DallasNews Corp - Quarter Report: 2011 September (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.

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 preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ 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):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(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 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 October 31, 2011
Common Stock, $.01 par value		21,539,753

 

 

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			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk			24
Item 4. Controls and Procedures			24
PART II OTHER INFORMATION
Item 1. Legal Proceedings			25
Item 1A. Risk Factors			25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3. Defaults Upon Senior Securities			25
Item 4. Removed and Reserved			25
Item 5. Other Information			25
Item 6. Exhibits			26
Signatures			29
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

A. H. Belo Corporation and Subsidiaries

		Three Months Ended September 30,								Nine Months Ended September 30,
In thousands, except per share amounts (unaudited)		2011				2010				2011				2010
Net Operating Revenues
Advertising		$	65,229			$	74,388			$	203,034			$	223,578
Circulation			34,749				34,927				104,699				105,970
Printing and distribution			10,012				9,817				28,918				26,914
Total net operating revenues			109,990				119,132				336,651				356,462
Operating Costs and Expenses
Salaries, wages and employee benefits			44,958				49,322				143,552				162,394
Other production, distribution and operating costs			41,996				43,280				130,875				136,341
Newsprint, ink and other supplies			14,618				13,280				44,192				36,994
Depreciation			7,386				7,496				23,225				25,101
Amortization			1,310				1,310				3,930				3,930
Asset impairments			—				857				—				862
Pension plan withdrawal			—				—				1,988				—
Total operating costs and expenses			110,268				115,545				347,762				365,622
(Loss) income from operations			(278	)			3,587				(11,111	)			(9,160	)
Other Income (Expense), Net
Interest expense			(132	)			(199	)			(510	)			(605	)
Other income, net			764				1,805				2,475				7,798
Total other income (expense), net			632				1,606				1,965				7,193
Income (loss) before income taxes			354				5,193				(9,146	)			(1,967	)
Income tax expense			489				621				4,538				2,760
Net (loss) income		$	(135	)		$	4,572			$	(13,684	)		$	(4,727	)
Net (loss) income per share:
Basic		$	(0.01	)		$	0.21			$	(0.64	)		$	(0.23	)
Diluted		$	(0.01	)		$	0.20			$	(0.64	)		$	(0.23	)
Weighted average shares outstanding:
Basic			21,534				22,127				21,477				20,935
Diluted			21,534				22,391				21,477				20,935

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

A. H. Belo Corporation and Subsidiaries

In thousands, except share amounts (unaudited)		September 30, 2011				December 31, 2010
Assets
Current assets:
Cash and cash equivalents		$	45,687			$	86,291
Accounts receivable (net of allowance of $2,998 and $3,853 at September 30, 2011 and December 31, 2010, respectively)			40,107				56,793
Funds held by Belo Corp. for future pension payments			—				3,410
Inventories			10,865				12,646
Deferred income taxes, net			1,386				1,394
Assets held for sale			3,282				5,268
Prepaids and other current assets			7,638				7,157
Total current assets			108,965				172,959
Property, plant and equipment at cost:
Land			29,335				26,789
Buildings and improvements			208,292				207,486
Publishing equipment			277,778				281,254
Other			140,161				139,580
Construction in process			6,654				5,520
Total property, plant and equipment			662,220				660,629
Less accumulated depreciation			498,754				483,953
Property, plant and equipment, net			163,466				176,676
Intangible assets, net			18,259				22,189
Goodwill			24,582				24,582
Investments			18,408				16,661
Deferred income taxes, net			1,722				2,127
Other assets			4,598				4,855
Total assets		$	340,000			$	420,049

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

A. H. Belo Corporation and Subsidiaries

In thousands, except share amounts (unaudited)		September 30, 2011				December 31, 2010
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	12,883			$	29,159
Accrued compensation and benefits			16,842				17,139
Pension liabilities			—				54,833
Other accrued expenses			13,591				10,309
Advance subscription payments			23,952				23,057
Total current liabilities			67,268				134,497
Long-term pension liabilities			80,796				77,513
Other post-employment benefits			3,283				3,492
Other liabilities			3,638				4,674
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 19,176,656 and 18,896,876 shares at September 30, 2011 and December 31, 2010, respectively			191				188
Series B: issued 2,363,097 and 2,392,074 shares at September 30, 2011 and December 31, 2010, respectively			24				24
Additional paid-in capital			493,538				491,542
Accumulated other comprehensive income			2,100				2,569
Accumulated deficit			(310,838	)			(294,450	)
Total shareholders’ equity			185,015				199,873
Total liabilities and shareholders’ equity		$	340,000			$	420,049

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

A. H. Belo Corporation and Subsidiaries

In thousands, except share amounts (unaudited)

