##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 1-33741
 A. H. Belo Corporation
 (Exact name of registrant as specified in its charter)
 Delaware
    
    38-3765318(State or other jurisdiction of
    
    (I.R.S. employerincorporation or organization)
    
    identification no.)P. O. Box 224866Dallas, Texas
    
    75222-4866(Address of principal executive offices)
    
    (Zip code)
 (214) 977-4866
  None
  Yes þ No o
  o o þ o
   Yes o No þ
  Class
    
    Outstanding at April 30, 2008Common Stock, $.01 par value
    
    20,478,022*
 *
    
    Consisting of 17,629,624 shares of Series A Common Stock and 2,848,398 shares of
Series B Common Stock.




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##### 



A. H. BELO CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    2Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4T. Controls and Procedures
    
    
    15PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 3. Defaults Upon Senior Securities
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16Item 5. Other Information
    
    
    16Item 6. Exhibits
    
    
    17Signatures
    
    
    18
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PART I.
 
 Item 1. Financial Statements
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended March 31,In thousands, except per share amounts (unaudited)
    
    2008
    
    
    2007Net Operating RevenuesAdvertising
    
    $
    124,423
    
    
    $
    141,945Circulation
    
    
    29,105
    
    
    
    27,617Other
    
    
    6,659
    
    
    
    6,151Total net operating revenues
    
    
    160,187
    
    
    
    175,713Operating Costs and ExpensesSalaries, wages and employee benefits
    
    
    74,265
    
    
    
    75,299Other production, distribution and operating costs
    
    
    60,966
    
    
    
    60,899Newsprint, ink and other supplies
    
    
    22,969
    
    
    
    26,668Depreciation
    
    
    12,241
    
    
    
    11,360Amortization
    
    
    1,625
    
    
    
    1,625Total operating costs and expenses
    
    
    172,066
    
    
    
    175,851Loss from operations
    
    
    (11,879
    )
    
    
    (138
    )Other Income and ExpenseInterest expense
    
    
    (3,066
    )
    
    
    (8,744
    )Other income, net
    
    
    957
    
    
    
    174Total other income (expense)
    
    
    (2,109
    )
    
    
    (8,570
    )Loss before income taxes
    
    
    (13,988
    )
    
    
    (8,708
    )Income tax (benefit) expense
    
    
    (5,270
    )
    
    
    688Net loss
    
    $
    (8,718
    )
    
    $
    (9,396
    )Net loss per share:Basic and diluted
    
    $
    (.43
    )
    
    $
    (.46
    )Weighted average shares outstanding:Basic and diluted
    
    
    20,473
    
    
    
    20,452Dividends declared per share
    
    $
    .25
    
    
    
    N/A
 See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
 December 31,2008
    
    
    2007In thousands, except share and per share amounts
    
    (unaudited)AssetsCurrent assets:
    
    
    
    
    
    
    
    

Cash and temporary cash investments
    
    $
    25,386
    
    
    $
    6,874Accounts receivable, net
    
    
    75,888
    
    
    
    90,792Inventories
    
    
    16,950
    
    
    
    11,407Deferred income taxes
    
    
    6,144
    
    
    
    4,744Prepaids and other current assets
    
    
    14,156
    
    
    
    8,202Total current assets
    
    
    138,524
    
    
    
    122,019Property, plant and equipment at cost:Land
    
    
    31,158
    
    
    
    46,403Buildings and improvements
    
    
    219,165
    
    
    
    232,267Publishing equipment
    
    
    353,550
    
    
    
    351,323Other
    
    
    163,521
    
    
    
    144,503Advance payments on property, plant and equipment
    
    
    15,673
    
    
    
    23,614Total property, plant and equipment
    
    
    783,067
    
    
    
    798,110Less accumulated depreciation
    
    
    500,363
    
    
    
    490,322Property, plant and equipment, net
    
    
    282,704
    
    
    
    307,788Intangible assets, net
    
    
    38,801
    
    
    
    40,426Goodwill
    
    
    119,667
    
    
    
    119,667Other assets
    
    
    42,394
    
    
    
    29,810Total assets
    
    $
    622,090
    
    
    $
    619,710
 See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
 March 31,
    
    
    December 31,2008
    
    
    2007In thousands, except share and per share amounts
    
    (unaudited)Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    33,811
    
    
    $
    25,384Accrued compensation and benefits
    
    
    29,198
    
    
    
    31,161Accrued interest on notes payable to Belo Corp.
    
