DallasNews Corp - Quarter Report: 2010 June (Form 10-Q)

 

 

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

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 (State or other jurisdiction of incorporation or organization)		38-3765318 (I.R.S. employer identification no.)
P. O. Box 224866 Dallas, Texas (Address of principal executive offices)		75222-4866 (Zip code)

Registrant’s telephone number, including area code: (214) 977-8200

Former name, former address and former fiscal year, if changed since last report.
None

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at July 22, 2010
Common Stock, $.01 par value		21,071,742

*

Consisting of 18,522,606 shares of Series A Common Stock and 2,549,136 shares of Series B Common Stock.

 

 

A. H. BELO CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		19
Item 4T. Controls and Procedures		19
PART II OTHER INFORMATION
Item 1. Legal Proceedings		20
Item 1A. Risk Factors		20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3. Defaults Upon Senior Securities		20
Item 4. Submission of Matters to a Vote of Security Holders		20
Item 5. Other Information		20
Item 6. Exhibits		20
Signatures		23
EX-31.1
EX-31.2
EX-32

PART I.

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

A. H. Belo Corporation and Subsidiaries

		Three months ended June 30,								Six months ended June 30,
In thousands, except per share amounts (unaudited)		2010				2009				2010				2009
Net Operating Revenues
Advertising		$	77,004			$	87,492			$	149,190			$	176,823
Circulation			35,456				33,266				71,042				64,980
Other			9,110				6,746				17,097				14,195
Total net operating revenues			121,570				127,504				237,329				255,998
Operating Costs and Expenses
Salaries, wages and employee benefits			56,817				51,720				113,071				114,614
Other production, distribution and operating costs			47,034				50,867				93,066				106,734
Newsprint, ink and other supplies			12,492				16,425				23,713				36,043
Asset impairment			—				1,749				—				82,689
Depreciation			8,441				9,662				17,605				20,198
Amortization			1,310				1,625				2,620				3,249
Total operating costs and expenses			126,094				132,048				250,075				363,527
Loss from operations			(4,524	)			(4,544	)			(12,746	)			(107,529	)
Other Income and Expense
Interest expense			(203	)			(291	)			(406	)			(591	)
Other income (expense), net			5,967				(702	)			5,992				120
Total other income (expense)			5,764				(993	)			5,586				(471	)
Income (loss) before income taxes			1,240				(5,537	)			(7,160	)			(108,000	)
Income tax expense (benefit)			1,411				1,534				2,139				(222	)
Net loss		$	(171	)		$	(7,071	)		$	(9,299	)		$	(107,778	)
Net loss per share:
Basic		$	(0.01	)		$	(0.34	)		$	(0.45	)		$	(5.25	)
Weighted average shares outstanding:
Basic and diluted			20,950				20,537				20,860				20,521

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

A. H. Belo Corporation and Subsidiaries

		June 30, 2010
In thousands, except share and per share amounts		(unaudited)				December 31, 2009
Assets
Current assets:
Cash and temporary cash investments		$	60,009			$	24,503
Accounts receivable (net of allowance of $5,168 and $6,505 at June 30, 2010 and December 31, 2009, respectively)			47,025				62,977
Receivable from the sale of the Washington Street Garage			5,793				—
Funds held by Belo Corp. for future pension payments			3,706				11,978
Inventories			9,032				10,460
Assets held for sale			6,396				5,268
Prepaids and other current assets			7,377				6,758
Total current assets			139,338				121,944
Property, plant and equipment at cost:
Land			27,394				27,844
Buildings and improvements			209,255				211,793
Publishing equipment			348,263				348,089
Other			153,171				146,174
Advance payments on property, plant and equipment			5,106				12,996
Total property, plant and equipment			743,189				746,896
Less accumulated depreciation			557,638				543,567
Property, plant and equipment, net			185,551				203,329
Intangible assets, net			24,808				27,427
Goodwill			24,582				24,582
Investments			21,618				21,314
Other assets			4,847				5,831
Total assets		$	400,744			$	404,427

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

A. H. Belo Corporation and Subsidiaries

		June 30, 2010
In thousands, except share and per share amounts		(unaudited)				December 31, 2009
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	16,395			$	19,191
Accrued compensation and benefits			20,449				11,692
Other accrued expenses			17,319				18,096
Advance subscription payments			24,211				26,713
Total current liabilities			78,374				75,692
Other post employment benefits			3,621				3,876
Deferred income taxes			1,366				223
Other liabilities			3,294				3,039
Commitments and contingent liabilities
Shareholders’ equity:
Preferred stock, $.01 par value. Authorized 2,000,000 shares; none issued.			—				—
Common stock, $.01 par value. Authorized 125,000,000 shares
Series A: issued 18,522,026 and 18,248,970 shares at June 30, 2010 and December 31, 2009, respectively			185				182
Series B: issued 2,549,716 and 2,507,590 shares at June 30, 2010 and December 31, 2009, respectively			25				25
Additional paid-in capital			490,394				488,241
Accumulated other comprehensive income			2,999				3,364
Accumulated deficit			(179,514	)			(170,215	)
Total shareholders’ equity			314,089				321,597
Total liabilities and shareholders’ equity		$	400,744			$	404,427

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

A. H. Belo Corporation and Subsidiaries

		Six months ended June 30, 2010
						Common Stock								Additional				Other
		Shares				Shares								Paid-in				Comprehensive				Retained
In thousands, except share amounts (unaudited)		Series A				Series B				Amount				Capital				Income				Deficit				Total
Balance at December 31, 2009			18,248,970				2,507,590			$	207			$	488,241			$	3,364			$	(170,215	)		$	321,597
Share-based compensation			—				—				—				1,288				—				—				1,288
Conversion of Series B to Series A			2,164				(2,164	)			—				—				—				—				—
Issuance of shares for restricted stock units			62,119				—				1				18				—				—				19
Issuance of shares for stock option exercises			208,773				44,290				2				879				—				—				881
Income tax on stock options			—				—				—				(32	)			—				—				(32	)
Amortization of curtailment gain			—				—				—				—				(365	)							(365	)
Net loss			—				—				—				—				—				(9,299	)			(9,299	)
Balance at June 30, 2010			18,522,026				2,549,716			$	210			$	490,394			$	2,999			$	(179,514	)		$	314,089

