A. H. BELO CORP AHC
June 25, 2010 - 3:18pm EST by
styx1003
2010 2011
Price: 6.91 EPS $0.00 $0.23
Shares Out. (in M): 21 P/E NM 30.4x
Market Cap (in $M): 148 P/FCF 2.9x 2.6x
Net Debt (in $M): -8 EBIT 6 8
TEV ($): 140 TEV/EBIT NM NM

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Description

 

A.H. Belo (AHC)

 

A.H. Belo (AHC) is an interesting spin-off situation in an unattractive industry: newspapers.  At year-end, this debt-free company will trade at approximately 0.7x reported 2011E EBITDA while its levered peers (LEE, MNI, GCI) trade between 5.5x to 6.5x forward EBITDA.  While the $150m million market cap and $700k daily trading volume likely explain some of this valuation discrepancy, we believe the company is extremely undervalued.  At 5.0x our conservative estimate of adjusted 2011 EBITDA (detailed below as we capitalize pension obligations and back the expense out to be conservative), AHC would trade at approximately $14.00 per share.  This would represent over 100% upside to the current trading price of $6.75.  This analysis includes $35m of expected proceeds from a sale of excess real estate.      

 

As AHC's earning power becomes more transparent and the asset sales are completed, it will draw greater attention from the investment community and be re-valued higher.  In the long-run, AHC needs to increase its scale by either acquiring additional newspapers or, more likely, sell the company to one of its larger daily newspaper-focused peers.

 

Business Description

 

The Dallas-based company publishes three leading local daily newspapers:  The Dallas Morning News, The Providence Journal and The Press-Enterprise (Riverside, CA).   These newspapers and their related online businesses reach a total audience of 3.7 million people and generated over $500 million of revenue in 2009.  The Dallas Morning News is the 10th largest daily newspaper in the U.S.  In addition, AHC operates 11 associated web sites which represent 7.5% of total revenues.  Taken together, 66% of AHC's revenues come from advertising while 28% comes from circulation. 

 

In February 2008, AHC was spun-off at $20 per share from its larger parent Belo Corporation (BLC) which owns and operates television stations.  Given the cyclical and secular declines in the newspaper industry as well as AHC's very small market capitalization, it garnered little investor or analyst attention subsequent to its spin-off. The stock never traded higher than its first day as a separate company.  Indeed with no sponsorship and deteriorating results, its share price declined 96% to $0.60 in March 2009 ($11 million market cap) despite being net-debt free.  Like its peers, AHC has significantly reduced headcount and other operational expenses to bring its cost structure in line with the lower revenue environment the newspaper industry is facing.  However, its operating margins and free cash flow have yet to reflect these changes in their entirety, in part because the calendar first quarter is seasonally week.

 

From 2006 to 2009, AHC's revenue declined 37% and its EBITDA margin fell from 20% to 7%.  Revenue has stabilized and as the economy recovers it should grow slightly and then resume a low single digit annual decline rate as the newspaper industry continues to cede share to other advertising mediums.  Under its new cost structure and with minimal top-line growth, AHC can generate 15% EBITDA margins or approximately $75 million of annual EBITDA, however we have assumed that the company never grows advertising revenue again and only achieves an approximate 12% EBITDA margin ($58 million of adjusted EBITDA in 2011). It is interesting to note that circulation has actually grown from 2007 to 2009.  The business could be even more profitable in the hands of AHC's peers who are larger, more capable operators.  Gannett (GCI), McClatchy (MNI) and Lee Enterprises (LEE) are generating EBITDA margins today in the range of 18% to 23%.  With minimal capital expenditures and low cash taxes, AHC can generate at least $2.00 per share of annual discretionary free cash flow.

 

The company has no debt but is obligated to help fund the $196m pension obligation of its parent Belo Corp (to the tune of 60% of it).  AHC is using a tax refund from 2009 to fund its share of the pension contribution in 2010.  After 2010, AHC's funding responsibility will depend on the performance of the pension plan's investments.  Although, it is not expected to be a requirement in perpetuity, if you treat the expected $8 million pension contribution as an annual requirement, this would increase AHC's trading multiple to 2.2x estimated free cash flow. 

 

In addition to this strong operating cash flow, AHC has $2.00 per share of cash on its balance sheet and expects to monetize real estate assets which could generate $35 million in proceeds, or another $1.50 per share.  This $35m amount is our estimate based upon discussions with real estate brokers though the book value is substantially higher. 