    
    
    
    
    
    35,148Other accrued expenses
    
    
    768
    
    
    
    3,822Advance subscription payments
    
    
    28,248
    
    
    
    24,495Dividends payable
    
    
    5,120
    
    
    
    Current portion of notes payable to Belo Corp.
    
    
    
    
    
    
    392Total current liabilities
    
    
    97,145
    
    
    
    120,402Notes payable to Belo Corp.
    
    
    
    
    
    
    378,916Deferred income taxes
    
    
    26,809
    
    
    
    19,189Other liabilities
    
    
    16,553
    
    
    
    14,263Shareholders equity:Preferred stock, $.01 par value. Authorized
2,000,000 shares; none issued.
    
    
    
    
    
    
    Common stock, $.01 par value. Authorized
125,000,000 sharesSeries A: Issued 17,629,624 shares at March 31, 2008
    
    
    176
    
    
    
    Series B: Issued 2,848,398 shares at March 31, 2008
    
    
    28
    
    
    
    Additional paid-in capital
    
    
    495,217
    
    
    
    Retained deficit
    
    
    (13,838
    )
    
    
    Belo Corp. equity
    
    
    
    
    
    
    86,940Total shareholders equity
    
    
    481,583
    
    
    
    86,940Total liabilities and shareholders equity
    
    $
    622,090
    
    
    $
    619,710
 See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 In thousands, except share amounts (unaudited)
    
    Three months ended March 31, 2008Common Stock
    
    
    AdditionalShares
    
    
    Shares
    
    
    
    
    
    
    Paid-in
    
    
    Retained
    
    
    Belo Corp.Series A
    
    
    Series B
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Equity
    
    
    TotalBalance at December 31, 2007
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    86,940
    
    
    $
    86,940Contribution by Belo Corp.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    494,550
    
    
    
    
    
    
    
    (86,940
    )
    
    
    407,610Issuance of stock in the Distribution
    

    
    17,603,499
    
    
    
    2,848,496
    
    
    
    204

    
    
    
    (204
    )
    

    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    871
    
    
    
    
    
    
    
    
    
    
    
    871Conversion of Series B to Series A
    
    
    98
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares for restricted stock units
    
    
    26,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,120
    )
    
    
    
    
    
    
    (5,120
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,718
    )
    
    
    
    
    
    
    (8,718
    )Balance at March 31, 2008
    
    
    17,629,624
    
    
    
    2,848,398
    
    
    $
    204
    
    
    $
    495,217
    
    
    $
    (13,838
    )
    
    $
    
    
    
    $
    481,583
 See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months ended March 31,In thousands (unaudited)
    
    2008
    
    
    2007OperationsNet loss
    
    $
    (8,718
    )
    
    $
    (9,396
    )Adjustments to reconcile net loss
to net cash provided by (used for) operations:Depreciation and amortization
    
    
    13,866
    
    
    
    12,985Deferred income taxes
    
    
    
    
    
    
    28Employee retirement benefit expense
    
    
    (226
    )
    
    
    66Share-based compensation
    
    
    (586
    )
    
    
    748Other non-cash expenses
    
    
    5,376
    
    
    
    (245
    )Net changes in operating assets and liabilities,
excluding the effects of the Distribution:Accounts receivable
    
    
    14,552
    
    
    
    19,410Inventories
    
    
    (5,543
    )
    