																		Accumulated
		Common Stock												Additional				Other
		Series A				Series B								Paid-in				Comprehensive				Accumulated
		Shares				Shares				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
Net loss			—				—				—				—				—				(4,727	)			(4,727	)
Other comprehensive loss:
Other post-employment benefits, net of tax			—				—				—				—				(608	)			—				(608	)
Total comprehensive loss			—				—				—				—				—				—				(5,335	)
Issuance of shares for restricted stock units			72,848				—				1				18				—				—				19
Issuance of shares from stock option exercises			224,258				44,290				2				951				—				—				953
Income tax on options			—				—				—				(41	)			—				—				(41	)
Conversion of Series B to Series A			31,944				(31,944	)			—				—				—				—				—
Share-based compensation			—				—				—				1,668				—				—				1,668
Balance at September 30, 2010			18,578,020				2,519,936			$	210			$	490,837			$	2,756			$	(174,942	)		$	318,861
Balance at December 31, 2010			18,896,876				2,392,074			$	212			$	491,542			$	2,569			$	(294,450	)		$	199,873
Net loss			—				—				—				—				—				(13,684	)			(13,684	)
Other comprehensive loss:
Other post-employment benefits, net of tax			—				—				—				—				(469	)			—				(469	)
Total comprehensive loss			—				—				—				—				—				—				(14,153	)
Issuance of shares for restricted stock units			244,803				—				3				(3	)			—				—				—
Issuance of shares from stock option exercises			6,000				—				—				12				—				—				12
Income tax on options			—				—				—				(27	)			—				—				(27	)
Conversion of Series B to Series A			28,977				(28,977	)			—				—				—				—				—
Share-based compensation			—				—				—				2,014				—				—				2,014
Dividends			—				—				—				—				—				(2,704	)			(2,704	)
Balance at September 30, 2011			19,176,656				2,363,097			$	215			$	493,538			$	2,100			$	(310,838	)		$	185,015

See accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

A. H. Belo Corporation and Subsidiaries

		Nine Months Ended September 30,
In thousands (unaudited)		2011				2010
Operations
Net loss		$	(13,684	)		$	(4,727	)
Adjustments to reconcile net loss to net cash (used in) provided by operations:
Depreciation and amortization			27,155				29,031
(Gain)/loss on disposal of fixed assets			359				(6,213	)
Gain on recovery of investment			(729	)			—
Asset impairment			—				862
Earnings on equity method investments			(1,746	)			—
Deferred income taxes			377				902
Pension plan withdrawal			1,988				—
Employee retirement benefit amortization			(469	)			98
Share-based compensation			2,014				2,336
Other non-cash items			381				(2,763	)
Assets acquired and held for sale			(3,096	)			—
Net changes in operating assets and liabilities:
Accounts receivable, net			16,686				18,885
Funds held by Belo for future pension contributions			3,410				8,568
Inventories			1,576				623
Assets held for sale			744				374
Prepaids and other current assets			(481	)			726
Other, net			266				(457	)
Accounts payable			(16,276	)			11,514
Accrued compensation, benefits and other			(1,338	)			—
Pension liabilities			(53,538	)			—
Other accrued expenses			3,282				(3,073	)
Advance subscription payments			895				(2,899	)
Other post employment benefits			(209	)			—
Net cash (used in) provided by operations			(32,433	)			53,787
Investments
Capital expenditures			(6,077	)			(6,479	)
Proceeds on the recovery of an impaired investment			729				—
Proceeds from sale of fixed assets			38				9,728
Investments in partnerships			(169	)			—
Other, net			—				(1,167	)
Net cash (used for) provided by investments			(5,479	)			2,082
Financing
Dividends and distributions			(2,704	)			—
Proceeds from exercise of stock options			12				932
Cash (used in) provided by financing activities			(2,692	)			932
Net (decrease) increase in cash and cash equivalents			(40,604	)			56,801
Cash and cash equivalents at beginning of period			86,291				24,503
Cash and cash equivalents at end of period		$	45,687			$	81,304
Supplemental Disclosures
Interest paid		$	194			$	—
Income taxes paid, net of refunds		$	1,019			$	2,400

See accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. H. Belo Corporation and Subsidiaries

(Unless otherwise stated, dollars in thousands, except share and per share amounts)

Note 1: Summary of Significant Accounting Policies

     Description of Business. 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 daily newspapers and several associated Web sites. A. H. Belo publishes The Dallas Morning News (www. dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www. projo.com), the oldest continuously-published daily newspaper in the U.S. and winner of four Pulitzer Prizes; The Press-Enterprise (www.pe.com) (Riverside, CA), serving the Inland Southern California region and winner of one Pulitzer Prize; and the Denton Record-Chronicle (www.dentonrc.com). The Company publishes various specialty publications targeting niche audiences, and its partnerships and/or investments include the Yahoo! Newspaper Consortium and Classified Ventures, LLC, owner of www.cars.com. A. H. Belo also owns and operates commercial printing, distribution and direct mail businesses.

     A. H. Belo Corporation was incorporated under Delaware law on October 1, 2007, as a wholly-owned subsidiary of Belo Corp. (“Belo”), to serve as a holding company in connection with Belo’s spin-off of its newspaper business and related assets and liabilities. The Company spun off from Belo effective February 8, 2008 through a pro-rata stock dividend to Belo shareholders (the “Distribution”). As a result, A. H. Belo became a separate public company on that date. Following the Distribution, Belo does not have any ownership interest in A. H. Belo, but continues to conduct limited business with A. H. Belo pursuant to various agreements. A. H. Belo and Belo also co-own certain downtown Dallas real estate and several investments associated with their respective businesses.

     Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of A. H. Belo and its subsidiaries have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and in accordance with the Securities and Exchange Commission’s 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 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, 2010. Operating results for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. 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.

     Balances previously referred to as Advanced Payments on Property Plant and Equipment are now referred to as Construction in Process.