 

Management has not been specific with its plans to maximize long-term shareholder value but is motivated given that the CEO and other executives own approximately 16% of AHC. Interestingly, the parent's CEO, Robert Decherd, a member of BLC's founding family (established in 1842), chose to leave the higher quality BLC TV business and become CEO of AHC.  In the short-term, the company is protecting value by conserving its cash, maintaining a debt-free balance sheet and exploring sales of non-core real estate assets.

 

Financial Summary

 

 

 

 

 

 

(Dollars in Millions)

 

 

 

 

 

 

 

2007

2008

2009

TTM

2010E

2011E

 

 

 

 

 

 

 

Advertising

600

484

352

335

320

320

Circulation

113

123

137

140

142

142

Other

26

29

29

30

32

32

Total Revenues

739

637

518

506

494

494

 

 

 

 

 

 

 

Adjusted EBITDA

79

10

33

51

58

58

Less: Pension Expense

 

 

 

(5)

(10)

(8)

Reported EBITDA

79

10

33

46

48

50

 

 

 

 

 

 

 

Net Income

(347)

(50)

(108)

-

(0)

5

 

 

 

 

 

 

 

Adjusted EBITDA

79

10

33

51

58

58

- Interest Expense

(35)

(4)

(1)

(1)

(1)

(1)

- Capex

(41)

(18)

(11)

(12)

(12)

(12)

- Cash Tax

(9)

(1)

(3)

(3)

(6)

(3)

Discretionary FCF (ex. WC)

(6)

(13)

18

35

40

43

Shares

20

20

21

21

21

21

FCF/Share

$(0.27)

$(0.66)

$0.86

$1.63

$1.85

$2.00

 

 

 

 

 

 

 

Advertising Growth Rate

 

-19.3%

-27.3%

 

-9.2%

0.0%

Circulation Growth Rate

 

9.5%

10.7%

 

4.2%

0.0%

Other Revenue Growth Rate

 

14.8%

-0.2%

 

8.5%

0.0%

Total Revenues Growth Rate

 

-13.7%

-18.7%

 

-4.6%

0.0%

Adjusted EBITDA Margin

10.7%

1.6%

6.5%

10.1%

11.7%

11.8%

 

 

 

 

 

 

 

 

 

Trading Multiples

 

 

 

 

 

 

 

 

 

 

 

 

Capitalized Pension

 

As Reported

 

3/31/2010

12/31/2010

 

3/31/2010

12/31/2010

 

 

 

 

 

 

Share Price

$6.91

$6.91

 

$6.91

$6.91

FD Shares

           21.4

          21.4

 

$21.41

$21.41

MARKET CAP

         148.0

        148.0

 

$147.96

$147.96

 

 

 

 

 

 

+ Debt

0

0

 

0

0

+ 2Q:4Q10-E Free Cash Flow

0

(36)

 

0

(36)

+ AHC 60% Share of $196m Belo Corp Pension Deficit

118

118

 

0

0

- Tax Refund @ Belo Corp

(12)

(12)

 

0

0

- 3/31/10 Cash

(43)

(43)

 

(43)

(43)

- Proceeds from Excess Real Estate

(35)

(35)

 

(35)

(35)

NET DEBT & PENSION

28

(8)

 

(78)

(114)

 

 

 

 

 

 

ENTERPRISE VALUE

176

140

 

70

34

 

 

 

 

 

 

TTM EBITDA

              51

             51

 

           46

             46

2010 EBITDA

               58  

             58

 

           48

             48

2011 EBITDA

              58

             58

 

           50

             50

 

 

 

 

 

 

EV/TTM EBITDA

3.5x

2.8x

 

1.5x

0.7x

EV/2010 EBITDA

3.0x

2.4x

 

1.5x

0.7x

EV/2011 EBITDA

3.0x

2.4x

 

1.4x

0.7x

 

 

 

 

 

 

TTM FCF/ Share

 $1.63
 $1.63

 

 $1.38
 $1.38

2010 FCF/ Share

 $ 1.85
 $1.85

 

 $1.39
 $ 1.39

2011 FCF/ Share

 $ 2.00
 $ 2.00

 

 $1.62
 $1.62

 

 

 

 

 

 

P/TTM FCF (1)

3.2x

3.2x

 

3.8x

3.8x

P/2010 FCF (1)

2.9x

2.9x

 

3.8x

3.8x

P/2011 FCF (1)

2.6x

2.6x

 

3.2x

3.2x

(1) $35m of excess real estate proceeds backed out

 

 

 

 

 

 

 