    
    2,083Prepaids and other current assets
    
    
    (2,746
    )
    
    
    (1,492
    )Other, net
    
    
    (867
    )
    
    
    Accounts payable
    
    
    8,471
    
    
    
    (9,391
    )Accrued compensation and benefits
    
    
    (2,640
    )
    
    
    (5,044
    )Other accrued expenses
    
    
    (2,189
    )
    
    
    (22,198
    )Advance subscription payments
    
    
    2,809
    
    
    
    3,283Net cash provided by (used for) operations
    
    
    21,559
    
    
    
    (9,163
    )InvestmentsCapital expenditures, net
    
    
    (1,915
    )
    
    
    (9,466
    )Other, net
    
    
    (1,132
    )
    
    
    (145
    )Net cash used for investments
    
    
    (3,047
    )
    
    
    (9,611
    )FinancingDividends and distributions
    
    
    
    
    
    
    (19,600
    )Net borrowings from Belo Corp.
    
    
    
    
    
    
    36,378Net cash provided by financing
    
    
    
    
    
    
    16,778Net increase (decrease) in cash and temporary cash investments
    
    
    18,512
    
    
    
    (1,996
    )Cash and temporary cash investments at beginning of period
    
    
    6,874
    
    
    
    10,521Cash and temporary cash investments at end of period
    
    $
    25,386
    
    
    $
    8,525Supplemental DisclosuresInterest paid, net of amounts capitalized
    
    $
    
    
    
    $
    31,490Income taxes paid, net of refunds
    
    $
    
    
    
    $
    252
 See accompanying Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    The accompanying unaudited condensed consolidated financial statements of A. H. Belo
Corporation and its subsidiaries (the Company or A. H. Belo) have been prepared in
accordance with generally accepted accounting principles for interim financial information and
in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The balance sheet at December 31, 2007 has been
derived from the audited combined financial statements at that date but does not include all
of the information and footnotes required by generally accepted accounting principles for
complete financial statements. These condensed consolidated financial statements should be
read in conjunction with the audited financial statements and footnotes thereto included in
the Companys Annual Report on Form 10-K for the year ended December 31, 2007. Operating
results for the three-month period ended March 31, 2008 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2008.(2)
    
