Parent writes off ProJo’s goodwill value

Journal parent’s losses widen in 1Q as ad sales drop further

A. H. BELO REDUCED TO NOTHING the estimated fair market value of The Providence Journal today as it reported a first-quarter loss.
Posted 5/4/09

DALLAS - The Providence Journal’s parent company, A. H. Belo Corp., said today it has written down The Journal’s goodwill value to zero as the company’s losses widened in the first three months of this year.

A. H. Belo (NYSE: AHC) posted a net loss of $103.07 million, or $5.03 per share, in the three months ended March 31, compared with a net loss of $8.72 million, or 43 cents per share, in the same period last year. The Dallas-based company’s quarterly revenue fell 19.8 percent to $128.49 million, compared with $160.19 million a year ago.

However, the company said about three-quarters of the $103 million quarterly loss was caused by its decision to wipe out its estimate of the value that it gave to The Providence Journal in excess of its asset value when it bought the paper in 1997, through what is known as a goodwill impairment charge.

The company also had a $4 million one-time charge related to a recent round of layoffs, which affected about 500 A. H. Belo employees nationwide, including 100 at The Journal, for an estimated annual savings to the company of $27 million.

Excluding those two charges, A. H. Belo said it lost $18.1 million, or 91 cents per share, in the first quarter, nearly double the amount it lost in the same period during 2008.

“A. H. Belo continues to face significant revenue challenges in 2009,” Robert W. Decherd, A. H. Belo’s chairman, president and CEO, said in a statement. “Lower advertising revenues require us to focus on expense reductions and operational realignment.”

Advertising revenue at A. H. Belo’s four major papers – The Dallas Morning News, The Journal, The Press-Enterprise of Riverside, Calif., and the Denton Record-Chronicle – and its smaller holdings continued to plummet, falling 28.2 percent compared with the first quarter of 2008, to $89.33 million from $124.42 million a year ago. The company said declining classified revenue was the primary cause of the decrease.

In a troubling sign, A. H. Belo also said Internet revenue fell 24 percent, to $9.3 million, compared with the same period last year, and accounted for only 7.2 percent of total quarterly revenue, down from 7.5 percent a year ago.

By comparison, circulation revenue edged upward by 9 percent, to $31.71 million from $29.11 million in the same quarter last year, thanks to higher newsstand and home delivery prices for The Journal and The Dallas Morning News.

It was unclear this morning what made A. H. Belo decide to completely write off The Journal’s goodwill value. Alison K. Engel, the company’s senior vice president and chief financial officer, did not immediately return a phone call requesting comment.

In 2007, Belo Corp. – which owned The Journal and A. H. Belo’s other properties until they were spun off into a separate company last year – reduced the goodwill value of The Journal by 75 percent, slashing its estimate of the paper’s value in excess of the sum of its parts from $323.73 million to $80.94 million. A. H. Belo wrote off The Journal’s remaining goodwill value today.

Belo Corp. paid $1.5 billion in cash and stock to buy The Providence Journal Co. in February 1997. At the time the sale was announced, Edward J. Atorino, a media analyst, told The New York Times he thought the price was high.

Not including asset value reductions based on cost-containment efforts and other changes, The Journal’s value has been reduced by a total of $410.62 million from goodwill write-downs by its parent.

Despite the goodwill write-down, the company also reported that The Journal posted the best margin of earnings before interest, taxes, depreciation and amortization of any of the company’s properties in the first quarter, including The Dallas Morning News.

Excluding charges related to the employee layoffs, A. H. Belo said its newspapers earned $1.3 million before interest, taxes, depreciation and amortization. The company did not break out results for its individual papers. In 2008, The Journal’s revenue fell 13.3 percent to $131.47 million, according to the company’s annual report.

Decherd also said the company’s first-quarter expenses were $150.5 million, or $21.5 million lower than in the first quarter of last year, excluding the $80 million accounting charge for the Journal write-down.

“We are extremely proud of the work done to adjust our cost base by A. H. Belo’s operating units, corporate leadership and all of our employees,” Decherd said. The company has asked employees to accept pay cuts as it looks to shave another $10 million from its annual expenses this year.

A. H. Belo did not declare a quarterly dividend. A year ago, it declared a first-quarter dividend of 25 cents per share.

A. H. Belo plans to hold a conference call to discuss the results at 2:30 p.m. At 10:34 a.m. Monday, the company’s stock price was up 7.7 percent, trading at $1.81 per share, on the New York Stock Exchange, after closing at $1.68 on Friday.

In a column published in Sunday’s edition of The Journal, Thomas E. Heslin, the paper’s executive editor, stressed: “We are here. Very much alive.” He also outlined a series of changes that the paper has made to adapt, including the reorganization of the smaller news staff into five topic desks.

A. H. Belo Corp. (NYSE: AHC) owns and operates The Providence Journal, The Dallas Morning News, The Press-Enterprise of Riverside, Calif., and the Denton Record-Chronicle, with a combined total audience estimated at 3.7 million readers. The company also produces a variety of specialty print and online publications and offers direct-mail and commercial printing services. For more information, visit

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