Target Price Determination

 

 

 

 

 

 

 

2011 EBITDA

              58

             58

             58

Target Multiple

4.5x

5.0x

5.5x

Enterprise Value

            262

           292

           321

Less 12/31/10 Net Debt

(8)

(8)

(8)

Equity Value

270

300

329

Shares

           21.4

          21.4

          21.4

Target Price 

 $      12.63

 $     13.99

 $     15.35

% Upside

83%

102%

122%

 

 

 

 

Note if AHC margins were similar to peers (20%), 2011 EBITDA would be $100m

 

 

Investment Positives

 

Unlevered Company with Very High Free Cash Flow Yield: While nearly 30% free cash flow yields are more common in a levered scenario, we believe AHC has been overlooked due to its small size and has been valued similar to its more levered peers despite its vastly superior capital structure. 

 

Hidden Value through Excess Real Estate to be Monetized: Based on our work, the real estate that AHC is attempting to sell is worth approximately $35 million. 

 

Margins Are Too Low Relative to Peers Suggesting Potential Improvement Ahead:  As discussed, there is a significant margin improvement opportunity to bring AHC's profitability thresholds closer to those achieved by its larger peers.  Of course, economies of scale may benefit those other companies but it is not unreasonably to anticipate some improvement. 

 

Minimal Capital Requirements: Since there is not much to invest in here, the capital requirements are not extensive.

 

Circulation Actually Increased from 2007 to 2009: During a difficult economic climate and in a declining industry, it is notable that circulation revenues proved resilient. 

 

High Insider Ownership: Management is aligned with shareholders through its 16% ownership in the company. 

 

Attractive Acquisition Candidate for a Larger Newspaper Company: a small asset like AHC could easily be tucked into a larger newspaper company and redundant costs could be eliminated thereby further improving the potential accretion. 

 

Investment Concerns

 

Significant Secular Headwinds: The threats to the newspaper industry are well known and clearly are reflected in the deteriorating topline at AHC.  Of course, part of the decline is also more cyclical in nature and could suggest a moderate rebound during an improving economic climate. 

 

Underfunded Pension: AHC is on the hook for 60% of its former parent's underfunded pension liability.  This amounts to $116 million and we choose to treat this liability like debt and back-out the associated pension expense. 

 

Industry Will Never Receive a High Multiple: Because as discussed the newspaper industry is in secular decline and faces substitution threats from the internet, it is extremely unlikely that a company like AHC will ever receive a growth multiple.  

 

Dual Class Share Structure: The directors and management hold approximately 52 percent of the voting power, though they have economic ownership of 16%.  A. H. Belo's Series A common stock has one vote per share and Series B common stock has ten votes per share.  Accordingly, the market may penalize the valuation of the company for this structure.

 

DISCLOSURE:  We and our affiliates are long AHC, and may buy additional shares or sell some or all of our shares, at any time.  We have no obligation to inform anybody of any changes in our views of AHC.  This is not a recommendation to buy or sell shares. We make no claims, promises or guarantees about the accuracy, completeness or adequacy of the contents of this document and expressly disclaim liability for errors and omissions in the document.  We have no obligation to update this document.  We may change our position at any time without posting an update.  The views expressed here are merely the opinion of the author.  Readers should do their own research.

 

 

Catalyst

Sale of excess real estate, stabilization of business, evidence of margin improvement.
    sort by   Expand   New

    Description

     

    A.H. Belo (AHC)

     

    A.H. Belo (AHC) is an interesting spin-off situation in an unattractive industry: newspapers.  At year-end, this debt-free company will trade at approximately 0.7x reported 2011E EBITDA while its levered peers (LEE, MNI, GCI) trade between 5.5x to 6.5x forward EBITDA.  While the $150m million market cap and $700k daily trading volume likely explain some of this valuation discrepancy, we believe the company is extremely undervalued.  At 5.0x our conservative estimate of adjusted 2011 EBITDA (detailed below as we capitalize pension obligations and back the expense out to be conservative), AHC would trade at approximately $14.00 per share.  This would represent over 100% upside to the current trading price of $6.75.  This analysis includes $35m of expected proceeds from a sale of excess real estate.      

     

    As AHC's earning power becomes more transparent and the asset sales are completed, it will draw greater attention from the investment community and be re-valued higher.  In the long-run, AHC needs to increase its scale by either acquiring additional newspapers or, more likely, sell the company to one of its larger daily newspaper-focused peers.