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

A. H. Belo Corporation and Subsidiaries

		Six months ended June 30,
In thousands (unaudited)		2010				2009
Operations
Net loss		$	(9,299	)		$	(107,778	)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization			20,225				23,447
Gain on disposal of Washington Street Garage			(5,373	)			—
Impairment on investment			—				1,000
Asset impairment			—				82,689
Deferred income taxes			1,143				(1,302	)
Employee retirement benefit expense (income)			26				103
Pension expense			8,272				—
Share-based compensation			1,631				412
Other non-cash items			(948	)			(1,078	)
Net changes in operating assets and liabilities:
Accounts receivable			17,289				25,094
Inventories			1,428				7,889
Prepaids and other current assets			(619	)			(315	)
Other, net			616				(566	)
Accounts payable			(2,796	)			(12,424	)
Accrued compensation and benefits			8,757				(6,056	)
Accrued interest payable			—				11
Other accrued expenses			(777	)			(874	)
Advance subscription payments			(2,502	)			1,086
Net cash provided by operations			37,073				11,338
Investments
Capital expenditures, net			(1,946	)			(4,796	)
Other, net			376				2,189
Net cash used for investments			(1,570	)			(2,607	)
Financing
Proceeds from issuance of stock options			3				—
Payments on credit facility			—				(6,460	)
Cash provided by (used in) financing activities			3				(6,460	)
Net increase in cash and temporary cash investments			35,506				2,271
Cash and temporary cash investments at beginning of period			24,503				9,934
Cash and temporary cash investments at end of period		$	60,009			$	12,205
Supplemental Disclosures
Interest paid, net of amounts capitalized		$	—			$	115
Income taxes paid, net of refunds		$	2,319			$	1

See accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. H. Belo Corporation and Subsidiaries

(Dollars in thousands, except share and per share amounts)

(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 United States Generally Accepted Accounting Principles, (“GAAP”) 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 GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Transactions between the companies comprising A. H. Belo have been eliminated in the condensed consolidated 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, 2009. Operating results for the three and six month periods ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.
(2)		The Company owns and operates three primary daily newspapers: The Dallas Morning News, The Providence Journal, and The Press-Enterprise (Riverside, CA). Each publishes and distributes 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 and distribution businesses. The Company’s operating segments are defined as its newspapers within a given market. The Company has determined that according to the applicable accounting guidance all of its operating segments meet the criteria 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 (herein 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 8, and co-own certain investments.
(3)		Accumulated Other Comprehensive Gain/(Loss) contains the minimum liability related to other post-employment benefits and deferral of a gain resulting from a negative plan amendment to The Press-Enterprise post-employment benefit plan. This negative plan amendment, which reduces the plan benefits, was made in 2009. The gain is being recognized over approximately five years, determined by the average life expectancy to age 65 of the plan participants at the date of the negative plan amendment and at which point the benefits will end for the remaining plan participants.
(4)		The following table presents stock-based awards that are excluded for purposes of calculating diluted earnings per share for the three and six months ended June 30, 2010 and 2009:

		Three Months Ended								Six Months Ended
		June 30, 2010				June 30, 2009				June 30, 2010				June 30, 2009
Options excluded as the effects are antidilutive:
Number outstanding			2,681,892				4,132,274				2,681,892				4,132,274
Weighted average exercise price		$	15.85			$	12.83			$	15.85			$	12.83

(5)

Prior to the Distribution, A. H. Belo 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.
		Share-based compensation cost recognized for awards to A. H. Belo’s employees and non-employee directors was $(146) and $2,531 for the three and six months ended June 30, 2010, respectively, and $731 and $1,109 for the three and six months ended June 30, 2009, respectively. The negative cost for the three months ended June 30, 2010, is due to forfeitures related to employees leaving the Company. No compensation cost is recognized related to options issued by A. H. Belo held by employees and non-employee directors of Belo. Each stock option and RSU (of A. H. Belo and of Belo) otherwise have the same terms as the original award. The awards continue to vest as under the existing vesting schedule based on continued employment with Belo or A. H. Belo, as applicable. Following the Distribution, A. H. Belo and Belo recognize compensation expense for any pre-Distribution awards related to their respective employees, regardless of which company ultimately issues the awards.
		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 $(425) and $(69) for the three and six months ended June 30, 2010, respectively, and $369 for the three and $504 for the six months ended June 30, 2009, respectively, related to awards that Belo issued.
		A. H. Belo Stock Option Activity
		The following table summarizes the stock option activity under A. H. Belo’s long-term incentive plan for the period ended June 30, 2010:

		Number of				Weighted Average
		Stock Options				Exercise Price
Outstanding at December 31, 2009			3,127,424			$	14.20
Granted			—			$	—
Exercised			(253,063	)		$	2.73
Canceled			(192,469	)		$	6.26
Outstanding at June 30, 2010			2,681,892			$	15.85

		Of the total A. H. Belo options outstanding at June 30, 2010, 1,639,908 options with a weighted average exercise price of $12.05 are held by A. H. Belo employees and non-employee directors. The remaining 1,041,984 stock options are held by Belo employees and non-employee directors.
		A. H. Belo RSU Activity
		The following table summarizes the RSU activity under A. H. Belo’s long-term incentive plan for the six-month period ended June 30, 2010:

		Number of				Weighted Average Price
		RSUs				on Date of Grant
Outstanding at December 31, 2009			438,582			$	16.63
Granted			770,589			$	6.20
Vested			(103,658	)		$	18.28
Canceled			(59,611	)		$	9.39
Outstanding at June 30, 2010			1,045,902			$	6.57

