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A. H. BELO CORP - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations
[March 07, 2014]

A. H. BELO CORP - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations


(Edgar Glimpses Via Acquire Media NewsEdge) 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, dispositions, impairments, business initiatives, acquisitions, pension plan contributions and obligations, real estate sales, working capital, 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 the following: changes in capital market conditions and prospects, changes in advertising demand and newsprint prices; newspaper circulation trends and other circulation matters, including changes in readership methods, patterns and demography; audits and related actions by the Alliance for Audited Media; challenges implementing increased subscription pricing and new pricing structures; challenges in achieving expense reduction goals in a timely manner and the resulting potential effect on operations; challenges in consummating asset acquisitions or dispositions upon acceptable terms; technological changes; development of Internet commerce; industry cycles; changes in pricing or other actions by new and existing competitors and suppliers; consumer acceptance of new products and business initiatives; labor relations; 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; pension plan matters; general economic conditions and changes in interest rates; significant armed conflict; acts of terrorism; and other factors beyond the Company's 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 SEC.

OVERVIEW A. H. Belo Corporation A. H. Belo Corporation, headquartered in Dallas, Texas, is a distinguished newspaper publishing and local news and information company that owns and operates three metropolitan daily newspapers and related websites, 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) (Dallas, Texas), Texas' leading newspaper and winner of nine Pulitzer Prizes; The Providence Journal (www.providencejournal.com) (Providence, Rhode Island), the oldest continuously-published daily newspaper in the United States and winner of four Pulitzer Prizes; 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 include Classified Ventures, LLC, owner of cars.com, and Wanderful Media, LLC, owner of FindnSave.com.


A. H. Belo offers digital marketing solutions through 508 Digital and Speakeasy, and 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. References to terms "revenue" and "expense" as used in Management's Discussion and Analysis refer to income (loss) from continuing operations, unless otherwise noted.

Sale of The Press­Enterprise In 2013, the Company completed the disposition of The Press-Enterprise, a daily newspaper in Riverside, California, its niche publications La Prensa and The Weekly, related websites and substantially all related real estate assets.

The disposition and the results of operations associated with The Press-Enterprise are discussed on page 49 and are presented within the Company's financial statements as discontinued operations.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 17 -------------------------------------------------------------------------------- Table of Contents Significant Transactions from Continuing Operations During 2013, the results of operations of the Company were influenced by several significant transactions and events. In the first quarter, the Company voluntarily terminated its credit agreement, which had not been drawn upon since 2009. This agreement contained various terms restricting the Company's ability to acquire investments, divest assets, make voluntary pension contributions and return capital to shareholders as described in Liquidity and Capital Resources below.

In the second quarter of 2013, The Providence Journal executed an agreement allowing it to effectively assume the distribution of various national and regional newspapers and magazines previously managed by a third-party distributor. The agreement also settled claims and disputes between The Providence Journal and the third-party distributor. Under the agreement, The Providence Journal is paying the third-party distributor approximately $1,330 over a two-year period for the acquisition of business and settlement of claims.

The Company anticipates profits from the distribution contracts to well exceed the amounts paid under the agreement. The Company allocated approximately one-half of the cost of the agreement as a loss on the settlement of claims and, accordingly, recorded a loss of $665 in the second quarter of 2013. The remaining amounts to be paid are treated as contract acquisition costs and are being amortized to expense over three years starting in July 2013, consistent with the contract terms between The Providence Journal and the newspaper and magazine publishers.

In the fourth quarter of 2013, The Dallas Morning News, Inc. executed an agreement with Star Telegram, Inc. to provide printing services for the Fort Worth Star-Telegram, a major metropolitan newspaper, whose reported average print circulation volumes per the September 2013 Publisher's Statement were approximately 190,000 copies on Sundays and 110,000 daily copies on Mondays through Fridays. Printing of this newspaper is scheduled to commence in the first quarter of 2014 at the Company's printing operations in Plano, Texas.

Effective September 11, 2013, Robert W. Decherd retired as the Company's Chairman, President and Chief Executive Officer after 40 years of employment with the Company and former parent company. Mr. Decherd was succeeded by James M. Moroney III. Mr. Moroney served as the Company's Executive Vice President since December 2007 and as Publisher and Chief Executive Officer of The Dallas Morning News since June 2001. In September 2013, Mr. Moroney was elected as the Chairman of the Company's board of directors and Mr. Decherd now serves as Vice Chairman of the Company.

In addition to the above, the following significant transactions and events affected A. H. Belo's results of operations and financial position during 2013: • In 2013, 508 Digital and Speakeasy each completed their first full year of operations and generated $5,773 in revenue. The Company continues to focus on diversifying its revenue streams and in addition to 508 Digital and Speakeasy, the Company began publishing Design Guide and Texas Wedding Guide, luxury design and wedding guide publications and related websites targeting upscale builders, interior designers and wedding related businesses in various Texas markets. The Company also began promoting events, such as One Day University, through its Crowdsource operation.

• The Company concluded the accrual of transition benefits to the A. H. Belo Pension Transition Supplement Plan (the "PTS Plan") in the first quarter. The Company recognized $1,090 of remaining expense related to the PTS Plan and made $5,217 of contributions to the plan, representing current and prior year obligations.

• As a result of an increase in the discount rate and favorable investment performance, the net unfunded position of the pension plans was $50,082 as of December 31, 2013, an improvement of $72,739 from the prior year. The Company made required contributions to its pension plans of $7,396 and voluntary contributions of $4,604.

• Dividend proceeds of $2,952 were received from an equity method investee, reducing the carrying value of this investment.

• Dividends totaling $6,356 were recorded and paid to shareholders and to holders of restricted stock units. The quarterly dividend rate was increased from $0.06 per share to $0.08 per share effective with the dividend declared in the second quarter and paid in the third quarter.

• The Company received a refund of $1,334 on a tax return amended in a prior year.

• The Company acquired 421,070 of its Series A shares through open market transactions for $2,763, which are recorded as treasury stock.

PAGE 18 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS Consolidated Results of Continuing Operations This section contains a discussion and analysis of net operating revenues, expenses and other information relevant to an understanding of results of operations for 2013, 2012 and 2011.