     

    Business Description

     

    The Dallas-based company publishes three leading local daily newspapers:  The Dallas Morning News, The Providence Journal and The Press-Enterprise (Riverside, CA).   These newspapers and their related online businesses reach a total audience of 3.7 million people and generated over $500 million of revenue in 2009.  The Dallas Morning News is the 10th largest daily newspaper in the U.S.  In addition, AHC operates 11 associated web sites which represent 7.5% of total revenues.  Taken together, 66% of AHC's revenues come from advertising while 28% comes from circulation. 

     

    In February 2008, AHC was spun-off at $20 per share from its larger parent Belo Corporation (BLC) which owns and operates television stations.  Given the cyclical and secular declines in the newspaper industry as well as AHC's very small market capitalization, it garnered little investor or analyst attention subsequent to its spin-off. The stock never traded higher than its first day as a separate company.  Indeed with no sponsorship and deteriorating results, its share price declined 96% to $0.60 in March 2009 ($11 million market cap) despite being net-debt free.  Like its peers, AHC has significantly reduced headcount and other operational expenses to bring its cost structure in line with the lower revenue environment the newspaper industry is facing.  However, its operating margins and free cash flow have yet to reflect these changes in their entirety, in part because the calendar first quarter is seasonally week.

     

    From 2006 to 2009, AHC's revenue declined 37% and its EBITDA margin fell from 20% to 7%.  Revenue has stabilized and as the economy recovers it should grow slightly and then resume a low single digit annual decline rate as the newspaper industry continues to cede share to other advertising mediums.  Under its new cost structure and with minimal top-line growth, AHC can generate 15% EBITDA margins or approximately $75 million of annual EBITDA, however we have assumed that the company never grows advertising revenue again and only achieves an approximate 12% EBITDA margin ($58 million of adjusted EBITDA in 2011). It is interesting to note that circulation has actually grown from 2007 to 2009.  The business could be even more profitable in the hands of AHC's peers who are larger, more capable operators.  Gannett (GCI), McClatchy (MNI) and Lee Enterprises (LEE) are generating EBITDA margins today in the range of 18% to 23%.  With minimal capital expenditures and low cash taxes, AHC can generate at least $2.00 per share of annual discretionary free cash flow.

     

    The company has no debt but is obligated to help fund the $196m pension obligation of its parent Belo Corp (to the tune of 60% of it).  AHC is using a tax refund from 2009 to fund its share of the pension contribution in 2010.  After 2010, AHC's funding responsibility will depend on the performance of the pension plan's investments.  Although, it is not expected to be a requirement in perpetuity, if you treat the expected $8 million pension contribution as an annual requirement, this would increase AHC's trading multiple to 2.2x estimated free cash flow. 

     

    In addition to this strong operating cash flow, AHC has $2.00 per share of cash on its balance sheet and expects to monetize real estate assets which could generate $35 million in proceeds, or another $1.50 per share.  This $35m amount is our estimate based upon discussions with real estate brokers though the book value is substantially higher. 

     

    Management has not been specific with its plans to maximize long-term shareholder value but is motivated given that the CEO and other executives own approximately 16% of AHC. Interestingly, the parent's CEO, Robert Decherd, a member of BLC's founding family (established in 1842), chose to leave the higher quality BLC TV business and become CEO of AHC.  In the short-term, the company is protecting value by conserving its cash, maintaining a debt-free balance sheet and exploring sales of non-core real estate assets.

     

    Financial Summary

     

     

     

     

     

     

    (Dollars in Millions)

     

     

     

     

     

     

     

    2007

    2008

    2009

    TTM

    2010E

    2011E

     

     

     

     

     

     

     

    Advertising

    600

    484

    352

    335

    320

    320

    Circulation

    113

    123

    137

    140

    142

    142

    Other

    26

    29

    29

    30

    32

    32

    Total Revenues

    739

    637

    518

    506

    494

    494

     

     

     

     

     

     

     

    Adjusted EBITDA

    79

    10

    33

    51

    58

    58

    Less: Pension Expense

     

     

     

    (5)

    (10)

    (8)

    Reported EBITDA

    79

    10

    33

    46

    48

    50

     

     

     

     

     

     

     

    Net Income

    (347)

    (50)

    (108)

    -

    (0)

    5

     

     

     

     

     

     

     

    Adjusted EBITDA

    79

    10

    33

    51

    58

    58

    - Interest Expense

    (35)

    (4)

    (1)

    (1)

    (1)

    (1)

    - Capex

    (41)

    (18)

    (11)

    (12)

