Michael Lavey - VP and Controller James Moroney - Chairman, President and CEO Daniel Blizzard - SVP and Secretary Tim Storer - Co-founder and CEO of Distribion, Marketing FX and Vertical Nerve.

Barry Lucas - Gabelli & Company Chris Mooney - Esposito Fred Nagle - Trowbridge International Inc..

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter and Full Year 2014 Financial Results Conference. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

[Operator Instructions] Also as a reminder today’s teleconference is being recorded. And at this time I will turn the conference call over to your host, Vice President and Controller Mr. Mike Lavey. Please go ahead, sir..

Thank you, Tony. Good morning everyone, welcome to A.H. Belo Corporation’s fourth quarter and full year 2014 financial results conference call. Jim Moroney, our Chief Executive Officer will lead today’s call. I will then provide a brief look at our fourth quarter results leaving plenty of time for Q&A.

In addition to Jim we are joined here by Dan Blizzard, Senior Vice President; and Grant Moise, Senior Vice President of Business Development and Tim Storer, Co-founder and CEO of Distribion, Marketing FX and Vertical Nerve. Yesterday evening we issued a press release announcing fourth quarter and full year 2014 net income.

We have posted this release on our website under the Investor Relations section. Unless otherwise specified, comparisons used in today’s call measure fourth quarter and full year 2014 performance from continuing operations, against fourth quarter and full year 2013 performance from continuing operations.

In conjunction with the sale of our newspaper operations in both Providence, Rhode Island and Riverside, California. Both The Providence Journal and The Press-Enterprise newspaper operations are reported as discontinued operations in the company’s financial statements.

Accordingly, the results from continuing operations consist primarily of The Dallas Morning News Incorporated activities. Our discussion today will include forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements.

Any additional information about these factors is detailed in the company's press releases and publicly available filings with the SEC. Finally, today’s discussion will include non-GAAP financial measures.

We believe that non-GAAP financial measures provide useful, supplemental information to assist investors in determining performance comparisons to our peers. Reconciliations to the most directly comparable financial measures presented in accordance with GAAP are provided in our press release on our website under the Investor Relations section.

Now, I will turn you all over to Jim.

Jim?.

Thank you, Mike and good morning everyone. A.H. Belo Corporation announced net income from continuing operations, of $3.07 per for fully diluted share in the first quarter of 2014, compared to net income from continuing operations of $0.23 per share in the fourth quarter of 2013.

For the full year 2014, the company had net income from continuing operations of $3.82 per fully diluted share, compared to net income from continuing operations of $0.07 per share in 2013. The company delivered 2014 adjusted EBITDA from continuing operations of $6.3 million in the first quarter and $17 million for the full year 2014.

Although corporate revenues remain challenged our investments in new and diversified sources of revenue are producing returns.

Our digital advertising grew by 5.6% during 2014 and our marketing services businesses, which primarily consisted in 2014 of Speakeasy and 508 Digital grew over 40% from the prior year period and what is only the second full year of operations for these two businesses. We also expanded our commercial printing revenues by 76%.

Together digital advertising, marketing services and our commercial printing contributed more than $11.5 million of incremental revenue in 2014.

During 2014, we completed several transactions that permitted us to return significant capital to our shareholders, while providing sufficient liquidity to make additional important investments that can continue to diversify our sources of revenue and make us less dependent on revenues tied to the paid print edition.

These transactions were the sale of the Providence Journal our investment in Classified Venture and the sale of several non-strategic real estate properties. In January of this year we announced the acquisition of three marketing services businesses Distribion, Vertical Nerve and Marketing FX.

This acquisition provides us with an even more comprehensive suite of marketing products that help our customers sell more of their goods and services to consumers. We will continue to explore further investment and acquisition opportunities that expand our suit of marketing product and further diversifies our sources of revenue.

In evaluating acquisition, our primary focus is directed at marketing companies with established financial performance and strong management teams. We look for companies for which we can leverage our sales force, our marketing resources, our existing customer relationship, and our brand equity.

In order to provide these companies a competitive advantage in the marketplace and thereby increased the trajectory of the revenue growth. Mike will now provide more detail around fourth quarter and full year 2014 financial results.

Mike?.

Thanks, Jim. A. H. Belo reported fourth quarter net income from continuing operations of $3.07 per fully diluted share, the increase of $2.84 per share from the fourth quarter of 2013. For the full year 2014, the company’s net income from continuing operations was $3.82 for fully diluted shares, an increase from $0.07 per share in 2013.