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

Years Ended December 31, Percentage Percentage 2013 Change 2012 Change 2011 Advertising and marketing services $ 208,959 (3.3 )% $ 216,108 (8.8 )% $ 237,061 Circulation 120,316 (2.4 )% 123,224 (2.4 )% 126,290 Printing and distribution 36,975 4.6 % 35,358 14.6 % 30,845 $ 366,250 (2.3 )% $ 374,690 (4.9 )% $ 394,196 The Company's primary revenues are generated from advertising within its core newspapers, niche publications and related websites and from subscription and single copy sales of its printed newspapers. As a result of competitive and economic conditions, the newspaper industry has faced significant revenue decline over the past decade. The Company has sought to diversify its revenues through development and investment in new product offerings, increased circulation rates and leveraging of its existing assets to offer cost efficient printing and distribution services to its local markets. Through these efforts, the Company has achieved in 2013 the lowest year-over-year revenue decline since the Distribution.

In 2013, 2012 and 2011, the Company's advertising revenue from the its core newspapers continues to be adversely affected by the shift of advertiser spending to other forms of media and the increased accessibility of free online news content, as well as news content from other sources, which resulted in a loss of advertising and paid circulation volumes and revenue. The most significant loss of advertising revenue was realized in display and classified categories. These categories, which represented 60.1 percent of consolidated revenue in 2011, have declined to 57.0 percent in 2013. The change in the revenue mix not only reflects the revenue loss, but reflects the Company's on-going efforts to develop new revenue sources outside of these traditional product offerings.

In 2012, The Dallas Morning News and its marketing solutions group, DMNmedia, reached an agreement with LocalEdge, Hearst Corporation's full service Internet marketing business, to resell LocalEdge's digital solutions to small businesses under the name of 508 Digital in the Dallas/Fort Worth areas. These solutions include development of mobile websites, search engine marketing and optimization, video, mobile advertising and email marketing. The Dallas Morning News also offers advertising analytics and online reputation management services. The Company also entered into a joint venture with a local advertising agency, forming Speakeasy, which targets middle-market business customers and provides turnkey social media account management and content development services. Revenues from these marketing services initiatives were $5,773 in 2013, up from $944 in 2012, offsetting approximately 70 percent of the core print advertising revenue declines at The Dallas Morning News in 2013. Although the Company expects advertising revenues in the Company's core newspapers will continue to decrease in 2014, we anticipate further revenue growth with 508 Digital, Speakeasy and other potential acquisitions to substantially offset these declines.

The Company's newspapers aggressively market the capacity of their printing and distribution assets to other newspapers that would benefit from cost sharing arrangements. The Company was successful in growing printing and distribution revenue by 4.6 percent and 14.6 percent in 2013 and 2012, respectively, as a result of expansion of its distribution of third-party newspapers in its Rhode Island markets. Additionally, as a result of executing an agreement to print the Fort Worth Star-Telegram starting in 2014, the Company anticipates additional printing and inserting revenues of $6,000 to $6,500 on an annual basis.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 19 -------------------------------------------------------------------------------- Table of Contents Newspaper Revenue The table below sets forth the net operating revenues of A. H. Belo's daily newspapers for the last three years.

Years Ended December 31, Percentage Percentage 2013 Change 2012 Change 2011 The Dallas Morning News $ 276,183 (1.7 )% $ 280,924 (6.1 )% $ 299,131 The Providence Journal (a) 90,067 (3.9 )% 93,766 (1.4 )% 95,065 Total net operating revenues $ 366,250 (2.3 )% $ 374,690 (4.9 )% $ 394,196 (a) Revenue reported for The Providence Journal in 2012 includes $3,737 due to the change in the circulation model used as described below.

PAGE 20 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents The Dallas Morning News The table below sets forth the components of The Dallas Morning News net operating revenue for the last three years.

Years Ended December 31, Percent Percent Percent of Total Percentage of Total Percentage of Total 2013 Revenue Change 2012 Revenue Change 2011 Revenue Advertising and marketing services $ 167,945 60.8 % (1.3 )% $ 170,113 60.5 % (7.6 )% 184,175 61.6 % Display 57,640 (6.8 )% 61,843 (16.1 )% 73,717 Classified 25,089 (8.1 )% 27,299 (7.3 )% 29,439 Preprint 56,562 (2.3 )% 57,910 (1.5 )% 58,793 Digital 28,654 24.3 % 23,061 3.8 % 22,226 Circulation 86,274 31.2 % (2.7 )% 88,662 31.6 % (4.1 )% 92,493 30.9 % Printing and distribution 21,964 8.0 % (0.8 )% 22,149 7.9 % (1.4 )% 22,463 7.5 % $ 276,183 100.0 % (1.7 )% $ 280,924 100.0 % (6.1 )% $ 299,131 100.0 % Display - Revenue decreased in 2013 due to lower retail advertising in substantially all categories. Additionally, general advertising declined in all categories except for telecommunications which realized improvement in volumes.

In 2012, retail and general advertising volumes and rates declined, of which approximately $1,076 of the decrease was attributable to nonrecurring advertising associated with the Super Bowl held in the Dallas-Fort Worth metroplex in February 2011.

Classified - Revenue decreased in 2013 due to lower rates in all categories except for other classified. This decline was partially offset by higher volumes in real estate and automotive. In 2012, revenue decreased due to lower volumes in all categories except legal and obituary.

Preprint - Revenue decreased in 2013 and 2012 due to a decline in the volume of preprint newspaper inserts, consistent with the decline in circulation volumes.

The 2013 decline is partially offset by higher volumes in home delivery mail advertisements.

Digital - Revenue increased in 2013 and 2012 primarily due to higher marketing services revenue associated with 508 Digital and Speakeasy, and also due to higher automotive and real estate classified advertising. Marketing services revenue provided by 508 Digital and Speakeasy grew in 2013 since these businesses commenced operations in the second and third quarters of 2012, respectively. Revenue recorded for 508 Digital and Speakeasy was $4,402 and $1,371, respectively, in 2013 and $881 and $64, respectively, in 2012. Almost 600 local advertisers contracted with 508 Digital in 2013, an increase of 33 percent compared to the prior year. The Company anticipates continued growth in both these product initiatives in 2014.

