DallasNews Corp - Annual Report: 2011 (Form 10-K)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended: December 31, 2011

OR

¨ 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)

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Series B Common Stock, $.01 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Act.     Yes   ¨     No   þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes   ¨    No   þ

Indicate by check mark whether the 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  ¨

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 preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  þ    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

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.

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   ¨     No   þ

The aggregate market value of the registrant’s voting stock held by nonaffiliates on June 30, 2011, based on the closing price for the registrant’s Series A Common Stock on such date as reported on the New York Stock Exchange, was approximately $140,396,699.*

Shares of Common Stock outstanding at March 6, 2012: 21,830,029 shares (consisting of 19,436,948 shares of Series A Common Stock and 2,402,081 shares of Series B Common Stock).

* For purposes of this calculation, the market value of a share of Series B Common Stock was assumed to be the same as the share of Series A Common Stock into which it is convertible.

Documents incorporated by reference:

Selected designated portions of the registrant’s definitive proxy statement, relating to the Annual Meeting of Shareholders to be held on May 17, 2012, are incorporated by reference into Parts II and III of this Annual Report.

A. H. Belo Corporation 2011 Annual Report on Form 10-K

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A. H. BELO CORPORATION

FORM 10-K

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A. H. Belo Corporation 2011 Annual Report on Form 10-K

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PART I

A. H. Belo Corporation (“A. H. Belo” or the “Company”), headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that owns and operates four metropolitan daily newspapers and several associated Web sites, with publishing roots that trace to The Galveston Daily News, which began publication in 1842. A. H. Belo publishes The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.providencejournal.com), the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press-Enterprise (www.pe.com) (Riverside, California), serving the Inland Southern California region and winner of one Pulitzer Prize; and The Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, approximately 40 miles north of Dallas. The Company publishes various niche publications targeting specific audiences, and its investments and/or partnerships include Classified Ventures, LLC, owner of cars.com and the Yahoo! Inc. (“Yahoo!”) Newspaper Consortium. A. H. Belo also owns and operates commercial printing, distribution and direct mail service businesses. In February 2008, the Company’s former parent, Belo Corp. (“Belo”) separated its publishing operations in a spin-off transaction (the “Distribution”) and A. H. Belo became an independent registrant listed on the New York Stock Exchange (NYSE trading symbol: AHC). Unless the context requires otherwise, all dollar amounts in this Annual Report on Form 10-K are in thousands, except per share amounts.

The Dallas Morning News’ first edition was published on October 1, 1885. It is one of the leading metropolitan newspapers in America and its success is founded upon the highest standards of journalistic excellence, with an emphasis on comprehensive local news and information and community service. The Dallas Morning News is distributed primarily in Dallas County and 10 surrounding counties. This coverage area represents the fourth most populous metropolitan area of the country. The Dallas Morning News’ nine Pulitzer Prizes were awarded for news reporting, editorial writing and photography, with the most recent awarded in April 2010. The Dallas Morning News also publishes Briefing, a condensed newspaper distributed four days per week at no charge to non-subscribers of The Dallas Morning News in select coverage areas; and Al Dia, an award-winning Spanish-language newspaper published on Wednesdays and Saturdays and distributed at no charge in select coverage areas. The Dallas Morning News also publishes other news products targeted at communities in the North Texas area. The Dallas Morning News’ financial and operating results also include the financial and operating results of The Denton Record-Chronicle.

The Providence Journal is the leading newspaper in Rhode Island and southeastern Massachusetts. The Providence Journal is the oldest major daily newspaper of general circulation and continuous publication in the United States. The Providence Journal also publishes ProjoExpress, a weekly publication distributed at no charge to households in select Rhode Island communities. The Press-Enterprise is distributed in the Inland Southern California region, which includes Riverside and San Bernardino Counties. The Press-Enterprise also publishes La Prensa, a weekly Spanish-language newspaper distributed at no charge in select coverage areas, as well as The Weekly, a targeted condensed newspaper distributed mid-week at no charge to non-subscribers, and Sunday Weekly, a publication that is distributed on Sunday at no charge to non-subscribers. The Providence Journal and The Press-Enterprise have long histories of journalistic excellence.

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The Company’s primary revenues are from advertising sold in published issues of its newspapers and on the Company’s Web sites, the sale of newspapers to subscribers and single copy customers, and commercial printing and distribution. The following sets forth the Company’s distribution of revenues in 2011, 2010 and 2009 by type:

Advertising Revenues

The Company has a comprehensive portfolio of print and digital advertising products and services. For 2011, advertising revenues accounted for approximately 61.2 percent of total revenues of which 12.5 percent of advertising revenue was generated by the Company’s digital advertising products. A. H. Belo’s strategy is to increase advertising revenue through strategic alliances with online advertisers and by creating new digital and print products that complement the Company’s core newspapers and Web sites, niche and specialty publications, direct mail advertising, total market coverage publications, zoned editions, and event-based publications, all of which enable the Company’s advertisers to reach new markets. These products allow existing advertisers to reach their target audience through integrated advertising campaigns, while also providing the Company a portfolio of products with which to attract new advertisers. The combined reach of the Company’s core daily newspapers, digital platforms and niche publications allows the Company to maintain its position as a leading local media outlet in each of its markets.