    (12)

    (12)

    - Cash Tax

    (9)

    (1)

    (3)

    (3)

    (6)

    (3)

    Discretionary FCF (ex. WC)

    (6)

    (13)

    18

    35

    40

    43

    Shares

    20

    20

    21

    21

    21

    21

    FCF/Share

    $(0.27)

    $(0.66)

    $0.86

    $1.63

    $1.85

    $2.00

     

     

     

     

     

     

     

    Advertising Growth Rate

     

    -19.3%

    -27.3%

     

    -9.2%

    0.0%

    Circulation Growth Rate

     

    9.5%

    10.7%

     

    4.2%

    0.0%

    Other Revenue Growth Rate

     

    14.8%

    -0.2%

     

    8.5%

    0.0%

    Total Revenues Growth Rate

     

    -13.7%

    -18.7%

     

    -4.6%

    0.0%

    Adjusted EBITDA Margin

    10.7%

    1.6%

    6.5%

    10.1%

    11.7%

    11.8%

     

     

     

     

     

     

     

     

     

    Trading Multiples

     

     

     

     

     

     

     

     

     

     

     

     

    Capitalized Pension

     

    As Reported

     

    3/31/2010

    12/31/2010

     

    3/31/2010

    12/31/2010

     

     

     

     

     

     

    Share Price

    $6.91

    $6.91

     

    $6.91

    $6.91

    FD Shares

               21.4

              21.4

     

    $21.41

    $21.41

    MARKET CAP

             148.0

            148.0

     

    $147.96

    $147.96

     

     

     

     

     

     

    + Debt

    0

    0

     

    0

    0

    + 2Q:4Q10-E Free Cash Flow

    0

    (36)

     

    0

    (36)

    + AHC 60% Share of $196m Belo Corp Pension Deficit

    118

    118

     

    0

    0

    - Tax Refund @ Belo Corp

    (12)

    (12)

     

    0

    0

    - 3/31/10 Cash

    (43)

    (43)

     

    (43)

    (43)

    - Proceeds from Excess Real Estate

    (35)

    (35)

     

    (35)

    (35)

    NET DEBT & PENSION

    28

    (8)

     

    (78)

    (114)

     

     

     

     

     

     

    ENTERPRISE VALUE

    176

    140

     

    70

    34

     

     

     

     

     

     

    TTM EBITDA

                  51

                 51

     

               46

                 46

    2010 EBITDA

                   58  

                 58

     

               48

                 48

    2011 EBITDA

                  58

                 58

     

               50

                 50

     

     

     

     

     

     

    EV/TTM EBITDA

    3.5x

    2.8x

     

    1.5x

    0.7x

    EV/2010 EBITDA

    3.0x

    2.4x

     

    1.5x

    0.7x

    EV/2011 EBITDA

    3.0x

    2.4x

     

    1.4x

    0.7x

     

     

     

     

     

     

    TTM FCF/ Share

     $1.63
     $1.63

     

     $1.38
     $1.38

    2010 FCF/ Share

     $ 1.85
     $1.85

     

     $1.39
     $ 1.39

    2011 FCF/ Share

     $ 2.00
     $ 2.00

     

     $1.62
     $1.62

     

     

     

     

     

     

    P/TTM FCF (1)

    3.2x

    3.2x

     

    3.8x

    3.8x

    P/2010 FCF (1)

    2.9x

    2.9x

     

    3.8x

    3.8x

    P/2011 FCF (1)

    2.6x

    2.6x

     

    3.2x

    3.2x

    (1) $35m of excess real estate proceeds backed out

     

     

     

     

     

     

     

    Target Price Determination

     

     

     

     

     

     

     

    2011 EBITDA

                  58

                 58

                 58

    Target Multiple

    4.5x

    5.0x

    5.5x

    Enterprise Value

                262

               292

               321

    Less 12/31/10 Net Debt

    (8)

    (8)

    (8)

    Equity Value

    270

    300

    329

    Shares

               21.4

              21.4

              21.4

    Target Price 

     $      12.63

     $     13.99

     $     15.35

    % Upside

    83%

    102%

    122%

     

     

     

     

    Note if AHC margins were similar to peers (20%), 2011 EBITDA would be $100m

     

     

    Investment Positives

     

    Unlevered Company with Very High Free Cash Flow Yield: While nearly 30% free cash flow yields are more common in a levered scenario, we believe AHC has been overlooked due to its small size and has been valued similar to its more levered peers despite its vastly superior capital structure. 