Fourth quarter and full year results include gains on non-recurring divestiture transactions related to the company’s investment in Classified Ventures partially offset by non-cash settlement charges related to the company’s pension plans.

Adjusted earnings before interest, taxes, depreciation and amortization or EBITDA from continuing operations was $6.3 million in the fourth quarter, a decrease of 28% compared to the prior year period. Adjusted EBITDA for the full year 2014, was $17 million, a decrease of 9% compared to the prior year.

Total revenue in the fourth quarter was $73.2 million remaining flat with the prior period. For the full year 2014, total revenue decreased 1% to $272.8 million the lowest year-over-year decline since our spin-off in 2008 and was driven by growth in digital advertising revenue, marketing services revenue and printing distribution and other revenue.

Total consolidated operating expense in the fourth quarter was $80.2 million, a 17% increase compared to the prior year period. Total consolidated operating expense was $280.5 million for the full year 2014 a 2% increase to the prior year.

These increases were primarily due to a $7.6 million charge resulting from pension settlements in the fourth quarter. Higher delivery cost and labor cost related to additional printing and distribution business, offset by lower salary and newsprint expenses.

If expenses associated with the one-time pension charge in the new printing contract were excluded total expenses for the year would have declined by $7.7 million. With respect to the company’s pension plans in the fourth quarter of 2014 the company made a voluntary contribution of $20 million.

The company previously made required contributions in 2014 of $9.9 million. The company does not anticipate any required cash contributions to its pension plans in 2015.

In 2014 the liability for the net unfunded position the company’s pension plans increased by $15.8 million from the prior year due to actuarial adjustments resulting from a decrease in the discount rate and adoption of new mortality tables, partially offset by favorable investment performance and contributions made during the year.

The net unfunded position of the pension plans was $65.9 million as of December 21, 2014 and the composite discount rate for the plan’s liability was 3.7% compared to 4.6% on December 31, 2013.

As a result of the divestiture of the newspaper operations of the Providence Journal and our investment in Classified Ventures the company generated taxable income in 2014. The tax provision recognized was reduced for changes in the valuation allowance, which primarily resulted from the use of $19.6 million of net operating loss carry forwards.

Turning to the balance sheet, total assets were approximately $298.7 million as of December 31, 2014 and included a $158.2 million of cash and cash equivalents. Capital expenditures were approximately $3.3 million in the fourth quarter and $7.8 million for the full year of 2014.

On December 31, 2014 the company had approximately 1200 full time equivalent employees a decrease of approximately 23% compared to the prior year, primarily due to the sale of the Providence Journal during 2014. Now I’ll turn it back to Jim..

Thank you, Mike. I previously mentioned our acquisition in January of three marketing services businesses. I’d like to take a couple of minutes here to discuss the investment and its role in our strategy to diversify our sources of revenue.

On January 2nd we completed the purchase of a majority ownership of Distribion, Vertical Nerve and Marketing FX for $15.3 million, which included acquisition cost. The existing Management Team led by Co-founder and CEO, Tim Storer, who is here with us today, will maintain their current roles in day-to-day operations.

Distribion provides a local marketing automation solution that allows organizations to easily create, distribute and measure marketing campaigns across numerous channels including email, social media and direct mail.

The platform also provides a real time access to millions of consumer and business records that allow marketers to easily target their ideal customers. It also allows marketers to centralize control over marketing functions, asset management, store front development and sales enablement tools.

Vertical Nerve is a digital optimization agency that enables clients to increase web traffic to their sites and improve their online conversions. It is a leading agency in the region and is a certified partner in Google Analytics, Google AdWords and Optimizely as well as a credit professional for being at.

These services combined with Marketing FX, which is a turnkey resource that provides print packaging, ad specialty and fulfillment services to companies nationwide will deliver premium marketing solutions for the clients of the Dallas Morning News and its affiliated businesses.

Over the coming months we’ll be making strategic investments to increase the staff of these three companies to target growth opportunities available in the Dallas/Fort Worth market.

Tim Storer will be increasing his sales team and we’ll be investing in the back office and fulfillment functions to allow the businesses to scale with the anticipated growth. These companies will continue to focus on enterprise level clientele and service the backbone of their existing customer base.

Distribion, Vertical Nerve and Marketing FX will also be incorporated into the broader Dallas Morning News portfolio of marketing channels over the next six months.