The Dallas Morning News results also include its niche publications which expand its advertising platform to nonsubscribers of The Dallas Morning News' core newspaper. This revenue is a component of total display, classified, preprint and digital revenue of The Dallas Morning News discussed above. In 2013 and 2012, advertising revenue for The Dallas Morning News' niche publications was $24,558 and $22,425, respectively. Revenue from niche publications is primarily generated by preprint advertising followed by display advertising. In 2011, niche publications Al Dia and Briefing re-branded their weekend circulation as a Sunday edition in order to attract additional preprint advertisers. As a result of this modification, the Company increased circulation of its niche publications since 2011 and has been able to sustain preprint advertising revenue. The Company acquired DG Publishing, Inc. in December 2012 and the Company began publishing Design Guide and Texas Wedding Guide, luxury design and wedding guide publications, generating $688 in advertising revenue in 2013.

Circulation - Revenue decreased in 2013 due to a decline in home delivery and single copy paid print circulation volumes of 7.5 percent and 10.6 percent, respectively. These declines were partially offset by an effective rate increase of 4.0 percent in home delivery rates. In 2012, revenue decreased due to an average 7.6 percent decline in paid print circulation volumes, primarily in single copy and daily home delivery sales.

Printing and distribution - Revenue remained flat year-over-year for 2013 and 2012.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 21 -------------------------------------------------------------------------------- Table of Contents The Providence Journal The table below sets forth the components of The Providence Journal net operating revenue for the last three years. Certain prior year amounts were reclassified to conform to current year presentation.

Years Ended December 31, Percent Percent Percent of Total Percentage of Total Percentage of Total 2013 Revenue Change 2012 Revenue Change 2011 Revenue Advertising and marketing services $ 41,014 45.5 % (10.8 )% $ 45,995 49.1 % (13.0 )% $ 52,886 55.6 % Display 10,062 (13.7 )% 11,656 (12.8 )% 13,370 Classified 13,156 (13.7 )% 15,247 (16.8 )% 18,329 Preprint 12,377 (6.1 )% 13,176 (8.4 )% 14,385 Digital 5,419 (8.4 )% 5,916 (13.0 )% 6,802 Circulation 34,042 37.8 % (1.5 )% 34,562 36.8 % 2.3 % 33,797 35.6 % Printing and distribution 15,011 16.7 % 13.6 % 13,209 14.1 % 57.6 % 8,382 8.8 % $ 90,067 100.0 % (3.9 )% $ 93,766 100.0 % (1.4 )% $ 95,065 100.0 % Display - Revenue decreased in 2013 and 2012 as a result of a decline in retail and general advertising volumes.

Classified - Revenue decreased in 2013 due to lower rates in all categories, offset by an increase in automotive volumes. Revenue decreased in 2012 due to a volume decline in legal and automotive advertising.

Preprint - Revenue decreased in 2013 and 2012 due to a decline in the volume of preprint newspaper inserts, consistent with the decline in circulation volumes.

The 2013 decline is partially offset by higher volumes in home delivery mail advertisements.

Digital - Revenue decreased in 2013 and 2012 due to reduced volumes in banner and online advertising. Revenue also declined in 2013 due to lower real estate classified advertising and, in 2012, due to a decline in employment and other classified advertising.

Circulation - Revenue decreased in 2013 due to a decline in home delivery and single copy paid print circulation volumes of 8.7 percent and 11.9 percent, respectively, partially offset by an effective rate increase of 10.0 percent in home delivery rates. Revenue increased in 2012 primarily due to $3,737 of revenue related to The Providence Journal's transition from a carrier buy-sell circulation model to a distributor fee-for-service circulation model at the end of 2011. Under this model, higher revenue is recognized, offset by higher distribution expenses. The increase due to the change in circulation model in 2012 was offset by a decline in home delivery and single copy paid print circulation volumes of 7.3 percent and 8.9 percent, respectively.

Printing and distribution - Revenue increased in 2013 and 2012 due to expanded distribution of new and existing third-party newspapers. In the second quarter of 2013, The Providence Journal executed an agreement allowing it to effectively assume the distribution of various national and regional newspapers and magazines previously managed by a third-party distributor. This expansion generated $1,886 of additional revenue in 2013. See the Consolidated Financial Statements, Note 14 - Contingencies.

The Company has currently engaged Stephens Inc. to explore a potential sale of The Providence Journal as the Company focuses resources and management time and attention on its core Dallas market.

PAGE 22 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents Operating Costs and Expenses The table below sets forth the components of the Company's operating expenses for the last three years.

Years Ended December 31, Percentage Percentage 2013 Change 2012 Change 2011 Operating Costs and Expense Employee compensation and benefits $ 146,307 (4.1 )% $ 152,523 (5.2 )% $ 160,874 Other production, distribution and operating costs 140,230 0.5 % 139,566 (5.0 )% 146,836 Newsprint, ink and other supplies 50,810 2.9 % 49,401 1.5 % 48,690 Depreciation 18,079 (15.5 )% 21,401 (13.9 )% 24,850 Amortization 4,493 2.7 % 4,373 - 4,373 Asset impairments - - - (100.0 )% 872 Pension plan withdrawal - - - (100.0 )% 1,988 Total operating costs and expense $ 359,919 (2.0 )% $ 367,264 (5.5 )% $ 388,483 Employee compensation and benefits - Expenses decreased in 2013 due to the cessation of benefits related to the PTS Plan in the second quarter of 2013, resulting in a savings of $3,038. Savings of $1,677 were also achieved due to lower headcount and cost control initiatives related to employee medical benefits. The Company realized lower pension expense in 2013 and 2012 of $1,465 and $2,065, respectively, due to lower discount rates on the A. H. Belo Pension Plans' projected benefit obligations and higher returns due to increased plan assets. In 2012, the Company realized lower compensation costs due to headcount reduction efforts. The 2011 loss for the pension plan withdrawal is further discussed below.

