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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, 2009
 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 
incorporation or organization)
    
    (I.R.S. employer
identification no.)P. O. Box 224866
Dallas, Texas
    
    75222-4866(Address of principal executive offices)
    
    (Zip code)
 (214) 977-8200
 None
  Yes þ No o
  Yes o No o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ
(Do not check if a smaller reporting company)
Smaller reporting company o  Yes o No þ
  Class
    
    Outstanding at May 1, 2009Common Stock, $.01 par value
    
    20,535,031
 
 *
    
    Consisting of 18,091,249 shares of Series A Common Stock and 2,443,782 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
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4T. Controls and Procedures
    
    
    19PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    23EX-31.1EX-31.2EX-32
  2




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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)
    
    2009
    
    
    2008Net Operating RevenuesAdvertising
    
    $
    89,331
    
    
    $
    124,423Circulation
    
    
    31,714
    
    
    
    29,105Other
    
    
    7,449
    
    
    
    6,659Total net operating revenues
    
    
    128,494
    
    
    
    160,187Operating Costs and ExpensesSalaries, wages and employee benefits
    
    
    62,894
    
    
    
    74,265Other production, distribution and operating costs
    
    
    55,866
    
    
    
    60,966Newsprint, ink and other supplies
    
    
    19,619
    
    
    
    22,969Goodwill impairment
    
    
    80,940
    
    
    
    Depreciation
    
    
    10,536
    
    
    
    12,241Amortization
    
    
    1,624
    
    
    
    1,625Total operating costs and expenses
    
    
    231,479
    
    
    
    172,066Loss from operations
    
    
    (102,985
    )
    
    
    (11,879
    )Other Income and ExpenseInterest expense
    
    
    (300
    )
    
    
    (3,066
    )Other income, net
    
    
    822
    
    
    
    957Total other income (expense)
    
    
    522
    
    
    
    (2,109
    )Loss before income taxes
    
    
    (102,463
    )
    
    
    (13,988
    )Income tax expense (benefit)
    
    
    605
    
    
    
    (5,270
    )Net loss
    
    $
    (103,068
    )
    
    $
    (8,718
    )Net loss per share:Basic and diluted
    
    $
    (5.03
    )
    
    $
    (0.43
    )Weighted average shares outstanding:Basic and diluted
    
    
    20,506
    
    
    
    20,473Dividends declared per share
    
    $
    
    
    
    $
    0.250
 See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
  March 31,2009
    
    
    December 31,In thousands, except share and per share amounts
    
    (unaudited)
    
    
    2008AssetsCurrent assets:Cash and temporary cash investments
    
    $
    6,809
    
    
    $
    9,934Accounts receivable (net of allowance of $5,265 and $5,332
at March 31, 2009 and December 31, 2008, respectively)
    
    
    56,969
    
    
    
    77,383Inventories
    
    
    18,845
    
    
    
    22,641Deferred income taxes
    
    
    5,080
    
    
    
    5,415Prepaids and other current assets
    
    
    10,956
    
    
    
    9,344Total current assets
    
    
    98,659
    
    
    
    124,717Property, plant and equipment at cost:Land
    
    
    30,895
    
    
    
    30,895Buildings and improvements
    
    
    231,747
    
    
    
    232,120Publishing equipment
    
    
    355,739
    
    
    
    358,413Other
    
    
    148,685
    
    
    
    150,065Advance payments on property, plant and equipment
    
    
    8,421
    
    
    
    9,358Total property, plant and equipment
    
    
    775,487
    
    
    
    780,851Less accumulated depreciation
    
    
    521,687
    
    
    
    517,107Property, plant and equipment, net
    
    
    253,800
    
    
    
    263,744Intangible assets, net
    
    
    32,302
    
    
    
    33,927Goodwill
    
    
    24,582
    
    
    
    105,522Investments
    
    
    21,534
    
    
    
    23,016Long-term deferred taxes
    
    
    10,064
    
    
    
    Other assets
    
    
    6,781
    
    
    
    6,752Total assets
    
    $
    447,722
    
    
    $
    557,678
 See accompanying Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
  March 31,2009
    
    
    December 31,In thousands, except share and per share amounts
    
    (unaudited)
    
    
    2008Liabilities and Shareholders EquityCurrent liabilities:Current portion of notes payable
    
    $
    12,650
    
    
    $
    10,000Accounts payable
    
    
    19,666
    
    
    