We know there are numerous synergistic opportunities to leverage these services into the existing Dallas Morning News customer base through the company’s sale force of over 80 sales representatives.

In addition Speakeasy will serve as a content development layer that can be served on top of the Distribion platform, adding an additional level of service that both companies can leverage to expand their customer base and improve performance.

Finally, digital will continue to operate as the digital marketing services provider to the small and medium businesses across Dallas Fort Worth while the new companies will continue to focus on larger local and regional customers.

The addition of these companies helps the Dallas Morning News maintain its place as a leading multi-channel media marketing company in the Dallas Fort Worth area. Also in 2014, we partnered with other major media companies to make an investment in Matter a San Francisco based venture capital firm and incubator.

Matter utilizes a rigorous selection process to identify star ups that are developing normal and creative voice technology to be used to enhance the way consumer consumers engage with journalism.

In addition, we plan to leverage the culture of innovation that Corey Ford has built into the Matter to further drive our efforts around sustaining innovation, which is a critical component of our business strategy. And operator with that we are ready for questions..

Thank you very much. [Operator Instruction] First question will come from Barry Lucas with Gabelli & Company. Please go ahead..

Good morning, Jim, thanks for taking the question..

Good morning, Barry..

A couple of items, maybe you can just review what the remaining real estate is you have sold a couple of little pieces in the fourth quarter but what’s left and what are the prospects?.

Great, I am going to turn it over to Dan..

Hi, Berry, how are you this morning?.

Good, thanks..

So in Dallas we have got four properties that remain in Downtown Dallas that are building and parking lots that we have available and then in Providence we have got three Downtown properties as well as a standalone property that is just outside of Downtown and those properties were probably range together in value from $20 million to $25 million.

We are actively marketing the properties in Providence, but we are not currently actively marketing the properties in Dallas as they generate enough income through contract parking to cover their costs and allow us to take a longer term view on how we can monetize those assets at the right time..

Great, thanks.

And with this I am just trying to understand a couple of cash items, so is there a remaining tax liability for the sale of Classified Ventures or cars.com that will come out of the cash on the balance sheet?.

Yes, that amount is accrued in our balance sheet at year-end and approximately $9 million..

Okay.

And similarly I just want to be sure that that pension charge of $7 million in change that was non-cash?.

That is correct, that was the previously booked actuarial adjustments to the accounts that cashed out..

Okay.

And just going to the P&L here, I understand that pension charge is contained the salary line, employee income?.

That is correct..

Now, if we go down one line production distribution had a fairly sizeable bump up is that reflecting the investments if you will, investments spend through the P&L on the newer business and I won’t say that a run rate, but how should we be thinking about the cost side of the equation?.

Well that is related to you are right the new businesses the additional commercial printing, increase in digital marketing services revenue as well as Crowdsource and Untapped activity..

Okay, pretty much it for me I was just wanted to get a sense here of kind of two areas, one on the commercial print, given the decline in print ads what kind of capacity do you think you have to take on additional printing jobs in Dallas?.

Barry this is Jim when we took on the Fort Worth Star-Telegram last year in March we pretty much filled our presses to capacity with live deadline type publications of any real scale, could we still take on a few smaller live deadline regional newspaper type contracts yeah, but I don’t have a percentage I’ll put against it, but we’re pretty full today across all seven of our press lines as far as live deadline now you get outside of the 10 to 2 O’clock window and we’ve got obviously plenty of capacity, but the jobs that these kinds of presses are set up for tend to be very large newspapers that are publishing to a deadline so they can get the distribution out.

So we’re pretty full..

Okay. Last one from me I promise, if I look at sort the model which continues to show declines in fiscal advertising in the Morning News and then try to kind of handicap what’s going on in the digital space.

When would you like to predict if you would or will not predict but look into the crystal ball and see a steady increase if you would in total revenues so what is the real cross over point where one can feel comfortable?.

Barry that’s obviously what the whole strategy is aimed to do we’re trying to expand the sources of revenue that we have that aren’t tied to paid print editions so that we can do just what you said.

The trick in all this is what are going to be the declines in print ad revenues, what’s that run rate going to be and depending on what that is, it changes the outlook and the forecast. As you could see we got to down 1% this year, I think last year we were down about 1.9% so we’re gaining on it.