		Of the total A. H. Belo RSUs outstanding at June 30, 2010, 987,106 RSUs are held by A. H. Belo employees and non-employee directors. The remaining 58,796 RSUs are held by Belo employees and non-employee directors.
(6)		Subsequent to the Distribution, Belo retained sponsorship of The G. B. Dealey Retirement Pension Plan (“Pension Plan”) and, jointly with A. H. Belo, oversees the investments of the Pension Plan. Belo administers, in accordance with the terms of the Pension Plan, benefits for the Belo and A. H. Belo current and former employees who participate in the Pension Plan. As sponsor of the Pension Plan, Belo is solely responsible for directly satisfying the funding obligations with respect to the Pension Plan and retains sole discretion to determine the amount and timing of any contributions required to satisfy such funding obligations. Belo also retains the right, in its sole discretion, to terminate the Pension Plan.
		By prior agreement, A. H. Belo is contractually obligated to reimburse Belo for 60 percent of each contribution Belo makes to the Pension Plan. As discussed in A. H. Belo’s 2009 Annual Report on Form 10-K filed with the SEC on April 15, 2010, the Pension Plan was underfunded, as determined for financial reporting purposes in accordance with the applicable accounting guidance, as of December 31, 2009, by $196,000, of which 60 percent is $118,000. The Company expects to be required to make significant future payments to Belo for reimbursements. In accordance with the applicable accounting guidance, a liability for these expected future payments is not recorded on the balance sheet.
		A. H. Belo accounts for its obligations related to the Pension Plan according to the applicable accounting guidance for multiemployer pensions, under which it recognizes as net pension cost the required contribution for each period and recognizes as a liability any contribution obligation due and unpaid. During the three and six month-periods ended June 30, 2010, the Company recognized pension expense for payments to Belo of $4,200 and $8,272, respectively. During the three and six month-periods ended June 30, 2009, the Company recognized no pension expense as no payments were made to Belo during these periods. The payments to Belo were made from the A. H. Belo funds held on deposit by Belo Corp. for future pension contributions.
(7)		On October 24, 2006, 18 former employees of The Dallas Morning News filed a lawsuit against various A. H. Belo-related parties in the United States District Court for the Northern District of Texas. The plaintiffs’ lawsuit mainly consists of claims of unlawful discrimination and ERISA violations. 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 is tentatively planned for March or April 2011. The Company believes the lawsuit is without merit and is defending vigorously against it.
		On April 13, 2009, four former independent home delivery contractors of The Press-Enterprise filed a purported class action lawsuit against A. H. Belo Corporation, Belo Corp., Press-Enterprise Company, and others in The Superior Court of the State of California, Riverside County. Plaintiffs allege, on behalf of themselves and those similarly situated, that they were improperly classified as independent contractors instead of as employees. Plaintiffs assert that they and members of the purported class were not paid all wages owed, including minimum wages, hourly wages, and overtime wages; and that Defendants failed to provide meal periods and rest periods or compensation in lieu thereof, failed to reimburse for reasonable and necessary business expenses, unlawfully withheld wages due, failed to provide accurate wage statements, failed to keep accurate payroll records, failed to pay wages timely, and thus committed unfair business practices. Plaintiffs will file a first amended complaint in July 2010 that adds a claim under the federal Fair Labor Standards Act. The original and amended complaints seek recovery of allegedly unpaid wages, meal and rest period payments, penalties, expenses, interest, attorneys’ fees, and costs. During the second quarter of 2010, A. H. Belo Corporation and the other parties to the lawsuit reached a preliminary agreement to settle the lawsuit, subject to Court approval. If approved, the maximum payment under the settlement, if all class members file valid and timely claims, is $2,500. Accordingly, during the second quarter of 2010, the Company recorded an accrual for this settlement, in other accrued expenses on the balance sheet and the corresponding expense is included in other production, distribution and operating costs in

		the income statement. The parties have agreed to cooperate and take all steps necessary and appropriate to obtain preliminary and final approval of the settlement, to effectuate its terms, and to record the satisfaction of judgment with the Court.
		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.
(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 and other agreements with Belo or its subsidiaries. Under 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 certain 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.
		Under the services agreement A. H. Belo and Belo (or their respective subsidiaries) 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 are made on an arm’s-length basis.
		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 solely responsible for its income taxes subsequent to the Distribution Date.
		On September 14, 2009, the Company and Belo entered into the first amendment to the tax matters agreement. The amendment allows for the carry-back of A. H. Belo’s losses since February 2008 to Belo’s pre-Distribution tax returns. In exchange, the Company and Belo have agreed that any tax refund relating to these net operating losses is for the account of A. H. Belo and will be held by Belo and applied to the Company’s share of future contributions to the Pension Plan.
		On September 24, 2009, Belo amended a previously filed tax return to generate an $11,978 federal income tax refund. Belo received the refund in the fourth quarter of 2009. Correspondingly, A. H. Belo reversed the associated valuation allowance on its deferred tax assets related to the net operating losses carried-back by Belo, resulting in an $11,978 tax benefit for A. H. Belo. During the three and six months ended June 30, 2010, $4,200 and $8,272 respectively, of such funds held by Belo were distributed to Belo in reimbursement of 60 percent of Belo’s contribution to the Pension Plan during such period.
(9)		The Company had approximately $743,189 of property, plant and equipment as of June 30, 2010. 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 the applicable accounting guidance, the Company records impairment charges on property plant and equipment 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. No related impairment was recorded in the three month and six month periods ended June 30, 2010 or June 30, 2009.
		In the second quarter of 2010, the Company sold a parking garage located in Providence, Rhode Island for approximately $6,050. The sale, which closed on June 30, 2010, was recorded as a non-operating gain of approximately $5,373 in the income statement. The proceeds from this sale were held in escrow for one day and received by the Company on July 1, 2010. Accordingly, the Company recorded a receivable for the net proceeds of approximately $5,793 on the balance sheet as of June 30, 2010.
(10)		Assets held for sale consist of 49.85 acres of land and a 133,390 square foot warehouse assembly building located in Dallas near Interstate 20 and Interstate 45 (the “South Plant”), and 8.2 acres and a 32,682 square foot building located in Plano, Texas, adjacent to The Dallas Morning News production plant where newspapers are printed (the “North Plant”). During the second quarter of 2010, the decision was made to sell a portion of the land and a building adjacent to the North Plant. The sale of this land and building was completed in July 2010.