     

    Hidden Value through Excess Real Estate to be Monetized: Based on our work, the real estate that AHC is attempting to sell is worth approximately $35 million. 

     

    Margins Are Too Low Relative to Peers Suggesting Potential Improvement Ahead:  As discussed, there is a significant margin improvement opportunity to bring AHC's profitability thresholds closer to those achieved by its larger peers.  Of course, economies of scale may benefit those other companies but it is not unreasonably to anticipate some improvement. 

     

    Minimal Capital Requirements: Since there is not much to invest in here, the capital requirements are not extensive.

     

    Circulation Actually Increased from 2007 to 2009: During a difficult economic climate and in a declining industry, it is notable that circulation revenues proved resilient. 

     

    High Insider Ownership: Management is aligned with shareholders through its 16% ownership in the company. 

     

    Attractive Acquisition Candidate for a Larger Newspaper Company: a small asset like AHC could easily be tucked into a larger newspaper company and redundant costs could be eliminated thereby further improving the potential accretion. 

     

    Investment Concerns

     

    Significant Secular Headwinds: The threats to the newspaper industry are well known and clearly are reflected in the deteriorating topline at AHC.  Of course, part of the decline is also more cyclical in nature and could suggest a moderate rebound during an improving economic climate. 

     

    Underfunded Pension: AHC is on the hook for 60% of its former parent's underfunded pension liability.  This amounts to $116 million and we choose to treat this liability like debt and back-out the associated pension expense. 

     

    Industry Will Never Receive a High Multiple: Because as discussed the newspaper industry is in secular decline and faces substitution threats from the internet, it is extremely unlikely that a company like AHC will ever receive a growth multiple.  

     

    Dual Class Share Structure: The directors and management hold approximately 52 percent of the voting power, though they have economic ownership of 16%.  A. H. Belo's Series A common stock has one vote per share and Series B common stock has ten votes per share.  Accordingly, the market may penalize the valuation of the company for this structure.

     

    DISCLOSURE:  We and our affiliates are long AHC, and may buy additional shares or sell some or all of our shares, at any time.  We have no obligation to inform anybody of any changes in our views of AHC.  This is not a recommendation to buy or sell shares. We make no claims, promises or guarantees about the accuracy, completeness or adequacy of the contents of this document and expressly disclaim liability for errors and omissions in the document.  We have no obligation to update this document.  We may change our position at any time without posting an update.  The views expressed here are merely the opinion of the author.  Readers should do their own research.

     

     

    Catalyst

    Sale of excess real estate, stabilization of business, evidence of margin improvement.

    Messages


    SubjectReplies
    Entry07/06/2010 12:52 PM
    Memberstyx1003
    mjw and Siren:
    Thanks for your questions and apologies for a slow response. 
     
    • 1) Do you know if A. H. Belo's reimbursement of 60% of Belo's contributions to the pension plan are tax-deductible to A. H. Belo?

     Yes. The reimbursement hits the AHC income statement under compensation expense and is tax-deductible.

    • 2) Also, what has management's track record been in terms of capital allocation? If this guy Decherd is from the founding family, how important is his ownership interest in AHC to him financially?

    On a return on assets (ROA) basis, defined as recurring EBITDA / Avg Total Assets, AHC has historically performed in line or better than its pure-play newspaper peers with the exception of 2008.

     Chairman and CEO Decherd's appears to be bullish on the media sector as his economic stakes in AHC and Belo Corp are worth ~$10 mm and ~$42 mm, respectively. He recently purchased an additional 234K shares of AHC at a price of $7.13 per share.

    • 3) What are these $35m of RE sales exactly? I was looking through the filings and it says they are selling the "south plant" which they estimate at $6m and the Belo building LLC was selling "certain assets", but unless they're selling the building itself how do you get to $35m?

    The $35 mm is referring to a figure provided on the AHC 2Q08 earnings call where management outlined its intention to monetize certain real estate assets within an unspecified time frame.  The $35 mm figure cited by management is associated with AHC's stake in the Belo Building, which it jointly owns (50/50) with Belo Corp. (BLC) and its property in Providence, RI. We believe that this figure is conservative given that there is construction of a large, high profile hotel/convention complex near the Belo Building in Dallas.  Belo Corp is on board with the sale of the jointly owned building. AHC staff has already vacated this building and the vacated space is available for lease while the property is shopped. So from the AHC perspective it is not a sale-leaseback.

    The South Plant, which is reported in "assets held for sale" on the balance sheet, is not included in the $35 mm.  

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