    32,950Accrued compensation and benefits
    
    
    21,604
    
    
    
    27,020Accrued interest on notes payable
    
    
    43
    
    
    
    11Other accrued expenses
    
    
    19,849
    
    
    
    18,826Advance subscription payments
    
    
    27,060
    
    
    
    26,335Total current liabilities
    
    
    100,872
    
    
    
    115,142Pension liabilities
    
    
    17,096
    
    
    
    17,096Other post employment benefits
    
    
    7,807
    
    
    
    7,738Deferred income taxes
    
    
    15,143
    
    
    
    6,620Other liabilities
    
    
    951
    
    
    
    2,430Commitments and contingent liabilitiesShareholders 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 18,091,249 shares at March 31, 2009
    
    
    180
    
    
    
    176Series B: issued 2,443,782 shares at March 31, 2009
    
    
    25
    
    
    
    28Additional paid-in capital
    
    
    483,819
    
    
    
    483,551Retained deficit
    
    
    (178,171
    )
    
    
    (75,103
    )Total shareholders equity
    
    
    305,853
    
    
    
    408,652Total liabilities and shareholders equity
    
    $
    447,722
    
    
    $
    557,678
 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, 2009Common Stock
    
    Additional
    
    OtherShares
    
    Shares
    
    
    
    
    
    Paid-in
    
    Comprehensive
    
    RetainedSeries A
    
    Series B
    
    Amount
    
    Capital
    
    Income
    
    Deficit
    
    TotalBalance at December 31, 2008
    
    
    17,774,149
    
    
    
    2,704,816
    
    
    $
    204
    
    
    $
    484,009
    
    
    $
    (458
    )
    
    $
    (75,103
    )
    
    $
    408,652Contribution to Belo Corp.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (322
    )
    
    
    
    
    
    
    
    
    
    
    (322
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    591
    
    
    
    
    
    
    
    
    
    
    
    591Conversion of Series B to Series A
    
    
    261,034
    
    
    
    (261,034
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of shares for restricted stock units
    
    
    56,066
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,068
    )
    
    
    (103,068
    )Balance at March 31, 2009
    
    
    18,091,249
    
    
    
    2,443,782
    
    
    $
    205
    
    
    $
    484,277
    
    
    $
    (458
    )
    
    $
    (178,171
    )
    
    $
    305,853
 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)
    
    2009
    
    
    2008OperationsNet loss
    
    $
    (103,068
    )
    
    $
    (8,718
    )Adjustments to reconcile net loss to net cash (used in) provided by operations:Depreciation and amortization
    
    
    12,160
    
    
    
    13,866Impairment on investment
    
    
    500
    
    
    
    Goodwill impairment
    
    
    80,940
    
    
    
    Deferred income taxes
    
    
    (73
    )
    
    
    Employee retirement benefit expense (income)
    
    
    69
    
    
    
    (226
    )Share-based compensation
    
    
    (126
    )
    
    
    (586
    )Other non-cash items
    
    
    (60
    )
    
    
    5,376Net changes in operating assets and liabilities, excluding the effects of the
Distribution:Accounts receivable
    
    
    20,481
    
    
    
    14,552Inventories
    
    
    3,796
    
    
    
    (5,543
    )Prepaids and other current assets
    
    
    (1,612
    )
    
    
    (2,746
    )Other, net
    
    
    (790
    )
    
    
    (867
    )Accounts payable
    
    
    (13,284
    )
    
    
    8,471Accrued compensation and benefits
    
    
    (5,540
    )
    
    
    (2,640
    )Accrued interest payable
    
    
    32
    
    
    
    Other accrued expenses
    
    
    1,180
    
    
    
    (2,189
    )Advance subscription payments
    
    
    725
    
    
    
    2,809Net cash (used for) provided by operations
    
    
    (4,670
    )
    
    
    21,559InvestmentsCapital expenditures, net
    
    
    (2,050
    )
    
    
    (1,915
    )Other, net
    
    
    945
    
    
    
    (1,132
    )Net cash used for investments
    
    
    (1,105
    )
    
    
    (3,047
    )FinancingProceeds from credit facility
    
    
    2,650
    
    
    
    Proceeds from credit facility
    
    
    2,650
    
    
    
    Net (decrease) increase in cash and temporary cash investments
    
    
    (3,125
    )
    
    
    18,512Cash and temporary cash investments at beginning of period
    
    
    9,934
    
    
    