		During 2009, in an additional step to reduce costs, The Dallas Morning News elected to consolidate its production facilities and relocated production equipment from the South Plant to the North Plant. The South Plant was built in 2007 and was used by The Dallas Morning News for the collating and assembly of the preprint packages included in the Sunday newspaper. The Company, with the assistance of a third party, estimated the market value of the South Plant based on market information for comparable properties in the Dallas-Fort Worth area. The estimated market value was compared to carrying value and, as a result, the Company recorded $20,000 of impairment expense in the third quarter of 2009, to align the carrying value with estimated market value, less selling costs. The Company began marketing the South Plant for sale during the third quarter of 2009. There have been no changes in the status of the property since December 31, 2009.
		Assets held for sale consist of the following:

		June 30, 2010				December 31, 2009
Land		$	1,517			$	1,067
Building and improvements			4,879				4,201
Total assets held for sale		$	6,396			$	5,268

(11)

The following table sets forth the Company’s goodwill. During the six months ended June 30, 2009, the Company recorded a goodwill impairment charge at The Providence Journal of approximately $80,940. After recording the goodwill impairment charge, no goodwill remained related to The Providence Journal.

						The Dallas				The Providence				The Press-
		Total Goodwill				Morning News				Journal				Enterprise
Gross goodwill balance as of January 1, 2009			526,248				26,076				370,155				130,017
Accumulated amortization			(62,157	)			(1,494	)			(46,421	)			(14,242	)
Accumulated impairment			(358,569	)			—				(242,794	)			(115,775	)
Impairment recorded in 2009			(80,940	)			—				(80,940	)			—
Net goodwill balance at December 31, 2009		$	24,582			$	24,582			$	—			$	—
Gross goodwill balance as of January 1, 2010			526,248				26,076				370,155				130,017
Accumulated amortization			(62,157	)			(1,494	)			(46,421	)			(14,242	)
Accumulated impairment			(439,509	)			—				(323,734	)			(115,775	)
Net goodwill balance at June 30, 2010		$	24,582			$	24,582			$	—			$	—

The following table sets forth the Company’s identifiable intangible assets, consisting of subscriber lists that are subject to amortization:

		Total Subscriber				The Dallas				The Providence				The Press-
		Lists				Morning News				Journal				Enterprise
Gross balance at December 31, 2009		$	114,824			$	22,896			$	78,698			$	13,230
Accumulated amortization			(87,397	)			(22,896	)			(56,109	)			(8,392	)
Net balance at December 31, 2009		$	27,427			$	—			$	22,589			$	4,838
Gross balance at December 31, 2009		$	114,824			$	22,896			$	78,698			$	13,230
Accumulated amortization at June 30, 2010			(90,016	)			(22,896	)			(58,294	)			(8,826	)
Net balance at June 30, 2010		$	24,808			$	—			$	20,404			$	4,404

(12)

On December 3, 2009, the Company entered into the Second Amendment (“Second Amendment”) to the Amended and Restated Credit Agreement (the Amended and Restated Credit Agreement as so amended, the “Credit Agreement”). Among other matters, the Second Amendment to the Credit Agreement extended the maturity date of the credit facility from April 30, 2011 to

		September 30, 2012, reduced the total commitment amount from $50,000 to $25,000, and released the lien on certain real property securing the facility. The amended facility remains subject to a borrowing base. If borrowing capacity under the Credit Facility becomes less than $17,500, then a fixed charge coverage ratio covenant of 1:1 will apply. The Second Amendment also makes certain minor administrative amendments to the Amended and Restated Pledge and Security Agreement dated as of January 30, 2009. The decrease in the Company’s revolving credit facility from $50,000 to $25,000 was a decision made by management. Management concluded that based on estimated future borrowing needs, the cost of the revolving credit facility, and borrowing base availability, $25,000 was sufficient to meet the Company’s borrowing needs. The borrowing base is calculated using eligible accounts receivable and inventory, as defined in the Credit Agreement. A decrease in the borrowing base could potentially limit the Company’s borrowing capacity. At June 30, 2010, the Company had eligible collateral to secure the Credit Agreement of $32,623, resulting in a borrowing base of $25,000. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $18,840 of borrowing capacity available under the credit facility. At December 31, 2009, the Company had eligible collateral to secure the Credit Agreement of $44,202, resulting in a borrowing base of $25,000. When letters of credit and other required reserves were deducted from the borrowing base, the Company had $18,871 of borrowing capacity available under the Credit Agreement as of December 31, 2009.
		At June 30, 2010 and December 31, 2009, the Company had no borrowings under the Credit Agreement.
(13)		Management has determined that the fair value of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable and notes payable, approximate their carrying values as of June 30, 2010 and December 31, 2009 primarily due to the short-term nature, and/or the variable interest rates associated with such instruments. The fair value of assets held for sale, based on current market values, also approximate their carrying values as of June 30, 2010.
(14)		In connection with the Distribution and after an assessment of their respective downtown Dallas real estate needs, A. H. Belo and Belo Corp. agreed to co-own, through the creation of a limited liability company (LLC), The Belo Building, (a seventeen story office building in downtown Dallas), related parking sites, and other real estate. A. H. Belo and Belo each own 50 percent of the LLC and each lease from the LLC 50 percent of the available rental space in The Belo Building and related parking sites under long-term leases. These leases are terminable under various conditions. A third party real estate services firm, engaged by the LLC, manages The Belo Building and other real estate owned by the LLC. The Company accounts for this investment using the equity method.
		In addition, A. H. Belo and Belo, through their subsidiaries, jointly own 6.6 percent of Classified Ventures, LLC, (“Classified Ventures”) a joint venture in which the other owners are Gannett Co., Inc., The McClatchy Company, Tribune Company, and The Washington Post Company. The three principal online businesses Classified Ventures operates are cars.com, apartments.com, and homegain.com. Effective January 1, 2010, the Company started accounting for its investment in Classified Ventures using the equity method and recorded $599 and $978 in earnings for the three and six month periods ended June 30, 2010, respectively.

