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20170331 Q1

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: March 31, 2017

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

Commission file no. 1-33741

Design Cover

A. H. Belo Corporation

(Exact name of registrant as specified in its charter)




Delaware		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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one):

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		April 28, 2017
Common Stock, $.01 par value		21,731,466

Total Common Stock consists of 19,258,786 shares of Series A Common Stock and 2,472,680 shares of Series B Common Stock.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 3

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A. H. BELO CORPORATION

FORM 10-Q

TABLE OF CONTENTS




		Page
PART I
Item 1.	Financial Information		PAGE 5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		PAGE 18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		PAGE 25
Item 4.	Controls and Procedures		PAGE 25

PART II
Item 1.	Legal Proceedings		PAGE 25
Item 1A.	Risk Factors		PAGE 25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		PAGE 25
Item 3.	Defaults Upon Senior Securities		PAGE 26
Item 4.	Mine Safety Disclosures		PAGE 26
Item 5.	Other Information		PAGE 26
Item 6.	Exhibits		PAGE 27
Signatures			PAGE 30
Exhibit Index			PAGE 31

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 4

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PART I

Item 1. Financial Information

A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Operations



	Three Months Ended March 31,
In thousands, except share and per share amounts (unaudited)	2017		2016
Net Operating Revenue:
Advertising and marketing services	$	35,204	$	35,237
Circulation		19,166		20,352
Printing, distribution and other		6,531		6,894
Total net operating revenue		60,901		62,483
Operating Costs and Expense:
Employee compensation and benefits		27,875		27,017
Other production, distribution and operating costs		28,326		28,331
Newsprint, ink and other supplies		5,901		6,058
Depreciation		2,506		2,632
Amortization		200		226
Goodwill impairment		228		—
Total operating costs and expense		65,036		64,264
Operating loss		(4,135)		(1,781)
Other income (expense), net		(337)		79
Loss from Continuing Operations Before Income Taxes		(4,472)		(1,702)
Income tax benefit		(42)		(1,109)
Net Loss		(4,430)		(593)
Net income attributable to noncontrolling interests		—		39
Net Loss Attributable to A. H. Belo Corporation	$	(4,430)	$	(632)

Per Share Basis
Net loss attributable to A. H. Belo Corporation
Basic and diluted	$	(0.21)	$	(0.03)

Number of common shares used in the per share calculation:
Basic and diluted		21,690,371		21,514,133

See the accompanying Notes to the Consolidated Financial Statements.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 5

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A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)



	Three Months Ended March 31,
In thousands (unaudited)	2017		2016
Net Loss	$	(4,430)	$	(593)
Other Comprehensive Income (Loss):
Amortization of actuarial (gains) losses, net of tax		57		(8)
Total other comprehensive income (loss)		57		(8)
Comprehensive Loss		(4,373)		(601)
Comprehensive income attributable to noncontrolling interests		—		39
Total Comprehensive Loss Attributable to A. H. Belo Corporation	$	(4,373)	$	(640)

See the accompanying Notes to the Consolidated Financial Statements.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 6

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A. H. Belo Corporation and Subsidiaries

Consolidated Balance Sheets



	March 31,		December 31,
In thousands, except share amounts (unaudited)	2017		2016
Assets
Current assets:
Cash and cash equivalents	$	69,205	$	80,071
Accounts receivable (net of allowance of $1,018 and $1,115 at March 31, 2017 and December 31, 2016, respectively)		25,524		29,114
Inventories		4,063		3,386
Prepaids and other current assets		10,705		9,553
Total current assets		109,497		122,124
Property, plant and equipment, at cost		446,203		445,874
Less accumulated depreciation		(404,621)		(402,115)
Property, plant and equipment, net		41,582		43,759
Intangible assets, net		4,672		4,872
Goodwill		13,973		14,201
Other assets		7,908		7,775
Total assets	$	177,632	$	192,731
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	11,550	$	9,036
Accrued compensation and benefits		6,709		8,657
Other accrued expense		4,859		6,318
Advance subscription payments		13,791		13,243
Total current liabilities		36,909		37,254
Long-term pension liabilities		53,916		54,843
Other post-employment benefits		2,326		2,329
Other liabilities		7,778		6,483
Total liabilities		100,929		100,909
Noncontrolling interest - redeemable		—		2,670
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 20,675,667 and 20,620,461 shares at March 31, 2017 and December 31, 2016, respectively		208		207
Series B: issued 2,472,680 shares at March 31, 2017 and December 31, 2016		24		24
Treasury stock, Series A, at cost; 1,416,881 shares held at March 31, 2017 and December 31, 2016		(11,233)		(11,233)
Additional paid-in capital		494,486		499,552
Accumulated other comprehensive loss		(39,251)		(39,308)
Accumulated deficit		(367,531)		(361,324)
Total shareholders’ equity attributable to A. H. Belo Corporation		76,703		87,918
Noncontrolling interests		—		1,234
Total shareholders’ equity		76,703		89,152
Total liabilities and shareholders’ equity	$	177,632	$	192,731

See the accompanying Notes to the Consolidated Financial Statements.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 7

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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, 2015	20,522,503	2,387,509	$	229	$	500,449	(1,416,881)	$	(11,233)	$	(38,442)	$	(333,222)	$	1,069	$	118,850
Net income (loss)	—	—		—		—	—		—		—		(632)		26		(606)
Other comprehensive loss	—	—		—		—	—		—		(8)		—		—		(8)
Distributions to noncontrolling interests	—	—		—		—	—		—		—		—		(165)		(165)
Issuance of shares for restricted stock units	58,584	—		1		(1)	—		—		—		—		—		—
Issuance of shares for stock option exercises	—	25,926		—		33	—		—		—		—		—		33
Share-based compensation	—	—		—		372	—		—		—		—		—		372
Conversion of Series B to Series A	269	(269)		—		—	—		—		—		—		—		—
Dividends	—	—		—		—	—		—		—		(1,745)		—		(1,745)
Balance at March 31, 2016	20,581,356	2,413,166	$	230	$	500,853	(1,416,881)	$	(11,233)	$	(38,450)	$	(335,599)	$	930	$	116,731
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	—	—		—		—	—		—		—		(4,430)		—		(4,430)
Other comprehensive income	—	—		—		—	—		—		57		—		—		57
Distributions to noncontrolling interests	—	—		—		—	—		—				—		(118)		(118)
Issuance of shares for restricted stock units	55,206	—		1		(1)	—		—		—		—		—		—
Share-based compensation	—	—		—		441	—		—		—		—		—		441
Purchases of noncontrolling interests	—	—		—		(5,506)	—		—		—		—		(1,116)		(6,622)
Dividends	—	—		—		—	—		—		—		(1,777)		—		(1,777)
Balance at March 31, 2017	20,675,667	2,472,680	$	232	$	494,486	(1,416,881)	$	(11,233)	$	(39,251)	$	(367,531)	$	—	$	76,703

