A.H. Belo Corporation Q3 2008 Earnings Call Transcript

| About: A.H. Belo (AHC)
This article is now exclusive for PRO subscribers.

A.H. Belo Corporation (NYSE:AHC) Q3 2008 Earnings Call October 31, 2008 11:00 AM ET


Maribel Correa - Director, Investor Relations and Corporate Communications

Robert Decherd - Chairman, President and Chief Executive Office

James M. Moroney, III - Executive Vice President

Donald (Skip) F. Cass, Jr. - Executive Vice President and Secretary

Alison Engel - Senior Vice President/Chief Financial Officer and Treasurer


Peter Salkowski - Goldman Sachs

Jack Ripstein - Potrero Capital Research


Ladies and gentlemen, thank you for standing by and welcome to A.H. Belo’s third quarter financial results conference call. (Operator’s instructions) As a reminder, this conference is being recorded.

I’d now like to turn the conference over to our host, Ms. Maribel Correa, Director, Investor Relations. Please go ahead.

Maribel Correa

Thank you, Lori. Good morning and thank you for joining AHC’s third quarter conference call. We issued a press release today announcing the company’s third quarter 2008 financial results. This release has been posted on our web site at ahbelo.com. Robert Decherd, our Chief Executive Officer and Ali Engel, our Chief Financial Officer will lead today’s call. Executive Vice Presidents Jim Moroney and Skip Cass are available for Q and A.

Before we begin, let me note that our discussion will include forward-looking statements. Forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those statements. Additional information about these factors are entailed in the company’s press release and publicly available filings with the FCC.

Also, we mention non-GAAP financial measures during this conference call. AHC management believes that non-GAAP financial measures provide useful supplemental information to assist in determining performance comparison’s to our peers. Reconciliation the most directly comparable financial measures presented in a course with GAAP, are provided on our web site at ahbelo.com under the investor relations section.

I would like to now introduce Robert Decherd.

Robert Decherd

Thank you, Maribel and good morning everyone. In the third quarter, A.H. Belo Corporation made important strides in streamlining operations and targeting incremental revenue streams. Despite a very challenging macro economic environment, the company succeeded in several major initiatives and accomplished them quickly.

In August, the Dallas Morning News launched Briefings, a free home-delivered condensed print news product that leverages existing resources and targets non-subscriber families who are interested in local news and information. Briefing has been very well-received by consumers and advertisers alike.

In its first five weeks of publication, Briefing generated approximately $500,000 in revenue. It’s lower than expected, single digit opt-out rate indicates that Briefing is engaging its target audience. Briefing further diversifies AHC’s product offerings, both for advertisers and audiences and strengthens readership.

The Dallas Morning News tripled the circulation of Al Dia, its free Spanish language newspaper, to increase effectiveness for preprint advertisers. Al Dia’s total revenue increased 14% in the third quarter, versus the same period last year.

On the expense side, the Dallas Morning News and the Fort Worth Star Telegram entered into a joint distribution agreement to maximize operating efficiencies and improve delivery time in certain parts of each newspaper’s distribution area. The Morning News understands the value of its brand equity and has incorporated service goals in the agreement to ensure quality delivery to subscribers.

In Riverside, The Press Enterprise reevaluated its circulation footprint and eliminated distribution to Palm Springs, which will improve EBITDA performance by approximately $600,000 for 2009.

As previously announced, A.H. Belo is restructuring its newspaper operations. The goal is to eliminate $50 million of ongoing costs by the end of the first quarter of 2009 and accelerate the allocation of resources to promising new products. We’ll receive approximately 60% of the $50 million in savings from head-count reductions. The voluntary severance offer or VSO, made to employees at the company’s three major publications was completed in the third quarter.

Charges in the third quarter related to the VSO totaled $11.1 million. On an annualized basis, the VSO is expected to save approximately $24 million. As of September 30, 2008, following the VSO, A.H. Belo had approximately 2,980 full-time and 480 part-time employees.