In addition to daily newspapers, the Company publishes a number of niche publications such as condensed and weekly newspapers, Spanish-language newspapers, and fashion and entertainment publications, which are targeted at specific demographic groups or geographies. These niche publications provide a vehicle for delivery of display, classified and preprint advertising, typically to non-subscribers of the Company’s core newspapers and typically at no charge. These niche publications provide unique content, but also leverage the news content from the core newspapers while using the Company’s printing and distribution infrastructure to drive additional advertising revenue at a low incremental cost.

A. H. Belo’s focus is to offer both mass distribution and targeted products in its markets which is accomplished in the following ways:

Display Advertising

Display advertising revenue results from sales of advertising space within the Company’s newspapers and niche publications to local, regional or national retail and service businesses with local operations, affiliates or resellers.

Classified Advertising

Classified advertising revenue results from sales of advertising space in the classified and other sections of the Company’s newspapers which include automotive, real estate, employment and other.

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Preprint Advertising

Preprint revenue results from sales of preprinted advertisements or circulars inserted into the Company’s core newspapers and niche publications, or distributed by mail or third-party distributors to households in targeted areas in order to provide total market coverage for advertisers. The Company has developed capabilities that allow its advertisers to selectively target preprint distribution at the sub-zip code level in order to optimize the coverage for the advertisers’ locations.

Digital Advertising

Digital advertising revenue results from sales of banner and other display, video, behavioral targeting, search, rich media, directories, classifieds, direct email marketing, or other advertising on digital platforms associated and integrated with the Company’s print publications, and on third party Web sites, such as Yahoo!, monster.com, and cars.com.

The following sets forth the distribution of the Company’s advertising revenues in 2011, 2010, and 2009 by product type:

Circulation Revenues

Circulation revenues accounted for approximately 30.3 percent of total revenues for 2011 and represent subscription and single copy sales revenue related primarily to the Company’s core newspapers. A. H. Belo’s steadfast commitment to producing superior, unduplicated local content enables the Company’s newspapers to charge premium subscription rates. In 2009, The Dallas Morning News, The Providence Journal and The Press-Enterprise developed and implemented consumer revenue strategies, the goal of which is to increase the amount of recurring revenue from consumers of the Company’s print and digital products and to reduce the Company’s reliance on advertising revenue. Accordingly, since 2009, home delivery and single copy prices have increased by up to 76 percent in certain circulation areas. In 2011, The Dallas Morning News implemented a subscriber content initiative by which access to certain premium content on dallasnews.com, on its e-Edition and on its applications for mobile and tablet devices is gated, and thereby limited to digital subscribers for varying subscription fees and to home delivery subscribers as part of their subscription. Most breaking news, wire stories and classified content remain free on dallasnews.com. As of December 31, 2011, approximately 35 percent of print subscribers have activated their digital subscriptions.

The Company’s Web sites, which also include providencejournal.com, pe.com and other related Web sites, offer users comprehensive news information, user-generated content, advertising, e-commerce and other services. During 2011, the Company introduced several initiatives to strengthen its ability to engage readers across multiple digital platforms with relevant, local, customized content and advertising. The Dallas Morning News redesigned and re-launched its flagship Web site, dallasnews.com and released upgraded or new applications for Web-enabled mobile phone and tablet devices. Additionally, during 2011, The Providence Journal and The Press-Enterprise offered e-Editions of their newspapers and introduced applications for tablet devices. The Company plans to aggressively introduce additional applications for mobile

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devices and continue to modify and enhance its Web sites to ensure consumer engagement and relevancy. The Company continues to implement new digital tools with many of its journalists using social media such as blogs, Facebook and Twitter to engage local audiences.

The table below sets forth average print and digital circulation information concerning A. H. Belo’s primary daily newspaper operations and niche publications:

Printing and Distribution Revenues

Printing and distribution revenues comprise approximately 8.5 percent of the Company’s 2011 revenue and consist primarily of commercial printing, distribution and direct mail service. The Company provides commercial printing services for national newspapers that require regional printing, such as The Wall Street Journal, The New York Times and USA Today,

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and other local newspapers. Newsprint used in the production of large national newspapers is generally provided by the customer. The Company also provides home delivery and retail outlet distribution services for such national newspapers, as well as for regional newspapers delivered into our coverage areas, such as The Boston Globe and The Los Angeles Times. The Company also operates a direct mail service business in Phoenix, Arizona and Las Vegas, Nevada.

Raw Materials and Distribution

The basic material used in publishing newspapers is newsprint. Currently, most of the Company’s newsprint is obtained through a purchasing consortium. Management believes the Company’s sources of newsprint, along with available alternate sources, are adequate for the Company’s current needs.

During 2011, Company operations consumed approximately 67,300 metric tons of newsprint at an average cost of $635 per metric ton. Consumption of newsprint in 2010 was approximately 69,300 metric tons at an average cost of $568 per metric ton.

The Company’s newspapers and other commercial print products are produced at facilities in each geographic market. Distribution of printed product to subscribers, retailers and newsstands is made under terms of agreements with third-party distributors. The Company believes a sufficient number of third-party distributors exist in each geographic market to allow uninterrupted distribution of the Company’s products.