Other production, distribution and operating costs - Expenses increased in 2013 and 2012 due to higher operating costs associated with 508 Digital and Speakeasy of $3,975 and $1,209, respectively, as these marketing services operations continued to grow. Expenses also increased in 2013 by $665 due to the settlement of a distribution contingency and by $2,297 due to a nonrecurring property tax credit received in 2012, both at The Providence Journal. In 2012, distribution costs for home delivery and outside publications increased at The Providence Journal due to the revised carrier distribution model and decreased at The Dallas Morning News consistent with lower circulation volumes. Other expenses declined in 2013 due to lower legal, technology and sales promotion costs and declined in 2012 due to reduced out-sourcing of technology and consulting services.

Newsprint, ink and other supplies - Expenses increased in 2013 and 2012 due to increased costs of supplements and ink resulting from a greater number of third-party publications under buy-sell arrangements, and due to additional preprint mail costs in 2013. These expenses were partially offset in both 2013 and 2012 by reduced newsprint costs associated with lower circulation volumes of the Company's newspapers. Newsprint consumption approximated 48,195, 49,670 and 52,570 metric tons in 2013, 2012 and 2011, respectively, at an average cost per metric ton of $606, $618 and $636, respectively.

Depreciation - Expenses decreased in 2013 and 2012 due to a higher level of in-service assets being fully depreciated. In 2012, the lower expense was partially offset by additional depreciation expense of $762 due to certain property, plant and equipment that was determined to have a shorter remaining useful life than previously estimated.

Asset impairments - Asset impairments in 2011 included a loss of $872 to adjust the carrying value of a former commercial printing operation located in Riverside, California to its appraised value.

Pension plan withdrawal - A final settlement was recorded in 2011 to adjust the projected benefit obligations assumed by the Company's pension plans, resulting in a loss of $1,988. In 2010, the Company had withdrawn from a defined benefit pension plan sponsored by the former parent company and recorded a loss for the unfunded obligations assumed at that time. The settlement recorded in 2011 represented an adjustment to the projected benefit obligation resulting from the finalization of demographic data for participants transferred to the Company's pension plans. The Company has no further obligations or claims related to the pension plan of the former parent company.

Amortization - Expense increased due to amortization of customer relationships acquired in the purchase of certain assets and liabilities of DG Publishing, Inc., which was recorded during the first quarter of 2013.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 23 -------------------------------------------------------------------------------- Table of Contents Other The table below sets forth the other components of the Company's results of operations for the last three years.

Years Ended December 31, Percentage Percentage 2013 Change 2012 Change 2011 Other Income (Expense), Net Other income (expense), net $ 2,721 (19.5 )% $ 3,380 N.M. $ (294 ) Interest expense (311 ) (50.6 )% (629 ) (5.8 )% (668 ) Total other income (expense), net $ 2,410 (12.4 )% $ 2,751 N.M. $ (962 ) Income Tax Provision $ 1,584 (12.2 )% $ 1,804 (64.7 )% $ 5,107 "N.M." - Percent change is not meaningful.

Other - Income in 2013 decreased due to lower gains on asset sales and lower income for equity method investments. Income in 2012 increased due to greater investment income recognized from Classified Ventures and the positive current year impact of the Company no longer owning an interest in Belo Investment, LLC, which previously resulted in the Company recognizing investment losses.

Interest expense - Interest expense decreased in 2013 due to the Company voluntarily terminating the its credit agreement in the first quarter, partially offset by the amortization of the $401 remaining debt issuance costs related to the credit agreement.

Tax provision - Tax provision decreased in 2012 due to a one-time charge of $2,961 related to a pre-Distribution Internal Revenue Service ("IRS") audit adjustment in 2011, pursuant to the Tax Matters Agreement with the former parent company. See the Consolidated Financial Statements, Note 9 - Income Taxes.

PAGE 24 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents Earnings and Adjusted Earnings before Interest, Taxes, Depreciation and Amortization from Continuing Operations In addition to net income (loss) from continuing operations, the Company also evaluates earnings before interest, taxes, depreciation and amortization ("EBITDA") which is presented for continuing operations by adjusting for discontinued operations and losses attributable to noncontrolling interests.

Adjusted EBITDA is calculated, as applicable, by adding back to EBITDA the withdrawal loss from a former parent company pension plan, non-cash impairment expense and net investment-related losses.

Years Ended December 31, 2013 2012 2011 Net income attributable to A. H. Belo Corporation $ 16,119 $ 526 $ (10,933 ) Less: income (loss) from discontinued operations, net 8,769 (7,954 ) (10,577 ) Plus: net loss attributable to noncontrolling interests (193 ) (107 ) - Income (loss) from continuing operations 7,157 8,373 (356 ) Depreciation and amortization 22,572 25,774 29,223 Interest expense 311 629 668 Income tax provision 1,584 1,804 5,107 EBITDA from Continuing Operations 31,624 36,580 34,642 Addback: Pension plan withdrawal - - 1,988 Impairments - - 872 Net investment-related losses - - 2,634Adjusted EBITDA from Continuing Operations $ 31,624 $ 36,580 $ 40,136 Neither EBITDA nor Adjusted EBITDA is a measure of financial performance under generally accepted accounting principles ("GAAP"). Management uses EBITDA, Adjusted EBITDA and similar measures in internal analyses as supplemental measures of the Company's financial performance, and for performance comparisons against its peer group of companies. Adjusted EBITDA is also used by management to evaluate the cash flows available for capital spending, investing, pension contributions (required and voluntary), dividends and other equity-related transactions. Neither EBITDA nor Adjusted EBITDA should be considered in isolation or as a substitute for cash flows provided by operating activities or other income or cash flow data prepared in accordance with GAAP, and these non-GAAP measures may not be comparable to similarly-titled measures of other companies.

In previous periods, the Company added back pension expense in the determination of Adjusted EBITDA, including both recurring pension expense and the loss from withdrawal from a pension plan sponsored by the former parent company.

Management reassessed this measurement and determined it is more appropriate to consider only the non-recurring loss from the pension plan withdrawal as an add-back to determine Adjusted EBITDA. Accordingly, all periods for which Adjusted EBITDA is presented exclude an adjustment for recurring pension expense. See the Consolidated Financial Statements, Note 10 - Pension and Other Retirement Plans for additional discussion of pension expense.

Sale of The Press-Enterprise In 2013, the Company completed the disposition of The Press-Enterprise, a daily newspaper in Riverside, California, its niche publications La Prensa and The Weekly, related websites and substantially all related real estate assets.