A reduction in force was necessary in order to achieve cost reduction targets and was completed in October. The reduction in force will cost approximately $2.4 million and be charged in the fourth quarter. The reduction in force affected about 90 employees in select departments at the three major publications.

On an annualized basis, the reduction in force is expected to save approximately $5 million. The combined workforce reductions will result in an overall savings of $29 million on an annualized basis and reduce head-count by approximately 14% from 2007 levels.

Realignment of AHC’s expense structure to match revenue trends is an ongoing process. For example, at the Dallas Morning News, the Monday, Tuesday and Wednesday classified sections have been integrated into the Metro, Sports Day and Business sections of the paper. The Dallas Morning News has reduced the number of zoned editions and publishes from five to three, thereby reducing press-runs and simplifying daily composition requirements. These steps were taken after careful consideration to ensure a smooth transition for our advertisers and consumers.

The Press Enterprise is expanding its circulation of La Printa, its Spanish language publication by approximately 3500, to 100,000 in the next year. This will provide advertisers with target audiences as the Hispanic population continues to grow in Southern California. La Printa will also be home-delivered in certain areas.

On the revenue side, Executive Vice Presidents Jim Moroney and Skip Cass are jointly heading a company-wide effort to improve our sales force effectiveness and go-to market capabilities and focus on online sales.

AHC is transforming its sales organization to benefit from online ad spending. Our sales forces are receiving more training on vertical categories that cut across both print and online products. This increased awareness and focus will allow our sales groups to enhance the marketing solutions they provide A.H. Belo’s business customers.

While these initiatives have had a favorable impact, today’s secular pressures and uncertain macro economic conditions require additional measures to achieve financial stability and maintain operating flexibility.

I sent a letter to AHC shareholders last week that among other things, highlighted the numerous actions we’ve initiated to manage through both cyclical and secular pressures in the near term. These initiatives reflect the positive impacts on advertisers, consumers, our brand equity and AHC’s long-term generation strategy.

I also announced that our bank group has approved an amendment and waiver to AHC’s credit facility. The existing credit agreement was amended for the period from October 23, 2008 to January 31, 2009, to include a fixed charge covenant waiver and reduction in the size of the facility from $100 million to $50 million. The credit facility is now secured by accounts receivable in inventory and the amendment waiver suspends the declaration of any dividends during the waiver period.

A.H. Belo’s business strategy includes paying a dividend on a regular basis and the board’s desire is to remain a dividend paying company. However, it is important to recognize the impact of current industry and market conditions and retain as much flexibility as possible as the company works through the remainder of 2008 and 2009. Overall, this amendment enables AHC to have adequate financial flexibility to make the right strategic and operating decisions.

We had previously disclosed that the company is evaluating its real estate portfolio to determine what non-core assets can be monetized without affecting ongoing operations. CB Richard Elis has been hired to develop a marketing strategy for our wholly-owned properties and providence and our Dallas properties jointly-owned with Belo Corp.

Turning to third quarter results, AHC had consolidated EBITDA of $2.8 million, excluding the $15.6 million in special charges for the VSO and an impairment charge for a printing press. As of September 30, our cash balance was $17.7 million dollars. The company drew $10 million from its revolving credit agreement to fund voluntary severance costs in September.

Challenging top-line trends were exacerbated by the economic downturn in the third quarter. AHC’s advertising revenue, including print and internet revenue, declined 22%, driven largely by declines in classified revenue at the Dallas Morning News and The Press Enterprise.

Online revenue contributed over $11 million the third quarter of 2008, 19% below the same period last year. AHC’s online revenues comprised 7.4% of the company’s total revenue. Online revenue declines in classified advertising, offset increases in the contextual advertising and national categories.

Usage was strong, year-over-year unique users increased by 67% and page-views by 15% on AHC’s web site in the third quarter. Video streams on AHC web sites increased by 117%, versus the same period last year.

Our web sites continue to be popular news and information destinations. In the month of September, A.H. Belo’s web sites ranked 25th in Nielson’s top 30 online current events and global news destinations list. ACH’s participation in the Yahoo newspaper consortium continues to expand as we implement Yahoo’s behavioral targeting capabilities.