Product Initiatives

The Company operates the largest newsrooms in the markets it serves. In addition, its news and community interest Web sites generally attract the largest audiences in the markets they serve. The Company strategically seeks to identify new product and investment opportunities that leverage the scale of its news and advertising content, as well as complementing the Company’s subscriber base and digital platforms. In 2011, the Company’s new products include applications available on, and designed specifically for, tablets and smart phones, stories published in e-book format, and revenue sharing arrangements related to internally and externally produced videos. Other initiatives being developed leverage search engine optimization related to the Company’s Web sites and other digital platforms, and include social media reseller arrangements whereby the Company manages advertisers’ social media accounts. The Company has also repackaged certain printed niche products, providing greater professional and local community content, in order to expand its reach among locally focused audiences. Although the Company continuously monitors its new product efforts, there can be no assurances these initiatives will be accepted by consumers and result in a return of the Company’s investment.

The Company believes the brand equity associated with each of its newspapers continues to have significant value in their respective coverage areas. In 2011, The Providence Journal initiated a marketing campaign to strengthen its relationship with consumers and to acquire new subscribers. The Company is considering similar campaigns at its other newspapers to build and leverage its brands and create consumer interest in new and existing products.

Other Interests

In addition to its core newspaper operations, A. H. Belo and Belo, together own 6.6 percent of Classified Ventures, LLC, 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 that Classified Ventures, LLC operates are cars.com, apartments.com, and homegain.com. A. H. Belo and Belo, through Belo Lead Management, LLC, have also invested in ResponseLogix, Inc. (www.responselogix.com). ResponseLogix provides advanced, Internet-based lead management solutions to auto dealers.

In November 2011, the Company made an investment of $2,500 in ShopCo Holdings, LLC (“ShopCo”), in return for a 12.5 percent ownership interest. ShopCo owns FindnSave.com, a digital preprint solution which provides a shopping platform where consumers can find retail goods and services for sale locally and nationally. This platform leverages the power of local media participation with advanced search and database technology to allow a consumer to review online sales circulars or

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local advertised offers, or search for an item and receive a list of local advertisers and the prices those advertisers are offering for the searched item.

Prior to December 31, 2011, A. H. Belo and Belo each owned a 50 percent share of Belo Investment, LLC (“Belo Investment”), which held various real estate properties including The Belo Building, a 17-story downtown Dallas office building formerly occupied by certain A. H. Belo employees, related parking sites, and other downtown Dallas real estate. Effective December 31, 2011, the Company exchanged its membership interest in Belo Investment for an equitable division of its net assets, which resulted in a loss on the investment of $5,018. In the exchange, the Company received three commercial parking lots and another property in downtown Dallas. See the Consolidated Financial Statements, Note 5 — Investments.

Our Competitive Strengths and Challenges

Our strengths are:

The Company’s newspapers, and the newspaper industry as a whole, continue to experience challenges to maintain and grow print revenues and circulation. This results from, among other factors, increased competition from other media, particularly the Internet. In addition, the downturn in the housing and employment markets as well as negative consumer sentiment have adversely affected the Company’s business. Additional declines in circulation could further adversely impact advertising and circulation revenues. The decline in advertising revenues has been particularly realized in the display and classified categories, as advertising budgets have been reduced and advertisers have shifted to other media. In response to these advertising decreases, A. H. Belo has worked to diversify its revenue base by increasing circulation prices and expanding the reach of its printed niche products to wider audiences.

The Company has also developed broad digital strategies designed to provide readers with multiple platforms for obtaining online access to local news coverage while protecting the Company’s core print business. The Company has increased its efforts to obtain key demographic data from readers, which allows the Company to provide digital content most desired by readers, and to modify marketing and distribution strategies to enable the Company’s newspapers and Web sites to reach audiences most valued by advertisers. At December 31, 2011, the Company’s Web sites had approximately 2,348,000 registered users and during 2011, the Company’s Web sites registered approximately 169,000 new users. The Company has established strategic relationships with major Internet companies, and invested in certain companies with innovative products and/or technologies. In selected cases, A. H. Belo markets, uses and sells products and services provided by companies in

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which it has invested. A. H. Belo has also increased its focus on neighborhood and other local community and regional news, both in print and online.

As a result of declining revenues, the Company has implemented measures to control operating expenses. These measures include reducing the Company’s workforce and benefits, and restructuring the Company’s newspapers through organizational realignments.

Strategies and Opportunities

A. H. Belo is committed to publishing newspapers and digital content of the highest quality and integrity, and creating and developing innovative print and digital products addressing the needs of consumers and advertisers. The Company’s goal is to produce positive net income and cash flow and create value for shareholders over the long-term through stock price appreciation and dividends, which were reinstituted on a quarterly basis in 2011. The Company intends to achieve these objectives through the following strategies:

Competition

The Dallas Morning News competes with one metropolitan daily newspaper in certain areas of the Dallas/Fort Worth metroplex. The Providence Journal competes with four daily newspapers in Rhode Island and southeastern Massachusetts. The Press-Enterprise competes with seven daily newspapers in the Inland Southern California area. The Company’s newspapers, including its niche publications, face competition for advertising and circulation revenue in varying degrees from other newspapers and specialized publications distributed in its circulation areas, including nationally circulated newspapers, television, radio, magazines, direct-mail, the Internet and other advertising media. The secular shift from print to digital media has increased competition for audience and advertising from a wide variety of digital alternatives, including news and social media Web sites, online advertising networks and exchanges, online classified services, advertisements on mobile applications, and other new media formats. The Company’s newspapers compete for advertising revenue based on the size and demographics of its subscriber base, advertising results, rates, and customer service. Competition for readers is primarily based on the quality of its journalism, price, timeliness of its interaction with audiences, the mode of delivery, and customer service.