On July 8, 2013, The Press­Enterprise sold certain equipment which was idled in 2012 when the newspaper ceased printing certain unprofitable commercial products. This transaction generated net proceeds of $504 and a pretax gain of $269. On July 17, 2013, the Company completed the sale of its five-story office building and certain related assets in Riverside, California to the County of Riverside for $30,000. This building served as the administrative headquarters for The Press­Enterprise. The proceeds to the Company were $28,589 after selling costs of $1,411. In the third quarter of 2013 the Company recorded a pretax gain of $4,477 related to this transaction.

On November 21, 2013, the Company completed the sale of the newspaper operations of The Press-Enterprise, including the production facility and related land, to Freedom Communications, Inc. ("Freedom Communications") under a definitive asset purchase agreement. Gross sales proceeds of $26,750 were received in the fourth quarter of 2013. Escrow proceeds of $500 were received in February 2014 and the Company expects to collect a working capital adjustment of $753 in the first quarter of 2014. Estimated selling and exit costs of $5,787 were recognized in 2013, resulting in a pretax gain of $8,656.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 25 -------------------------------------------------------------------------------- Table of Contents The Company recorded net income (loss) from discontinued operations of The Press-Enterprise as set forth in the table below.

Years Ended December 31, 2013 2012 2011 Loss from discontinued operations Revenue $ 46,648 $ 65,356 $ 67,307 Costs and expense (51,348 ) (73,382 ) (77,980 ) (4,700 ) (8,026 ) (10,673 ) Gain related to the divestiture of discontinued operations Gain on sale of The Press-Enterprise 8,656 - - Gain on sale of five-story office building 4,477 - - Gain on sale of press equipment 269 - - 13,402 - - Tax benefit from discontinued operations (67 ) (72 ) (96 ) Income (Loss) from Discontinued Operations, Net $ 8,769 $ (7,954 ) $ (10,577 ) Upon completion of these transactions, the Company no longer owns newspaper operations in Riverside, California but continues to own and market for sale the land and buildings associated with a former commercial printing operation in Riverside, California. Through the disposition of The Press-Enterprise, the Company anticipates it will be able to more efficiently focus resources in serving its core geographic markets.

Critical Accounting Policies and Estimates A. H. Belo's Consolidated Financial Statements are based on the selection and application of accounting policies that require management to make significant estimates and assumptions. The Company believes that the following are the more critical accounting policies, estimates and assumptions currently affecting A. H. Belo's financial position and results of operations. See the Consolidated Financial Statements, Note 1 - Significant Accounting Policies and Recently Issued Accounting Standards, for additional information concerning significant accounting policies.

Revenue Recognition and Reserves for Uncollectible Accounts Receivables. The Company's principal sources of revenue are the advertising space in published issues of its newspapers and on the Company's websites, the sale of newspapers to distributors and individual subscribers, as well as amounts charged to customers for commercial printing, distribution and direct mail. Advertising revenue is recorded net of agency commission at the time the advertisements are published in the newspaper and ratably over the period of time the advertisement is placed on websites. Marketing services revenue is recognized at the time the services are rendered. Proceeds from subscriptions are deferred and are included in revenue ratably over the term of the subscriptions. Subscription revenue under buy-sell arrangements with distributors is recorded based on the net amount received from the distributor, whereas subscription revenue under fee-based delivery arrangements with distributors is recorded based on the amount received from the subscriber. Commercial printing and direct mail revenue is recorded when the product is distributed or shipped.

The Company estimates and records a reserve for uncollectible accounts receivable based upon recent collection experience and management's knowledge of customers' ability to pay amounts due. Expense for such uncollectible amounts is included in other production, distribution and operating costs.

Inventories. Inventories, consisting primarily of newsprint, ink and other supplies used in printing newspapers, are recorded at average cost. The Company reviews its inventories for obsolescence and records an expense for any items that no longer have future value.

Assets Held for Sale. Assets held for sale include fixed assets being actively marketed for which a sale is considered probable within the next 12 months.

These assets are recorded at the lower of their fair value less costs to sell or their carrying value at the time they are classified as assets held for sale.

In 2011, the Company recorded a loss of $700 to adjust the carrying value of a residence acquired pursuant to an employment retention and relocation agreement.

The residence was sold in the second quarter of 2012 for $2,410, resulting in a gain of $14.

PAGE 26 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents Property, Plant and Equipment. The Company records property, plant and equipment at cost or its fair value if acquired through a business acquisition or non-monetary exchange. Depreciable assets are reviewed to ensure the remaining useful life of the assets continues to be appropriate and the Company records any resulting adjustments to depreciation expense on a prospective basis. Depreciation of property, plant and equipment is recorded on a straight-line basis over the estimated useful lives of the assets as follows: Estimated Useful Lives Buildings and improvements 5 - 30 years Newspaper publishing equipment 3 - 20 years Other 3 - 10 years Goodwill. The Company records goodwill at the reporting unit level based on the excess fair value of prior business acquisitions over the fair value of the assets and liabilities acquired. Reporting units of the Company are based on its internal reporting structure and represent a reporting level below an operating segment. Unless qualitative factors allow the Company to conclude it is more likely than not that the fair value of the reporting unit exceeds its carrying value, the Company tests for goodwill impairment by estimating the fair value of the reporting unit. If the fair value of the reporting unit is less than its carrying value, the Company will determine a fair value for the reporting unit's underlying assets and liabilities and adjust goodwill accordingly. The Company uses a discounted cash flow model to calculate the fair value of its reporting units. The model includes a number of significant assumptions and estimates regarding future cash flows including discount rates, volumes, prices, capital expenditures and the impact of current market conditions. These estimates could be materially impacted by changes in market conditions. The Company performs the goodwill impairment test as of December 31 each fiscal year or when changes in circumstances indicate an impairment event may have occurred. Impairment charges represent non-cash charges and do not affect the Company's liquidity, cash flows from operating activities or have any effect on future operations. As of December 31, 2013, the Company recorded goodwill at The Dallas Morning News reporting unit, for which the fair value exceeded its carrying value by a margin in excess of 100 percent at December 31, 2013. See the Consolidated Financial Statements, Note 3 - Goodwill and Intangible Assets.