The Dallas Morning News introduced Yahoo’s behavioral targeting tools in October of 2007 and since launch, has driven nearly $1 million in incremental revenue in early base selling. In the third quarter, among all newspaper consortium participants, the Morning News ranked in the top three for overall revenue with Yahoo’s behavioral targeting tools. And number two for auto sales. The complete roll-out of Yahoo’s behavioral targeting tools is expected by the end of this year at The Providence Journal and The Press Enterprise.

AHC received accolades for its content creating capabilities in the third quarter. Some of the awards received include the following: the Visa d’Or, International Daily Press Award, an award given for the best report published in the daily press in any country in the world, won by the Dallas Morning News for its story, “The Bottom Line.”

The 2008 Online News Association Award for investigative reporting was won by the Dallas Morning News for its series on problems with Texas criminal justice system. First place went to the Dallas Morning News for its online story, “Among the Wounded” in the 2008 military reporters and editors contest. The Providence Journal was honored with 15 awards by the New England Associated Press News Executives Association in its annual writing, photo and design contest.

The Press Enterprise won first place in Editor and Publisher’s 2008 photo of the year contest in the news category. And The Press Enterprise was awarded the top newspaper in California in its class and received the award of excellence at the California newspaper publisher’s association press summit.

Ali will now provide more detail about our third quarter financial results and outlook, after which we’ll be glad to respond to your questions, Ali?

Alison Engel

Thank you, Robert. AHC reported third quarter revenues $154 million and a net loss $17.3 million or .84 cents per share for the third quarter of 2008. Earnings per share results included an $8.2 million tax benefit. AHC’s net loss would improve $1.7 million when special items related to the VSO and printing press impairment are excluded.

Total advertising revenue decreased 22% in the third quarter of 2008, with classified and national print revenue decreasing most significantly. Retail revenue for the third quarter declined 17%. Increases in national print revenue at the Providence Journal and The Press Enterprise were offset by declines at the Dallas Morning News.

Total national print revenue decreased 23% over the prior year. Classified revenue dropped 39% versus the third quarter of 2007. Classified revenue at the Dallas Morning News was affected mostly by declines in employment and real estate. The largest classified revenue declines at the Providence Journal and at The Press Enterprise were in employment.

On the good news for us, circulation and other revenue were up 12 and 20% respectively in the third quarter. Total consolidated operating expenses decreased 1.2% or $2 million in the third quarter, despite having incurred $11 million in VSO costs. Year-to-date, this equates to reduction of $17 million.

Improvements in the third quarter of consolidated operating expenses were driven by lower direct compensation and other benefits. Expense decreases in outside services of $4.8 million, advertising and promotion expense of $1.8 million and newsprint expense of $800,000 further contributed to overall expense reductions.

For the third quarter of 2008, aggregate newspaper EBITDA was $12.5 million, excluding special items. Newspaper EBITDA margin excluding special items was 8.1%. EBITDA margin performance, including special items in the third quarter was highest at the Providence Journal, followed by the Dallas Morning News.

For the third consecutive year, a year-over-year percent decline in The Press Enterprise’s advertising revenues including print and internet improved. The percent decline in The Press Enterprise’s advertising revenues, improved 300 basis points from the second quarter to the third quarter.

This improvement may indicate some bottoming-out from cyclical pressures in Southern California. The Press Enterprise experienced a 29% increase in part-run revenue and an 8% increase in national revenue. And in the September audit bureau of circulations report, The Press Enterprise was ranked number nine, by the ABC in its top 25 gainers in net combined audience.

Corporate and non-operating company expenses declined more than $3.1 million in the third quarter versus the same period last year. Because of AHC’s spinoff in February of 2008, full-year 2007 corporate expenses are based on an allocated amount.

Turning to the balance sheet, total assets were $588 million, as of September 30th, 2008. AHC drew down $10 million from its credit facility in September. The company did not repurchase any shares in the third quarter and capital expenditures were $5.3 million in the third quarter.