The Company’s Web sites and digital applications face competition from Internet sites that provide news, aggregated content from different sources, and sites that allow users to generate content. Competition for advertising revenue is encountered from Web sites providing platforms for classified advertisements, and major search engines, such as Google and Yahoo!, which offer directory information for local businesses with enhanced functionality, such as mapping and links to reviews. In

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addition, other forms of digital distribution, such as digital applications for Web-enabled mobile phones and tablets, compete for digital advertising revenue with the Company’s Web sites and digital applications.

Seasonality

A. H. Belo’s advertising revenues are subject to moderate seasonality, with advertising revenues typically higher in the fourth calendar quarter of each year because of the holiday shopping season. The level of advertising sales in any period may also be affected by advertisers’ decisions to increase or decrease their advertising expenditures in response to anticipated consumer demand and general economic conditions.

Employees

As of December 31, 2011, the Company had approximately 1,900 full-time and 260 part-time employees. Approximately 330 employees are represented by various employee unions. All union-represented employees are located in Providence, Rhode Island. The Company believes its relations with its employees are satisfactory.

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Available Information

A. H. Belo maintains its corporate Web site at www.ahbelo.com. The Company makes available on its Web site, free of charge, this Annual Report on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K and amendments to those reports, as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as soon as reasonably practicable after the reports are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

Sections of this Annual Report on Form 10-K and management’s public comments from time to time may contain forward-looking statements that are subject to risks and uncertainties. These statements are based on management’s current knowledge and estimates of factors affecting the Company’s operations, both known and unknown. Readers are cautioned not to place undue reliance on such forward-looking information as actual results may differ materially from those currently anticipated. In addition, a number of other factors (those identified elsewhere in this document and others, both known and unknown) may cause actual results to differ materially from expectations.

A. H. Belo's businesses operate in highly competitive media markets, and the Company's ability to maintain market share and generate revenues depends on how effectively the Company competes with existing and new competition.

The Company’s businesses operate in highly competitive media markets. A. H. Belo’s newspapers compete for advertising and circulation revenue with other newspapers, Web sites, digital applications, magazines, television, radio, direct mail and other media. The proliferation of the Internet and expansion of digital media and communications, particularly mobile applications, and the development of tablet and mobile devices, has increased some consumers’ preferences to receive all or part of their news and information digitally. Web sites such as craigslist.com, monster.com, and autotrader.com have provided an efficient forum for reaching wide but targeted audiences for classified advertisements. Web sites such as Google and Yahoo! have been successful in gathering national, local and entertainment news and information from multiple sources and attracting a broad readership base. The continued development and deployment of new technologies and greater competition from other media increases the challenges to the Company to provide competitive offerings to retain its print and digital customer base of both advertisers and subscribers. Circulation revenues and the Company’s ability to achieve price increases for its print products may be affected by competition from other publications and other forms of media available in the Company’s various markets, declining consumer spending on discretionary items like newspapers, decreasing amounts of free time, and declining frequency of regular newspaper buying among certain demographic groups. A. H. Belo may incur higher costs competing for advertising dollars and paid circulation, and if the Company is not able to compete effectively for advertising dollars and paid circulation, revenues may decline and the Company’s financial condition and results of operations may be adversely affected.

A. H. Belo may be unsuccessful in providing the desired types of news and information content on digital platforms.

In 2011, the Company increased the functionality of the Web sites associated with its core newspapers and has offered applications for Web-enabled phones and tablet devices. These digital platforms offer consumers varying levels of access to similar content offered within the respective newspaper, as well as late-breaking local, national and international news stories, and interactive content, such as video, blogs and twitter feeds. However, the frequency, types and depth of news desired by digital users may not be predictable or consistent with the news and other content offered on the Company’s digital platforms and the costs to retain such consumers may be unprofitable to the Company’s operations.

A. H. Belo may be unable to respond to changing perceptions about the effectiveness of print advertising.

Historically, newspaper publishing has been viewed as a cost-effective method of delivery for various forms of advertising. To the extent advertisers shift expenditures to other media, the Company’s ability to provide effective low-cost advertising may suffer. Additionally, digital advertising can provide tools to measure advertising effectiveness. To the extent the Company is not able to provide comparable data to support the effectiveness of print advertising, it may be unable to compete effectively against digital advertising.

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There can be no assurance that the Company’s product initiatives will be successful.

The Company continuously identifies product initiatives to develop new markets and to respond to challenges of maintaining sustainable revenues in existing markets. These initiatives may not be accepted by consumers and could result in unprofitable financial performance.

The economic slowdown experienced in the United States and national and worldwide financial instability, may continue to adversely affect the Company’s business, financial condition and results of operations.