     Pension Plans. Through December 31, 2010, certain employees and retirees of the Company participated in The G. B. Dealey Retirement Pension Plan (“GBD Pension Plan”), sponsored by Belo. The Company accounted for its pension obligations pursuant to accounting guidance for multiemployer pension plans. Accordingly, the Company recognized as net pension cost the required contribution for each period and recognized as a liability any unpaid reimbursement obligation to Belo, as sponsor. On October 6, 2010, the Company and Belo entered into a Pension Plan Transfer Agreement (the “Transfer Agreement”), agreeing to split the GBD Pension Plan. Under the Transfer Agreement, the GBD Pension Plan assets and liabilities related to current and former Company employees were transferred into two newly established pension plans, sponsored solely by the Company, effective January 1, 2011, having similar terms to the GBD Pension Plan. Accordingly, in the fourth quarter of 2010, the Company recognized a loss for the unfunded projected benefit obligation transferred to the new pension plans, as the liability was probable and could be estimated. In 2011, the Company follows accounting guidance for single employer defined benefit plans. Plan assets and the projected benefit obligation are measured each December 31, and the Company records as an asset or liability the net funded position of the plans. Certain changes in actuarial valuations related to returns on plan assets and projected benefit obligations are recorded to other comprehensive income and recognized into earnings over future periods.

Net periodic pension expense is recognized each period by accruing interest expense and the return on assets associated with the projected benefit obligation and the plan assets, respectively. As of the effective date of the new pension plans, benefits to participants remained frozen and accordingly, the Company does not recognize on-going service costs as a component of its net periodic pension expense, Additionally, the unfunded projected benefit obligation was recognized in the fourth quarter of 2010 and other comprehensive loss does not include any prior service costs.

     New Accounting Standards. In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04—Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU No. 2011-04 provides clarity to the fair value definition in order to achieve greater consistency in fair value measurements and disclosures between U.S. GAAP and IFRS. Additional disclosures are required regarding transfers of assets between Level 1 and 2 of the fair value hierarchy and regarding sensitivity of fair values for Level 3 assets. The effective date of this amendment is for fiscal periods beginning after December 15, 2011. The adoption of this amendment is not anticipated to have a material effect on the Company’s financial condition, results of operations or its liquidity.

     In June 2011, the FASB issued ASU No. 2011-05—Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to increase the prominence of other comprehensive income in financial statements. ASU No. 2011-05 gives businesses two options for presenting other comprehensive income. A statement of other comprehensive income can be included with the statement of operations, which together will make a statement of total comprehensive income. Alternatively, businesses can present a statement of comprehensive income separate from a statement of operations, but the two statements will be required to appear consecutively within a financial report. The effective date of this amendment is for fiscal periods beginning after December 15, 2011. The Company is currently evaluating its presentation options. The adoption of this amendment will not effect on the Company’s financial condition, results of operations or its liquidity.

     In September 2011, the FASB issued ASU No. 2011-08 —Intangibles — Goodwill and Other (Topic 350); Testing Goodwill for Impairment. The purpose of this amendment is to simplify how entities, both public and nonpublic test goodwill for impairment. ASU No. 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption allowed. The adoption of this amendment is not anticipated to have a material effect on the Company’s financial condition, results of operations or its liquidity.

     In September 2011, the FASB issued ASU No. 2011-09 — Compensation — Retirement Benefits - Multiemployer Plans (Subtopic 715-80); Disclosures about an Employer’s Participation in a Multiemployer Plan. The purpose of this amendment is to require employers to provide additional disclosures for multiemployer pension plans and multiemployer other postretirement benefit plans. For public entities, the amendments in this update are effective for annual periods for fiscal years ending after December 15, 2011. The amendment will be applied retrospectively for all prior periods presented. The adoption of this amendment will require additional disclosures by the Company for 2010 and 2009, due to the Company’s obligation to Belo related to the GBD Pension Plan through December 31, 2010.

Note 2: Changes in Accounting Estimates

     In the second quarter of 2011, the Company fully depreciated certain property, plant and equipment that was determined to no longer have a remaining useful life. Accordingly, the Company recorded additional depreciation expense of $1,017 in the nine months ended September 30, 2011. The Company also revised its estimate of the unfunded projected benefit obligation it has assumed in connection with the withdrawal from the GBD Pension Plan during the second quarter of 2011. See Note 5 — Pension and Other Retirement Plans for the changes in this estimate.

Note 3: Exit and Disposal Liabilities

     In the second and third quarters of 2011 the Company began staffing reductions which are scheduled to occur through the fourth quarter of 2011, resulting in the elimination of approximately 230 positions. The Company estimates severance and employee-related costs associated with these staffing reductions to be approximately $2,108, of which $1,149 and $2,011, respectively, were recorded as a charge to salaries, wages and employee benefits, in the three and nine months ended September 30, 2011, respectively. Payments

against this liability for the three and nine months ended September 30, 2011 totaled $1,281 and $1,581, respectively, resulting in recorded liability of $430 as of September 30, 2011.

Note 4: Long-term Incentive Plans

     On February 8, 2008, A. H. Belo established a long-term incentive plan under which eight million common shares were authorized for equity-based awards. On the date of Distribution, awards under the plan were granted to holders of Belo stock options and restricted stock units (“RSUs”) in connection with the Distribution. Subsequent awards may be granted to A. H. Belo employees and outside directors in the form of non-qualified stock options, incentive stock options, restricted shares, RSUs, performance shares, performance units or stock appreciation rights.