See the accompanying Notes to the Consolidated Financial Statements.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 8

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A. H. Belo Corporation and Subsidiaries

Consolidated Statements of Cash Flows



	Three Months Ended March 31,
In thousands (unaudited)	2017		2016
Operating Activities
Net loss	$	(4,430)	$	(593)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,706		2,858
Net periodic pension and other post-employment benefit		(859)		(867)
Share-based compensation		441		372
Deferred income taxes		—		(4)
Goodwill impairment		228		—
Changes in working capital and other operating assets and liabilities, net of acquisitions
Accounts receivable		3,590		5,146
Inventories, prepaids and other current assets		(1,829)		(3,602)
Other assets		(133)		4
Accounts payable		2,514		(2,786)
Compensation and benefit obligations		(1,902)		(1,748)
Other accrued expenses		178		429
Advance subscription payments		548		1,140
Other post-employment benefits		(15)		(2)
Net cash provided by operating activities		1,037		347
Investing Activities
Purchases of assets		(852)		(2,095)
Net cash used for investing activities		(852)		(2,095)
Financing Activities
Purchases of noncontrolling interests		(9,231)		—
Dividends paid		(1,763)		(1,745)
Distributions to noncontrolling interests		(57)		(264)
Proceeds from exercise of stock options		—		33
Net cash used for financing activities		(11,051)		(1,976)
Net decrease in cash and cash equivalents		(10,866)		(3,724)
Cash and cash equivalents, beginning of period		80,071		78,380
Cash and cash equivalents, end of period	$	69,205	$	74,656

Supplemental Disclosures
Income tax paid, net (refund)	$	(127)	$	43
Noncash investing and financing activities:
Investments in property, plant and equipment payable		680		—
Dividends payable		1,777		—
Distributions to nonconrolling interests payable		122		—

See the accompanying Notes to the Consolidated Financial Statements.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 9

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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 a leading local news and information publishing company with commercial printing, distribution and direct mail capabilities, as well as expertise in emerging media and digital marketing. With a continued focus on extending the Company’s media platform, 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; the Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, and various niche publications targeting specific audiences. A. H. Belo also offers digital marketing solutions through DMV Digital Holdings Company (“DMV Holdings”) and Your Speakeasy, LLC (“Speakeasy”), and provides event activation, promotion and marketing services through DMN CrowdSource LLC (“CrowdSource”).

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, 2016. 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.

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

In May 2014, the FASB issued ASU 2014-09 – Revenue 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 31, 2017.

The Company currently anticipates adopting ASU 2014-09 using the modified retrospective approach as of January 1, 2018. This approach consists of recognizing the cumulative effect of initially applying the standard as an adjustment to opening retained earnings. The Company is currently evaluating the impact that the updated guidance will have on the Company’s financial statements and related disclosures. The Company will utilize a bottoms-up approach to analyze the impact of the standard on the Company’s portfolio of contracts by reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to the Company’s existing revenue contracts. The Company expects to complete this evaluation prior to the fourth quarter of 2017.

In February 2016, the FASB issued ASU 2016-02 – Leases (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. The guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and will be applied retrospectively. 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.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 10

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In January 2017, the FASB issued ASU 2017-04 – Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The guidance will be effective for fiscal years beginning after December 15, 2019, including 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.

In February 2017, the FASB issued ASU 2017-06 – Plan Accounting – Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962) and Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. This update clarifies the presentation requirements for a plan’s interest in a master trust and requires more detailed disclosures of the plan’s interest in the master trust. The guidance will be effective for fiscal years beginning after December 15, 2018, including 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.

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 costs in the Consolidated Statement of Operations. The guidance will be effective for fiscal years beginning after December 15, 2017, including 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

In the first quarter of 2017, in conjunction with the promotion of Grant Moise from Senior Vice President Business Development / Niche Products to General Manager of The Dallas Morning News and Executive Vice President of A. H. Belo, the Company reorganized its two reportable segments based on changes in 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. These operations generate revenue from sales of advertising within its newspaper and digital platforms, subscription and retail sales of its newspapers, sponsorship advertising for events, 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 Holdings, Speakeasy and digital advertising through Connect (programmatic advertising). The Company operates the 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, we believe the Company’s chief operating decision makers (the “CODMs”) are its Chief Executive Officer, Jim Moroney, and Grant Moise, the General Manager of The Dallas Morning News and Executive Vice President of A. H Belo Corporation. The CODMs allocate resources and capital to the Publishing and Marketing Services segments at the segment level.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 11

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The following tables show summarized financial information for the Company’s reportable segments. Due to the first quarter 2017 reorganization of the Company’s two reportable segments, the prior year period financial information by segment was recast for comparative purposes.



	Three Months Ended March 31,
	2017		2016
			(Recast)
Revenue
Publishing	$	53,491	$	56,505
Marketing Services		7,410		5,978
Total	$	60,901	$	62,483

Operating Income (Loss)
Publishing	$	(4,725)	$	(2,480)
Marketing Services		590		699
Total	$	(4,135)	$	(1,781)

Noncash Expenses
Publishing
Depreciation	$	2,491	$	2,611
Amortization		—		26
Goodwill impairment		228		—
Total	$	2,719	$	2,637

Marketing Services
Depreciation	$	15	$	21
Amortization		200		200
Total	$	215	$	221



	March 31,		December 31,
	2017		2016
			(Recast)
Total Assets
Publishing	$	155,116	$	170,820
Marketing Services		22,516		21,911
Total	$	177,632	$	192,731

Note 3: Acquisitions

On February 16, 2017, the Company acquired the remaining 30 percent voting interest in Speakeasy for a cash purchase price of $2,111, and on March 2, 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 for a cash purchase price of $14,110. DMV Digital Holdings Company 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.

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 three months ended March 31, 2017 and 2016, the Company recorded pro-rata distributions to noncontrolling interests of $163 and $264, respectively, in connection with this agreement based on 2016 and 2015 free cash flow as defined, respectively.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 12

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Redeemable noncontrolling interest. Also, in connection with the 2015 acquisition of 80 percent voting interest in DMV Holdings, the Company entered into a shareholder agreement which provided for a put option to a noncontrolling shareholder. The put option provided the shareholder with the right to require the Company to purchase up to 25 percent of the noncontrolling ownership interest in DMV Holdings between the second and third anniversaries of the agreement and up to 50 percent of the noncontrolling ownership interest in DMV Holdings between the fourth and fifth anniversaries of the agreement.

Redeemable noncontrolling interest was recorded at fair value on the acquisition date and the carrying value was adjusted each period for its share of the earnings related to DMV Holdings and for any distributions. The carrying value was also adjusted for the change in fair value, which was based on the estimated redemption value as of December 31, 2016. Adjustments were recorded to retained earnings or additional paid in capital, as applicable, and have no effect to earnings of the Company. During the three months ended March 31, 2017 and 2016, redeemable noncontrolling interest was decreased by $61 and $99, respectively, for distributions related to the 2016 and 2015 free cash flow, respectively, as required under the shareholder agreement.

The exercisability of the noncontrolling interest put option was outside the control of the Company. As such, the redeemable noncontrolling interest of $2,670 was reported in the mezzanine equity section of the Consolidated Balance Sheet as of December 31, 2016. As a result of the purchase of the remaining 20 percent voting interest in DMV Holdings, the shareholder agreement was terminated and the redeemable noncontrolling interest was eliminated as of March 31, 2017.

Note 4: Goodwill and Intangible Assets

The following table shows goodwill and other intangible assets by reportable segment as of March 31, 2017 and December 31, 2016. Due to the first quarter 2017 reorganization of the Company’s two reportable segments, the prior year period financial information by segment was recast for comparative purposes.



	March 31,		December 31,
	2017		2016
			(Recast)
Goodwill
Publishing	$	—	$	228
Marketing Services		13,973		13,973
Total	$	13,973	$	14,201

Intangible Assets
Publishing
Cost	$	240	$	240
Accumulated Amortization		(240)		(240)
Net Carrying Value	$	—	$	—
Marketing Services
Cost	$	6,470	$	6,470
Accumulated Amortization		(1,798)		(1,598)
Net Carrying Value	$	4,672	$	4,872

Intangible assets consist of $5,190 of customer relationships with estimated useful lives of 10 years and $1,520 of developed technology with an estimated useful life of five years. Aggregate amortization expense was $200 and $226 for the three months ended March 31, 2017 and 2016, respectively.

Certain goodwill and intangible assets previously reported in the Marketing Services segment were moved to the Publishing segment as a result of the first quarter 2017 segment reorganization. The Publishing reporting unit’s goodwill was determined to be 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 goodwill for impairment as of December 31, 2016 at the reporting unit level 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 values of the businesses.

Because the Company’s annual test indicated that the Publishing reporting unit’s carrying value exceeded its estimated fair value, a second phase of the goodwill impairment test (“Step 2”) was performed specific to the Publishing reporting unit. Under Step 2, the fair

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 13

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value of the Publishing reporting unit’s assets and liabilities were estimated, including intangible assets, for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of goodwill was then compared to the recorded goodwill to determine the amount of the impairment.

Upon completion of the annual test, the Publishing reporting unit’s goodwill was determined to be impaired, and the Company recorded a noncash goodwill impairment charge of $22,682 in the fourth quarter of 2016, fully impairing the Publishing reporting unit’s goodwill.

Note 5: Long-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.

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 March 31, 2017.

There were 114,979 options outstanding at a weighted average exercise price of $8.21 as of March 31, 2017 and December 31, 2016. There was no activity in the first quarter of 2017. As of March 31, 2017, the aggregate intrinsic value of outstanding options was $12 and the weighted average remaining contractual life of the Company’s stock options was 1.2 years. The aggregate intrinsic value of options exercised in the three months ended March 31, 2016, was $117.

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 March 31, 2017, the liability for the portion of the awards to be redeemed in cash was $815. The table below sets forth a summary of RSU activity under the Plan.



	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, 2016	121,131					$	5.65
Granted	213,027						6.25
Vested and outstanding	(86,000)						6.25
Vested and issued	(22,734)	13,634	9,100	$	57		6.90
Non-vested at March 31, 2017	225,424						5.86

For the three months ended March 31, 2017, the Company issued 41,572 shares of Series A common stock and 27,720 shares were redeemed in cash for RSUs that were previously vested as of December 31, 2016. In addition, there were 253,782 and 237,074 RSUs that were vested and outstanding as of March 31, 2017 and December 31, 2016, 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 March 31, 2017, unrecognized compensation expense related to non-vested RSUs totaled $916, which is expected to be recognized over a weighted average period of 1.1 years.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 14

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Compensation Expense. A. H. Belo recognizes compensation expense for awards granted under the Plan over the vesting period of the award. Compensation expense related to RSUs granted under the Plan is set forth in the table below.



Three Months Ended March 31,	RSUs Redeemable in Stock		RSUs Redeemable in Cash		Total RSU Awards Expense
2017	$	441	$	279	$	720
2016		372		232		604

Note 6: Income Taxes

The interim provision for income taxes reflects the Company’s estimate of the effective tax rate expected to be applied for the full fiscal year, adjusted for any discrete transactions which are reported in the period in which they occur. The estimated annual effective tax rate is reviewed each quarter based on the Company’s estimated income tax expense for the year. Under certain circumstances, the Company may be precluded from estimating an annual effective tax rate. Such circumstances may include periods in which tax rates vary significantly due to earnings trends, in addition to the existence of significant permanent or temporary differences. Under such circumstances, a discrete tax rate is calculated for the period.

The Company recognized income tax benefit from continuing operations of $42 and $1,109 for the three months ended March 31, 2017 and 2016, respectively. Effective income tax rates from continuing operations were 0.9 percent and 65.2 percent for the three months ended March 31, 2017 and 2016, respectively. The effective income tax rate for the three months ended March 31, 2017, was lower when compared to the prior year period due to a tax benefit in 2016 resulting from a carryback of net operating loss applied against 2014 taxable income.

Note 7: Pension and Other Retirement Plans

Defined Benefit Plans. The Company sponsors the A. H. Belo Pension Plans (the “Pension Plans”), which provide benefits to approximately 2,300 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 2017 under the applicable tax and labor laws governing pension plan funding.

Net Periodic Pension 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 benefit.



	Three Months Ended March 31,
	2017		2016
Interest cost	$	2,386	$	2,525
Expected return on plans' assets		(3,313)		(3,396)
Amortization of actuarial loss		75		11
Net periodic pension benefit	$	(852)	$	(860)

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 on a per-pay-period basis. During the three months ended March 31, 2017 and 2016, the Company recorded expense of $264 and $279, respectively, for matching contributions to the Savings Plan.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 15

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Note 8: Shareholders’ Equity

Dividends. On March 2, 2017, 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 May 12, 2017, which is payable on June 2, 2017. During the three months ended March 31, 2017, the Company recorded $1,777 to accrue for dividends declared but not yet paid.

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 associated with the accumulated other comprehensive loss are fully reserved.

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



	Three Months Ended March 31,
	2017						2016
	Total		Defined benefit pension plans		Other post- employment benefit plans		Total		Defined benefit pension plans		Other post- employment benefit plans
Balance, beginning of period	$	(39,308)	$	(39,737)	$	429	$	(38,442)	$	(38,898)	$	456
Amortization		57		75		(18)		(8)		11		(19)
Balance, end of period	$	(39,251)	$	(39,662)	$	411	$	(38,450)	$	(38,887)	$	437

Note 9: Earnings Per Share

The table below sets forth the reconciliation for net loss and weighted average shares used for calculating basic and diluted earnings per share (“EPS”). The Company’s Series A and B common stock equally share in the distributed and undistributed earnings.



	Three Months Ended March 31,
	2017		2016
Earnings (Numerator)
Net loss attributable to A. H. Belo Corporation	$	(4,430)	$	(632)
Less: Dividends to participating securities		39		26
Net loss available to common shareholders from continuing operations	$	(4,469)	$	(658)

Shares (Denominator)
Weighted average common shares outstanding (basic and diluted)		21,690,371		21,514,133

Loss Per Share from Continuing Operations
Basic and diluted	$	(0.21)	$	(0.03)

Holders of service-based RSUs participate in A. H. Belo dividends on a one-for-one share basis. Distributed and undistributed income associated with participating securities is included in the calculation of EPS under the two-class method as prescribed under ASC 260 – Earnings Per Share.

The Company considers outstanding stock options and RSUs in the calculation of earnings per share. A total of 594,185 and 576,695 options and RSUs outstanding during the three months ended March 31, 2017 and 2016, respectively, were excluded from the calculation because the effect was anti-dilutive.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 16

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Note 10: Contingencies

Legal proceedings. From time to time, the Company is involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes in these matters, as well as the ranges of probable losses to the extent losses are reasonably estimable. Accruals for contingencies are recorded when, in the judgment of management, adverse judgments or outcomes are probable and the financial impact, should an adverse outcome occur, is reasonably estimable. The determination of likely outcomes of litigation matters relates to factors that include, but are not limited to, past experience and other evidence, interpretation of relevant laws or regulations and the specifics and status of each matter. Predicting the outcome of claims and litigation and estimating related costs and financial exposure involves substantial uncertainties that could cause actual results to vary materially from estimates and accruals.

The Company is currently involved in a dispute with a customer regarding performance and pricing terms with respect to a change order to its printing services contract with the Company. Although the Company believes its position related to the contract can be sustained on its legal merits, it is reasonably possible that losses from zero up to the total amount of disputed invoices, totaling approximately $1,500, could be incurred in connection with the dispute.

In the opinion of management, liabilities, if any, arising from other currently existing claims against the Company would not have a material adverse effect on A. H. Belo’s results of operations, liquidity or financial condition.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 17

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

A. H. Belo intends for the discussion of its financial condition and results of operations that follows to provide information that will assist in understanding its financial statements, the changes in certain key items in those statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect its financial statements. The following information should be read in conjunction with the Company’s consolidated financial statements and related notes filed as part of this report. Unless otherwise noted, amounts in Management’s Discussion and Analysis reflect continuing operations of the Company, and all dollar amounts are presented in thousands, except share and per share amounts.

OVERVIEW

A. H. Belo, headquartered in Dallas, Texas, is a leading local news and information publishing company with commercial printing, distribution and direct mail capabilities, as well as expertise in emerging media and digital marketing. With a continued focus on extending the Company’s media platform, A. H. Belo delivers news and information in innovative ways to a broad spectrum of audiences with diverse interests and lifestyles.

The Company’s Publishing segment includes the operations of The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; the Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, and various niche publications targeting specific audiences. These operations generate revenue from sales of advertising within its newspaper and digital platforms, subscription and retail sales of its newspapers, sponsorship advertising for events, 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 Marketing Services segment includes marketing services generated by DMV Digital Holdings Company (“DMV Holdings”) and its subsidiaries Distribion, Inc., Vertical Nerve, Inc. and CDFX, LLC (“MarketingFX”). The Marketing Services segment also includes Your Speakeasy, LLC (“Speakeasy”) and digital advertising through Connect (programmatic advertising). The Company operates the 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.

The initial purchase of 80 percent voting interest in DMV Holdings occurred in January 2015 for a cash purchase price of $14,110. DMV Holdings holds all outstanding ownership interests of three Dallas-based companies, Distribion, Inc., Vertical Nerve, Inc. and MarketingFX. These businesses specialize in local marketing automation, search engine marketing, and direct mail and promotional products, respectively.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 18

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RESULTS OF CONTINUING OPERATIONS

Consolidated Results of Continuing Operations

This section contains discussion and analysis of net operating revenue, expense and other information relevant to an understanding of results of operations for the three months ended March 31, 2017 and 2016. Due to the first quarter 2017 reorganization of the Company’s two reportable segments, the prior year period financial information by segment was recast for comparative purposes.

The table below sets forth the components of A. H. Belo’s operating income (loss) by segment.



	Three Months Ended March 31,
	2017		Percentage Change		2016
					(Recast)
Publishing
Advertising and marketing services	$	27,794	(5.0)	%	$	29,259
Circulation		19,166	(5.8)	%		20,352
Printing, distribution and other		6,531	(5.3)	%		6,894
Total Net Operating Revenue		53,491	(5.3)	%		56,505

Total Operating Costs and Expense		58,216	(1.3)	%		58,985

Operating Loss	$	(4,725)	(90.5)	%	$	(2,480)

Marketing Services
Advertising and marketing services	$	7,410	24.0	%	$	5,978
Total Net Operating Revenue		7,410	24.0	%		5,978

Total Operating Costs and Expense		6,820	29.2	%		5,279

Operating Income	$	590	(15.6)	%	$	699

Traditionally, the Company’s primary revenues are generated from advertising within its core newspapers, niche publications and related websites and from subscription and single copy sales of its printed newspapers. As a result of competitive and economic conditions, the newspaper industry has faced a significant revenue decline over the past decade. Therefore, the Company has sought to diversify its revenues through development and investment in new product offerings, increased circulation rates and leveraging of its existing assets to offer cost efficient commercial printing and distribution services to its local markets. The Company continually evaluates the overall performance of its core products to ensure existing assets are deployed adequately to maximize return.

The Company’s advertising revenue from its core newspapers continues to be adversely affected by the shift of advertiser spending to other forms of media and the increased accessibility of free online news content, as well as news content from other sources, which resulted in declines in advertising and paid print circulation volumes and revenue. The most significant decline in advertising revenue has been attributable to print display and classified categories. These categories, which represented 26.6 percent of consolidated revenue in 2014, have declined to 19.6 percent of consolidated revenue thus far in 2017, and further declines are likely in future periods. Decreases in print display and classified categories are indicative of continuing trends by advertisers towards digital platforms, which are widely available from many sources. In the current environment, companies are allocating more of their advertising spending towards programmatic channels that provide digital advertising on multiple platforms with enhanced technology for targeted delivery and measurement. As a result of the continued declines the Publishing segment experienced, and expects to continue to experience, in advertising and print circulation revenues, the Publishing reporting unit’s goodwill was determined to be fully impaired as of December 31, 2016. Certain goodwill and intangible assets previously reported in the Marketing Services segment were moved to the Publishing segment as a result of the first quarter 2017 segment reorganization. The Publishing reporting unit’s goodwill was fully impaired. Therefore, the Company recorded a noncash goodwill impairment charge of $228 in the first quarter of 2017.

The Company has responded to these challenges by expanding programmatic channels through which it works to meet customer demand for digital advertisement opportunities in display, mobile, video and social media categories. By utilizing advertising exchanges to apply marketing insight, the Company believes it offers greater value to clients through focused targeting of advertising to potential customers.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 19

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The Company’s expanded digital and marketing services product offerings leverage the Company’s existing resources and relationships to offer additional value to existing and new advertising clients. Solutions provided by DMV Holdings include development of mobile websites, search engine marketing and optimization, video, mobile advertising, email marketing, advertising analytics and online reputation management services. Through Speakeasy, the Company is able to target middle-market business customers and provide turnkey social media account management and content development services.

Advertising and marketing services revenue

Advertising and marketing services revenue was 57.8 percent and 56.4 percent of total revenue for the three months ended March 31, 2017 and 2016, respectively.



	Three Months Ended March 31,
	2017		Percentage Change		2016
					(Recast)
Publishing
Display advertising	$	7,390	(8.5)	%	$	8,077
Classified advertising		4,545	(0.2)	%		4,555
Preprint advertising		10,297	(7.0)	%		11,068
Digital advertising		5,562	0.1	%		5,559
Marketing Services
Digital services		6,282	22.7	%		5,121
Other services		1,128	31.6	%		857
Advertising and Marketing Services	$	35,204	(0.1)	%	$	35,237

Publishing

Display – Display revenue primarily represents sales of non-classified advertising space within the Company’s core and niche newspapers. As advertisers continue to diversify marketing budgets to incorporate more and varied avenues of reaching consumers, traditional display advertising continues to decline. Revenue decreased due to lower retail advertising in substantially all categories except entertainment in the three months ended March 31, 2017. The department store, food and beverage and furniture categories experienced the greatest declines with a combined revenue decrease of approximately $788, driven heavily by a retail volume decline of 12.7 percent for the three months ended March 31, 2017.

Classified – Classified primarily represents sales of classified advertising space within the Company’s core and niche newspapers. Growth in classified advertising revenue continues to be challenging as alternative digital outlets continue to emerge. Rate improvement trends in certain display advertising categories partially offset the volume decline. Overall classified revenue remained flat for the three months ended March 31, 2017.

Preprint – Preprint primarily reflects preprinted advertisements inserted into the Company’s core newspapers and niche publications, or distributed to non-subscribers through the mail. Revenue decreased due to a rate decline in preprint newspaper inserts and home delivery mail advertising.

Digital – Digital publishing is primarily comprised of banner and real estate classified advertising on The Dallas Morning News’ website dallasnews.com, sales of online automotive classifieds on the cars.com platform, as well as online employment and obituary classified advertising on third-party websites sold under a print/digital bundle package. Revenue remained flat in the three months ended March 31, 2017.

Marketing Services

Digital services – Digital marketing includes targeted and multi-channel advertising placed on third-party websites, content development, social media management, search optimization, and other consulting. DMV Holdings provided a significant portion of the growth in digital marketing revenue. DMV Holdings revenue increased $2,056 in the three months ended March 31, 2017. The digital services revenue increase offset approximately 98 percent of the core print advertising revenue decline in the three months ended March 31, 2017.

Other services – Other services revenue increased $271 in the three months ended March 31, 2017, due to the sale of promotional merchandise by MarketingFX.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 20

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Circulation revenue

Circulation revenue was 31.5 percent and 32.6 percent of total revenue for the three months ended March 31, 2017 and 2016, respectively.



	Three Months Ended March 31,
	2017		Percentage Change		2016
Publishing
Circulation	$	19,166	(5.8)	%	$	20,352

Revenue decreased primarily due to a decline in home delivery volume of 9.9 percent for the three months ended March 31, 2017. Single copy revenue remained relatively flat to prior year, driven by a decrease in single copy paid print circulation volume of 17.3 percent, for the three months ended March 31, 2017, offset by an increase in the daily single copy rate.

Volume declines in circulation revenue have been more pronounced with single copy sales as it competes for retail space. Price increases and supplemental editions are critical to maintaining the revenue base to support this product. During the three months ended March 31, 2017, the Company generated $169 of incremental circulation revenue through the distribution of specialty magazines to its core subscribers.

Printing, distribution and other revenue

Printing, distribution and other revenue was 10.7 percent and 11.0 percent of total revenue for the three months ended March 31, 2017 and 2016, respectively.



	Three Months Ended March 31,
	2017		Percentage Change		2016
					(Recast)
Publishing
Printing, Distribution and Other	$	6,531	(5.3)	%	$	6,894

The Company aggressively markets the capacity of its printing and distribution assets to other newspapers that would benefit from cost sharing arrangements. Additionally, the Company’s event activation, promotion and marketing services provider, CrowdSource, works closely with cities and other corporate sponsors to bring large entertainment events to local communities. Revenue decreased due to a decline in volumes associated with certain national newspapers.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 21

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Operating Costs and Expense

The table below sets forth the components of the Company’s operating costs and expense.



	Three Months Ended March 31,
	2017		Percentage Change		2016
					(Recast)
Publishing
Employee compensation and benefits	$	24,542	0.2	%	$	24,492
Other production, distribution and operating costs		25,326	(2.4)	%		25,937
Newsprint, ink and other supplies		5,629	(4.9)	%		5,919
Depreciation		2,491	(4.6)	%		2,611
Amortization		—	(100.0)	%		26
Goodwill impairment		228	N/A			—
Marketing Services
Employee compensation and benefits		3,333	32.0	%		2,525
Other production, distribution and operating costs		3,000	25.3	%		2,394
Newsprint, ink and other supplies		272	95.7	%		139
Depreciation		15	(28.6)	%		21
Amortization		200	-	%		200
Total Operating Costs and Expense	$	65,036	1.2	%	$	64,264

Publishing

Employee compensation and benefits – The Company continues to implement measures to optimize its workforce and reduce risk associated with future obligations towards employee benefit plans. Employee compensation and benefits remained flat in the three months ended March 31, 2017.

Other production, distribution and operating costs – Expense decreased in the Company’s Publishing segment reflecting savings as the Company continues to manage discretionary spending. Savings were generated by reductions in temporary services, promotional spending and distribution expense related to mail delivered preprints.

Newsprint, ink and other supplies – Expense decreased due to reduced newsprint costs associated with lower circulation volumes from the Company and certain third-party newspapers and the discontinuation of unprofitable product lines. Newsprint consumption for the three months ended March 31, 2017 and 2016, approximated 5,835 and 6,589 metric tons, respectively, at an average cost per metric ton of $563 and $503, respectively. The average purchase price for newsprint was $565 and $511 for the three months ended March 31, 2017 and 2016, respectively.

Depreciation – Expense decreased due to a lower depreciable asset base as a higher level of in-service assets are now fully depreciated.

Amortization – All definite-lived intangible assets are fully amortized.

Goodwill impairment – In the three months ended March 31, 2017, operating costs and expense for the Publishing segment reflect a noncash goodwill impairment charge of $228.

Marketing Services

Employee compensation and benefits – Expense increased in the three months ended March 31, 2017, primarily related to the growth associated with DMV Holdings of $822. As of March 31, 2017 and 2016, DMV Holdings employed 86 and 69 personnel, respectively.

Other production, distribution and operating costs – Expense increased $606 in the three months ended March 31, 2017, in connection with growth in DMV Holdings, partially offset by a reduction in Speakeasy expenses.

Newsprint, ink and other supplies – Expense increased $133 in the three months ended March 31, 2017, primarily due to an increase in promotional material printing costs associated with MarketingFX.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 22

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Depreciation – Marketing and event services’ cost structure is primarily labor driven. Capital purchases are required to support technology investments, the Company’s websites and customer engaging applications. Capital assets are primarily depreciated over a life of three years.

Amortization – Expense is primarily related to customer lists associated with DMV Holdings.

Other

The table below sets forth the other components of the Company’s results of operations.



	Three Months Ended March 31,
	2017		Percentage Change		2016
Other income (expense), net	$	(337)	(526.6)	%	$	79

Income tax benefit	$	(42)	96.2	%	$	(1,109)

Other Income (Expense) – Other income (expense) is primarily comprised of investment activity and gain (loss) on disposal of fixed assets. As of March 31, 2017, the Company did not have any equity method investments.

Tax provision – Effective income tax rates from continuing operations were 0.9 percent and 65.2 percent for the three months ended March 31, 2017 and 2016, respectively. The effective income tax rate for the three months ended March 31, 2017, was lower when compared to the prior year period due to a tax benefit in 2016 resulting from a carryback of net operating loss applied against 2014 taxable income.

Legal proceedings – From time to time, the Company is involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes in these matters, as well as the ranges of probable losses to the extent losses are reasonably estimable. Accruals for contingencies are recorded when, in the judgment of management, adverse judgments or outcomes are probable and the financial impact, should an adverse outcome occur, is reasonably estimable. The determination of likely outcomes of litigation matters relates to factors that include, but are not limited to, past experience and other evidence, interpretation of relevant laws or regulations and the specifics and status of each matter. Predicting the outcome of claims and litigation and estimating related costs and financial exposure involves substantial uncertainties that could cause actual results to vary materially from estimates and accruals.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 23

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Liquidity and Capital Resources

The Company’s cash balances as of March 31, 2017 and December 31, 2016, were $69,205 and $80,071, respectively.

The Company intends to hold existing cash for purposes of future investment opportunities, potential return of capital to shareholders and for contingency purposes. Although revenue from Publishing operations is expected to continue to decline in future periods, operating contributions expected from the Company’s Marketing Services businesses, as well as planned adjustments for tax, pension and other cost cutting measures, are expected to be sufficient to fund operating activities and capital spending of approximately $12,000 over the remainder of the year.

The future payment of dividends is dependent upon available cash after considering future operating and investing requirements and cannot be guaranteed. The Company discontinued stock repurchases in December 2015, and current holdings of treasury stock could be used to satisfy its obligations related to share-based awards issued to employees and directors, or can be sold on the open market.

The following discusses the changes in cash flows by operating, investing and financing activities.

Operating Cash Flows

Net cash provided by operating activities for the three months ended months ended March 31, 2017 and 2016, was $1,037 and $347, respectively. Cash flows from operating activities improved by $690 during the three months ended March 31, 2017, when compared to the prior year period, primarily due to changes in working capital and other operating assets and liabilities of $4,370, partially offset by an increase in net loss of $3,837.

Investing Cash Flows

Net cash used for investing activities was $852 and $2,095 for the three months ended March 31, 2017 and 2016, respectively, all of which is attributable to capital spending.

Financing Cash Flows

Net cash used for financing activities was $11,051 and $1,976 for the three months ended March 31, 2017 and 2016, respectively. Cash flows used for financing activities increased in 2017 compared to 2016, due to the first quarter 2017 acquisitions of the remaining interests in DMV Holdings and Speakeasy for a purchase price of $7,120 and $2,111, respectively. Cash used for financing activities also included dividend payments of $1,763 and $1,745 in 2017 and 2016, respectively.

Financing Arrangements

None.

Contractual Obligations

Under the applicable tax and labor laws governing pension plan funding, no contributions to the A. H. Belo Pension Plans are required in 2017.

On March 2, 2017, 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 May 12, 2017, which is payable on June 2, 2017.

Additional information related to the Company’s contractual obligations is available in Company’s Annual Report on Form 10‑K for the year ended December 31, 2016, filed on March 10, 2017, with the Securities and Exchange Commission (“SEC”).

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 24

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Critical Accounting Policies and Estimates

No material changes were made to the Company’s critical accounting policies as set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2016.

Forward-Looking Statements

Statements in this communication concerning A. H. Belo Corporation’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, dispositions, impairments, business initiatives, acquisitions, pension plan contributions and obligations, real estate sales, working capital, future financings and other financial and non-financial items that are not historical facts, are “forward-looking statements” as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. Such risks, trends and uncertainties are, in most instances, beyond the Company’s control, and include changes in advertising demand and other economic conditions; consumers’ tastes; newsprint prices; program costs; labor relations; technology obsolescence; as well as other risks described in the Company’s Annual Report on Form 10-K and in the Company’s other public disclosures and filings with the Securities and Exchange Commission. Forward-looking statements, which are as of the date of this filing, are not updated to reflect events or circumstances after the date of the statement.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in A. H. Belo Corporation’s exposure to market risk from the disclosure included in the Annual Report on Form 10-K for the year ended December 31, 2016.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of the Company’s disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

(b) Changes in internal controls. As required by Exchange Act Rule 13a-15(d), the Company’s management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the last fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation there have been no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report other than SOX control changes related to the implementation of a new enterprise resource planning system that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1. Legal Proceedings

A number of legal proceedings are pending against A. H. Belo. In the opinion of management, liabilities, if any, arising from these legal proceedings would not have a material adverse effect on A. H. Belo’s results of operations, liquidity or financial condition.

Item 1A. Risk Factors

There were no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A in the Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of the Company’s equity securities during the period covered by this report.

Issuer Purchases of Equity Securities

None.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 25

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 26

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Item 6. Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the SEC, as indicated. In accordance with Regulation S-T, the XBRL-related information marked with a double asterisk (**) in Exhibit No. 101 to this Quarterly Report on Form 10-Q is deemed filed. All other documents are filed with this report. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.




Exhibit Number		Description
3.1	*	Amended and Restated Certificate of Incorporation of the Company (Exhibit 3.1 to Amendment No. 3 to the Company’s Form 10 dated January 18, 2008 (Securities and Exchange Commission File No. 001‑33741) (the “Third Amendment to Form 10”))
3.2	*	Certificate of Designations of Series A Junior Participating Preferred Stock of the Company dated January 11, 2008 (Exhibit 3.2 to Post‑Effective Amendment No. 1 to Form 10 filed January 31, 2008 (Securities and Exchange Commission File No. 001‑33741))
3.3	*	Amended and Restated Bylaws of the Company, effective December 11, 2014 (Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 12, 2014 (Securities and Exchange Commission File No. 001-33741))
4.1	*	Certain rights of the holders of the Company’s Common Stock set forth in Exhibits 3.1‑3.3 above
4.2	*	Specimen Form of Certificate representing shares of the Company’s Series A Common Stock (Exhibit 4.2 to the Third Amendment to Form 10)
4.3	*	Specimen Form of Certificate representing shares of the Company’s Series B Common Stock (Exhibit 4.3 to the Third Amendment to Form 10)
4.4	*	Rights Agreement dated as of January 11, 2008 between the Company and Mellon Investor Services LLC (Exhibit 4.4 to the Third Amendment to Form 10)
10.1	*	Material Contracts
		(1)	*	Asset Purchase Agreement by and between the Press-Enterprise Company, AHC California Properties LLC, A. H. Belo Management Services, Inc. and Freedom Communications Holdings, Inc. dated October 9, 2013 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2013 (Securities and Exchange Commission file no. 001-33741) (the “October 11, 2013 Form 8-K”))
		(2)	*	Form of Limited Guaranty by and between A. H. Belo Corporation and Freedom Communications Holdings, Inc (Exhibit 10.2 to the October 11, 2013 Form 8-K)
		(3)	*	Amendment No. 1 to Asset Purchase Agreement dated October 31, 2013, between the Press-Enterprise Company, AHC California Properties LLC, A. H. Belo Management Services, Inc. and Freedom Communications Holdings Inc. (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 4, 2013 (Securities and Exchange Commission file no. 001-33741))
		(4)	*	Amendment No. 2 to Asset Purchase Agreement dated November 21, 2013, between the Press-Enterprise Company, AHC California Properties LLC, A. H. Belo Management Services, Inc. and Freedom Communications Holdings Inc. (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2013 (Securities and Exchange Commission file no. 001-33741))

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 27

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Exhibit Number

Description

(5)

Asset Purchase Agreement among The Providence Journal Company and LMG Rhode Island Holdings, Inc. dated as of July 22, 2014 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 25, 2014 (Securities and Exchange Commission file no. 001-33741))

(6)

Unit Purchase Agreement dated August 5, 2014 by and among Gannett Company, Inc., Classified Ventures, LLC, and Unitholders of Classified Ventures, LLC (Exhibit 2.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 6, 2014 (Securities and Exchange Commission file no. 001-33741))

(7)

Sublease Agreement for Old Dallas Library Building dated December 30, 2016 (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 3, 2017 (Securities and Exchange Commission File No. 001‑33741) (the “January 3, 2017 Form 8-K”))

(8)

Guaranty of Lease dated December 30, 2016 (Exhibit 10.2 to the January 3, 2017 Form 8-K)

10.2

Compensatory plans and arrangements:

~(1)

A. H. Belo Savings Plan as Amended and Restated Effective January 1, 2015 (Exhibit 10.2(1) to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2015 (Securities and Exchange Commission File No. 001-33741))

(a)

First Amendment to the A. H. Belo Savings Plan effective January 1, 2016 (Exhibit 10.2(1)(a) to the Company’s Quarterly Report on Form 10‑Q filed with the Securities and Exchange Commission on November 1, 2016 (Securities and Exchange Commission File No. 001-33741))

(b)

Second Amendment to the A. H. Belo Savings Plan effective September 8, 2016 (Exhibit 10.2(1)(b) to the Company’s Quarterly Report on Form 10‑Q filed with the Securities and Exchange Commission on November 1, 2016 (Securities and Exchange Commission File No. 001-33741))

~(2)

A. H. Belo Corporation 2008 Incentive Compensation Plan (Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2008) (the “February 12, 2008 Form 8‑K”)

(a)

First Amendment to A. H. Belo 2008 Incentive Compensation Plan effective July 23, 2008 (Exhibit 10.2(2)(a) to the Company’s Quarterly Report on Form 10‑Q filed with the Securities and Exchange Commission on August 14, 2008 (Securities and Exchange Commission File No. 001‑33741))

(b)

Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Grant (for Non‑Employee Director Awards) (Exhibit 10.2(2)(b) to the Company’s Quarterly Report on Form 10‑Q filed with the Securities and Exchange Commission on May 13, 2010 (Securities and Exchange Commission File No. 001‑33741) (the “1st Quarter 2010 Form 10‑Q”))

(c)

Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Grant (for Employee Awards) (Exhibit 10.2(2)(c) to the 1st Quarter 2010 Form 10‑Q)

(d)

Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Grant (for Employee Awards) (Exhibit 10.1 to A. H. Belo Corporation’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on March 12, 2012 (Securities and Exchange Commission File No. 001‑33741) (the “March 12, 2012 Form 8-K”))

(e)

Form of A. H. Belo Cash Long‑Term Incentive Evidence of Grant (for Employee Awards) (Exhibit 10.2 to the March 12, 2012 Form 8-K)

~(3)

A. H. Belo 2017 Incentive Compensation Plan (Exhibit I to A. H. Belo Corporation’s Schedule 14A Proxy Statement filed with the Securities and Exchange Commission on March 28, 2017)

~(4)

A. H. Belo Corporation Change In Control Severance Plan (Exhibit 10.7 to the February 12, 2008 Form 8‑K)

(a)

Amendment to the A. H. Belo Change in Control Severance Plan dated March 31, 2009 (Exhibit 10.3 to the April 2, 2009 Form 8‑K)

~(5)

Robert W. Decherd Compensation Arrangements dated June 19, 2013 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 19, 2013)

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 28

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Exhibit Number

Description

~(6)

Timothy M. Storer Employment Agreement dated March 2, 2017 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 6, 2017 (Securities and Exchange Commission File No. 001-33741) (the “March 6, 2017 Form 8-K”))

(a)

Timothy M. Storer PBRSU Award Notice dated March 2, 2017 (Exhibit 10.2 to the March 6, 2017 Form 8-K)

10.3

Agreements relating to the separation of A. H. Belo from its former parent company:

(1)

Pension Plan Transfer Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of October 6, 2010 (Exhibit 10.1 to the Company’s current Report on Form 8‑K filed with the Securities and Exchange Commission on October 8, 2010 (Securities and Exchange Commission File No. 001-33741))

(2)

Agreement among the Company, Belo Corp., and The Pension Benefit Guaranty Corporation, effective March 9, 2011 (Exhibit 10.3(6) to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 11, 2011 (Securities and Exchange Commission File No. 001‑33741))

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002

31.2

Certification of principal financial officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002

Certifications of Chief Executive Officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Scheme

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 29

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




A. H. BELO CORPORATION

By:	/s/	Katy Murray
		Katy Murray
		Senior Vice President/Chief Financial Officer
		(Principal Financial Officer)

Dated:	May 3, 2017

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 30

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EXHIBIT INDEX




Exhibit Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
32		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
101.INS	**	XBRL Instance Document
101.SCH	**	XBRL Taxonomy Extension Schema
101.CAL	**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	**	XBRL Taxonomy Extension Presentation Linkbase Document

In accordance with Regulation S-T, the XBRL-related information marked with a double asterisk (**) in Exhibit No. 101 to this Quarterly Report on Form 10-Q is deemed filed.

A. H. Belo Corporation First Quarter 2017 on Form 10-Q 31

Exhibit 311

Exhibit 31.1

SECTION 302 CERTIFICATION

I, James M. Moroney III, Chairman of the Board, President and Chief Executive Officer of A. H. Belo Corporation, certify that:

I have reviewed this quarterly report on Form 10-Q of A. H. Belo Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	By:	/s/ James M. Moroney III
		James M. Moroney III
		Chairman of the Board, President and Chief Executive Officer


	Date:	May 3, 2017

Exhibit 312

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Katy Murray, Senior Vice President/Chief Financial Officer of A. H. Belo Corporation, certify that:

I have reviewed this quarterly report on Form 10-Q of A. H. Belo Corporation;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	By:	/s/ Katy Murray
		Katy Murray
		Senior Vice President/Chief Financial Officer


	Date:	May 3, 2017

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of A. H. Belo Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, James M. Moroney III, Chairman of the Board, President and Chief Executive Officer of the Company, and Katy Murray, Senior Vice President/Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	By:	/s/ James M. Moroney III
		James M. Moroney III
		Chairman of the Board, President and Chief Executive Officer


	Date:	May 3, 2017


	By:	/s/ Katy Murray
		Katy Murray
		Senior Vice President/Chief Financial Officer


	Date:	May 3, 2017