In addition to the LLC and Classified Ventures, A. H. Belo has invested in other startup companies related to the news and information industry. Details of the investment amounts are in the table below:

		June 30, 2010				December 31, 2009
LLC owning The Belo Building		$	16,088			$	16,344
Other equity method investments			4,680				2,984
Cost method investments			850				1,986
Total investments		$	21,618			$	21,314

		Although some of the real estate owned by the LLC is currently being marketed for sale, management considers all of the investments long-term in nature. The ability to readily convert these investments into cash is limited.
(15)		Income taxes are recorded using the liability method in accordance with applicable accounting guidance. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted by any discrete events, which are reported in the period in which they occur. This estimate is re-evaluated each quarter based on the Company’s estimated tax expense for the year.
		The Company recognized income tax expense of approximately $1,411 and $2,139 for the three months and six months ended June 30, 2010, respectively. The Company recognized an income tax expense of approximately $1,534 for the three months ended June 30, 2009 and an income tax benefit of approximately $222 for the six months ended June 30, 2009. The tax expense

		for the three and six months ended June 30, 2010 is primarily attributable to tax expense incurred related to the Texas margin tax and Rhode Island state income tax and changes in the valuation allowance.
		The Company projects taxable losses for the year 2010 for federal income tax purposes and some state jurisdictions in which the Company operates. Net operating losses can be carried forward to offset future taxable income. The Company’s net operating loss carryforwards begin to expire in the years 2029 and 2030 if not used.
		The applicable accounting guidance places a threshold for recognition of deferred tax assets including net operating loss carryforwards. Based on such criteria, the Company established a valuation allowance against the deferred tax assets in certain jurisdictions in March of 2009, as it was more likely than not the benefit resulting from these deferred tax assets would not be realized. The factors used to assess the likelihood of realization of the deferred tax assets include reversal of future deferred tax liabilities, available tax planning strategies, and future taxable income. Any reversal relating to the valuation allowance will be recorded as a reduction of income tax expense. The Company increased the valuation allowance during the three months and six months ended June 30, 2010 by $422 and $3,872, respectively. The valuation allowance change for the three months and six months ended June 30, 2010 was due to increases in deferred tax assets and the continued evaluation of deferred tax liability reversals.
(16)		The total number of authorized shares of common stock is 125,000,000 shares. The Company has two series of common stock outstanding, Series A and Series B, each with a par value of $0.01 per share. The Series A and Series B shares are identical except as noted herein. Series B shares are entitled to 10 votes per share on all matters submitted to a vote of shareholders, while the Series A shares are entitled to one vote per share. Series B shares are convertible at any time on a one-for-one basis into Series A shares but Series A shares are not convertible into Series B shares. Shares of the Company’s Series A common stock are traded on the New York Stock Exchange (NYSE symbol: AHC). There is no established public trading market for shares of Series B common stock. Transferability of the Series B shares is limited to family members and affiliated entities of the holder. Upon any other type of transfer, the Series B shares automatically convert into Series A shares.

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

A. H. Belo Corporation, headquartered in Dallas, Texas, is a distinguished news and information company that owns and operates three primary daily newspapers and 11 associated Web sites. A. H. Belo publishes The Dallas Morning News, Texas’ leading newspaper; The Providence Journal, the oldest major daily newspaper of general circulation and continuous publication in the U.S.; and The Press-Enterprise (Riverside, CA), serving southern California’s Inland Empire region. These newspapers produce extensive local, state, national and international news. In addition, the Company publishes various specialty publications targeting niche audiences, young adults and the fast-growing Hispanic market. A. H. Belo also owns direct mail and commercial printing and distribution businesses.

The Company intends for the discussion of its financial condition and results of operations that follows to provide information that will assist in understanding A. H. Belo’s financial statements, the changes in certain key items in those statements from period to period and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect the Company’s financial statements.

Results of Operations

(Dollars in thousands, except per share amounts)

Condensed Consolidated Results of Operations

		Three months ended June 30,												Six months ended June 30,
						Percentage												Percentage
		2010				Change				2009				2010				Change				2009
Net operating revenues		$	121,570				(4.7	)%		$	127,504			$	237,329				(7.3	)%		$	255,998
Operating costs and expenses			126,094				(4.5	)%			132,048				250,075				(31.2	)%			363,527
Other income (expense)			5,764				680.2	%			(993	)			5,586				1,286.0	%			(471	)
Income (loss) before income taxes			1,240				(122.4	)%			(5,537	)			(7,160	)			(93.4	)%			(108,000	)
Income tax expense (benefit)			1,411				(8.0	)%			1,534				2,139				(1,061.5	)%			(222	)
Net loss		$	(171	)			(97.6	)%		$	(7,071	)		$	(9,299	)			(91.4	)%		$	(107,778	)

The table below presents the components of net operating revenues for the three months and six months ended June 30, 2010 and June 30, 2009, respectively:

Revenues

		Three months ended June 30,												Six months ended June 30,
						Percentage												Percentage
		2010				Change				2009				2010				Change				2009
Advertising		$	77,004				(12.0	)%		$	87,492			$	149,190				(15.6	)%		$	176,823
Circulation			35,456				6.6	%			33,266				71,042				9.3	%			64,980
Other			9,110				35.0	%			6,746				17,097				20.4	%			14,195
Net operating revenues		$	121,570				(4.7	)%		$	127,504			$	237,329				(7.3	)%		$	255,998

Advertising revenues accounted for 63.3 and 62.9 percent of total revenues for the three and six months ended June 30, 2010, respectively compared to 68.6 and 69.1 percent for the same periods in the prior year. Circulation revenues accounted for 29.2 and 29.9 percent of total revenues for the three and six months ended June 30, 2010, respectively compared to 26.1 and 25.4 percent for the same periods in the prior year. Circulation revenue as a percentage of total revenue increased due to (i) the Company’s success in raising circulation prices in Dallas and Providence as part of its strategy to reduce dependence upon advertising revenue, which the Company believes is less predictable, over time and (ii) declines in advertising revenues.