Advertisers generally reduce spending during economic downturns. The continued economic slowdown in the United States, particularly the downturn in the housing and employment markets as well as negative consumer sentiment, has adversely affected the Company’s advertising revenues and may continue to adversely affect its business by reducing demand for local and national advertising. The Company’s advertising revenues have declined by 19.9 percent since 2009. Advertising demand is a factor in determining advertising rates. Continued diminished demand could result in a reduction in advertising rates, leading to lower revenues and operating margins. Additionally, the Company’s advertising customers could face liquidity constraints. If such events were to occur, the Company could encounter difficulties in collecting its advertising receivables, which could increase the Company’s exposure to loss.

Decreases in circulation may adversely affect A. H. Belo’s advertising and circulation revenues.

A. H. Belo’s newspapers, and the newspaper industry as a whole, are challenged to maintain and grow print circulation. Continuing declines in circulation could affect the rate and volume of advertising revenues. To maintain the Company’s circulation base, A. H. Belo may incur additional costs and may not be able to recover these costs through circulation and advertising revenues. The Company may incur increased spending on marketing designed to retain its existing subscriber base and to continue or create niche publications targeted at specific market groups. The Company may also incur increased marketing costs to drive traffic to its Web sites and digital applications and to create consumer interest in new products.

Access to credit may be adversely affected by an uncertain outlook for the newspaper industry and instability in worldwide credit markets.

The Company operates with a $25,000 credit agreement (the “Credit Agreement”), which expires in September 2014. Although the Company did not draw on the credit facility and has no plans to draw on the credit facility during 2012, its ability to access funds under its Credit Agreement, if needed, depends on its compliance with certain financial covenants. Disruptions in the capital and credit markets, as have been experienced since mid-2008, could adversely affect the Company’s ability to draw on the credit facility under its Credit Agreement. Further, additional uncertainty in the newspaper industry may limit the Company’s ability to renew or obtain credit from other sources when the facility expires, may reduce the amount of credit available or may increase the costs associated with obtaining credit. Any disruption could require the Company to take measures to conserve cash until the markets and industry stabilizes or until alternative credit arrangements or other funding for its business needs can be arranged.

The Company’s potential inability to successfully execute cost control measures could result in total operating costs that are greater than expected.

The Company has taken steps to lower its costs by reducing staff, employee benefits, and implementing general cost control measures. Although the Company continues its cost control efforts, if revenues continue to decline, the ability to reduce costs to match revenue declines could be limited. If the Company does not achieve expected savings or if operating costs increase due to the creation and development of new products or otherwise, total operating costs may be greater than anticipated.

The Company could experience inflationary pressures as suppliers increase prices after experiencing a period of price suppression and the Company may be unable to initiate price increases or additional cost reductions to offset these inflationary pressures. The Company’s inability to offset inflationary pressures could adversely affect its financial condition and results of operations.

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The basic raw material for newspapers is newsprint, the cost of which for the last three years has represented between approximately 8.1 percent and 9.3 percent of A. H. Belo’s revenues. The price of newsprint historically has been volatile. Consolidation in the North American newsprint industry has reduced the number of suppliers and has led to paper mill closures and conversions to other grades of paper, which in turn has decreased overall newsprint capacity and increased the likelihood of higher prices. A. H. Belo currently purchases most of its newsprint through a purchasing consortium. Significant increases in newsprint costs or the Company’s inability to obtain an adequate supply of newsprint in the future could adversely affect its financial condition and results of operations.

Recently enacted health care mandates may require the Company to evaluate the scope of health care benefits offered to its workforce and the method in which health care benefits are delivered. These mandates may increase the Company’s and employees’ costs due to expansion of coverage and benefits that companies may be required to offer employees and potential future increases in medical costs. Higher health care costs may reduce the Company’s earnings, resulting in (i) an inability to reinvest sufficient capital in its operations, (ii) an inability to pay dividends, and (iii) an increase in the cost of capital, all of which could have a negative effect on the Company’s stock price.

The Company believes that appropriate steps are being taken to control costs. However, if costs are not managed properly, such steps may affect the quality of A. H. Belo’s products, its ability to generate future revenue, and compliance with the financial covenants in the Credit Agreement.

A. H. Belo depends on key personnel and may not be able to operate and grow its business effectively if the Company loses the services of any of its senior executive officers or key operational employees or is unable to attract and retain qualified personnel in the future.

A. H. Belo relies on the efforts of its senior executive officers and other management. The success of the Company’s business depends heavily on its ability to retain current management and to attract and retain qualified personnel in the future. Competition for senior management personnel is intense and A. H. Belo may not be able to retain its key personnel. In addition, reductions in staff and in employee benefits could adversely affect the Company’s ability to attract and retain key employees. The Company has not entered into employment agreements with key management personnel and does not have “key person” insurance for any of its senior executive officers or other key personnel. A. H. Belo has a change in control severance plan covering key management personnel that is triggered under certain conditions if a change in control occurs.

A. H. Belo’s business may be negatively affected by work stoppages, slowdowns, or strikes by its employees.

Currently, one of A. H. Belo’s primary newspapers, The Providence Journal, is party to collective bargaining agreements with unions representing approximately 330 of its 468 employees. These agreements expire in 2012 and 2013, unless extended. A. H. Belo cannot predict the results of negotiations related to future collective bargaining agreements, whether future collective bargaining agreements will be negotiated without interruptions in the Company’s business, or the possible effect of future collective bargaining agreements on the Company’s business, financial condition, and results of operations. The Company also cannot assume that strikes or work stoppages will not occur in the future in connection with labor negotiations or otherwise. Any prolonged strike or work stoppage could adversely affect the Company’s business, financial condition, and results of operations.