Beyond the head-count reductions, additional cost cutting actions have been put in place until the company returns to profitability. These actions include; a compensation philosophy established by the board that freezes salaries at current levels for most employees effective November 1, 2008.

A revision of executive bonus plans that focuses opportunities for 2009 bonuses, almost exclusively on revenue goals throughout the company. A suspension, effective January 1, 2009, of the 2% profit related contributions to employees 401K accounts.

The company’s 401K match of up 6% of employee’s base salaries will remain in place for 2009. A proposed 20% reduction in directors fees to be effective May, 2009 and a reduction in capital expenditures to $18 million or less in 2009 and 2010. We also believe that the CB Richard Elis, real estate monetization initiative could result in some property sales in 2009.

Operator, we’re now ready to take questions.

Question-and-Answer Session


Thank you. (Operator’s Instructions) Our first question from the line of Jack Ripstein with Potrero Capital Research. Please go ahead.

Jack Ripstein - Potrero Capital Research

Hi, good morning, thanks for taking my call. You guys went through a couple of the numbers in different ways than maybe I’d been thinking about it; but could you give us just—you talked about 8.1% EBITDA margin. Is that after G&A et cetera?

And then I’m assuming that’s excluding the charges. And then we’re working without the benefit of the queue, obviously which will be soon, could you give us the operating cash-flow number as well?

Robert Decherd

Ali, you want to start in?

Alison Engel

8.1% in the newspaper EBITDA margin, so that’s not consolidated, EBITDA margin. That’s the margin for the three papers, excluding the special items, so excluding the VSO, any impairment of the printing press.

Robert Decherd

But which is a way of trying to focus on what the operating potential is of the three newspapers. The other parts of expense that come in when you put in the corporate numbers and overhead we retain at corporate is what brings that number down to the reported net income.

Jack Ripstein - Potrero Capital Research

Okay, but the non-cash items. So you still at even the consolidated level, it looks like you would have– if I am looking the numbers correctly, positive EBITDA, when you back out the special charges, is that correct?

Robert Decherd


Jack Ripstein - Potrero Capital Research

Okay, even on a consolidated with overhead, correct?

Robert Decherd

Well, we’d be pretty close to break even.

Jack Ripstein - Potrero Capital Research

Okay. And then of these charges, what of those are cash versus non-cash?

Alison Engel

The $11.1 million for the VSO is a cash charge. The $4.5 million for the impairment of the printing press is a non-cash charge.

Jack Ripstein - Potrero Capital Research


Robert Decherd

And this is a press that we inherited when we took over the Dallas Times Herald in the early 90s; we previously wrote-off the second press we received from them to install a new press in the mid 90s. So this just cease to have any value and so far as our current operations or expected future operations.

And Jack, just work back through that EBITDA number, it’s probably about $1.5 million negative, if you roll everything together, to not be break even.

Jack Ripstein - Potrero Capital Research

Okay. In the shareholder letters, which I think is a great idea for updates by the way. You guys talked kind of– it seems to be the strategy in the moment of times that cost containment and whatnot, but if I look out at the numbers and I don’t know what the appropriate rate of decline in revenue would be, it seems like you almost– if you declined on a run-rate basis, which might be aggressive, you’d eat into the sort of $50 million run-rate cost savings, you’d be back to kind of flat.

And given that your assets are almost worth more in sort of a dead than alive mode, what other sort of strategic thinking plan B, C, D et cetera can you guys talk about?

Robert Decherd

Yeah, that last one’s the Bon Jovi strategy but we’re not running it right now.

Jack Ripstein - Potrero Capital Research

Okay, I’m glad you have names for them at least.

Robert Decherd

Yeah, I think he’s got nice music. Let me comment in two or three ways that I hope will be helpful. First of all, if we were trying to be net income positive or cash-flow positive, no matter what we could take out the investments were making our future right now and probably get there. We think that’s a bad idea, our board thinks it’s a bad idea.

So, we’re investing in business development and Belo Interactive Media to facilitate the transition that is obviously well underway, insofar as the buildup of online advertising and the, at least for now, the decline of traditional print on paper advertising. The great unknown is what is the run rate in the decline of print advertising and how long will a decline persist.

Our belief has been for a long time, and remains, that there is a point at which print advertising stabilizes and can be maintained at or around a level that enables us to run these businesses on a profitable basis, when you take into account all the revenue streams that the three newspapers have, both print and online. Getting there is the challenge and, as we and all of our peer companies are coping with right now, the economy has, in some ways, masked what the actual decline rate is, rate of decline, the secular phenomenon.

And therefore 2009 is a mystery, I believe, to anyone who’s trying to analyze what’s going to happen in advertising generally in this country and specifically with respect to our company and the newspaper industry. So, to your point, we are working really hard on the expense side.

I think that we have made good progress, we can make more, and are developing plans right now to take into account the very contingency you described, instead of some stabilization in the rate of decline, if this continues for a few more months or even all of 2009. That would chew up a lot of the savings that we and our peer companies have realized through the initiatives that have already been taken.

The key in all of this, as I noted in my shareholder letter, is to protect to the greatest degree possible the content creating capabilities we have which provide competitive advantages in our markets and enable us to create proprietary content on a day to day basis.

There’s a lot of power behind that notion in the brand, online and in print. Some of the numbers I cited this morning, in terms of usage of our sites, are impressive. The challenge is to monetize those, and Skip Cass and Jim Moroney are working on that very hard.

As to the last notion about the value of our assets, this has been properly raised in the last few months for us and all of our peer companies. We think the best approach is the one we have taken, and when I say we I’m talking about our board and management committee, and that is let’s fight our way through this combination of secular and economic cyclical pressures, do the smart things to protect our competitive advantages, and then assess the marketplace and industry condition at that time.

We’ve talked previously about monetizing some of the real estate assets that we have. The number potentially there is around $35 million, but anyone who can time real estate transactions is a lot more clever than we are, but we think we’ve got the right people on the field now to do that, and that would certainly help us make this transition.

I’m not sure what the value of any media asset is today, in our sector or elsewhere, which is why you see basically a dearth of any kind of serious conversations in our sector, in cable, in television, in radio, about transactions. The market’s telling us, I believe, that the advertising climate is going to be very difficult for the next 15 months until it improves there’s really no marketplace that we would ever consider participating in.

Does that help you on that last point?

Jack Ripstein - Potrero Capital Research

Oh yeah, no that helped. The other question I suppose I have, as you guys model out, and this isn’t a guidance question, more of a philosophy question, but as you model out kind of what this looks like and granted you don’t know the exact number of decline, I’m assuming you see a model in which you can cash flow and not really dip in.

I mean, obviously you can’t dip in too much because you only have 15 million capacity on that debt. I guess what I’m trying to get at is what kind of cash flow dynamic do you see in terms of cash flow generation that can be poured back into this investment process, and I guess it’s really dovetailing into is there a need for further financing of any kind, in your current model that you’re contemplating?

Robert Decherd

Well, let me talk about the financing first and Ali can certainly amplify it. We are in regular conversation with our bank group, who by the way have been very supportive, and we think the pricing of this waiver reflects the very positive relationship we have with JP Morgan and Bank of America, who are the co-leads in our credit, and are two of the strongest banks on the planet at the moment.

So, we feel very good about that. Are we considering, and will we consider ways to improve our financing flexibility? Yes.

Do we have a specific game plan to talk about at this point? No, but we’re very attentive to that and there are some choices that are available to us, perhaps that aren’t available to all of our peer companies who are more leveraged.

As the cash flows, I think cash is going to be the whole game for everyone in our industry in the next 12 to 18 months, and it’s going to be very tight. Depending on the way you address the point you raised earlier, insofar as trends, we’re going to have to manage very, very carefully. And I don’t think we can answer your questions, well wouldn’t in any event, but from a philosophical standpoint our idea is to invest cash we have available in our businesses, not be exposing us to over levered position.