     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 nine months ended September 30, 2011:

						Weighted-
						Average
		Number of				Exercise
		Options				Price
Oustanding at December 31, 2010			2,191,736			$	16.77
Granted			—				—
Exercised			(6,000	)		$	2.05
Canceled			(75,486	)		$	19.17
Outstanding at September 30, 2011			2,110,250			$	16.73
Vested and exercisable at September 30, 2011			1,911,050			$	18.26

     A. H. Belo RSU Activity

     Under A. H. Belo’s long-term incentive plan, the Board of Directors has awarded RSUs that vest over a period of one to three years. Upon vesting, the RSUs will be redeemed 60 percent in A. H. Belo Series A common stock and 40 percent in cash. A liability is recorded for the portion of the RSUs to be redeemed in cash and is adjusted each period based on the market value of the Company’s common stock. As of September 30, 2011, the liability for the cash portion of the redemption was $1,260. During the vesting period, holders of service-based RSUs participate in A. H. Belo declared dividends by receiving payments for dividend equivalents. The RSUs do not have voting rights. The following table summarizes the RSU activity under A. H. Belo’s long-term incentive plan for the nine months ended September 30, 2011:

						Issuance
						of				RSUs				Cash Payments at				Weighted- Average
		Total				Common				Redeemed in				Closing Price of				Price on Date of
		RSUs				Stock				Cash				Stock ($000)				Grant
Non-vested at December 31, 2010			1,018,452															$	6.36
Granted			425,710															$	7.58
Vested			(408,039	)			244,803				163,236			$	1,242			$	8.47
Canceled			(8,078	)														$	6.19
Non-vested at September 30, 2011			1,028,045															$	6.03

Long-term incentive plan expense (benefit) for the three and nine months ended September 30, 2011 and 2010 consists of the following:

						A. H. Belo																Belo Corp.				Total
						Equity Awards												Cash Awards				Equity				Incentive
						Options				RSUs				Total				for RSUs				Awards				Awards
Three months ended September 30,
			2011			$	49			$	405			$	453			$	(814	)		$	—			$	(361	)
			2010			$	75			$	305			$	380			$	354			$	119			$	854
Nine months ended September 30,
			2011			$	162			$	1,852			$	2,014			$	(386	)		$	131			$	(1,759	)
			2010			$	75			$	1,593			$	1,668			$	1,597			$	50			$	3,315

     In the first quarter of 2011, all pre-Distribution options and RSUs issued by Belo Corp. to Company employees were fully vested and the Company no longer recognizes expense for these awards.

Note 5: Pension and Other Retirement Plans

     On October 6, 2010, the Company and Belo Corp. entered into the Transfer Agreement whereby the Company and Belo agreed to split the assets and liabilities of the GBD Pension Plan, allowing the Company to establish separate pension plans and serve as sponsor of these plans. On January 1, 2011, the Company established the A. H. Belo Pension Plans I and II (collectively the “A. H. Belo Pension Plans”) which consist of the transferred assets and obligations associated with current and former employees of the Company that participated in the GBD Pension Plan. A. H. Belo Pension Plan I provides benefits to certain employees primarily employed with The Dallas Morning News or the A. H. Belo corporate offices. A. H. Belo Pension Plan II provides benefits to certain employees at The Providence Journal. In the second quarter of 2011, the Company and Belo completed the allocation of the GBD Pension Plan assets and liabilities outstanding as of December 31, 2010. The A. H. Belo Pension Plans were allocated $238,327 of plan assets and $363,928 of projected benefit obligations. The net unfunded obligation, in addition to $8,733 of contributions the Company was required to make to the GBD Pension Plan as a result of the Transfer Agreement, resulted in a loss on withdrawal from the GBD Pension Plan of $134,334. The Company recognized $132,346 of this loss in the fourth quarter of 2010 based on preliminary actuarial estimates, and the remaining $1,988 loss was recognized in the second quarter of 2011. No additional benefits are accruing under the A. H. Belo Pension Plans, as future benefits were frozen prior to the plans’ effective date. In January 2011, the A. H. Belo Pension Plans received $215,235 of the estimated assets to be transferred from the GBD Pension Plan and the remaining $23,092 was received in the second quarter of 2011.

     During January 2011, the Company contributed $8,733 to the GBD Pension Plan to settle required contributions associated with the Transfer Agreement, of which $3,410 of this payment came from A. H. Belo funds held by Belo for future pension contributions. In the first quarter of 2011, the Company made a discretionary contribution of $30,000 to the A. H. Belo Pension Plans. Required contributions of $5,896 were made in the second quarter of 2011 and contributions of $10,409 were made in the third quarter of 2011, meeting remaining contribution requirements through December 31, 2011.

     The Company has estimated net periodic pension expense for 2011 based on the plan assets and estimated projected pension obligations assumed by the A. H. Belo Pension Plans. The Company assumes a 6.5 percent long-term return on the plans’ assets. Investment strategies for plans’ assets are based upon factors such as the remaining life expectancy of participants and market risks. As of December 31, 2010, the Company targeted between 60 to 70 percent of the plans’ assets during 2011 to be invested in equity securities and the remaining 30 to 40 percent to be invested in fixed income securities. Projected benefit obligations for the plans are estimated based on the Citigroup Pension Yield Curve, which produced a composite discount rate of 5.3 percent, as of December 31, 2010. Components of net periodic pension expense for the three and nine months ended September 30, 2011 were as follows:

		Three Months				Nine Months
		Ended				Ended
		September 30, 2011				September 30, 2011
Interest costs		$	4,675			$	14,025
Return on plan assets (estimated)			(4,175	)			(12,525	)
Net expense		$	500			$	1,500

     In 2010, Company employees participated in the GBD Pension Plan, and the Company accounted for its pension obligations under the accounting guidance established for multiemployer plans. Pension expense recorded for the three and nine months ended September 30, 2010 was $300 and $8,572, respectively.