The Company’s revenues have continued to be adversely affected by competitive and economic pressures and advertising expenditures have shifted to other media, including the internet. During times of economic uncertainty or a recession, advertising expense budgets tend to be reduced more than other expenses. The shift of advertising expenditures and the economic slowdown continue to adversely affect advertising demand and the Company’s business, financial condition and results of operations. Total advertising revenue, including print and Internet revenue, was down 12.0 and 15.6 percent for the three and six months ended June 30, 2010, when compared to the same periods last year. Retail advertising revenue was down 17.2 and 19.0 percent, general advertising revenue was down 8.7 and 17.7 percent, and classified advertising revenue (exclusive of Internet revenue) was down 16.3 and 20.5 percent for the three and six months ended June 30, 2010, respectively, when compared to the same periods last year. The Dallas Morning News, The Press-Enterprise and The Providence Journal each experienced declines in substantially all advertising categories that are included in retail, general and classified. The Dallas Morning News’ advertising revenues were down 8.5 and 13.8 percent for the three and six months ended June 30, 2010, respectively, when compared to the same periods in the prior year. The Press-Enterprise’s advertising revenues were down 17.8 and 18.6 percent for the three and six months ended June 30, 2010, respectively, when compared to the same periods in the prior year. The Providence Journal’s advertising revenues were down 17.3 and 18.6 percent for the three and six months ended June 30, 2010, when compared to the same periods in the prior year. The Company had $9,336 and $17,867 in Internet revenue for the three and six months ended June 30, 2010, respectively, which accounted for 7.7 and 7.5 percent of total revenues. Compared to the prior year period, Internet revenues decreased 4.3 and 6.1 percent for the three and six months ended June 30, 2010. Decreases in Internet revenues resulted from declines in auto, employment and real estate classifieds, which depend on upselling from the same print categories. Internet ad revenue, exclusive of classified revenue, increased 3.5 and 6.4 percent for the three and six months ended June 30, 2010, when compared to the same periods in the prior year.

Circulation revenue increased 6.6 and 9.3 percent for the three and six months ended June 30, 2010, respectively, primarily due to single-copy and home delivery price increases at The Dallas Morning News and The Providence Journal and less discounting at The Press-Enterprise.

Other revenue, which consists primarily of commercial printing and distribution, increased 35.0 and 20.4 percent for the three and six months ended June 30, 2010, respectively, due to new printing contracts.

Operating Costs and Expenses

		Three months ended June 30,												Six months ended June 30,
						Percentage												Percentage
		2010				Change				2009				2010				Change				2009
Salaries, wages and employee benefits		$	56,817				9.9	%		$	51,720			$	113,071				(1.3	)%		$	114,614
Other production, distribution and operating costs			47,034				(7.5	)%			50,867				93,066				(12.8	)%			106,734
Newsprint, ink and other supplies			12,492				(23.9	)%			16,425				23,713				(34.2	)%			36,043
Asset impairment			—				(100.0	)%			1,749				—				(100.0	)%			82,689
Depreciation			8,441				(12.6	)%			9,662				17,605				(12.8	)%			20,198
Amortization			1,310				(19.4	)%			1,625				2,620				(19.4	)%			3,249
Total operating costs and expenses		$	126,094				(4.5	)		$	132,048			$	250,075				(31.2	)		$	363,527

For the three months ended June 30, 2010, when compared to the same period last year, the Company’s operating costs and expenses decreased $5,954 or 4.5 percent due to decreases in all operating expense categories except salaries, wages and employee benefits. This decrease in operating expense reflects the Company’s ongoing cost reduction and management strategy. Salaries, wages and employee benefits increased $5,097 due to incremental pension expense of $5,478 and incremental bonus expense of $4,612, partially offset by a decrease in salaries and wages of $3,384 and a decrease in other payroll related costs, including benefits and taxes, of $1,609. Other production, distribution and operating costs decreased $3,833 primarily due to decreases in bad debt expense of $1,905, distribution expense of $1,258 and rent expense of $840, partially offset by an increase in outside services of $440. The increase in outside services includes $2,500 for a legal settlement, an increase in legal fees of $1,096, an increase in computer charges of $3,489

and an increase in other outside services of $853. These increases are offset by a decrease in consulting expense of $7,498, which includes an accrual reversal of $1,197 for a contract settlement. Newsprint, ink and other supplies decreased $3,933. This decrease is related to a decrease in newsprint consumed. During the three months ended June 30, 2010, the Company’s publishing operations used approximately 16,719 metric tons of newsprint at an average cost of $551. Consumption of newsprint for the same period in 2009 was approximately 17,373, at an average cost of $738 per ton. Asset impairment decreased $1,749, reflecting impairment recorded in 2009. Depreciation expense decreased $1,221 due to lower depreciable assets in service. Amortization expense decreased $315 due to the subscriber lists at The Dallas Morning News being fully amortized at December 31, 2009.

For the six months ended June 30, 2010, when compared to the same period last year, the Company’s operating costs and expenses decreased $113,452 or 31.2 percent due to decreases in all operating expense categories. Salaries, wages and employee benefits decreased $1,543 due to a decrease in salaries and wages of $12,086 and a decrease in benefits, payroll taxes and other payroll related costs of $1,810. These decreases were partially offset by incremental pension expense of $10,829 and incremental bonus expense of $4,610. Other production, distribution and operating costs decreased $13,668 primarily due to decreases in bad debt expense of $3,531, distribution expense of $3,594, rent expense of $1,749, outside services of $1,093 and communications expense of $974. Outside services includes a decrease in consulting fees of $12,724, which includes an accrual reversal of $1,197 for a contract settlement, partially offset by $6,215 of increased computer expenses, $2,500 for a legal settlement, $1,476 in legal expense and other miscellaneous services of $1,440. Newsprint, ink and other supplies decreased $12,330. This decrease is related to a decrease in newsprint consumed. During the six months ended June 30, 2010, the Company’s publishing operations used approximately 32,755 metric tons of newsprint at an average purchase price of $540. Consumption of newsprint for the same period in 2009 was approximately 38,460, at an average cost of $737 per ton. Asset impairment decreased $82,689, reflecting impairment recorded in 2009. Depreciation expense decreased $2,593 due to lower depreciable assets in service. Amortization expense decreased $629 due to the subscriber lists at The Dallas Morning News being fully amortized at December 31, 2009.

Interest Expense

Interest expense decreased $88 and $185, or 30.2 and 31.3 percent, respectively, during the three and six months ended June 30, 2010, compared to the prior year periods, as the Company has had no borrowings against the revolving credit facility under its Credit Agreement in 2010.