    6,874Cash and temporary cash investments at end of period
    
    $
    6,809
    
    
    $
    25,386Supplemental DisclosuresInterest paid, net of amounts capitalized
    
    $
    115
    
    
    $
    Income taxes paid, net of refunds
    
    $
    1
    
    
    $
    
 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. 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, 2008.
Operating results for the three month period ended March 31, 2009 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2009.(2)
    
    The Company owns and operates 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 continues to conduct business with A. H. Belo pursuant
to various agreements, as more fully described in Note 7, and co-own certain investments.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) comprise 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 for the 39 days ended February 8, 2008. 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 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.
 8




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(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, 2009 and 2008:
 Three Month EndedMarch 31, 2009
    
    March 31, 2008Options excluded due to exercise price in excess of average market priceNumber outstanding
    
    
    3,754
    
    
    
    2,494Weighted average exercise price
    
    $
    14.32
    
    
    $
    21.09
 (4)
    
    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.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 A. H. Belo or Belo, as applicable.Share-based compensation cost recognized for awards to A. H. Belos employees and non-employee
directors was $378 and $734 for the three months ended March 31, 2009 and 2008, 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 $136 and $443 for the three months ended March 31, 2009 and 2008,
respectively, 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 period ended March 31, 2009:
 Number of
    
    Weighted AverageOptions
    
    Exercise PriceOutstanding at December 31, 2008
    
    
    3,784,388
    
    
    $
    14.32Granted
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    Canceled
    
    
    (30,120
    )
    
    $
    14.89Outstanding at March 31, 2009
    
    
    3,754,268
    
    
    $
    14.32
 Of the total A. H. Belo options outstanding at March 31, 2009, 2,405,295 options with a weighted
average exercise price of $10.41 are held by A. H. Belo employees and non-employee directors.
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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 period ended March 31, 2009:
 Number of
    
    Weighted AverageRSUs
    
    Exercise PriceOutstanding at December 31, 2008
    
    
    402,951
    
    
    $
    16.63Granted
    
    
    
    
    
    $
    Vested
    
    
    (93,615
    )
    
    $
    15.46Canceled
    
    
    (1,991
    )
    
    $
    8.28Outstanding at March 31, 2009
    
    
    307,345
    
    
    $
    15.53
 Of the total A. H. Belo RSUs outstanding at March 31, 2009, 174,529 RSUs are held by A. H. Belo
employees and non-employee directors.(5)
    
    As described in Note 7 in the 2008 Annual Report on Form 10-K, Belo retained sponsorship and
funding obligations of the G. B. Dealey Retirement Pension Plan (Pension Plan), in which some
of A. H. Belo employees participate. Under the employee matters agreement between the Company
and Belo, A. H. Belo will reimburse Belo for 60 percent of each contribution Belo makes to the
Pension Plan. As of March 31, 2009, the Company has recorded a liability of $17,096 for these
anticipated future fundings. Both the fair value of the plan assets and the projected benefit
obligations are measured annually on December 31, and as such, the funded status (the
difference between the fair value of plan assets and the projected benefit obligation) of the
Pension Plan as of March 31, 2009, does not reflect changes in the fair value of plan assets
or changes in discount rates on benefit obligations. Changes in general market conditions may
affect the funded status of the Pension Plan at each December 31 measurement date,(6)
    
    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 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. On
June 17, 2008, permission was granted and on April 2, 2009 the Fifth Circuit heard oral
argument. No amount of damages has been specified. The Company believes the complaints are
without merit and is defending vigorously against them.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 liability, net of any applicable insurance, resulting
from the lawsuits described above.On March 17, 2009, the 191st Judicial District Court of Dallas County, Texas, dismissed a
shareholder derivative lawsuit filed by a purported individual shareholder of Belo 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, which was filed on June 3, 2005, made various claims asserting
mismanagement and alleged breach of fiduciary duties related to the circulation overstatement at
The Dallas Morning News.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. In June
2007, the court issued a memorandum order granting in part and denying in part defendants
motion to dismiss. In August 2007 and in March 2009, the court dismissed certain additional
claims. A trial date, originally set in January 2009, has been reset to April 2010. The Company
believes the lawsuit is without merit and is defending vigorously against it.
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On April 13, 2009, four former independent contractor newspaper carriers of The
Press-Enterprise, on behalf of themselves and other similarly situated individuals, filed a
purported class-action lawsuit against A. H. Belo, Belo, Press-Enterprise Company, and as yet
unidentified defendants in the Superior Court of the State of California, County of Riverside.
The complaint alleges that the defendants violated California laws by allegedly improperly
categorizing the plaintiffs and the purported class members as independent contractors rather
than employees, and in doing so, allegedly failed to pay minimum, hourly and overtime wages to
the purported class members and allegedly failed to comply with other laws and regulations
applicable to an employer-employee relationship. Plaintiffs and purported class members are
seeking minimum wages, unpaid regular and overtime wages, unpaid rest break and meal period
compensation, reimbursement of expenses and losses incurred by them in discharging their duties,
payment of minimum wage to all employees who failed to receive minimum wage for all hours worked
in each payroll period, penalties, injunctive and other equitable relief, and reasonable
attorneys fees and costs. The Company believes the lawsuit is without merit and intends to
vigorously defend against these claims.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
condition.(7)
    