     Other Defined Contribution Plans. In the second quarter of 2011, the Company announced that it would provide a match of employee
401(k) contributions up to 1.5 percent of base salary occurring in the first two quarters of 2011. No match was provided in 2010. The Company recorded $840 of expense associated with its 401(k) plan for the nine months ended September 30, 2011.

     Expense associated with the A. H. Belo Pension Transition Supplement Plan and the A. H. Belo Pension Transition Supplement Restoration Plan (collectively the “Pension Transition Plans”), was $1,098 and $1,278 for the three months ended September 30, 2011 and 2010, respectively, and $3,424 and $3,835 for the nine months ended September 30, 2011 and 2010, respectively.

Note 6: Assets Held for Sale

     As a result of continued weak economic conditions, the Company has determined that it is no longer probable that it will sell within the next 12 months a 133,390 square foot warehouse facility located on 49.9 acres in south Dallas, although marketing activities continue. Accordingly, in the third quarter of 2011, the Company reclassified the $5,268 carrying value of this facility from assets held for sale to property, plant and equipment. The carrying value represents the lower of this facility’s estimated fair value or the depreciated value of these assets through September 30, 2011. Additionally, on September 18, 2011, the Company reached an agreement to sell a commercial office building in Hemet, California for $1,075. The carrying value of this asset is $886 which has been reclassified to assets held for sale from property, plant and equipment. The sale is expected to close in the fourth quarter of 2011. In the first quarter of 2011, the Company acquired the residence of a Company officer pursuant to an employment retention and relocation agreement as further described in Note 13 — Fair Value Measurements.

Note 7: Investments

     The Company owns various non-controlling interests in third party entities and records these interests under the equity or cost method of accounting. Under the equity method, the Company records its share of the investee’s earnings or losses each period. Under the cost method, the Company records earnings or losses when the amounts are realized. The following represents the non-controlling interests held by the Company:

		September 30, 2011				December 31, 2010
Equity method investments		$	17,645			$	15,899
Cost method investments			763				762
Total investments		$	18,408			$	16,661

     Investments accounted for under the equity method include the following:

	•		Belo Investment, LLC (“Belo Investment”) — A. H. Belo and Belo each own a 50 percent interest in Belo Investment. In connection with the February 2008 Distribution, Belo Investment was formed to hold certain real properties, including The Belo Building, related parking sites, and other downtown Dallas real estate. A third party real estate services firm, engaged by Belo Investment, manages The Belo Building and its other real estate holdings, and the Company and Belo equally share the operating costs associated with these properties.
	•		Classified Ventures, LLC (“Classified Ventures”) — A. H. Belo and Belo, through subsidiaries, jointly own 6.6 percent of 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 two principal online businesses Classified Ventures operates are www.cars.com and www.apartments.com.

Note 8: Goodwill and Intangible Assets

     The Company has recorded intangible assets consisting of goodwill and subscriber lists from its previous acquisitions. The carrying value of goodwill was $24,582, net of cumulative impairment losses of $439,509, as of both September 30, 2011 and December 31, 2010. The remaining goodwill is recorded at The Dallas Morning News reporting unit. The recorded value of subscriber lists, which are amortized over an 18 year period, are as follows:

		Total Subscriber				The Dallas Morning				The Providence				The Press-
		Lists				News				Journal				Enterprise
Gross balance at December 31, 2010		$	114,824			$	22,896			$	78,698			$	13,230
Accumulated amortization			(92,635	)			(22,896	)			(60,480	)			(9,259	)
Net balance at December 31, 2010		$	22,189			$	—			$	18,218			$	3,971
Gross balance at September 30, 2011		$	114,824			$	22,896			$	78,698			$	13,230
Accumulated amortization			(96,565	)			(22,896	)			(63,760	)			(9,909	)
Net balance at September 30, 2011		$	18,259			$	—			$	14,938			$	3,321

Note 9: Long-term Debt

     The Company operates with a Credit Agreement (“Credit Agreement”) that has a total commitment of $25,000. The Credit Agreement is subject to a borrowing base comprised of eligible accounts receivable and inventory, which determines the available borrowing capacity. On May 2, 2011, the Company entered into the Fifth Amendment to its Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. and Capital One, N.A. (“Fifth Amendment”). Among other matters, the Fifth Amendment to the Credit Agreement extends the maturity date of the credit facility from September 30, 2012 to September 30, 2014, allows the Company to pay annual cash dividends (subject to the fixed charge coverage ratio and $12,500 of borrowing availability if borrowings are outstanding), and removes the restrictions on capital expenditures. In addition, under this Fifth Amendment, if borrowing availability falls below $7,500, a fixed charge coverage ratio covenant of 1:1 will apply. As long as no borrowings are outstanding under the revolving credit facility, the Fifth Amendment permits the Company to make voluntary pension contributions, declare special dividends, and repurchase shares of the Company’s common stock. The Fifth Amendment also makes other amendments to the Amended and Restated Pledge and Security Agreement dated as of January 30, 2009 relating to cash management procedures for the Company’s deposit accounts.