Other Income, Net

Other income, net increased $6,669 and $5,872 for the three and six months ended June 30, 2010, respectively compared to the same periods in 2009. This increase reflects the non-operating gain recorded in June 2010 of approximately $5,373, related to the sale of a parking garage in Providence, Rhode Island and increases of approximately $1,052 and $1,259, respectively, for the three and six months ended in income from investments accounted for using the equity method of accounting. The increase for the six months ended June 30, 2010 is partially offset by the effect of The Dallas Morning News’ receipt of a sales tax refund during the first six months of 2009.

Income Taxes

Income tax expense decreased approximately $123 and increased approximately $2,361 for the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009. The tax expense for the three and six months ended June 30, 2010 is primarily attributable to tax expense incurred related to the Texas margin tax and Rhode Island state income tax and changes in the valuation allowance. The Company projects taxable losses for the year for federal income tax purposes and some jurisdictions in which the Company operates. The quarter’s tax benefit associated with these tax losses is offset by a corresponding increase in the valuation allowance of approximately $422 and $3,872, respectively for the three months and six months ended June 30, 2010.

Net operating losses can be carried forward to offset future taxable income. The Company’s net operating loss carryforwards will begin to expire in the years 2029 and 2030 if not used. The applicable accounting guidance places a threshold for recognition of deferred tax assets including net operating loss carryforwards. Based on such criteria, the Company established a valuation allowance against the deferred tax assets in certain jurisdictions in March of 2009, as it was more likely than not that the benefit resulting from these deferred tax assets would not be realized. The factors used to assess the likelihood of realization of the deferred tax assets include reversal of future deferred tax liabilities, available tax planning strategies, and future taxable income. Any reversal relating to the valuation allowance will be recorded as a reduction of income tax expense. The Company continues to evaluate the more likely than not threshold for recognition of its deferred tax assets and records adjustments as necessary.

Liquidity and Capital Resources

Operating Cash Flows

Net cash provided by operations was $37,073 for the six months ended June 30, 2010 compared to net cash provided by operations of $11,338 for the same period last year. The 2010 operating cash flows were primarily provided by a lower operating loss in the six months ended June 30, 2010 when compared to the same period in 2009 and routine changes in working capital. The lower operating loss was the result of cost cutting during 2009 and 2010, which resulted in the lower net loss by the Company and lower cash expenditures.

At June 30, 2010, the Company’s working capital was $60,964 compared to $46,252 at December 31, 2009, an increase of $14,712. This improvement resulted from an increase in current assets of $17,394 partially offset by an increase in current liabilities of $2,682. The increase in working capital reflects higher cash levels, an increase in prepaid assets and lower accounts payable. These increases in working capital are partially offset by decreases in accounts receivable resulting from lower advertising revenue and the funds held by Belo for future pension contributions and increases in accrued compensation and benefits. During the six months ended June 30, 2010, the Company reimbursed Belo $8,272 for pension contributions. These reimbursements to Belo were made by reducing the amount of funds held by Belo for future pension payments.

Management believes that current working capital, cash flow provided by operations and the ability to borrow under the Company’s revolving credit facility should be adequate to fund its current obligations.

Investing Cash Flows

Net cash flows used for investing activities were $1,570 for the six months ended June 30, 2010 compared to net cash flows used for investing activities of $2,607 for the same period in 2009. Cash flows used in investing activities for the six months ended June 30, 2010, reflects capital expenditures of $1,946 compared to capital spending of $4,796 for the same period in 2009. The decrease in capital spending is primarily due to timing differences in spending between 2009 and 2010.

Financing Cash Flows

Cash provided by financing activities for the six months ended June 30, 2010 was $3, reflecting proceeds received from stock option exercises, compared to $6,460 used in financing activities during the same period in 2009. The cash used in 2009 was to reduce the outstanding amount under the Company’s credit facility.

On December 3, 2009, the Company entered into the Second Amendment (“Second Amendment”) to the Amended and Restated Credit Agreement (the Amended and Restated Credit Agreement as so amended, the “Credit Agreement”). Among other matters, the Second Amendment to the Credit Agreement extended the maturity date of the credit facility from April 30, 2011 to September 30, 2012, reduced the total commitment amount from $50,000 to $25,000, and released certain real property securing the facility. The amended facility remains subject to a borrowing base. If borrowing capacity under the Credit Agreement becomes less than $17,500, then a fixed charge coverage ratio covenant of 1:1 will apply. The Second Amendment also makes certain minor administrative amendments to the Amended and Restated Pledge and Security Agreement dated as of January 30, 2009. The decrease in the Company’s revolving credit facility from $50,000 to $25,000 was a decision made by management. Management concluded that based on estimated future borrowing needs, the cost of the revolving credit facility, and borrowing base availability, $25,000 was sufficient to meet the Company’s borrowing needs. The borrowing base is calculated using eligible accounts receivable and inventory, as defined in the Credit Agreement. A decrease in the borrowing base could potentially limit the Company’s borrowing capacity. At June 30, 2010, the Company had eligible collateral to secure the Credit Agreement of $32,623 resulting in a borrowing base of $25,000. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $18,840 of borrowing capacity available under the credit facility. At December 31, 2009, the Company had eligible collateral to secure the Credit Agreement of $44,202, resulting in a borrowing base of $25,000. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $18,871 of borrowing capacity available under the Credit Agreement as of December 31, 2009.

At June 30, 2010 and December 31, 2009, the Company had no borrowings under the Credit Agreement.

Forward-Looking Statements

Statements in this communication concerning A. H. Belo Corporation’s business outlook or future economic performance, anticipated financial performance, revenues, expenses, dividends, capital expenditures, investments, impairments, pension plan contributions,

future financings, and other financial and non-financial items that are not historical facts, are “forward-looking statements” as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements.