Long-Lived Assets. The Company evaluates its ability to recover the carrying value of property, plant and equipment and finite-lived intangible assets, using the lowest level of cash flows associated with the assets, which are grouped based on the Company's intended use of these assets. This evaluation is performed whenever a change in circumstances indicates that the carrying value of the asset groups may not be recoverable from future undiscounted cash flows.

If the analysis of future cash flows indicates the carrying value of the long-lived assets cannot be recovered, the assets are adjusted to the lower of its carrying value or fair value.

In 2011, an impairment charge of $872 was recorded associated with certain real estate assets in Riverside, California. The recovery estimates, based on the eventual sale of the assets, were less than the carrying value of the assets of $2,846 due to declines from economic conditions and real estate markets in California. As a result, the Company determined the impairment based on the fair value of the properties, as established by current appraisals, less selling costs.

Investments. The Company owns certain equity securities in companies in which it does not exercise control. For those investments where the Company is able to exercise significant influence over the investee as defined under ASC 323 - Equity Method and Joint Ventures, the Company accounts for the investment under the equity method of accounting, recognizing its share of the investee's income or loss as a component of earnings. All other investments are recorded under the cost method and the Company recognizes income or loss upon the receipt of dividends or distributions or upon liquidation of the investment. Each reporting period, the Company evaluates its ability to recover the carrying value of both equity and cost method investments based upon the financial strength of the investee. If the Company determines the carrying value is not recoverable, the Company will record an impairment charge for the difference between the fair value of the investment and the carrying value.

Concurrent with the Distribution, certain previously acquired real estate properties were transferred to Belo Investment, LLC ("Belo Investment"), an entity holding various investments in which the Company and its former parent Company each received a 50 percent interest. Through December 31, 2011, the Company accounted for its interest in Belo Investment under the equity method of accounting. On December 31, 2011, Belo Investment transferred four of its real estate properties to a newly formed subsidiary, AHC Dallas Properties, LLC. The Company entered into a nontaxable, non-monetary exchange arrangement with Belo Investment whereby it yielded its interests in Belo Investment in exchange for 100 percent of the holdings in AHC Dallas Properties, LLC and assumed a liability for certain capital repairs to properties retained by Belo Investment. The asset distribution was based on an equitable allocation of the properties using values established by third party independent appraisals. The Company determined that as a result of its continuing interests in these properties, the assets received in the exchange should be accounted for at the lower of fair value or historical carrying value. Accordingly, $11,191 of fixed assets and $90 of other assets received by AHC Dallas Properties, LLC in the exchange were consolidated in the Company's 2011 financial statements, and the Company A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 27 -------------------------------------------------------------------------------- Table of Contents recorded a non-operating loss of $5,018 on its investment in other expense in 2011. See the Consolidated Financial Statements, Note 4 - Investments.

Self-Insured Risks. A. H. Belo self-insures certain risks for employee medical costs, workers' compensation, general liability and commercial automotive claims and records a liability for such risks. The Company purchases stop-loss insurance and/or high deductible policies with third-party insurance carriers to limit these risks, and third-party administrators are used to process claims.

Each period, the Company estimates, utilizing third party experts, the undiscounted liability associated with its uninsured risks based on historical claim patterns, employee demographic data, assets insured and insurance policy.

The estimates associated with these uninsured liabilities are monitored by A. H.

Belo's management for adequacy based on information currently available.

However, actual amounts could vary significantly from such estimates if actual trends, including the severity or frequency of claims and/or medical cost inflation, were to change.

Pension and Other Retirement Obligations. 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 (loss) and are amortized to net periodic pension expense over the weighted average remaining life of plan participants, to the extent the cumulative balance in accumulated other comprehensive income (loss) exceeds 10 percent of the greater of the respective plan's (a) projected benefit obligation or (b) the market-related value of the plan's assets. Net periodic pension expense is recognized each period by accruing interest expense on the projected benefit obligation and accruing a return on assets associated with the plan assets. Participation in and accrual of new benefits to participants has been frozen since 2007 and, accordingly, on-going service costs are not a component of net periodic pension expense. From time to time, the Company-sponsored plans may elect to settle pension obligations with certain plan participants through the plans' master trust as part of its de-risking strategies. The Company elected not to recognize the gains or losses associated with settlements of plan obligations to participants if such settlements are less than the interest component of net periodic pension cost for the year. Accordingly, such amounts are included in actuarial gains (losses) in accumulated other comprehensive income (loss).

The projected benefit obligations of the A. H. Belo Pension Plans are estimated using the Citigroup Pension Yield Curve, which is based upon a portfolio of high quality corporate debt securities with maturities that correlate to the timing of benefit payments to the plans' participants. Future benefit payments are discounted to their present value at the appropriate yield curve rate to determine the projected benefit obligation outstanding at each year end. Yield curve discount rates as of December 31, 2013 and 2012, were 4.6 percent and 3.7 percent, respectively.

Interest expense included in net periodic pension expense is based on the Citigroup Pension Yield Curve established at the beginning of the fiscal year.

Interest expense for 2013, 2012 and 2011 was determined using beginning of year yield curve rates of 3.7 percent, 4.2 percent and 5.3 percent, respectively.

The Company assumed a 6.5 percent long-term rate of return on the plans' assets in 2013, 2012 and 2011. This return is based upon historical returns of similar investment pools having asset allocations consistent with the expected allocations of the A. H. Belo Pension Plans. Investment strategies for the plans' assets are based upon factors such as the remaining useful life expectancy of participants and market risks. The Company currently targets the plans' assets invested in equity securities and fixed-income securities to approximate 50 percent and 50 percent, respectively.

The Company-sponsored plans implemented a de-risking strategy in 2012, making lump sum pay outs of $10,526 to 889 participants. These liquidations reduced the projected benefit obligation by $14,500. These obligations were funded through the plans' master trust account and are a component of 2012 benefit payments. As the cost of these settlements was less than the interest component of net periodic pension expense, the related gain (loss) associated with these settlements was reflected as a component of the actuarial loss and included in accumulated other comprehensive loss. The Company will continue to evaluate the feasibility of additional settlement of participant obligations based on the economic benefits to the Company.