     At September 30, 2011 and December 31, 2010, the Company had eligible collateral of $30,009 and $40,471, respectively, to secure borrowings under the Credit Agreement, resulting in a borrowing base of $25,000 for both periods. When letters of credit and other required reserves are deducted from the borrowing base, the Company had $20,015 and $19,976 of borrowing capacity available under the Credit Agreement as of September 30, 2011 and December 31, 2010, respectively. The Company had no borrowings under the revolving credit facility during 2010 or 2011.

Note 10: Contingencies

     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, 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.

Note 11: Earnings per Share

     The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share for the three and nine months ended September 30, 2011 and 2010:

		Three months ended								Nine months ended
		September 30,								September 30,
		2011				2010				2011				2010
Earnings (numerator) Net earnings		$	(135	)		$	4,572			$	(13,684	)		$	(4,727	)
Shares (denominator)
Weighted average shares outstanding (basic)			21,534				21,085				21,477				20,935
Dilutive effect of participating securities			—				1,042				—				—
Weighted shares outstanding for Basic EPS			21,534				22,127				21,477				20,935
Dilutive effect of employee stock options			—				264				—				—
Adjusted weighted average shares outstanding			21,534				22,391				21,477				20,935
Earnings per share:
Basic		$	(0.01	)		$	0.21			$	(0.64	)		$	(0.23	)
Diluted		$	(0.01	)		$	0.20			$	(0.64	)		$	(0.23	)

     Anti-dilutive stock-based awards excluded from the calculation of earnings per share included 3,138,295 options and RSUs for the three and nine months ended September 30, 2011 and 3,001,038 options and RSUs for the three and nine months ended September 30, 2010.

Note 12: Dividends

     On September 2, 2011, the Company paid a dividend of $0.06 per share on outstanding Series A and Series B common stock and to holders of outstanding RSU awards, which are considered participating securities, as of August 12, 2011. Total dividends declared and paid were $1,351 and $2,704 for the three and nine months ended September 30, 2011, respectively.

     On October 27, 2011, the Company declared a dividend of $0.06 per share on outstanding Series A and Series B common stock and to holders of outstanding RSU awards, to be paid on December 2, 2011 to shareholders of record on November 10, 2011.

Note 13: Fair Value Measurements

     On March 3, 2011, the Company purchased the personal residence of a Company officer pursuant to a retention and relocation agreement. The residence was recorded at an estimated fair value of $2,696, based on a purchase price of $3,096, net of anticipated holding and selling costs of $400. During the third quarter of 2011, the Company reassessed the holding and selling costs of the residence and recorded an additional $300 of expense. The estimated holding and selling costs were included in earnings for the nine months ended September 30, 2011.

     The following presents the assets by major category that are measured at fair value on a nonrecurring basis during the period, as required by Accounting Standards Codification No. 820, Fair Value Measurements.

						Fair Value Measurements Using
							Quoted Price in			Significant
							Active Markets			Other		Significant
							for Indentical			Observable		Unobservable
		Carrying					Assets			Inputs		Inputs				Total Gains
Assets held for sale:		Value				(Level I)			(Level II)			(Level III)				(Losses)
Three months ended September 30, 2011		$	2,396			$	—		$	—		$	2,396			$	(300	)
Nine months ended September 30, 2011		$	2,396			$	—		$	—		$	2,396			$	(700	)

     Fair value measurements are based on a fair value hierarchy that prioritizes the inputs to valuation techniques for recurring and nonrecurring fair value measurements. The three levels of the fair value hierarchy are:

Level 1 — Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities

Level 2 — Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly

Level 3 — Prices or valuations that require inputs that are significant to the valuation and are unobservable

Note 14: Income Taxes

     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 $489 and $4,538 for the three months and nine months ended September 30, 2011, respectively, and $621 and $2,760 for the three and nine months ended September 30, 2010, respectively, representing effective income tax rates of (49.6) percent and (140.3) percent, for the nine months ended September 30, 2011 and 2010, respectively. The increase in tax expense for the nine months ended September 30, 2011, is primarily attributable to the Texas margin tax, changes in the valuation allowance, and a one-time charge of $2,961 related to a pre-Distribution Internal Revenue Service (“IRS”) audit adjustment. This one time charge was incurred pursuant to the Tax Matters Agreement with Belo. The Company anticipates making this payment to Belo in the fourth quarter of 2011 upon closing of all pre-Distribution federal income tax years.

     The Company currently projects taxable losses for the year 2011 for federal income tax purposes and in certain state income tax jurisdictions. Net operating losses can be carried forward to offset future taxable income. The Company’s net operating loss carryforwards begin to expire in the year 2029 if not utilized.

     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, 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 change in deferred tax assets for the nine months ended September 30, 2011, is partially offset by a corresponding increase in the valuation allowance of approximately $1,888.

     The Company records a tax benefit from uncertain tax positions when it is more likely than not the positions will be sustained by taxing authorities based on the technical merits of those positions. As of September 30, 2011, the Company recorded $388 in reserves for uncertain tax positions. The Company recognizes interest and penalties related to these reserves in interest expense.

     On December 31, 2010, the Company recorded a receivable from Belo of $3,549 related to a carryback of the Company’s taxable net operating losses on Belo’s federal income tax return filed in the fourth quarter of 2010. During March 2011, Belo received the refund and the receivable from Belo has been collected.

