss deferred tax asset and the effect of the Texas margin tax. The change to the valuation allowance was a decrease of $60 for the nine months ended September 30, 2018, primarily due to the pension liability, accrued bonuses and the allowance for bad debt.



A refund of $4,095 was received in the third quarter of 2018, for a tax benefit recognized in 2017 related to a capital loss on the sale of the Denton Record-Chronicle in the fourth quarter of 2017, of which a portion was carried back against taxes paid in 2014. In the second quarter of 2018, the Company received a refund of $3,210 for a  tax benefit recognized in 2016 that was carried back against taxes paid in 2014. The 2016 tax benefit was the result of the abandonment of the Company’s ownership interest in Wanderful Media, LLC and the sale of the Company’s equity investment in Homesnap, Inc. in the fourth quarter of 2016.



Note 8Pension and Other Retirement Plans



Defined Benefit Plans.   The Company sponsors the A. H. Belo Pension Plans (the “Pension Plans”), which provide benefits to approximately 1,500 current and former employees of the Company. A. H. Belo Pension Plan I provides benefits to certain current and former employees primarily employed with The Dallas Morning News or the A. H. Belo corporate offices. A. H. Belo Pension Plan II provides benefits to certain former employees of The Providence Journal Company. This obligation was retained by the Company upon the sale of the newspaper operations of The Providence Journal.  No additional benefits are accruing under the A. H. Belo Pension Plans, as future benefits were frozen.



No contributions are required to the A. H. Belo Pension Plans in 2018 under the applicable tax and labor laws governing pension plan funding. In the third quarter of 2017, the Company made a voluntary contribution of $20,000 to the Pension Plans and using the contribution, in addition to liquidating $23,391 of plan assets, transferred $43,391 of pension liabilities to an insurance company. As a result of this de-risking action, the Company reduced the number of participants in its Pension Plans by 796, or 36 percent.  In the three months ended September 30, 2017, a charge to pension expense for $5,911 was recorded to reflect the amortization of losses in

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     15


 

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accumulated other comprehensive loss associated with this transaction. In addition, the projected benefit obligation was remeasured as of September 30, 2017, which resulted in an actuarial gain of $3,648 that was recorded to other comprehensive income (loss) in the three months ended September 30, 2017; see Note 9 – Shareholders’ Equity.  This transaction occurred on September 20, 2017, but the Company elected to use the measurement date practical expedient, allowing the Company to use September 30, 2017, as the alternative measurement date. No material transactions or changes in market conditions occurred between the transaction date and the alternative measurement date.



Net Periodic Pension Expense (Benefit)



The Company’s estimates of net periodic pension expense or benefit are based on the expected return on plan assets, interest on the projected benefit obligations and the amortization of actuarial gains and losses that are deferred in accumulated other comprehensive loss. The table below sets forth components of net periodic pension expense (benefit), which are included in other income, net in the Consolidated Statements of Operations.











 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,

 

Nine Months Ended September 30,



 

2018

 

2017

 

2018

 

2017

Interest cost

 

$

1,796 

 

$

2,386 

 

$

5,389 

 

$

7,158 

Expected return on plans' assets

 

 

(2,894)

 

 

(3,313)

 

 

(8,681)

 

 

(9,940)

Amortization of actuarial loss

 

 

168 

 

 

75 

 

 

503 

 

 

224 

Recognized settlement loss

 

 

 —

 

 

5,911 

 

 

 —

 

 

5,911 

Net periodic pension expense (benefit)

 

$

(930)

 

$

5,059 

 

$

(2,789)

 

$

3,353 



Defined Contribution Plans.   The A. H. Belo Savings Plan (the “Savings Plan”), a defined contribution 401(k) plan, covers substantially all employees of A. H. Belo. Participants may elect to contribute a portion of their pretax compensation as provided by the Savings Plan and the Internal Revenue Code. Employees can contribute up to 100 percent of their annual eligible compensation less required withholdings and deductions up to statutory limits. The Company provides an ongoing dollar-for-dollar match of eligible employee contributions, up to 1.5 percent of the employees’ compensation. During the three months ended September 30, 2018 and 2017, the Company recorded expense of $199 and $175, respectively, and during the nine months ended September 30, 2018 and 2017, the Company recorded expense of $653 and $670, respectively, for matching contributions to the Savings Plan.

 

Note 9Shareholders’ Equity



Dividends.    On September 5, 2018, the Company’s board of directors declared an $0.08 per share dividend to shareholders of record and holders of RSUs as of the close of business on November 16, 2018, which is payable on December 7, 2018. During the three months ended September 30, 2018, the Company recorded $1,783 to accrue for dividends declared but not yet paid.



Treasury Stock.   The Company repurchased shares of its common stock pursuant to a publicly announced share repurchase program authorized by the Company’s board of directors. In the fourth quarter of 2017, the Company resumed open market repurchases under a repurchase plan agreement limited to a total of $2,500.  During the third quarter of 2018, the Company repurchased 50,784 shares of its Series A common stock at a total cost of $231.



Outstanding Shares.    The Company had Series A and Series B common stock outstanding of 19,209,803 and 2,469,555, respectively, net of treasury shares at September 30, 2018. At December 31, 2017, the Company had Series A and Series B common stock outstanding of 19,269,331 and 2,469,755, respectively, net of treasury shares.



Accumulated other comprehensive loss.    Accumulated other comprehensive loss consists of actuarial gains and losses attributable to the A. H. Belo Pension Plans, gains and losses resulting from Pension Plans’ amendments and other actuarial experience attributable to other post-employment benefit (“OPEB”) plans. The Company records amortization of the components of accumulated other comprehensive loss in employee compensation and benefits in its Consolidated Statements of Operations. Gains and losses associated with the A. H. Belo Pension Plans are amortized over the weighted average remaining life expectancy of the Pension Plans’ participants. Gains and losses associated with the Company’s OPEB plans are amortized over the average remaining service period of active OPEB plans’ participants. Net deferred tax assets related to amounts recorded in accumulated other comprehensive loss are fully reserved.

A. H. Belo Corporation Third Quarter 2018 on Form 10-Q     16


 

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The tables below set forth the changes in accumulated other comprehensive loss, net of tax, as presented in the Company’s consolidated financial statements.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended September 30,



 

2018

 

2017



 

Total

 

Defined
benefit pension
plans

 

Other post-
employment
benefit plans

 

Total

 

Defined
benefit pension
plans

 

Other post-
employment
benefit plans

Balance, beginning of period

 

$

(24,617)

 

$

(25,099)

 

$

482 

 

$

(39,195)

 

$

(39,588)

 

$

393 

Amortization

 

 

158 

 

 

168 

 

 

(10)

 

 

5,967 

 

 

5,986 

 

 

(19)

Actuarial gains

 

 

 —

 

 

 —

 

 

 —

 

 

3,648 

 

 

3,648 

 

 

 —

Balance, end of period

 

$

(24,459)

 

$

(24,931)

 

$

472 

 

$

(29,580)

 

$

(29,954)