Market conditions could increase the funding requirements associated with the Company’s pension plans.

On January 1, 2011, two new pension plans, A. H. Belo Pension Plans I and II (collectively, the “A. H. Belo Pension Plans”), were established to assume the assets and liabilities transferred from The G. B. Dealey Retirement Pension Plan (the “GBD Pension Plan”) associated with current and former employees of the Company. The Company, as sole sponsor of the A. H. Belo Pension Plans, must meet certain pension funding requirements established by law. Instability in global and domestic capital markets may result in low returns on the assets contributed to the A. H. Belo Pension Plans. Additionally, low yields on corporate bonds may decrease the discount rate, resulting in a higher calculated pension liability. These conditions could materially increase the funding requirements associated with the A. H. Belo Pension Plans, which could have an adverse impact on the Company’s liquidity and financial condition.

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Adverse results from pending or new litigation or governmental proceedings or investigations could adversely affect A. H. Belo’s financial condition and results of operations.

From time to time, A. H. Belo and its subsidiaries are subject to litigation, governmental proceedings, and investigations. Current matters include those described under “Item 3. Legal Proceedings.” Adverse determinations in any of these pending or future matters could require A. H. Belo to make monetary payments or result in other sanctions or findings that could affect adversely the Company’s business, financial condition, and results of operations.

A. H. Belo’s directors and executive officers have significant combined voting power and significant influence over its management and affairs.

A. H. Belo directors and executive officers hold approximately 54 percent of the voting power of the Company’s outstanding voting stock as of December 31, 2011. A. H. Belo’s Series A common stock has one vote per share and Series B common stock has 10 votes per share. Except for certain extraordinary corporate transactions, generally all matters to be voted on by A. H. Belo’s shareholders must be approved by a majority of the voting power of the Company’s outstanding voting stock, voting as a single class. Certain extraordinary corporate transactions, such as a merger, consolidation, sale of all or substantially all of the Company’s assets, or a dissolution, the alteration, amendment, or repeal of A. H. Belo’s bylaws by shareholders, and certain amendments to A. H. Belo’s certificate of incorporation, require the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding voting stock, voting as a single class. Accordingly, A. H. Belo’s directors and executive officers will have significant influence over the Company’s management and affairs and over all matters requiring shareholder approval, including the election of directors and significant corporate transactions. This ownership may limit other shareholders’ ability to influence corporate matters and, as a result, A. H. Belo may take actions that some shareholders do not view as beneficial.

Certain members of management, directors, and shareholders may face actual or potential conflicts of interest.

A. H. Belo and Belo have two directors in common. Robert W. Decherd serves as the Non-Executive Chairman of the Board of Belo and as Chairman of the Board, President and Chief Executive Officer of A. H. Belo. Mr. Decherd and Dealey D. Herndon, his sister, serve as directors of A. H. Belo and Belo. James M. Moroney III, Executive Vice President of A. H. Belo and the Publisher and Chief Executive Officer of The Dallas Morning News, is their second cousin. Mr. Moroney also serves as a director of Belo. In addition, the management and directors of both companies own common stock in both companies. This ownership overlap and these common directors could create, or appear to create, potential conflicts of interest when A. H. Belo’s and Belo’s management and directors face decisions that could have different implications for A. H. Belo and Belo. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between A. H. Belo and Belo regarding the terms of the agreements governing the Distribution and the relationship between, as well as other agreements between, A. H. Belo and Belo.

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None.

The table below sets forth the principal operations and other significant physical properties of the Company:

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. On March 28, 2011, the Court granted defendants summary judgment and dismissed all claims. Plaintiffs moved for reconsideration, which motion was denied by the United States Magistrate. On July 15, 2011, the plaintiffs appealed the decision to the United States Court of Appeals for the Fifth Circuit. The Company believes the lawsuit is without merit and is vigorously defending against it.

In addition to the proceeding described above, a number of other legal proceedings are pending against A. H. Belo. 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.

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PART II

The Company’s authorized common equity consists of 125,000,000 shares of common stock, par value $.01 per share. The Company has two series of common stock outstanding, Series A and Series B. Shares of the two series are identical in all respects except as noted herein. Series B shares are entitled to 10 votes per share on all matters submitted to a vote of shareholders; Series A shares are entitled to one vote per share. Transferability of the Series B shares is limited to family members and affiliated entities of the holder and Series B shares are convertible at any time on a one-for-one basis into Series A shares, and upon a transfer other than as described above, Series B shares automatically convert into Series A shares. Shares of the Company’s Series A common stock are traded on the New York Stock Exchange (NYSE trading symbol: AHC), and began trading on February 11, 2008. There is no established public trading market for shares of Series B common stock.

The table below sets forth the high and low sales prices reported on the New York Stock Exchange for a share of the Company’s common stock and the quarterly cash dividends per share declared for the past two years.

The closing price of the Company’s Series A common stock as reported on the New York Stock Exchange on March 6, 2012 was $4.56. The approximate number of shareholders of record of the Company’s Series A and Series B common stock at the close of business on March 6, 2012 was 511 and 223, respectively.