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

(Unless the context requires otherwise, all dollar amounts in the Quarterly Report on Form 10-Q are 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 newspaper publishing and local news and information company that owns and operates four daily newspapers and several associated Web sites. A. H. Belo publishes The Dallas Morning News (www.dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.projo.com), the oldest continuously-published daily newspaper in the U.S. and winner of four Pulitzer Prizes; The Press-Enterprise (www.pe.com) (Riverside, CA), serving the Inland Southern California region and winner of one Pulitzer Prize; and the Denton Record-Chronicle (www.dentonrc.com). The Company publishes various specialty publications targeting niche audiences, and its partnerships and/or investments include the Yahoo! Newspaper Consortium and Classified Ventures, LLC, owner of www.cars.com. A. H. Belo also owns and operates commercial printing, distribution and direct mail businesses.

     The Company was spun off from Belo Corp. effective February 8, 2008 through a pro-rata stock dividend to Belo shareholders. As a consequence, A. H. Belo became a separate public company on that date. Following the Distribution, Belo has no further ownership interest in A. H. Belo or in any newspaper or related businesses, and A. H. Belo has no ownership interest in Belo or in any television station or related businesses, but continues to conduct limited business with Belo. A. H. Belo’s relationship with Belo is now governed by a separation and distribution agreement and several ancillary agreements. A. H. Belo and Belo also co-own certain downtown Dallas real estate and several investments associated with their respective 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.

Overview of Significant Activity in the Third Quarter of 2011

	•		The Company’s core advertising revenues related to its newspapers continue to decline in response to the continued weak economy and secular changes in the newspaper industry resulting in a 12.3 percent decrease for the three months ended September 30, 2011 when compared to the three months ended September 30, 2010. In response, the Company continues to focus on expanding its advertising in niche publications and digital platforms and increasing commercial printing revenues. Additionally, the Company continues to lower its costs by reducing staff and implementing general cost-control measures.
	•		Average newsprint purchase prices increased 8.9 percent for the three months ended September 30, 2011 when compared to the three months ended September 30, 2010, but have increased only 1.9 percent when compared to the three months ended December 31, 2010. These price changes were expected by the Company and are subject to market conditions. The Company participates in a purchasing consortium to obtain favorable pricing on its newsprint purchases.
	•		During the third quarter 2011, the Company launched Web sites for DealsinDFW.com and DealsinRI.com, which provide subscribers opportunities to purchase daily deals from advertisers at highly discounted prices. The Company also released a mobile application, SportDayHS, featuring high school sports coverage in the local markets in which the Company operates. These offerings are a continuation of the subscriber content initiatives introduced in the first quarter of 2011 to strengthen Company’s ability to engage readers on digital platforms.
	•		On September 2, 2011, the Company paid a dividend of $0.06 per share, or $1,353, to its shareholders of record on August 12, 2011.

Results of Operations

Condensed Consolidated Results of Operations

     The table below presents the Company’s components of consolidated (loss) income for the three and nine months ended September 30, 2011 and 2010:

		Three Months Ended September 30,												Nine Months Ended September 30,
						Percentage												Percentage
		2011				Change				2010				2011				Change				2010
Revenues
Advertising		$	65,229				(12.3)	%		$	74,388			$	203,034				(9.2)	%		$	223,578
Circulation			34,749				(0.5)	%			34,927				104,699				(1.2)	%			105,970
Printing and distribution			10,012				2.0	%			9,817				28,918				7.4	%			26,914
Total revenue			109,990				(7.7)	%			119,132				336,651				(5.6)	%			356,462
Operating costs and expenses			110,268				(4.6)	%			115,545				347,762				(4.9)	%			365,622
Other income (expense), net			632				(60.6)	%			1,606				1,965				(72.7)	%			7,193
Income (loss) before income taxes			354				(93.2)	%			5,193				(9,146	)			365.0	%			(1,967	)
Income tax expense			489				(21.3)	%			621				4,538				64.4	%			2,760
Net (loss) income		$	(135	)			(103.0)	%		$	4,572			$	(13,684	)			189.5	%		$	(4,727	)

Newspaper Revenues

     The Dallas Morning News

     The table below presents the components of The Dallas Morning News net operating revenues for the three and nine months ended September 30, 2011 and 2010:

		Three Months Ended September 30,																				Nine Months Ended September 30,
						Percent												Percent								Percent												Percent
						of Total				Percentage								of Total								of Total				Percentage								of Total
		2011				Revenues				Change				2010				Revenues				2011				Revenues				Change				2010				Revenues
Advertising		$	42,466				59.8	%			(12.1	)%		$	48,298				62.8	%		$	132,149				60.4	%			(7.4	)%		$	142,749				62.3	%
Display			16,048								(22.0	)%			20,562								52,619								(14.1	)%			61,270
Classified			7,024								(8.5	)%			7,676								21,894								(5.1	)%			23,059
Preprints			13,998								(5.4	)%			14,796								41,174								(3.5	)%			42,656
Digital			5,396								2.5	%			5,264								16,462								4.4	%			15,764
Circulation			22,951				32.4	%			1.4	%			22,637				29.4	%			69,717				31.9	%			0.7	%			69,247				30.2	%
Printing and distribution			5,510				7.8	%			(8.2	)%			6,004				7.8	%			16,897				7.7	%			(1.5	)%			17,151				7.5	%
		$	70,927				100.0	%			(7.8	)%		$	76,939				100.0	%		$	218,763				100.0	%			(4.5	)%		$	229,147				100.0	%

     Display advertising revenues decreased in the three and nine months ended September 30, 2011, due to lower levels of retail and general advertising.

     Classified advertising revenues declined for the three months ended September 30, 2011, as a result of lower levels of employment and auto advertising. For the nine months ended September 30, 2011, classified advertising revenues decreased as a result of lower real estate and auto advertising, partially offset by an increase in classified employment revenues.