So I don’t want to put out forecast that I can’t stand behind because I’m not I don’t just don’t know what’s going to happen with print ad revenues particularly but I’m hoping that over the next 24 months that if we can I think really depending on our ability to acquire some businesses that have given us other channels of marketing like we did with Tim’s companies that is going to make the real difference and whether that’s going to be shorter or longer on that horizon.

If we’re unable to make these acquisitions that we will still be doing some organic innovation and bring some new products to market or extending current products like one of our magazines this year we’re going to extend we had our FD Magazine, then we had FD Love which is a wedding publication, now we’re extending it into FD Homes, and we’ll have two publications this year, Grant, four FD Homes.

So we’ll keep doing some of that and that really is going to answer that question. If we did everything right like us too and as we planned I think in probably 24 months I think we could be there..

Great thanks very much, Jim..

Thank you [Operator Instructions] Our next question will come from Chris Mooney with Esposito Global. Please go ahead..

Good morning..

Hi, Chris..

Congratulations on a very successful year for the shareholders Jim, it’s been very nice sort of 18 months I guess..

Thank you, Chris I appreciate that very much..

Couple of just sort of clean up questions on the cash that Barry was asking about, I did a quick back of the envelop and ended up after the dividends paid, after the acquisitions and after assuming I take out the $9 billion in tax I get it to about $82 million, $83 million in cash left.

Is that about right?.

Yeah that’s a pretty good number..

Okay, good.

CapEx budget for this?.

It’s $8 million and one of the big part of that Chris is that our GuideLive.com and sort of that’s the first part of a complete redesign of our website starting at the screen level and moving up to the tablet and into the desktop and we just actually launched the GuideLive.com beta yesterday if you type in GuideLive.com into your browser and go straight there you will see the beta and I have gone through it and it’s really exciting and I think shows what’s the comments we take the same development out across the rest of our news and information we publish..

Great.

On the real estate the $20 million to $25 million was that addressing the four properties in Providence or the four lots in Dallas and the Providence properties?.

Yes it’s all eight properties to...

All eight, okay, thank you.

You got a CFO search going on making progress?.

Yeah, we are making very good progress, we have interviewed a lot of candidates a lot of very well quantified candidates and I think Chris with any luck next week we could be making an offer and shortly thereafter hopefully making announcement.

We have a candidate who I think very much wants to come to work for us we want this person to come to work for us as well and the person has gone through I would call a gauntlet of interviews with all the kinds of people here in John Beckert, who the heads up our Audit Committee and so forth and I am really excited, but I have got one final visit with this person next week and then all that goes well as I have planned it will, hope it will we will make an offer..

Great and good to hear.

Print circulation the pricing for the monthly and daily et cetera we kind of have you kind of concluded or kind of maxed out on that?.

Say that again now the….

For the Morning News, for the….

The pricing for home delivery?.

Yes, correct..

No we are continuing to take up the price of home delivery we will take it up again this year as you know we raise single copy pricing last year on the daily side by $0.50 so we’re now the $1.50 daily and we are continuing to take up the price of home delivery.

But Chris what we are doing is we segment the marketplace and we find those segments where there is greater inelasticity in the pricing where we could take it up more, in some places where there is no inelasticity and we don’t take it up at all.

So it’s much scientific if you will segmentation process than say when we did it in 2009 and everybody got the same price increase and that’s how it work.

So we use a company called Matter Economics we have using them for several years now and they probably do this work for 152 papers, 200 papers across the country they are very good at it and it’s proven to be successful..

Okay, let’s see.

The acquisition front you finally made one or set of ones back in January are you still looking for additional acquisitions for the cash?.

Yeah, absolutely.

We as I said in the call earlier, we have got to continue to expand the marketing channels that we can provide to our customers so they can reach their customers in different ways and sell more good and services, I am very excited about the three companies that we bought that were co-founded by Tim who is here and we are looking for other similar kinds of acquisitions in terms of the magnitude of the acquisition, but we want of course different marketing channel.

So that when the customers come to us and as they have traditionally but back in the day just for print advertising we want to be able say to them look we have many, many ways to reach your targeted customers and let us put together a bundle of these channels and then optimize way to give you the best return on investment for your marketing dollar.

And we want to be at that place that more customers here and does more businesses they come to us first and they say alright help me, help me make my marketing and investment not an expenses and once we get a good investment from them they can go talk to the TV stations, the radio stations and everybody else..

Okay.