    The Company owns three primary daily newspapers: The Dallas Morning News, The Providence
Journal, and The Press-Enterprise(Riverside, CA). They publish and distribute local, state,
national, and international news. In addition to these three daily newspapers, the Company
publishes various niche products in the same or nearby markets where the primary daily
newspapers are located. Each of the Companys daily newspapers and niche publications operates
and maintains its own Web site. The Company also operates direct mail and commercial printing
businesses. The Companys operating segments are defined as its newspapers within a given
market. The Company has determined that all of its operating segments meet the criteria under
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of
an Enterprise and Related Information, to be aggregated into one reporting segment.On February 8, 2008, Belo Corp. (Belo) contributed all of the stock of its subsidiaries
engaged in the newspaper business and related assets to A. H. Belo (hereafter referred to as the
Distribution). On February 8, 2008 (the Distribution Date), Belo also distributed, through
a pro rata, tax-free dividend to its shareholders, 0.20 shares of A. H. Belo Series A common
stock for every share of Belo Series A common stock, and 0.20 shares of A. H. Belo Series B
common stock for every share of Belo Series B common stock, owned as of the close of business on
January 25, 2008. As a result of the Distribution, A. H. Belo issued 17,603,499 shares of Series
A common stock and 2,848,496 shares of Series B common stock. This resulted in A. H. Belo
becoming a separate public company with its own management and board of directors. The assets
and liabilities transferred to A. H. Belo were recorded at historical cost as a reorganization
of entities under common control. Following the Distribution, Belo does not have any ownership
interest in A. H. Belo but will continue to conduct business with A. H. Belo pursuant to various
agreements, as more fully described in Note 8, and co-own certain investments.Operating expenses reflect direct operating expenses of the business together with allocations
of certain Belo corporate expenses for the periods prior to the Distribution. For the three
months ended March 31, 2007, corporate expenses for the full three months are based on
allocations of Belo corporate expenses. The three months ended March 31, 2008 include allocated
Belo corporate expenses up to the Distribution Date only. Corporate expenses for the remainder
of the three-month period (post-Distribution) are comprised of actual costs incurred by the
Company. The allocations from Belo include certain costs associated with Belos corporate
facilities, information systems, legal, internal audit, finance (including public company
accounting and reporting), employee compensation and benefits administration, risk management,
treasury administration and tax functions, and are based on actual costs incurred by Belo.
Allocations of corporate facility costs are based on the actual space used. Information
technology costs and employee compensation and benefits administration are allocated based on
headcount. Other costs are allocated to A. H. Belo based on the Companys size relative to the
Belo subsidiaries. Costs allocated to the Company totaled $7,430 and $12,061 for the 39 days
ended February 8, 2008 and the three months ended March 31, 2007, respectively. Transactions
between the companies comprising A. H. Belo have been eliminated in the consolidated financial
statements.On the Distribution Date, Belo settled or assigned intercompany indebtedness between and among
Belo and its subsidiaries, including Belos subsidiaries engaged in the newspaper business and
related assets. Belo settled
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accounts through contributions of such indebtedness to the capital of the debtor subsidiaries,
distributions by creditor subsidiaries, and other non-cash transfers, or assigned indebtedness
to A. H. Belo. As of the effective time of the Distribution, Belo had contributed to the capital
of A. H. Belo and its subsidiaries the net intercompany indebtedness owed to Belo by A. H. Belo
and its subsidiaries, and A. H. Belo assumed the indebtedness owed by Belo to the A. H. Belo
subsidiaries.All dollar amounts are in thousands, unless otherwise indicated. Certain prior period amounts
have been reclassified to conform to the current period presentation.(3)
    
    The following table presents stock-based awards that are excluded for purposes of calculating
diluted earnings per share for the three months ended March 31, 2008:
 2008Options excluded due to exercise price in excess of average
market priceNumber outstanding
    
    
    2,494Weighted average exercise price
    
    $
    21.09
 (4)
    
    In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 141(R), Business Combinations (SFAS 141(R)).
SFAS 141(R) establishes principles and requirements for how the acquirer of a business
recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. The statement also
provides guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business combination. SFAS
141(R) is effective for financial statements issued for fiscal years beginning after December
15, 2008. Accordingly, any business combinations the Company engages in will be recorded and
disclosed following existing accounting principles until January 1, 2009. The Company expects
SFAS 141(R) will have an impact on the Companys consolidated financial statements when
effective, but the nature and magnitude of the specific effects will depend upon the nature,
terms and size of the acquisitions, if any, consummated after the effective date.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Liabilities (SFAS 159). This statement permits entities to measure many financial
instruments and certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in reported earnings
caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions. SFAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007. The Company has elected not to implement the fair
value option with respect to any existing assets or liabilities; therefore, the adoption of SFAS
159 had no impact on the Companys financial position or results of operations.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS
157 establishes, among other items, a framework for fair value measurements in the financial
statements by providing a single definition of fair value, provides guidance on the methods used
to estimate fair value, and increases disclosures about estimates of fair value. SFAS 157 is
effective for financial assets and liabilities in financial statements issued for fiscal years
beginning after November 15, 2007, and will be effective for non-financial assets and
liabilities in financial statements issued for fiscal years beginning after November 15, 2008.
Effective January 1, 2008, the Company adopted SFAS 157 for its financial assets and
liabilities. The adoption of this standard on January 1, 2008 did not have a material impact on
the Companys financial position or results of operations. The Company is currently assessing
the impact of SFAS 157 for non-financial assets and liabilities.(5)
    