The declaration and payment of dividends is subject to the discretion of A. H. Belo’s Board of Directors, and any determination as to the payment of such dividends, as well as the amount and timing of such dividends, will depend on, among other things, A. H. Belo’s results of operations and financial condition, earnings, capital requirements, debt covenants, other contractual restrictions, prospects, applicable law, general economic and business conditions, and other future factors that A. H. Belo’s Board deems relevant. If borrowings are outstanding against the Company’s Credit Agreement, the payment of dividends is allowed when the Company’s fixed charge coverage ratio is equal to or exceeds 1:1 and the borrowing availability at the time of, and after giving effect to, such dividends is equal to or greater than $12,500. A. H. Belo cannot provide any assurance that any dividends will be declared and paid due to the foregoing factors and the factors discussed in “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.

On March 2, 2012, the Company paid the dividend declared in the fourth quarter of 2011, and on March 8, 2012, the Company declared a dividend of $0.06 per share on outstanding Series A and Series B common stock and to holders of outstanding restricted stock units (“RSU”), to be paid on June 1, 2012 to shareholders of record on May 11, 2012.

Equity Compensation Plan Information

The information set forth under the heading “Equity Compensation Plan Information” contained in the definitive Proxy Statement for the Company’s Annual Meeting of Shareholders, to be held on May 17, 2012, is incorporated herein by reference.

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Issuer Purchases of Equity Securities

The Company did not repurchase any Series A or Series B common stock during the quarter ended December 31, 2011.

Sales of Unregistered Securities

During 2011, 2010 and 2009, shares of the Company’s Series B common stock in the amounts of 30,057, 207,806 and 260,826, respectively, were converted, on a one-for-one basis, into shares of Series A common stock. The Company did not register the issuance of these securities under the Securities Act of 1933 (the “Securities Act”) in reliance upon the exemption under Section 3(a)(9) of the Securities Act.

Performance Graph

The following graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

The graph below compares the annual cumulative shareholder return on an investment of $100 on February 11, 2008, with a closing price of $14.40 per share, in A. H. Belo’s Series A common stock, based on the market price of the Series A common stock and assuming reinvestment of dividends, with the cumulative total return, assuming reinvestment of dividends, of a similar investment in (1) companies on the Standard & Poor’s 500 Stock Index, and (2) the 2011 group of peer companies selected on a line-of-business basis and weighted for market capitalization. The Company’s peer group includes the following companies: Gannett Co., Inc., The E. W. Scripps Company, Journal Communications, Lee Enterprises, Inc., The McClatchy Company, Media General, Inc. and The New York Times Company. A. H. Belo is not included in the calculation of peer group cumulative total shareholder return on investment.

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The table below sets forth selected financial data of the Company for each of the years 2007 through 2011. For a more complete understanding of this selected financial data, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and accompanying Notes.

Other income and expense includes $2,983 and $34,834 for 2008 and 2007, respectively, for interest on intercompany notes payable to Belo. On February 8, 2008, in connection with the Distribution, Belo contributed to the capital of A. H. Belo and its subsidiaries the net intercompany indebtedness owed to Belo by the Company and its subsidiaries. This transaction effectively settled the notes payable balances. Amounts presented prior to the Distribution reflect the direct operating expenses of the businesses with allocation of certain Belo corporate expenses for services provided by Belo. The Company believes the allocation methods to be reasonable.

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Forward-Looking Statements

The following information should be read in conjunction with the other sections of this Annual Report on Form 10-K. Statements in this Annual Report on Form 10-K concerning A. H. Belo’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, impairments, business initiatives, pension plan contributions and obligations, real estate sales, 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, 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 in a timely manner, and the resulting potential effect on operations; technological changes; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; consumer acceptance of new products and business initiatives; 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 and co-owned ventures and investments; returns and discount rates on pension plan assets; general economic conditions; significant armed conflict; and other factors beyond our control, as well as other risks described elsewhere in this Annual Report on Form 10-K and in the Company’s other public disclosures and filings with the Securities and Exchange Commission.

All references to earnings per share represent diluted earnings per share.

Unless the context requires otherwise, all dollar amounts are in thousands, except per share amounts.

OVERVIEW

A. H. Belo Corporation

A. H. Belo, headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that owns and operates four metropolitan daily newspapers and several associated Web sites, with publishing roots that trace to The Galveston Daily News, which began publication in 1842. A. H. Belo publishes The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.providencejournal.com), the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; The Press-Enterprise (www.pe.com) (Riverside, California), serving the Inland Southern California region and winner of one Pulitzer Prize; and The Denton Record-Chronicle (www.dentonrc.com), a daily newspaper operating in Denton, Texas, approximately 40 miles north of Dallas. The Company publishes various niche publications targeting specific audiences, and its investments and/or partnerships include Classified Ventures, LLC, owner of cars.com, and the Yahoo! Newspaper Consortium. A. H. Belo also owns and operates commercial printing, distribution and direct mail service businesses.

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

Basis of Presentation

The consolidated financial statements in this Annual Report on Form 10-K include the accounts of A. H. Belo and its wholly-owned subsidiaries after elimination of all significant intercompany accounts and transactions.