Such risks, uncertainties and factors include, but are not limited to, general economic conditions, changes in capital market conditions and prospects, and other factors such as changes in advertising demand, interest rates, and newsprint prices; newspaper circulation trends and other circulation matters, including changes in readership patterns and demography, and audits and related actions by the Audit Bureau of Circulations; challenges in achieving expense reduction goals, and on schedule, and the resulting potential effects on operations; technological changes; development of Internet media and commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; regulatory, tax and legal changes; adoption of new accounting standards or changes in existing accounting standards by the Financial Accounting Standards Board or other accounting standard-setting bodies or authorities; the effects of Company acquisitions, dispositions, co-owned ventures, and investments; pension plan matters; significant armed conflict; and other factors beyond our control, as well as other risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and other public disclosures and filings with the SEC.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Other than as disclosed, there have been no material changes in A. H. Belo’s exposure to market risk from the disclosure included in the Annual Report on Form 10-K for the year ended December 31, 2009.

Item 4T.		Controls and Procedures

During the six months ended June 30, 2010, there were no changes in A. H. Belo’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Senior Vice President/Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and the Senior Vice President/Chief Financial Officer concluded that, as of June 30, 2010, due to a material weakness in internal control over financial reporting described in Management’s Report on Internal Control over Financial Reporting in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, the Company’s disclosure controls and procedures were not effective.

Notwithstanding the material weakness discussed above, the Company’s principal executive officer and the principal financial officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present in all material respects our financial position, results of operations and cash flows as of the period ends, and for each of the periods presented in this report.

In response to the identified material weakness, management has identified several enhancements to the Company’s internal control over financial reporting to remediate the material weakness described above. These ongoing efforts include the following:

	•		Preparing more robust documentation over the Company’s analysis and conclusions over the Company’s critical accounting policies;
	•		Preparing more detailed analyses of conclusions reached in (a) the selection of new accounting policies and (b) the accounting for significant non-routine transactions.
	•		Enhancing management review controls over conclusions reached with regard to documentation of critical accounting policies, selection of new policies and accounting for significant non-routine transactions.

We anticipate that the actions described above and resulting improvements in controls will strengthen our internal control over financial reporting and will, over time, address the related material weakness that we identified as of December 31, 2009. As part of our 2010 assessment of internal control over financial reporting, our management will test and evaluate these additional controls to assess whether they are operating effectively.

PART II.

Item 1.		Legal Proceedings

On April 13, 2009, four former independent home delivery contractors of The Press-Enterprise filed a purported class action lawsuit against A. H. Belo Corporation, Belo Corp., Press-Enterprise Company, and others in The Superior Court of the State of California, Riverside County. Plaintiffs allege, on behalf of themselves and those similarly situated, that they were improperly classified as independent contractors instead of as employees. Plaintiffs assert that they and members of the purported class were not paid all wages owed, including minimum wages, hourly wages, and overtime wages; and that Defendants failed to provide meal periods and rest periods or compensation in lieu thereof, failed to reimburse for reasonable and necessary business expenses, unlawfully withheld wages due, failed to provide accurate wage statements, failed to keep accurate payroll records, failed to pay wages timely, and thus committed unfair business practices. Plaintiffs will file a first amended complaint in July 2010 that adds a claim under the federal Fair Labor Standards Act. The original and amended complaints seek recovery of allegedly unpaid wages, meal and rest period payments, penalties, expenses, interest, attorneys’ fees, and costs. During the second quarter of 2010, A. H. Belo Corporation and the other parties to the lawsuit reached a preliminary agreement to settle the lawsuit, subject to Court approval. If approved, the maximum payment under the settlement, if all class members file valid and timely claims, is $2,500. Accordingly, during the three months ended June 30, 2010, the Company recorded $2,500 in expense a current liability on the balance sheet. The parties have agreed to cooperate and take all steps necessary and appropriate to obtain preliminary and final approval of the settlement, to effectuate its terms, and to record the satisfaction of judgment with the Court.

In addition to the foregoing and the matters previously disclosed (see Note 7 to the Condensed Consolidated Financial Statements in Part I, Item 1) for which there are no material developments, a number of other legal proceedings are pending against the Company, 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 the consolidated results of operations, liquidity or financial position of the Company.

Item 1A.		Risk Factors

There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A of our 2009 Annual Report on Form 10-K.

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

None.

Issuer Purchases of Equity Securities

None.

Item 3.		Defaults Upon Senior Securities

None.

Item 4.		Removed and Reserved

Item 5.		Other Information

None.

Item 6.		Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. All other documents are filed with this report. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

Exhibit Number		Description
2.1		*		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

Exhibit Number		Description
				“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 above
4.2		*		Specimen Form of Certificate representing shares of the Company’s Series A Common Stock (Exhibit 4.2 to the Third Amendment to Form 10)
4.3		*		Specimen Form of Certificate representing shares of the Company’s Series B Common Stock (Exhibit 4.3 to the Third Amendment to Form 10)
4.4		*		Rights Agreement dated as of January 11, 2008 between the Company and Mellon Investor Services LLC (Exhibit 4.4 to the Third Amendment to Form 10)
10.1				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)
				(5)* First Amendment to the Amended and Restated Credit Agreement dated as of August 18, 2009 (Exhibit 10.1(5) to the Company’s Quarterly Report on Form 10-Q file with the Securities and Exchange Commission on December 13, 2009 (Securities and Exchange Commission File No. 001-33741))
				(6)* Second Amendment to the Amended and Restated Credit Agreement dated as of December 3, 2009, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 4, 2009 (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)
				*(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

Exhibit Number		Description
				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”))
				*(c)      Third Amendment to the A. H. Belo Savings Plan effective March 31, 2009 (Exhibit 10.2 to the April 2, 2009 Form 8-K)
				*(d)      Fourth Amendment to the A. H. Belo Savings Plan dated September 10, 2009, (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2009 (Securities and Exchange Commission File No. 001-33741))
		~		(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 Grant (for Non-Employee Director Awards) (Exhibit 10.2.2(b) to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 13, 2010 (Securities and Exchange Commission File No. 001-33741) (the “1st Quarter 2010 Form 10-Q”))
				*(c)      Form of A. H. Belo 2008 Incentive Compensation Plan Evidence of Grant (for Employee Awards) (Exhibit 10.2.2(c) to the 1st Quarter 2010 Form 10-Q)
		~		(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)
				* (a)      First Amendment to Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated September 14, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2009 (Securities and Exchange Commission file No. 00-00741))
				(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 by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (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 2002
31.2				Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32				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

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXHIBIT INDEX

Exhibit Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		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