    Prior to the Distribution, the Company established a long-term incentive plan under which
awards may be granted to employees and outside directors in the form of non-qualified stock
options, incentive stock options, restricted shares, restricted stock units, performance
shares, performance units and stock appreciation rights. In addition, options may be
accompanied by stock appreciation rights and limited stock
appreciation rights. Rights and limited rights may also be issued without accompanying options. Cash-based bonus awards are
also available under the plan.
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In connection with the Distribution, holders of outstanding Belo options received an adjusted
Belo option for the same number of shares of Belo common stock as held before the Distribution
but with a reduced exercise price based on the closing price on February 8, 2008. Holders also
received one new A. H. Belo option for every five Belo options held as of the Distribution Date
(the distribution ratio) with an exercise price based on the closing share price on February 8,
2008. The Belo Restricted Stock Units (RSUs) were treated as if they were issued and
outstanding shares. Holders of Belo RSUs retained their existing RSUs and also received
A. H. Belo RSUs. The number of A. H. Belo RSUs awarded to Belos RSU holders was determined using the distribution ratio. As a result,
the Belo RSUs and the A. H. Belo RSUs taken together, had the same aggregate value based on the
closing prices of the Belo stock and the A. H. Belo stock on the Distribution Date, as the Belo
RSUs immediately prior to the Distribution.Each stock option and RSU (of A. H. Belo and of Belo) otherwise has the same terms as the
original awards. The awards continue to vest as under the existing vesting schedule based on
continued employment with Belo or A. H. Belo, as applicable.Share-based compensation cost recognized for awards to A. H. Belos employees and non-employee
directors was $734 and $3,475, for the three months ended March 31, 2008 and 2007, respectively.
No compensation cost is recognized related to options issued by A. H. Belo held by employees and
non-employee directors of Belo.A. H. Belo also recognizes compensation expense for any pre-Distribution awards related to
its employees that were issued under Belos long-term incentive plans. A. H. Belos share-based
compensation expense includes $443 for the three months ended March 31, 2008, related to awards that were issued by Belo.A. H. Belo Option ActivityThe following table summarizes the option activity under A. H. Belos long-term incentive plan
for the three months ended March 31, 2008:
 WeightedAverageNumber of
    
    
    ExerciseOptions
    
    
    PriceIssued in connection with the Distribution on February 8, 2008
    
    
    2,496,728
    
    
    $
    21.09Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled
    
    
    (2,714
    )
    
    $
    21.91Outstanding at March 31, 2008
    
    
    2,494,014
    
    
    $
    21.09
 Of the total A. H. Belo options outstanding at March 31,
2008, 994,830 options with a
weighted average exercise price of $21.06 are held by A. H. Belo employees and non-employee
directors.
 9




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A. H. Belo RSU ActivityThe following table summarizes the RSU activity under A. H. Belos long-term incentive plan for
the three months ended March 31, 2008:
 WeightedAverageNumber of
    
    
    ExerciseRSUs
    
    
    PriceIssued in connection with the Distribution on February 8, 2008
    
    
    391,297
    
    
    $
    18.35Granted
    
    
    
    
    
    
    Vested
    
    
    (43,477
    )
    
    $
    19.10Canceled
    
    
    (2,218
    )
    
    $
    19.29Outstanding at March 31, 2008
    
    
    345,602
    
    
    $
    18.25
 Of the total A. H. Belo RSUs outstanding at March 31,
2008, 157,702 RSUs are held by A. H.
Belo employees and non-employee directors.(6)
    
    The Company has various employees who participate in The G. B. Dealey Pension Plan, which is
sponsored by Belo. As prescribed in the employee matters agreement between the Company and
Belo, the Company will reimburse Belo for 60 percent of any future cash contributions to the
pension plan. In conjunction with the Distribution, the Company recorded a liability of
$3,096 for these anticipated future fundings.(7)
    
    In 2004, Belo announced that an internal investigation, then ongoing, disclosed practices and
procedures that led to an overstatement of previously reported circulation figures at The
Dallas Morning News, primarily in single copy sales. In response to the overstatement, Belo
implemented a voluntary advertiser plan developed by Belo management. The plan included cash
payments to advertisers and future advertising credits. Payments under the plan were made
without any condition that such advertisers release The Dallas Morning Newsfrom liability for
the circulation overstatement. To use the credits, advertisers generally placed advertising in
addition to the terms of the advertisers current contract. There are no unused credits.On August 23, 2004, August 26, 2004 and October 5, 2004, three related lawsuits, now
consolidated, were filed by purported shareholders of Belo in the United States District Court
for the Northern District of Texas against Belo, Robert W. Decherd, and Barry T. Peckham, a
former executive officer of The Dallas Morning News, arising out of the circulation
overstatement at The Dallas Morning News.James M. Moroney III, an executive officer of The
Dallas Morning News,was added later as a defendant. The plaintiffs seek to represent a
purported class of shareholders who purchased Belo common stock between May 12, 2003 and August
6, 2004, and allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934. On April 2, 2008, the court denied plaintiffs motion for class certification and on
April 16, 2008, plaintiffs petitioned the United States Court of Appeals for the Fifth Circuit
for permission to appeal that denial. No amount of damages has been specified. The Company
believes the complaints are without merit and intends to defend vigorously against them.On June 3, 2005, a shareholder derivative lawsuit was filed by a purported individual
shareholder of Belo in the 191st Judicial District Court of Dallas County, Texas, against Robert
W. Decherd, John L. Sander, Dunia A. Shive, Dennis A. Williamson, and James M. Moroney III;
Barry T. Peckham; and Louis E. Caldera, Judith L. Craven, Stephen Hamblett, Dealey D. Herndon,
Wayne R. Sanders, France A. Córdova, Laurence E. Hirsch, J. McDonald Williams, Henry P. Becton,
Jr., Roger A. Enrico, William T. Solomon, Lloyd D. Ward, M. Anne Szostak, and Arturo Madrid,
current or former directors of Belo. The lawsuit makes various claims asserting mismanagement
and breach of fiduciary duty related to the circulation overstatement at The Dallas Morning
News.On May 30, 2007, after a prior discovery stay ended, the court issued an order
administratively closing the case and, as a result, no further action can be taken unless the
case is reinstated. The court retained jurisdiction and the case is subject to being reinstated
by the court or upon motion by any party. The courts order was not a dismissal with prejudice.
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##### Table of Contents



Under the terms of the separation and distribution agreement between A. H. Belo and Belo, A. H.
Belo and Belo will share equally in any liabilities, net of any applicable insurance, resulting
from the circulation-related lawsuits described above.On October 24, 2006, 18 former employees of The Dallas Morning Newsfiled a lawsuit against
various A. H. Belo-related parties in the United States District Court for the Northern District
of Texas. The plaintiffs lawsuit alleges unlawful discrimination and ERISA violations and
includes allegations relating to The Dallas Morning Newscirculation overstatement (similar to
the circulation-related lawsuits described above). In June 2007, the court issued a memorandum
order granting in part and denying in part defendants motion to dismiss. In August 2007, the
court dismissed certain additional claims. A trial date in January 2009 has been set. The
Company believes the lawsuit is without merit and intends to defend vigorously against it.In addition to the proceedings disclosed above, a number of other legal proceedings are pending
against A. H. Belo, including several actions for alleged libel and/or defamation. In the
opinion of management, liabilities, if any, arising from these other legal proceedings would not
have a material adverse effect on A. H. Belos results of operations, liquidity, or financial
position.(8)
    
    In connection with the Distribution, the Company entered into a separation and distribution
agreement; a services agreement; a tax matters agreement; an employee matters agreement, which
allocates liabilities and responsibilities regarding employee compensation and benefit plans
and related matters; and other agreements with Belo or its subsidiaries. In the separation and
distribution agreement, effective as of the Distribution Date, A. H. Belo and Belo have agreed
to indemnify each other and certain related parties from all liabilities existing or arising
from acts and events occurring, or failing to occur (or alleged to have occurred or to have
failed to occur), regarding each others businesses, whether occurring before, at or after the
effective time of the Distribution; provided, however, that under the terms of the separation
and distribution agreement, the Company and Belo will share equally in any liabilities, net of
any applicable insurance, resulting from certain circulation-related lawsuits.Under the services agreement, for a period of up to two years after the Distribution Date, A. H.
Belo and Belo (or their respective subsidiaries) will provide each other various services and/or
support. Payments made or other consideration provided in connection with all continuing
transactions between the Company and Belo will be on an arms-length basis or on a basis consistent with the business purpose of the parties.The tax matters agreement sets out each partys rights and obligations with respect to payment
deficiencies and refunds, if any, of federal, state, local, or foreign taxes for periods before
and after the Distribution and related matters such as the filing of tax returns and the conduct
of IRS and other audits. Under this agreement, Belo will be responsible for all income taxes
prior to the Distribution, except that A. H. Belo will be responsible for its share of income
taxes paid on a consolidated basis for the period of January 1, 2008 through February 8, 2008.
A. H. Belo will also be responsible for its income taxes subsequent to the Distribution Date.Belos Dallas/Fort Worth television station, WFAA-TV, and The Dallas Morning News,owned by A.
H. Belo, have agreed to provide media content, cross-promotion, and other services to the other.
In addition, A. H. Belo and Belo co-own certain downtown Dallas real estate through a limited
liability company formed in connection with the Distribution.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except per share amounts)
 The following information should be read in conjunction with the Companys Condensed Consolidated
Financial Statements and related Notes filed as part of this report.
 Overview
 The Dallas Morning News, The Providence Journal The
Press-Enterprise
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##### Table of Contents



Results of Operations  (Dollars in thousands, except per share amounts)
 Consolidated Results of Operations
 PercentageThree Months ended March 31,
    
    2008
    
    
    Change
    
    
    2007Net operating revenues
    
    $
    160,187
    
    
    
    (8.8
    %)
    
    $
    175,713Operating costs and expenses
    
    
    172,066
    
    
    
    2.2
    %
    
    
    175,851Other income (expense)
    
    
    (2,109
    )
    
    
    75.4
    %
    
    
    (8,570
    )Loss before income taxes
    
    
    (13,988
    )
    
    
    (60.6
    %)
    
    
    (8,708
    )Income tax (benefit) expense
    
    
    (5,270
    )
    
    
    (866.0
    %)
    
    
    688Net loss
    
    $
    (8,718
    )
    
    
    7.2
    %
    
    $
    (9,396
    )
  PercentageThree Months ended March 31,
    
    2008
    
    
    Change
    
    
    2007Advertising
    
    $
    124,423
    
    
    
    (12.3
    %)
    
    $
    141,945Circulation
    
    
    29,105
    
    
    
    5.4
    %
    
    
    27,617Other
    
    
    6,659
    
    
    
    8.3
    %
    
    
    6,151Net operating revenues
    
    $
    160,187
    
    
    
    (8.8
    %)
    
    $
    175,713
 The Dallas Morning News The Providence Journal The Press-Enterprise The
Press-Enterprises The Providence Journal The Dallas Morning News.
 The Dallas Morning News
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Operating Costs and Expenses
  Interest Expense
  Other Income, Net
  Income Taxes
  Liquidity and Capital Resources
 Operating Cash Flows
   Investing Cash Flows
  Capital Expenditures
  The Dallas Morning News
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##### Table of Contents



The Press-Enterprise
 Financing Cash Flows
  Dividends
  Other
     Recent Accounting Pronouncements
  14




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Forward-Looking Statements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4T. Controls and Procedures
   15




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##### Table of Contents



PART II.
 
 Item 1. Legal Proceedings
  The Dallas Morning News The Dallas Morning
News. The Dallas Morning News,
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Issuer Purchases of Equity Securities
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
   16




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##### Table of Contents



Item 6. Exhibits
  Exhibit
    
    
    
    Description2.1
    
    *
    
    Separation and Distribution Agreement by and between
Belo Corp. and A. H. Belo Corporation dated as of
February 8, 2008 (Exhibit 2.1 to the Companys
Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 12, 2008
(Securities and Exchange Commission File No.
001-33741) (the February 12, 2008 Form 8-K))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))3.3
    
    *
    
    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 dated January 31, 2008
(Securities and Exchange Commission File No.
001-33741))3.4
    
    *
    
    Amended and Restated Bylaws of the Company, effective
January 11, 2008 (Exhibit 3.3 to the Third Amendment
to Form 10)4.1
    
    
    
    Certain rights of the holders of the Companys Common
Stock are set forth in Exhibits 3.1-3.3 above4.2
    
    *
    
    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
    
    
    
    Financing agreements:(1)* Credit Agreement dated as of February 4, 2008
among the Company, as Borrower, JPMorgan Chase, N.A.,
as Administrative Agent, JPMorgan Securities Inc. and
Banc of America Securities LLC, as Joint Lead
Arrangers and Bookrunners, Bank of America, N.A., as
Syndication Agent, SunTrust Bank and Capital One
Bank, N.A. as Co-Documentation Agents (Exhibit 99.1
to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on
February 5, 2008 (Securities and Exchange Commission
File No. 001-33741))10.2
    
    
    
    Compensatory plans:~
    

(1)*      A. H. Belo Corporation Savings Plan (Exhibit
10.4 to the February 12, 2008 Form 8-K)~
    

(2)*      A. H. Belo Corporation 2008 Incentive
Compensation Plan (Exhibit 10.5 to the February 12,
2008 Form 8-K)(a)      Form of A. H. Belo 2008 Incentive Compensation Plan Non-Employee Director Evidence of Award(b)      Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of
Award (for Employee Awards)~
    

(3)*      A. H. Belo Pension Transition Supplement
Restoration Plan effective January 1, 2008 (Exhibit
10.6 to the February 12, 2008 Form 8-K)~
    
    (4)*      A. H. Belo Corporation Change In Control
Severance Plan (Exhibit 10.7 to the February 12, 2008
Form 8-K)10.3
    
    
    
    Agreements relating to the distribution of A. H. Belo:(1)*      Tax Matters Agreement by and between Belo Corp.
and A. H. Belo Corporation dated as of February 8,
2008
 (Exhibit 10.1 to the February 12, 2008 Form 8-K)(2)*      Employee Matters Agreement by and between Belo
Corp. and A. H. Belo Corporation dated as of February
8, 2008 
(Exhibit 10.2 to the February 12, 2008 Form
8-K)(3)*      Services Agreement by and between Belo Corp. and
A. H. Belo Corporation dated as of February 8, 2008

(Exhibit 10.3 to the February 12, 2008 Form 8-K)(4)*      Separation and Distribution Agreement (See
Exhibit 2.1 to the February 12, 2008 Form 8-K)31.1
    
    
    
    Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    
    Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232
    
    
    
    Certification 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 200299.1
    
    
    
    Press Release dated May 14, 2008
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##### Table of Contents



SIGNATURES
  A. H. BELO CORPORATIONMay 15, 2008
    By:
    /s/ Alison K. EngelAlison K. EngelSenior Vice President/Chief Financial Officer
and Treasurer
(Principal Financial Officer)May 15, 2008
    By:
    /s/ George F. FinfrockGeorge F. FinfrockVice President/Corporate Controller
(Principal Accounting Officer) 18