A. H. Belo Corporation (NYSE: AHC) reported fourth quarter net income from continuing operations of $3.07 per fully diluted share, an increase of $2.84 per share over fourth quarter 2013. Full-year 2014 net income from continuing operations was $3.82 per fully diluted share, an increase of $3.75 per share over 2013. Fourth quarter earnings growth was due to a $77.1 million gain on the Company's divestiture of its investment in Classified Ventures, partially offset by a $7.6 million non-cash charge related to the amortization of actuarial losses in conjunction with pension settlements. Full-year earnings growth also reflects an $18.5 million gain related to the second quarter sale of apartments.com by Classified Ventures. Fourth quarter and full-year 2014 net income from continuing and discontinued operations was $56.5 million and $92.9 million, respectively.
Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations was $6.3 million in the fourth quarter of 2014, a decrease of 28 percent compared to the prior year period. Full-year 2014 Adjusted EBITDA from continuing operations was $17.0 million, a decrease of 9 percent compared to the prior year.
As of December 31, 2014, cash and cash equivalents were $158.2 million, and the Company had no debt.
Jim Moroney, chairman, president and Chief Executive Officer, said, "After considering non-cash pension expenses and transaction related costs, the Company's operating income has remained strong. In 2014, digital advertising and marketing services revenues grew by 13 percent for the full year and we expanded our commercial printing revenues by 76 percent. Taken together, these areas added $11.5 million in incremental revenue to our top line in 2014, all of which helped us limit our decline in year-over-year revenue to 1.2 percent, the smallest degree of decline since the spin-off of the Company. In addition, the Company realized a significant return on its investment in Classified Ventures, which permitted us to return significant capital to our shareholders, while providing sufficient liquidity to make additional investments in new businesses that will further diversify our sources of revenue and make the Company less dependent on revenue tied to paid print edition volumes."
Fourth Quarter Results from Continuing Operations
Total revenue was $73.2 million in the fourth quarter of 2014, remaining flat compared to the prior year period.
Revenue from advertising and marketing services, including print and digital revenues, decreased 5 percent to $43.3 million as display, preprint and classified advertising revenues decreased 11 percent, 7 percent and 14 percent, respectively.
Digital revenue increased 17 percent to $8.6 million primarily due to the continued growth in marketing services revenue associated with Speakeasy and increased revenue from dallasnews.com resulting from a new programmatic advertising platform and growth in both unique visitors and page views.
Advertising revenue from niche publications, which is a component of the display, preprint, classified and digital revenues reported above, decreased 12 percent to $5.9 million. This decline primarily resulted from lower classified and preprint advertising revenue at The Dallas Morning News' free, home-delivered print news product Briefing.
Circulation revenue decreased 4 percent to $21.5 million as a decline in home delivery revenue due to lower volumes was partially offset by increased single copy revenue due to higher rates.
Printing, distribution, and other revenue increased 52 percent to $8.5 million in the fourth quarter of 2014 primarily due to the impact of printing the Fort Worth Star-Telegram, additional printing of two local community newspapers and two Untapped events owned and promoted by Crowdsource.
Total consolidated operating expense in the fourth quarter was $80.2 million, a 17 percent increase compared to the prior year period primarily due to a $7.6 million charge resulting from pension settlements in the fourth quarter, higher delivery and labor costs related to additional printing and distribution business, and increased severance expense, offset by lower salary and newsprint expenses.
The Company's newsprint expense in the fourth quarter was $5.1 million, a decrease of 12 percent compared to the prior year period. Newsprint consumption declined 7 percent to approximately 9,000 metric tons. Compared to the prior year period, newsprint cost per metric ton decreased 6 percent and the average purchase price per metric ton for newsprint decreased 2 percent.
Full-Year Results from Continuing Operations
Total revenue was $272.8 million in 2014, a decrease of 1 percent compared to the prior year. This represents the second consecutive year the Company has been effective in significantly stabilizing year-over-year revenue losses attributable to declines in print related revenue. The continued improvement in year over year revenue performance in 2014 was driven by growth in printing and distribution revenues and from growth in revenues from the Company's recent initiatives in marketing services and event promotion.
Advertising and marketing services revenue decreased 6 percent to $158.2 million primarily due to declines in display, preprint and classified advertising revenues which decreased 14 percent, 6 percent and 8 percent, respectively. These decreases were partially offset by growth in digital advertising revenue of 5.6 percent, while the Company's marketing services revenue associated with 508 Digital and Speakeasy generated $8.0 million of combined revenues in 2014, an increase of 39 percent over the prior year.
Advertising revenue from niche publications, which is a component of the display, preprint, classified and digital revenues reported above, decreased 7 percent to $23.0 million, primarily due to lower preprint and classified advertising.
Circulation revenue decreased 2 percent to $84.9 million due to lower volumes, substantially offset by increased rates for home delivery and single copy.
Printing, distribution and other revenue increased 35 percent to $29.7 million primarily due to the impact of printing the Fort Worth Star-Telegram, additional printing of two local community newspapers and an increase in events promoted by Crowdsource.
Total consolidated operating expense was $280.5 million in 2014, a 2 percent increase compared to the prior year. This increase was primarily driven by a $7.6 million charge resulting from pension settlements in the fourth quarter, higher delivery and labor costs related to additional printing and distribution business, and higher third party costs associated with classified advertising, offset by lower salary and newsprint expense. Excluding the $7.6 million non-cash pension charge, consolidated operating expense decreased 1 percent compared to the prior year.
In 2014, the Company's newsprint expense was $19.8 million, a decrease of 11 percent compared to the prior year. Newsprint consumption decreased 9 percent to approximately 34,000 metric tons. Compared to the prior year, newsprint cost per metric ton and the average purchase price per metric ton for newsprint decreased 3 percent and 1 percent, respectively.
In 2014, the Company's total direct compensation expense decreased by $4.1 million or 4.3 percent, primarily due to headcount reductions and lower commissions. As of December 31, 2014, A. H. Belo had approximately 1,200 full-time equivalent employees, a decrease of approximately 23 percent compared to the prior year, primarily due to the sale of The Providence Journal during 2014.
Discontinued Operations
In 2014, income from discontinued operations was $6.8 million, which included a pretax gain of $17.1 million from the disposition of The Providence Journal and pretax income of $4.1 million from operations through its September 3, 2014 sale date.
Pension Plans
In 2014, the Company made required contributions to its pension plans of $9.9 million and a fourth quarter voluntary contribution of $20.0 million. The Company does not anticipate any required cash contributions to its pension plans in 2015.
In 2014, the liability for the net unfunded position of the Company's pension plans increased by $15.8 million due to $49.2 million in actuarial adjustments primarily related to lower discount rates and adoption of new mortality tables, partially offset by favorable investment performance and contributions during the year. These actuarial adjustments were recorded to accumulated other comprehensive loss on the balance sheet. Pension expense for 2014 was $4.1 million, which includes the $7.6 million charge for pension settlements.
Income Taxes
As a result of the previously discussed transactions, the Company generated taxable income in 2014. The tax provision recognized was reduced by $28.4 million for changes in the valuation allowance, which primarily resulted from the use of $19.6 million in net operating loss carryforwards.
Real Estate Holdings
In the fourth quarter of 2014, the Company sold the land and building formerly used as a commercial packaging operation in southern Dallas, generating sales proceeds and a gain of $6.7 million and $1.8 million, respectively.
Non-GAAP Financial Measures
Reconciliations of net income to EBITDA and Adjusted EBITDA from continuing operations are included as exhibits to this release.
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