Accumulated other comprehensive loss decreased by $58,439 and increased by $10,463 in 2013 and 2012, respectively, primarily due to net actuarial (gains) losses associated with the A. H. Belo Pension Plans. The net actuarial (gains) losses associated with the pension plans included $8,522 and $21,127 of higher than estimated returns on plan assets in 2013 and 2012, respectively, combined with higher discount rates in 2013 and lower discount rates in 2012 applied against the projected benefit obligation. Actuarial losses of $1,702 and $700 were amortized to earnings in 2013 and 2012, respectively. See the Consolidated Financial Statements, Note 10 - Pension and Other Retirement Plans.

Contingencies. A. H. Belo is involved in certain claims and litigation related to its operations. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual PAGE 28 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents matter. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters. See the Consolidated Financial Statements, Note 14 - Contingencies.

Treasury Stock. The Company's board of directors authorized the purchase of the Company's Series A or Series B common stock, for use other than retirement, through open market purchases, privately negotiated transactions or otherwise.

The Company follows the guidance under ASC 505-30 - Equity - Treasury Stock, and treasury stock is recorded at cost, reducing shareholders' equity. Treasury stock purchased privately through negotiated transactions at other than market prices shall be recorded at cost and the price paid in excess of the market cost shall be accounted for according to its substance. When shares of treasury stock are subsequently sold or reissued, the cost of the treasury stock is reversed and the realized gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related tax, is recognized as a change in additional paid in capital. See the Consolidated Financial Statements, Note 11 - Shareholders' Equity.

Share-Based Compensation. The Company recognizes the granting of share-based awards at fair value in the financial statements. The fair value of option awards is estimated at the date of grant using the Black-Scholes-Merton pricing model and the fair value of restricted stock unit awards ("RSU") is the closing price of the Company's common stock on the date of grant. Total compensation cost is amortized to earnings over the requisite service period. Upon vesting, RSUs are redeemed 60 percent in A. H. Belo Series A common stock and 40 percent in cash. The Company records a liability for the portion of the outstanding RSUs to be redeemed in cash, which is adjusted to its fair value each period, based on the closing price of the Company's common stock. Prior to the Distribution, the Company's employees participated in a share-based compensation plan sponsored by the Company's former parent. The Company recorded expense for the vesting of these awards for its employees which was completed in 2011. See the Consolidated Financial Statements, Note 6 - Long-term Incentive Plans.

Income Taxes. The Company uses the asset and liability method of accounting for income taxes and recognizes deferred tax assets and liabilities based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates. The Company establishes a valuation allowance if it is more likely than not that the deferred tax assets will not be realized. The factors used to assess the likelihood of realization of the deferred tax asset include reversal of future deferred tax liabilities, available tax planning strategies and future taxable income. For the periods prior to the Distribution, the Company's results were included in the consolidated income tax returns of the Company's former parent, and the Company participates in any subsequent amendment to these tax returns or IRS audit determination as it applies to the Company's operations in accordance with the Tax Matters Agreement with its former parent company.

The Company also evaluates any uncertain tax positions and recognizes a liability for the tax benefit associated with an uncertain tax position if it is more likely than not that the tax position will not be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company records a liability for uncertain tax positions taken or expected to be taken in a tax return. Any change in judgment related to the expected ultimate resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs. Interest and penalties, if any, related to unrecognized tax benefits are recorded in interest expense. See the Consolidated Financial Statements, Note 9 - Income Taxes.

Recent Accounting Standards See the Consolidated Financial Statements, Note 1 - Significant Accounting Policies and Recently Issued Accounting Standards, regarding the impact of certain recent accounting pronouncements.

Liquidity and Capital Resources The Company's cash balances as of December 31, 2013 and 2012, were $82,193 and $34,094, respectively. The increase in cash is primarily due to the receipt of proceeds associated with the disposition of substantially all of the assets relating to The Press-Enterprise. Net proceeds totaling $50,056 were received after deducting selling costs of $7,198. In 2014, the Company received escrow proceeds of $500 and expects to collect a $753 working capital adjustment and to pay approximately $1,200 of outstanding obligations related to the sale. See the Consolidated Financial Statements, Note 2 - Discontinued Operations and Sales of Assets. Cash provided by continuing operations was $14,527, which reflected required contributions of $7,396 and voluntary contributions of $4,604 to the Company's pension plans. Cash used for continuing investing activities was $7,372, which included capital spending of $6,362 and an additional investment of $1,377 in Wanderful Media, owner of FindnSave.com. Cash used for continuing financing activities was $8,823, which included dividend payments of $6,356 and the purchase of treasury stock for $2,763.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 29 -------------------------------------------------------------------------------- Table of Contents The Company's working capital as of December 31, 2013 and 2012, was $86,345 and $75,403, respectively. After excluding assets and liabilities of discontinued operations, which are classified as current assets and liabilities, respectively, working capital increased by $51,958. In 2013, Adjusted EBITDA plus dividends received from equity method investees totaled $34,576. These amounts were used for required contributions to the A. H. Belo Pension Plans of $7,396 and capital spending of $6,362. Discretionary spending in 2013 included $6,356 of dividend payments, $4,604 of voluntary pension contributions and $1,377 for contributions to an equity method investee. The Company's pension obligations for 2014 will be approximately $10,000 and capital expenditures are estimated to be approximately $8,000. The Company anticipates EBITDA from operations to be sufficient to cover these expenditures.

As discussed in Item 1. Business, on February 28, 2014, an equity investee of the Company entered into an agreement to sell one of its business units. The sale is expected to close in the second quarter of 2014 and the Company's portion of the proceeds, net of selling costs, on the sale will be approximately $18,900. The Company expects federal income taxes to be minimal as a result of previously incurred net operating losses and is finalizing its estimate of state taxes.

The Company intends to deploy its cash in the long-term interests of the Company, its shareholders and employees as it seeks potential acquisition or investment opportunities complimenting its advertising and marketing services products. Management works aggressively to manage expenses in correlation to changes in revenue and believes cash flows generated from operations will be sufficient to meet foreseeable cash flow requirements for operations, capital spending and pension contributions. The following discusses the changes in cash flows by operating, investing and financing activities.