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Overview of 2011 Significant Transactions

The following represent significant transactions and events affecting A. H. Belo’s results of operations and financial position during 2011:

RESULTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

Consolidated Results of Operations

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The table below sets forth the components of A. H. Belo’s net operating revenues for the last three years:

In 2011, 2010 and 2009, the Company’s advertising revenues were adversely affected by competitive and economic pressures. Advertisers tend to reduce advertising budgets more than other expenses in times of economic uncertainty or recession. The continuing economic sluggishness and the shift of advertising expenditures to other forms of media adversely affected advertising demand and the Company’s business, financial condition and results of operations. In order to reduce its reliance on advertising revenue, the Company has implemented circulation pricing strategies and aggressively expanded its printing and distribution operations. As a result of these economic, secular and strategic factors, advertising revenues as a percent of A. H. Belo’s total revenue have steadily declined from approximately 68.0 percent in 2009 to 61.2 percent in 2011. The Company expects newspaper advertising revenues will continue to decrease in 2012, although at a lower rate of decline.

In response to the declines in advertising revenues, the Company has implemented several new product initiatives to increase other sources of revenue, including circulation revenues. The Company’s consumer revenue strategies, based on superior unduplicated local content and active customer engagement, have allowed the Company to raise circulation rates resulting in increasing revenue from a smaller subscriber base. In 2011 and 2010, circulation revenues increased, although daily circulation volumes decreased 12.0 percent and 1.9 percent, respectively, and Sunday volumes decreased 19.5 percent and 8.5 percent, respectively. The Company is proactively positioning its newspapers as a premium product, offering relevant and differentiated local content, and has therefore increased subscription prices in each of its markets. In 2012 and the foreseeable future, the Company intends to maintain its strategy of requiring subscribers to bear an appropriate share of the cost of the news and information product.

Commercial printing, distribution and direct mail services substantially comprised the remainder of the Company’s revenues. Printing and distribution revenues increased 2011 and 2010 when compared to the prior period due to new printing and distribution contracts.

The table below sets forth the net operating revenues of A. H. Belo’s three daily newspapers for the last three years:

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The table below sets forth the components of The Dallas Morning News net operating revenue for the last three years:

Display advertising revenues decreased in 2011 and 2010 due to lower revenue from retail and general advertising. Retail advertising volumes grew in 2011 and 2010, while general advertising volumes were down in 2011 and up in 2010. Rates for display advertising were flat in 2011 compared to 2010.

Classified advertising revenues decreased in 2011 and 2010. These declines are attributable to lower volumes in 2011 and 2010 and a lower average rate charged to classified customers in 2011. The lower volumes are primarily a result of lower automotive and general advertisements within classified advertising. Although published advertising rates have remained stable in 2011 and 2010, The Dallas Morning News has discounted its classified advertisements to attract more revenue and compete for classified advertisements against other media.

Preprint advertising revenues decreased in 2011 and in 2010. Revenues from preprint newspaper inserts decreased in 2011 and increased in 2010, and preprint mail advertisements decreased in both 2011 and 2010. The decline in preprint advertisements is consistent with the declines in circulation volumes for inserts and increased competition for advertising dollars for mail advertisements.

Digital advertising revenues decreased slightly in 2011 and 2010 due to reduced volumes in banner advertising, offset by higher auto and real estate classified advertising. In 2010, digital advertising revenues decreased due to lower classified employment and banner advertising.

The Dallas Morning News continues to extend the reach of its niche publications, including Briefing and Al Dia, in order to expand its advertising platform to nonsubscribers of The Dallas Morning News’ core newspaper. In 2011 and 2010, the advertising revenues for The Dallas Morning News’ niche publications were $23,764 and $23,363, respectively. These revenues are a component of total display, classified, preprint and digital revenues of The Dallas Morning News discussed above.

Circulation revenues were flat in 2011 as the Company was successful in stabilizing circulation volumes. In 2011 and 2010, home delivery revenue increased, but was partially offset by a decrease in single copy revenue. The 2010 circulation revenues grew as a result of 2009 price increases being effective for a full year.

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The table below sets forth the components of The Providence Journal net operating revenues for the last three years:

Display advertising decreased in 2011 as a result of declines in retail advertising, and in 2010, as a result of declines in retail advertising, partially offset by growth in general advertising.

Classified advertising revenues grew in 2011 due to increases in automotive, partially offset by decreases in real estate and employment, and decreased in 2010 due to declines in general and real estate, partially offset by growth in automotive.

Preprint advertising revenues decreased in 2011 and 2010 due to a reduction in preprint insert volume, partially offset in 2011 by growth in preprinted mail advertising.

Digital advertising revenues decreased slightly in 2011 and 2010 due to reduced volumes in classified employment, legal, obituaries and in banner advertising.

Circulation revenues decreased in 2011 in both home delivery and single copy due to declines in volumes. These declines were offset by $1,065 of additional revenue resulting from The Providence Journal transitioning from a carrier buy-sell circulation model to a distributer fee-for-service circulation model at the end of 2011. Circulation revenues grew in 2010 as rate increases in 2010 more than offset circulation home delivery volume declines. Single copy revenue was relatively flat as volumes and prices stabilized.

Printing and distribution revenues grew in 2011 due to The Providence Journal’s expansion of its home delivery and single copy sales of an outside publication which was added in 2010. Additionally in 2010, a major commercial printing customer was added.

The table below sets forth the components of The Press-Enterprise net operating revenues for the last three years: