A. H. Belo Corporation, headquartered in Dallas, Texas, is a distinguished news and information company that owns and operates three daily newspapers and 12 associated Web sites. A. H. Belo publishes The Dallas Morning News, Texas’ leading newspaper; The Providence Journal, the oldest major daily newspaper of general circulation and continuous publication in the U.S.; and The Press-Enterprise (Riverside, CA), serving southern California’s Inland Empire region. These newspapers publish extensive local, state, national and international news. In addition, the Company publishes various specialty publications targeting niche audiences, and owns direct mail and commercial printing businesses. For purposes of this Annual Report, references to the “Company,” “we,” “us,” “our” and “A. H. Belo” mean A. H. Belo Corporation collectively with all of our subsidiaries unless the context otherwise requires.
A. H. Belo Corporation was incorporated under Delaware law on October 1, 2007, as a wholly-owned subsidiary of Belo Corp. (“Belo”), to serve as a holding company in connection with Belo’s spin-off of its newspaper business and related assets and liabilities. The Company was spun off from Belo effective February 8, 2008 through a pro-rata stock dividend to Belo shareholders (the “Distribution”). As a consequence, A. H. Belo became a separate public company on that date. Except as noted herein, Belo has no further ownership interest in A. H. Belo or in any newspaper or related businesses, and A. H. Belo has no ownership interest in Belo or in any television station or related businesses. A. H. Belo’s relationship with Belo is now governed by a separation and distribution agreement and several ancillary agreements governing various relationships between A. H. Belo and Belo. A. H. Belo and Belo also co-own certain downtown Dallas real estate and several investments associated with their respective businesses.
A. H. Belo’s publishing roots trace to The Galveston Daily News, which began publication in 1842. Today, A. H. Belo owns three primary daily newspapers: The Dallas Morning News, The Providence Journal and The Press-Enterprise. They publish extensive local, state, national and international news. In addition to these three daily newspapers, A. H. Belo publishes various niche products in the same geographic areas where these daily newspapers are published. Each of A. H. Belo’s daily newspapers and niche publications operates its own related Web site. A. H. Belo also operates direct mail and commercial printing businesses.
The Dallas Morning News’ first edition was published on October 1, 1885. It is one of the leading newspapers in America and its success is founded upon the highest standards of journalistic excellence, with an emphasis on comprehensive local news and information, and community service. The Dallas Morning News is distributed primarily in Dallas County and the 10 surrounding counties. The newspaper has been awarded eight Pulitzer Prizes since 1986 for its news reporting and photography.
The Providence Journal, acquired by Belo in February 1997, is the leading newspaper in Rhode Island and southeastern Massachusetts. The Providence Journal is America’s oldest major daily newspaper of general circulation and continuous publication, and has won four Pulitzer Prizes.
The Press-Enterprise was acquired in July 1997. The Press-Enterprise is distributed throughout Southern California’s Inland Empire region, which includes Riverside and San Bernardino Counties. It has a long history of journalistic excellence and has won one Pulitzer Prize.
Belo Interactive Media (“BIM”) supports A. H. Belo’s digital product development initiatives as well as certain Web site functions, and Belo Technologies supports information technology requirements. BIM and Belo Technologies, which are owned by A. H. Belo, provide services to Belo Corp. and its television Web sites pursuant to inter-company agreements whereby Belo compensates A. H. Belo for such services.
Web sites operated by A. H. Belo’s newspapers provide consumers with timely news and information. The newspaper-affiliated Web sites for The Dallas Morning News, The Providence Journal, and The Press-Enterprise are leading local media sites in their respective markets. Revenues for interactive media for the years ended December 31, 2008 and 2007 represented approximately 7.3 and 7.0 percent, respectively, of the Company’s total revenues and were derived principally from advertising on the various Web sites. In addition, A. H. Belo and Belo, through their subsidiaries, jointly own 6.6 percent of Classified Ventures, LLC, a joint venture of which the other owners are Gannett Co., Inc., The McClatchy Company, Tribune Company, and The Washington Post Company. The three principal online businesses Classified Ventures, LLC operates are cars.com, apartments.com, and homegain.com.
The basic material used in publishing newspapers is newsprint. Currently, most of the Company’s newsprint is obtained through a purchasing consortium. Management believes the Company’s sources of newsprint, along with available alternate sources, are adequate for the Company’s current needs.
Our Competitive Strengths and Challenges
Our strengths are:
•proven performance of three quality daily newspapers that have been widely recognized over the years for their distinguished journalism.
•a strong, cohesive senior management team with significant sector experience focused on strategic and operating issues.
•the development of product innovations using our local content, distribution platforms, technologies, and partnerships.
•a capital structure and credit facility that allow flexibility during realignment of our operations.
Our newspapers, and the newspaper industry as a whole, are experiencing challenges to maintain and grow print revenues and circulation. This results from, among other factors, increased competition from other media, particularly the Internet. In addition, the continued economic slowdown in the United States has adversely affected our business. A significant decline in circulation could further affect advertising revenues; however, A. H. Belo’s newspapers have grown in total readership over the past five years. Readership, as defined by the Company, includes circulation (including ancillary niche products) and traffic on the Company’s Web sites.
Our Strategies and Opportunities
The Company is committed to publishing newspapers and online content of the highest quality and integrity, and creating and developing innovative print and online products addressing the needs of customers and advertisers. Our goal is to return to profitability and create value for shareholders over the long-term. The Company intends to achieve these objectives through the following strategies:
•focus management’s attention on operating A. H. Belo’s core newspaper businesses and related Web sites to derive maximum revenue and earnings in an Internet-centric media environment.
•be attentive to the needs of our advertisers by implementing initiatives that enable them to reach more effectively the consumers who are most valuable.
•innovate and continue to develop print and online products that create sustainable incremental revenue and earnings.
•restructure our business to align costs more closely with anticipated lower revenue levels, preserve cash, and return to profitability.
•strengthen and improve our underlying technology platform.
•maintain a conservative balance sheet.
•continue our commitment of journalism and community service to the localities we serve.
As of December 31, 2008, the Company had approximately 2,950 full-time and 400 part-time employees, including approximately 450 employees represented by various employee unions. All union-represented employees are located in Providence, Rhode Island. The Company believes its relations with its employees are satisfactory.