     Preprint advertising revenues decreased due to lower levels of retail and mail preprints for the three and nine months ended September 30, 2011.

     Digital advertising revenues are primarily comprised of retail display advertising and online classified advertising, including auto, real estate and employment on The Dallas Morning News’ Web sites, including its affiliation with www.cars.com. Such revenues increased in the three and nine months ended September 30, 2011, due to growth in local advertising, primarily banners, and auto classified revenues.

     Advertising revenues from The Dallas Morning News niche publications were $5,607 and $16,676 for the three and nine months ended September 30, 2011, respectively, and $6,165 and $16,268 for the three and nine months ended September 30, 2010, respectively. Advertising revenues for niche publications decreased $558, or 9.1 percent, in the three months ended September 30, 2011, due to declines in retail, general and preprint advertising and increased $408, or 2.5 percent, for the nine months ended September 30, 2011, due to increases in retail and general advertising. These revenues are a component of total display, classified, preprint and digital revenues of The Dallas Morning News discussed above.

     Circulation revenues remained flat for the periods presented.

     Printing and distribution revenues decreased for the three and nine months ended September 30, 2011, due to lower levels of printing for promotional events.

     The Providence Journal

     The table below presents the components of The Providence Journal net operating revenues for the three and nine months ended September 30, 2011 and 2010:

		Three Months Ended September 30,																				Nine Months Ended September 30,
						Percent												Percent								Percent												Percent
						of Total				Percentage								of Total								of Total				Percentage								of Total
		2011				Revenues				Change				2010				Revenues				2011				Revenues				Change				2010				Revenues
Advertising		$	12,028				52.9	%			(11.1	)%		$	13,528				56.1	%		$	38,213				55.5	%			(11.2	)%		$	43,030				58.8	%
Display			2,953								(34.3	)%			4,495								12,009								(18.2	)%			14,681
Classified			4,320								24.0	%			3,484								11,356								(1.7	)%			11,555
Preprints			3,125								(16.6	)%			3,746								9,800								(12.1	)%			11,148
Digital			1,630								(9.6	)%			1,803								5,048								(10.6	)%			5,646
Circulation			8,396				36.9	%			(5.3	)%			8,867				36.8	%			24,809				36.1	%			(5.5	)%			26,257				35.9	%
Printing and distribution			2,320				10.2	%			36.2	%			1,704				7.1	%			5,780				8.4	%			49.8	%			3,858				5.3	%
		$	22,744				100.0	%			(5.6	)%		$	24,099				100.0	%		$	68,802				100.0	%			(5.9	)%		$	73,145				100.0	%

     Display advertising revenues declined for the three months ended September 30, 2011, due to decreases in retail and general advertising. The decline in display advertising revenues for the nine months ended September 30, 2011 is due to decreases in retail advertising, partially offset by an increase in general advertising.

     Classified advertising revenues increased in the three months ended September 30, 2011, due to growth in automotive and other categories, partially offset by decreases in employment and real estate. The decline in classified advertising revenues for the nine months ended September 30, 2011, is due to decreases in the real estate, employment and other categories, partially offset by growth in the classified automotive category.

     Preprint advertising revenues decreased in the three and nine months ended September 30, 2011, due to a decline in preprinted insert volumes, partially offset by an increase in preprinted home delivery revenues.

     Digital advertising revenues decreased in the three and nine months ended September 30, 2011, and primarily consist of retail display advertising and online classified advertising, including auto, real estate, employment, legal and obituaries as major categories. The decrease for the three and nine months ended September 30, 2011, is due to declines in auto, real estate and employment digital advertising.

     Circulation revenues decreased in the three and nine months ended September 30, 2011, due to both lower home delivery and lower single-copy revenues.

     Printing and distribution revenues increased in the three and nine months ended September 30, 2011, due to The Providence Journal’s continued expansion of single copy distribution services for large national and local newspapers. The Providence Journal has also increased its commercial printing services to include a major metro newspaper and a community newspaper, which also contributed to the growth.

The Press-Enterprise

     The table below presents the components of The Press-Enterprise net operating revenues for the three and nine months ended September 30, 2011 and 2010:

		Three Months Ended September 30,																				Nine Months Ended September 30,
						Percent												Percent								Percent												Percent
						of Total				Percentage								of Total								of Total				Percentage								of Total
		2011				Revenues				Change				2010				Revenues				2011				Revenues				Change				2010				Revenues
Advertising		$	10,735				65.8	%			(14.5	)%		$	12,562				69.4	%		$	32,672				66.6	%			(13.6	)%		$	37,799				69.8	%
Display			2,440								(26.9	)%			3,336								8,179								(19.6	)%			10,172
Classified			3,345								(20.8	)%			4,222								9,819								(23.9	)%			12,906
Preprints			3,350								(1.6	)%			3,404								10,056								1.2	%			9,938
Digital			1,600								0.0	%			1,600								4,618								(3.4	)%			4,783
Circulation			3,402				20.8	%			(0.6	)%			3,423				18.9	%			10,173				20.7	%			(2.8	)%			10,466				19.3	%
Printing and distribution			2,182				13.4	%			3.5	%			2,109				11.7	%			6,241				12.7	%			5.7	%			5,905				10.9	%
		$	16,319				100.0	%			(9.8	)%		$	18,094				100.0	%		$	49,086				100.0	%			(9.4	)%		$	54,170				100.0	%