A.H. Belo Brass Reward Themselves for Losing Money

The news about A.H. Belo paying shareholders a special dividend is a bit curious. The company’s board of directors has declared a special cash dividend of 24 cents per share. That’s in addition to the regular quarterly cash dividend of 6 cents per share. Chairman and chief executive Robert Decherd said, “Despite pension funding requirements and various business challenges, the company has consistently generated cash. As a result, we are able to distribute additional cash to shareholders.”

Generating cash and making a profit are two different things. Generally, dividends are distributed when a company is making a profit — which A.H. Belo is most decidedly not. The company has an accumulated deficit on its balance sheet of $316 million. Now let’s take a look at its performance in the first six months of this year. EBITDA was $18 million. That’s a measure of cash generated from operations. Here’s what it spent: $24 million on pension payments (ouch), $4 million on capital expenditures, $3 million on dividends, and $3 million on other working capital and financing needs. Add that all up, and it comes to $34 million. Meaning it had to get $16 million from someplace because its earnings didn’t cover its costs. More bad news: the company saw total revenues decline by 6 percent in the first six months of this year when compared to 2011.

So, yes, the company is generating cash. But the cash is going out faster than it’s coming in.

Here’s some more interesting math: according to a proxy statement filed in April, Decherd owns about 1.6 million series B shares (those are the good ones, worth 10 votes each). He owns more than 333,000 series A shares (the kind the hoi polloi like you and I can buy). So call it 2 million shares total. That means this special 24-cent dividend is worth about $480,000 to him. Nice!


  • Dan

    Since when does corporate profits have anything to do with executive bonuses? First they take their cut then lay off those who are unseen to them.

  • Joe

    Are you sure pension payments were not part of the EBITDA calculation?

  • Amy S

    In the business world, the weak are killed and eaten. I hope DMagazine has a plan for the feast.

  • Amy S

    I still believe, no matter the medium, the best writing wins.

  • Colin Z

    Tim, I loved you in the tux, but your understanding of earnings is flawed. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. Not all of the $34 million you listed comes out of EBITDA.

  • Mark

    I’m not a financial subject matter expert, and a five minute web search didn’t turn up anything to definitively support my position, but I believe EBITDA reflects the costs of retirement benefits just like it does the costs of other benefits. You don’t get to subtract these costs again just to make a point.

    I’m not arguing the morality or fairness of the special dividend, I just think you need to report your facts correctly.

  • I know my limitations, so I asked for help w the EBITDA stuff and the pension payments. I’ll ask another source and double check.

  • marisa

    In the past I have found when the ship is sinking, the shareholders drown and the Board of Directors grab a life line and make out like bandits……they have the power.

  • Rocco

    Sure Tim. You just take your time checking your facts AFTER you write the blog post.

    One source fact checking is always a fine example of journalism.

    And I think its great that Dmag is having someone admittedly short on knowledge of financial and business stuff, write blog posts about financial and business stuff.


    Kinda like Wilonsky having a radio show – about football – oh, wait….

  • @Rocco: It is a travesty that Robert Wilonsky has a show on the Ticket and you don’t. But save your ire for those responsible for this injustice. I’m not your enemy.

    I asked our CFO to double-check AH Belo’s 10Q for how the pension payments figure into the math. The figures in this post are accurate.

  • Not that Jon Abel

    EBITDA includes annual pension expense, which is a different number than pension payments. Pension expense is the amount the company charges against earnings for the fact that it has a pension program. It is basically a measure of the net additional liability incurred because the people on the company’s pension plan continue getting older, net of the expected return on pension plan assets. A.H. Belo recorded $1.6 million in pension expense in 2011.

    Pension payments are the actual cash funds paid into the pension plan (which is a separate group of assets from the company’s other assets) to ensure that there is enough money available to pay pension obligees. Because Belo’s pension plan is underfunded, it had to contribute $55 million in cash its pension funds in 2011. Even with this contribution, the company’s pension fund is still short about $145 million relative to the projected present value of future obligations to pensioners.

    Also, EBITDA, though closer to being a measure of cash than net income, is not a measure of cash. The company’s statement of cash flows for the first 6 months of 2011 shows that it’s burned through $16.2 million of cash this year, after $29.9 million in cash outflow last year, including the pension plan payments. The pension overhang is going to be a significant burden on cash for years to come as well.

    Hard to see how that’s consistent with the statement that the company has “consistently generated cash.”

    • @Not That Jon Abel: Thank you for your help and corroboration.

  • Not that Jon Abel

    Penultimate paragraph should have read:

    “The company’s statement of cash flows for the first 6 months of 2012….”

    Not so good with numbers.

  • Frauline

    Tim – since when did you start ghost blogging for Wick? I thought that was Mooney’s job.