We feel real good about the starting point of having no debt and the spinoff, it’s been a huge advantage and we want to stay as close to that as we can. But, will we borrow into the line? Depending on how things play out over the next 12 months, absolutely, have to.

Jack Ripstein - Potrero Capital Research

Okay, and was there positive cash flow in the quarter? It’s hard to tell, given the different, certain operations.

Alison Engel

We don’t present the cash flow until we file the Q.

Robert Decherd

And that’s been historic, Jack. That’s not a change in —

Alison Engel


Robert Decherd

In relationship to the marketplace, we just wait for the Q as a matter of practice.

Jack Ripstein - Potrero Capital Research

Okay, well we can wait, as well. Sounds good, thanks.

Robert Decherd

All right, thank you.


And our next question from the line of Peter Salkowski with Goldman Sachs, please go ahead.

Peter Salkowski - Goldman Sachs

Thank you, good morning everybody. Robert, a question on trends in terms of what you’re seeing. Coming into October, you know, a lot of people were reporting September got really soft, obviously with what was going on in the world of finance in the financial world, I think there’s a lot of pullback by advertisers’ as well.

If you could just kind of give a sense of how the trends ended in September and what’s happening in October going into the fourth quarter.

Robert Decherd

Peter, I’m going to make a general statement and then let Jim and Skip talk somewhat more specifically. I think it’s very difficult, frankly, to draw conclusions from what’s happened in the last three to four weeks, because advertisers like every business in America have hunkered down in a way that’s not been seen for a long time.

We certainly saw some softness develop towards the end of the third quarter that became more pronounced in late September and during this month. We don’t see much change to the positive yet, but we take some comfort that in retail and national at least, despite the predictions of a very, very difficult holiday season, people have got to advertise.

There are products and brands and specific needs that are well suited to the distribution choices we present, whether it’s print on paper or our specialty products or pre-print, the whole range of product offerings you know about, and online. So, while we can’t tell you we see things improving, I’m not sure it is correct to say they are declining at an accelerated rate that will be sustained.

Have they declined in the last four to six weeks? Yes. Is it going to be sustained at these more challenging levels? Nobody knows, and we certainly don’t. Jim, do you want to pick up?

Jim Moroney

You know, it’s really interesting. We did have a third quarter that, as reported, was slower in ad revenues across the board than second quarter.

So far, in the month of October, we haven’t seen a real change in those trends from September. And, I think it speaks to Robert’s point that these advertisers, many of them in the retail business, what’s happening now and what comes up for Christmas is a very critical time for them and I think it remains to be seen whether or not they’re going to pull in their advertising or whether they’re going to try to maintain their spending in order to try to get the best share of business they can during an important quarter for them. So, so far October has not appeared to be different from September and most of the third quarter.

Peter Salkowski - Goldman Sachs

When would you see, sort of, a pickup in the pre-print inventory that you would be delivering at the end of the year?

Jim Moroney

Most of the pre-print orders and so forth, because of the timing of the printing, are already in place and we basically know what’s coming. And, again, we’ve had one instance of a little bit of pull back from one retailer, but frankly that’s it.

There has not yet been communicated to us any changes in those orders, neither increases nor decreases.

Peter Salkowski - Goldman Sachs

And then, on the circulation revenue, could you just explain what’s driving that, the year-over-year growth net number. I guess I’m forgetting, I assume there’s some changes to rate and things.

Jim Moroney

Robert, do you want me to do that, or?

Robert Decherd

Yes, yes, please.

Jim Moroney

We took single copy price up in all three of our markets this year at different intervals. So that’s rolling through and will even roll through the first part of next year on a year over year basis.

And, the Dallas market, particularly, we took the home delivery price increase and that’s what you’re seeing, is the change in rate which is greater than any decreases there have been in volumes, causing an increase in revenues.

Peter Salkowski - Goldman Sachs

And, that will carry into the first quarter of next year?

Jim Moroney

Yeah, all of those rate increases that we made, and there’s another rate increase that the Dallas Morning News is making to home delivery in November, will carry through into next year, particularly the single copy which did not begin until different intervals into the 2008 year.

Peter Salkowski - Goldman Sachs

Great, thank you. And, Robert, wondering about newsprint, what you’re hearing in terms of the price increases. I know there have been $20 price increases per month over most of this year, and, kind of, what you’re hearing now with the change in the dollar and the Canadian dollar, and such.

Robert Decherd

Peter, we have not heard anything definite from the consortium that buys from us. The comment I made in my share holder letter is more an opinion than it is some fact based view as to what’s going to happen to pricing, but whether it’s the value of the Canadian dollar or all of the other factors that would affect the price of any commodity, you have to believe that the steam has come out of this train to some degree. Until we hear from the newsprint suppliers we won’t know.

We’ve taken into account, certainly, the announced increases for the rest of this year and our own modeling. And we’ve been conservative about next year, meaning at least acknowledging that they say they’re going to put through other increases.

It’s just hard to imagine how they’re going to pull that off, though, given that demand is down, the other factors that affect their pricing are all stabilizing or coming our direction, if you will. We should know in a few weeks, but we hope it’s an opportunity, from their standpoint they should make it an opportunity because we need to be doing business together for a long time here.

Peter Salkowski - Goldman Sachs

So, in terms of your possible increase in that line, the newsprint line, for next year, you’re expecting that to be up, or will you offset that all with cuts in consumption?

Alison Engel

We’re really not giving a lot of guidance on what we’re doing next year, but I think to an extent there are any surprises next year, we would be looking to what we would do on the volume side to mitigate the increase in the total expense line.

Peter Salkowski - Goldman Sachs

Great, thank you, and then the last question on the dividend. I think it says in the release there was a $0.375 dividend paid in the third quarter.

Alison Engel

Declared. One was declared in July at the board meeting, it’s a declaration. So, it’s a timing issue.

Peter Salkowski - Goldman Sachs

Got you. That’s what I figured. And, then the other part of that is, Robert, I think the loan agreement states that you have a moratorium on dividends through the first quarter of ’09, what’s the thought in terms of coming back as a dividend payer sometime next year or in the future? What would be the trigger that would allow you to come back and do that?

Robert Decherd

The trigger is consistent profitability, it’s as simple as that. I wish it were that easy to achieve. When you factor in all the views expressed about ’09, as I said earlier, it’s going to be tight for all of us in the industry. So, our view is until we can record more than a couple of quarters of solid profitable performance we’re not going to be considering that as a use of cash.

Peter Salkowski - Goldman Sachs

Great, that’ll do for me, thank you.

Robert Decherd

Okay, let me circle back to circulation. Because, not only have we been able to implement price increases very successfully, but I think what Jim has done in Dallas, particularly, but we’ve also accomplished in Providence and have underway in Riverside, is really important. We have been on a focused mission, almost, for the last three years, to get down to core circulation that is our core readership and therefore most valued to our advertisers.

The reductions at the Dallas Morning News, for example, in September all had to do with things such as third party hotels, bonus days, and related items, and some single copy as a result of the price increase. But, if we had not taken those initiatives, circulation for the six month period at the Dallas Morning News would have been up, and when you look at percent of daily circulation for us and the largest newspapers in the country, and analyze how much of it is being paid at 50% or more of the basic price, we have now reached the head of the line.

We have 94.7% of our circulation at 50% or above, by getting rid of discounting, getting rid of third party, and so forth. This is the place to live in the environment that’s arrived and is going to persist, and we’re very pleased that we’re making that progress, because it then enables us to price in the ways Jim described and do it effectively. Okay, operator, another question?


(Operator instructions)

Robert Decherd

Alright, well, operator, and those of you still on the line, thank you very much for joining us. We feel like we’re making progress in a difficult environment and look forward to seeing many of you in New York at the conferences in December.


Thank you, ladies and gentlemen, that does conclude your conference call for today. We thank you for your participation, and you may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!