In describing those businesses we’re going to have a lot of questions I am sure from myself I think eight funds on Wednesday when we’re in your offices, so I’ll say most of that, but it sounded like you kept saying in Dallas, in the Dallas area it sounded to me like a lot of those businesses could leverage out of the Dallas area?.

So I’m going to let Tim address a little bit, but you’re right in that even his current customer base his enterprise level clients a lot of them are outside of the Dallas Fort Worth area what we’re saying of course is that the Dallas Morning News customer base tends to be Dallas Fort Worth centric and when we started up Speakeasy I would say 75% grant something like that of our initial customer base our initial 40 or 50 customers were previously customers of the Dallas Morning News or were customers to Dallas Morning News to whom we introduced Speakeasy to, so we’ve sort of two tracks here, one is Tim’s track that he has built his company up with enterprise level clients around the country now we’re going to try to help with the Dallas Morning News channels do a deeper dive into our customer base in the Dallas Fort Worth market.

I mean Tim you want to pick up on that a little bit..

Yeah absolutely, hi Chris this is Tim.

The very high level specifically speaking around Distribion as Jim alluded to we provide a marketing software solution that was built specifically to help address the marketing needs of organizations that leverage a local sales and marketing strategy, certainly those organizations can live well beyond the DFW [indiscernible].

At a high level the software allows organizations to easily create distribute highly personalized marketing messages that target local prospects across a variety of communication channels that include the email, social drive mail and more.

What’s really exciting about this opportunity is that our solution can really be sold at an enterprise SaaS subscription model as we do today for large organizations that are really looking to want a platform to conduct and control all local marketing initiatives across their enterprise.

Similarly however we do have the ability to sell the solution based upon a campaign volume model and that’s anyone who simply wants to conduct a series of targeted local marketing campaigns, as far as the dealer sales team is concerned certainly there’s going to be a lot of activity in that campaign volume model specific to the DFW local market.

But we’re also going to continue to go after and secure enterprise SaaS subscription deals outside that DFW market place as well..

Great, I look forward to the discussion next week and I’ll stop there thank you very much again Jim and all for a really great 18 months..

Thank you, Chris we’ll look forward to seeing you and your team on Wednesday..

Thank you very much. At this time there is, actually we do have a question just coming in that’s from Fred Nagle with Trowbridge International Inc. please go ahead..

Jim, good morning..

Hey, Fred..

What a great year and thank you.

If everything works out and I know this is theoretical, what would you like to see the company look like in three years in terms of sales and earnings and what components of those things would be?.

So Fred we ended last year with about 30% of our revenue coming from print advertising, about 30% coming from print subscription revenue and other components I can go into, but the whole sort of marketing services area was somewhere around 8% to 10%, I think with the acquisition of Distribion and Vertical Nerve and Marketing FX that’s going to grow to probably about 16% to 17% in 2015 and if you add in our Crowdsource and a couple of other things you can get that number to about 20% of our total revenue.

I’d like to see that number be in three years I’d like to see that number be in the 35% to 40% range, which would be a combination of two things, one, acquiring more of those businesses starting or extending current businesses like those that we have and then of course you get some decline in the denominator as the print revenue goes down and you can’t keep the circulation goes down to some degree based on print and volume decline.

So those two effects I think we could get this into the 35% to 40% range and I think in three years that would be a good place to be I think we’d have the company in very good financial shape with 40% or more of our revenues in a growth pattern, a good another I would say 30% or so of them and so I would call kind of a holding pattern something that’s got moderates very slow decline and then you are going to have 25% to 30% this is going to be really tied to print volumes and it’s just going to continue to do down.

We have based our strategy on that I am not happy about it, but I am sober about it the way we’ve been dealing with for seven years and we are going to build our strategy overcome that and that’s what we are doing. So I think that would be my thought for three years from now..

Okay, that could be very saying. Thank you..

Thank you for it..

At this time there is no additional questions in queue. Please continue..

Alright, well I want to thank everybody for being on the call. We appreciate, we look forward to really great 2015 and we will be back after the first quarter. Thank you, all. Thank you, Tony..

Thank you. And ladies and gentlemen this conference will be available for replay after 12 central today, running through March 6th at midnight. You may access the AT&T Executive payback service at any time, by dialing 800-475-6701 and entering access code of 351809, international participants may dial 320-365-3844.

Once again those phone numbers are 800-475-6701 and 320-365-3844, using the access code of 351809. That does conclude your conference call for today. We do thank you for your participant and for using AT&T Executive Teleconference. You may now disconnect..