    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 is responsible for all income taxes prior to
the Distribution, except that 
A. H. Belo is 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 is
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.(8)
    
    On January 30, 2009, the Company announced that it would pursue a number of initiatives that
focus on cost reduction. Included in these cost reduction initiatives was a
reduction-in-force of approximately 500 jobs. During the first quarter of 2009, the Company
expensed $3,586 related to the reduction-in-force. These reductions will be completed in the
second quarter of 2009 and $1,151 of the costs were paid in the first quarter of 2009, with
the remainder of the costs to be paid during the second quarter of 2009.(9)
    
    The Company had approximately $775,500 of property, plant and equipment as of March 31, 2009,
including approximately $504,500 related to publishing equipment and other fixed assets. In
addition to the original cost of these assets, their recorded value is determined by a number
of estimates made by the Company, including estimated useful lives. In accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company records
impairment charges on long-lived assets used in operations when events and circumstances
indicate that the assets may be impaired, the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of those assets and the net book
value of the assets exceeds their estimated fair value. In making these determinations, the
Company uses certain assumptions, including, but not limited to: (i) the estimated fair value
of the assets; and (ii) the estimated future cash flows expected to be generated by the
assets, which estimates are based on additional assumptions such as asset utilization, length
of service and estimated salvage values.
 11




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##### Table of Contents



(10)
    
    SFAS 142, Goodwill and Other Intangible Assets, requires that goodwill be tested for
impairment using the two-step method at least annually or between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. The Company measures the fair value of its
reporting units annually on December 31. Changes in general market conditions may affect the
fair value of a reporting unit at the December 31 measurement date, which could lead to an
impairment when the Company completes its annual impairment test. However, any impairment
would not impact the Companys liquidity. Please refer to notes 1 and 3 to the Companys
consolidated financial statements in the 2008 Annual Report on Form 10-K for a full
description of the Companys goodwill impairment policies.During the three months ended March 31, 2009, primarily based upon the continued declining
economic environment which resulted in a larger than anticipated decline in advertising demand
during the first quarter of 2009 and potentially the remainder of the year, the Company
determined that sufficient evidence existed to require it to perform an interim goodwill
impairment analysis. The Company performed the first step of its interim goodwill impairment
test for both The Dallas Morning Newsand The Providence Journal. The Company uses the
discounted cash flow method to determine fair value of its operating units. The use of
discounted cash flows is based on assumptions requiring significant judgment regarding revenue
growth rates, margins, discount factors and tax rates. The assumptions used in the step one
analysis are consistent with the Companys current estimates and projections, some of which
differ from the assumptions used for the annual impairment testing in December 2008. The change
in assumptions is driven by greater than anticipated declines in revenue in the first quarter of
2009 which resulted in lower margins, despite significant cost reductions.The step one analyses results indicated a potential goodwill impairment existed at The
Providence Journal, but not at The Dallas Morning News. While the step one analysis for both
reporting units reflected significant declines in forecasted advertising revenue based on the
results from the first quarter of 2009, The Dallas Morning Newsis expected to continue to
produce sufficient margins such that the carrying value of its goodwill is not impaired. In
performing the step one analysis for The Dallas Morning News, management also considered the
sensitivity of its assumptions to additional risk and concluded that the step one analysis would
continue to not indicate impairment with more conservative inputs. However, The Providence
Journalmargins were impacted such that the carrying value of the reporting unit exceeded its
estimated fair value. Therefore, the Company performed the second step of the goodwill
impairment analysis, which involves calculating the implied impairment of goodwill for The
Providence Journal. The second step involved allocating the estimated fair value of the
operating unit to all of its assets and liabilities, except goodwill, and comparing the residual
fair value to the carrying value of goodwill of The Providence Journal. As of March 31, 2009,
the Company determined the goodwill related to The Providence Journalwas impaired and recorded
a non-cash goodwill impairment charge of $80,940. After recording the impairment charge no
goodwill remained related to The Providence Journal.A summary of the changes in the Companys recorded goodwill is below:
 The Dallas
    
    
    The Providence
    
    
    TheTotal Goodwill
    
    
    Morning News
    
    
    Journal
    
    
    Press-EnterpriseBalance at December 31, 2008
    
    $
    105,522
    
    
    $
    24,582
    
    
    $
    80,940
    
    
    $
    Goodwill impairment
    
    
    (80,940
    )
    
    
    
    
    
    
    (80,940
    )
    
    
    Balance at March 31, 2009
    
    
    24,582
    
    
    
    24,582
    
    
    
    
    
    
    
    
 (11)
    
    On February 4, 2008, the Company entered into a $100,000 senior revolving credit facility (the
Credit Agreement), with JP Morgan Chase Bank, N.A., J.P. Morgan Securities, Inc., Banc of
America Securities LLC, Bank of America, N.A. and certain other parties thereto. The Credit
Agreement was effective as of the Distribution Date and may be used for working capital needs
and other general corporate purposes, including letters of credit.As of September 30, 2008, the Company was not in compliance with the fixed charge coverage ratio
as required by its credit facility. On October 23, 2008, the Company entered into the First
Amendment and Waiver to the Credit Agreement. Among other matters, the amendment reduced the
total commitment amount from $100,000 to $50,000; set interest rates at LIBOR plus 250 basis
points; waived compliance with the fixed charge coverage ratio covenant through January 31,
2009; restricted the payment of cash dividends during the waiver period; and provided the
lenders with a security interest in the Companys and its material subsidiaries accounts
receivable and inventory.
 12




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##### Table of Contents



On January 30, 2009, the Company entered into an amendment and restatement of its existing
Credit Agreement dated as of February 4, 2008 with JP Morgan Chase Bank, N.A., J.P. Morgan
Securities Inc., Banc of America Securities LLC, Bank of America, N.A. and certain other lenders
party thereto (the Amended and Restated Credit Agreement). The Amended and Restated Credit
Agreement was effective as of January 30, 2009 and matures April 30, 2011. The Amended and
Restated Credit Agreement provides for a $50,000 working capital facility that is subject to a
borrowing base. Among other matters, the Amended and Restated Credit Agreement creates an
asset-based revolving credit facility secured by the Companys accounts receivable, inventory,
specified real property and other assets; sets pricing at LIBOR plus 375 basis points;
establishes minimum quarterly adjusted EBITDA covenant requirements in 2009; establishes a fixed
charge coverage ratio in 2010 of 1.0 to 1.0; allows capital expenditures and investments of up
to $16,000 per year in total; allows the Company to pay dividends when the Companys fixed
charge coverage ratio exceeds 1.2 to 1.0 and the aggregate availability under the credit
facility exceeds $15,000; and contains other covenants and restrictions, including those which
have limitations on indebtedness, liens, and asset sales. Adjusted EBITDA means, for any period,
Net Income for such period plus (a) without duplication and to the extent deducted in
determining Net Income for such period, the sum of (i) Interest Expense for such period, (ii)
income tax expense for such period, (iii) all amounts attributable to depreciation and
amortization expense for such period, (iv) any extraordinary or non-recurring non-cash charges
or expenses for such period, (v) any other non-cash charges for such period including, without
limitation, any non-cash stock-based compensation expenses for such period, and (vi)
Restructuring Costs in an amount not to exceed $10,000 minus (b) without duplication and to the
extent included in Net Income, (i) any cash payments made during such period in respect of
non-cash charges described in clause (a)(v) taken in a prior period and (ii) any extraordinary
gains and any non-cash items of income for such period, all calculated for the Company and its
subsidiaries on a consolidated basis in accordance with Generally Accepted Accounting
Principles, (GAAP). In connection with the Amended and Restated Credit Agreement, the Company
and each of specified subsidiaries entered into an Amended and Restated Pledge and Security
Agreement granting a security interest in all personal property and other assets now owned or
thereafter acquired. In addition, the Amended and Restated Credit Agreement requires certain of
the Companys subsidiaries to enter into mortgages or deeds of trust granting liens on certain
specified real property.Under the revolving credit facility, the Company must meet the minimum adjusted EBITDA covenants
as outlined below:
 For the six months ended March 31, 2009:
    
    $
    (4,000
    )For the nine months ended June 30, 2009:
    
    $
    6,500For the 12 months ended September 30, 2009:
    
    $
    15,000For the 12 months ended December 31, 2009:
    
    $
    22,500
 Compliance with the minimum adjusted EBITDA and other financial covenants depends on the
Companys financial condition and results of operations, which are subject to a number of
factors, including current and future economic conditions. Based on the Companys projections
for the remainder of fiscal year 2009, which incorporate the Companys assessment of current
economic conditions, the projections currently indicate that the Company should be able to meet
these financial covenants throughout fiscal year 2009. These projections are based on revenue
and expense estimates for the remainder of 2009 and include the implementation of continuing
expense savings initiatives, as well as other expense and revenue expectations for the remainder
of fiscal year 2009. However, there can be no assurance of the Companys ability to meet these
projections, achieve the performance estimates or assumptions underlying these projections or
these financial covenants.Throughout 2008 and the beginning of 2009, the economy has experienced disruptions resulting
from the sub-prime mortgage crisis and general credit market conditions in the United States.
The full effect that these disruptions will have on the Companys results as well as their
length and ultimate severity are difficult to predict. Should these or other economic conditions
worsen or persist for an extended time, the Companys results could be materially adversely
affected. Due to the dynamic nature of assumptions used in estimating the Companys financial
results and the Companys inability to control the effect of the current economic conditions,
actual results may differ materially from the Companys projections. Furthermore, the Companys
results may be affected by continued economic and political developments and those effects could
be material to the consolidated financial statements.If the current economic recession causes advertising revenues to decline more than currently
anticipated, if other parts of our business experience adverse effects, or if our expense-saving
initiatives prove insufficient, then we may not be able to meet these financial covenants.
Absent a waiver from the Amended and Restated Credit Agreement lenders, not meeting these
financial
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##### Table of Contents



covenants will result in an event of default under the Amended and Restated Credit
Agreement. Upon the occurrence of an event of default, the Amended and Restated Credit Agreement
lenders could elect to terminate all commitments to extend further credit and declare all
amounts outstanding to be immediately due and payable.The Companys ability to borrow under the Amended and Restated Credit Agreement depends on a
borrowing base determined from a formula based on the levels of our accounts receivable and
inventory. If our accounts receivable and inventory are insufficient (including, with respect to
accounts receivable, as a result of decreased revenues), then we may be unable to borrow under
the Amended and Restated Credit Agreement notwithstanding compliance with the Amended and
Restated Credit Agreements financial covenants.Notes payable at March 31, 2009 and December 31, 2008 consist of the following:
 March 31, 2009
    
    December 31, 2008Current maturity of revolving notes
    
    $
    12,650
    
    
    $
    10,000
 14




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##### Table of Contents



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
  Results of Operations
 (Dollars in thousands, except per share amounts)
 Consolidated Results of Operations
 Three months ended March 31,Percentage2009
    
    
    Change
    
    
    2008Net operating revenues
    
    $
    128,494
    
    
    
    (19.8)
    %
    
    $
    160,187Operating costs and expenses
    
    
    150,539
    
    
    
    (12.5)
    %
    
    
    172,066Goodwill impairment
    
    
    80,940
    
    
    
    
    
    
    
    Other income (expense)
    
    
    522
    
    
    
    (124.8)
    %
    
    
    (2,109
    )Loss before income taxes
    
    
    (102,463
    )
    
    
    632.5
    %
    
    
    (13,988
    )Income tax expense (benefit)
    
    
    605
    
    
    
    (111.5)
    %
    
    
    (5,270
    )Net loss
    
    $
    (103,068
    )
    
    
    1,082.2
    %
    
    $
    (8,718
    )
 15




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##### Table of Contents



Revenues
 Three months ended March 31,Percentage2009
    
    
    Change
    
    
    2008Advertising
    
    $
    89,331
    
    
    
    (28.2
    )%
    
    $
    124,423Circulation
    
    
    31,714
    
    
    
    9.0
    %
    
    
    29,105Other
    
    
    7,449
    
    
    
    11.9
    %
    
    
    6,659Net operating revenues
    
    $
    128,494
    
    
    
    (19.8
    )%
    
    $
    160,187
  The Dallas Morning News, The
Press-Enterprise and The Providence Journal The Dallas Morning News The Press-Enterprises The Providence Journals
   Operating Costs and Expenses
 The Providence
Journal
 16




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##### Table of Contents



Interest Expense
  Other Income, Net
  Income Taxes
 
 Liquidity and Capital Resources
 Operating Cash Flows
   Investing Cash Flows
  Capital Expenditures
 The Providence Journal.
 17




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##### Table of Contents



Financing Cash Flows
    For the six months ended March 31, 2009:
    
    $
    (4,000
    )For the nine months ended June 30, 2009:
    
    $
    6,500For the 12 months ended September 30, 2009:
    
    $
    15,000For the 12 months ended December 31, 2009:
    
    $
    22,500
     18




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##### Table of Contents



Forward-Looking Statements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4T. Controls and Procedures
   
 PART II.
 
 Item 1. Legal Proceedings
  19




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##### Table of Contents



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
  
 Item 6. Exhibits
  20




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##### Table of Contents



Exhibit Number
    
    
    
    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))3.2
    
    *
    
    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 dated January 31, 2008
(Securities and Exchange Commission File No. 001-33741))3.3
    
    *
    
    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 Capitol 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))~
    
    (2)* First Amendment and Waiver to the Credit Agreement dated as of October 23, 2008 (Exhibit 10.1 to the Companys Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 24, 2008 (Securities and Exchange Commission File No. 001-33741))~
    
    (3) * Amended and Restated Credit Agreement dated as of January 30, 2009, (Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 2, 2009 (Securities and Exchange Commission File No. 001-33741) (the February 2, 2009 Form 8-K)~
    
    (4) * Amended and Restated Pledge and Security Agreement dated as of January 30, 2009 (Exhibit 10.2 to the February 2, 2009 From 8-K)10.2
    
    
    
    Compensatory plans:~
    
    (1)*
    
    A. H. Belo Corporation Savings Plan (Exhibit 10.4 to the February 12, 2008 Form 8-K)* (a)
    
    First Amendment to the A. H. Belo Savings Plan dated September 23, 2008 (Exhibit 10.2(1)(A) to the Companys Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on November 14, 2008 (Securities and Exchange Commission File No. 001-33741))* (b)
    
    Second Amendment to the A. H. Belo Savings Plan effective March 27, 2009 (Exhibit 10.1 to the Companys Current Report on From 8-K filed with the
Securities and Exchange Commission on April 2, 2009 (Securities and Exchange Commission File No. 001-33741) (the April 2, 2009 Form 8-K)* (b)
    
    Third Amendment to the A. H. Belo Savings Plan effective March 31, 2009 (Exhibit 10.2 to the April 2, 2009 Form 8-K)~
    
    (2)*
    
    A. H. Belo Corporation 2008 Incentive Compensation Plan (Exhibit 10.5 to 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 Non-Employee Director Evidence of Award (Exhibit 10.2(2)(A) to the Companys Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2008 (Securities and Exchange Commission File No. 001-33741) (the First
Quarter 2008 Form 10-Q))* (c)
    
    Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Award (for Employee Awards) (Exhibit 10.2(2)(B) to the First Quarter 2008 Form 10-Q)
 21




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##### Table of Contents



Exhibit Number
    
    
    
    Description~
    
    (3)*
    
    A. H. Belo Pension Transition Supplement Restoration Plan effective January 1, 2008 (Exhibit 10.6 to the February 12, 2008 Form 8-K)* (a)
    
    First Amendment to the A. H. Belo Pension Transition Supplement Restoration Plan dated March 31, 2009 (Exhibit 10.4 to the April 2, 2009 From 8-K)~
    
    (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)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 2002
 22




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##### Table of Contents



SIGNATURES
  A. H. BELO CORPORATIONMay 14, 2009
    By:
    /s/ Alison K. EngelAlison K. EngelSenior Vice President/Chief Financial
Officer and Treasurer
(Principal Financial Officer)May 14, 2009
    By:
    /s/ George F. FinfrockGeorge F. FinfrockVice President/Corporate Controller
(Principal Accounting Officer) 23