Operating Cash Flows Net cash provided by (used for) continuing operations was $14,527, $(4,283) and $(13,878) in 2013, 2012 and 2011, respectively. Cash flows from continuing operations increased due to lower pension plan contributions of $20,672 and $13,633 in 2013 and 2012, respectively, decreased funding of self-insured medical expenses of $2,728 in 2013 and the receipt of $1,334 related to an amended prior year tax return in 2013. Additionally, 2012 was impacted by a nonrecurring tax settlement payment of $2,961 and the receipt of proceeds of $2,410 related to the sale of a former officer's residence acquired by the Company as part of an employment agreement.

In 2013, the Company made a final contribution of $5,217 to the PTS Plan. During 2013, the Company fulfilled its obligation to this plan and the accrual and payment of contributions is now complete. Contributions to this plan in 2012 and 2011 were $4,497 and $5,306, respectively.

Investing Cash Flows Net cash used for continuing investing activities was $7,372, $8,546 and $9,057 in 2013, 2012 and 2011, respectively. Cash flows used for continuing investing activities decreased due to reduced capital expenditures in 2013 of $1,704, which is primarily due to construction costs no longer being incurred for a data center completed at The Providence Journal in 2012. These savings were offset by cash used to invest in Wanderful, an equity-method investee, of $1,377 and $705 in 2013 and 2012, respectively. The Company expects to make capital expenditures of approximately $8,000 in 2014 using cash generated from operations.

Financing Cash Flows Net cash used for continuing financing activities was $8,823, $10,870 and $3,963 in 2013, 2012 and 2011, respectively. Significant components in continuing financing cash flows include $6,356, $10,947 and $4,058 of dividends paid in 2013, 2012 and 2011, respectively. As of December 31, 2013, the Company is authorized to purchase up to a total of 1,500,000 shares of the Company's Series A or Series B common stock through open market purchases or negotiated transactions, as authorized by its board of directors. The Company purchased 421,070 shares of Series A common stock at a cost of $2,763 in 2013, and 74,130 shares of Series A common stock at a cost of $350 in 2012.

Financing Arrangements As of December 31, 2012, the Company operated under an Amended and Restated Credit Agreement (the "Credit Agreement") dated January 30, 2009, by and between the Company and certain of its subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (as amended by First through Fifth Amendments dated August 18, 2009, December 3, 2009, August 18, 2010, March 10, 2011 and May 2, 2011, respectively). The Credit Agreement, with a maturity date of September 30, 2014, provided a $25,000 working capital facility that was subject to a borrowing base. Among other matters, the Credit Agreement created an asset-based revolving credit facility secured by the Company's accounts receivable, inventory, real property and other assets.

Under certain conditions, the facility restricted payment of dividends, imposed a fixed charge coverage ratio covenant, limited investments and limited the Company's ability to divest assets. Additionally, payment of voluntary pension contributions, PAGE 30 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents declaration of special dividends and purchase of shares of the Company's common stock were permitted only as long as no borrowings were outstanding under the revolving credit facility. The Company was also required to pay commitment fees at 0.5 percent on the unused credit facility and 2.5 percent on outstanding letters of credit. The Company had not borrowed under the Credit Agreement since 2009 as cash flows from operations were sufficient to meet liquidity requirements.

On January 4, 2013, the Company voluntarily terminated its Credit Agreement to provide greater financial and operating flexibility for purposes of funding its pension plans, returning capital to shareholders, managing its investments and eliminating direct and indirect costs related to the Credit Agreement. All liens and security interests under the Credit Agreement were released and no early termination penalties were incurred by the Company as a result of the termination. Unamortized debt issuance costs of $401 were recorded to interest expense in the first quarter of 2013 as a result of the termination.

Contractual Obligations The table below sets forth the summarized commitments of the Company as of December 31, 2013. See the Consolidated Financial Statements, Note 13 - Commitments.

Total 2014 2015 2016 2017 2018 Thereafter Operating lease commitments $ 2,960 $ 1,359 $ 629 $ 469 $ 370 $ 133 $ - Capital commitments 2,172 2,172 - - - - - Total commitments $ 5,132 $ 3,531 $ 629 $ 469 $ 370 $ 133 $ - The Company expects to make required contributions of approximately $10,000 to its pension plans in 2014.

On November 14, 2013, the Company announced an $0.08 per share dividend to shareholders of record and holders of RSUs as of the close of business on February 14, 2014, which was paid on March 7, 2014.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk A. H. Belo has exposure to changes in the price of newsprint. The Company does not engage in the purchase of derivative contracts to hedge against price fluctuations that may occur. See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" for further discussion of this risk.

The investment assets and actuarial liabilities associated with the A. H. Belo Pension Plans are impacted by market factors such as interest rates, inflation and the overall economic environment. Changes in these risk factors could have a direct and material impact on the funded status of the A. H. Belo Pension Plans and the level of funding the Company is required to meet each year.

Item 8. Financial Statements and Supplementary Data The Consolidated Financial Statements, together with the Report of Independent Registered Public Accounting Firm, are included elsewhere in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company maintains "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating these disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

A. H. Belo Corporation 2013 Annual Report on Form 10-K PAGE 31 -------------------------------------------------------------------------------- Table of Contents The Company's management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2013.

Based on that evaluation, management concluded that, as of such date, the Company's disclosure controls and procedures were effective.

Management's Report on Internal Control Over Financial Reporting The management of A. H. Belo is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control system was designed to provide reasonable assurance to management and the board of directors regarding the preparation and fair presentation of published financial statements. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, an assessment of the effectiveness of internal control over financial reporting was conducted as of December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. Based on this assessment using the criteria set forth by COSO in Internal Control - Integrated Framework, management concluded that internal control over financial reporting was effective as of December 31, 2013.

Audit Opinion on Internal Control over Financial Reporting The effectiveness of the Company's internal control over financial reporting was audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included herein on page 40 of this Form 10-K, which is incorporated by reference herein.

Changes in Internal Control Over Financial Reporting There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2013, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information None.

PAGE 32 A. H. Belo Corporation 2013 Annual Report on Form 10-K -------------------------------------------------------------------------------- Table of Contents

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