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A.H. Belo Corp., the parent of The Providence Journal Co., plans to pare its work force by 500 jobs, or 14 percent, as it struggles to cope with declining advertising revenue.

“A.H. Belo continues to make notable progress in our strategy to diversify revenue and continue building strong brand equity,” Robert W. Decherd, the company’s chairman, president and CEO, said in a statement late yesterday that accompanied the release of the quarterly report. But, he added, “while these successes are transforming the company, the weak macroeconomic environment and declines in overall advertising spending have impacted AHC significantly. Given that the declines in ad revenue are unlikely to stabilize in the near term, we’re taking steps to dramatically change AHC’s cost structure.”

At The Providence Journal Co., voluntary buyouts have been offered to about 260 workers represented by The Providence Newspaper Guild, the union said in a statement on its Web site. “The Journal buyout program targets 20 job titles that the company has determined it are overstaffed. The company is seeking to cut up to 54 workers by Sept. 12.”

The company’s offer “provides 1.5 weeks pay for the first 15 consecutive years or service and 2.5 weeks pay for each year of service over 15,” the Guild noted. Employees who work fewer than 22.5 hours a week or whose job title is not among the 20 targeted by the company as “overstaffed” are not eligible, the union said, adding “Positions excluded from the buyouts include: Pre-publishing, credit office, housekeeping and most online jobs,” the Guild said.

“This marks the end of the Journal as we have known it,” added Providence Newspaper Guild President John Hill.

Decherd wrote yesterday, in a letter to shareholders, that the process will begin with a buyout offer made yesterday “to many employees of A.H. Belo newspapers.” The 500 jobs targeted for elimination are in addition to the roughly 170 full-time equivalents the company already has eliminated this year, he noted.

“We expect to complete the voluntary severance process by mid-September, and have notified A.H. Belo’s newspaper employees that if we are not able to achieve the goal of a 500 FTE reduction, an involuntary reduction-in-force will be necessary,” Decherd said. A severance payment, based on length of service, will be offered to employees who accept the company’s voluntary buyout offer, “or are part of the subsequent reduction-in-force,” he wrote.

Meanwhile, in its financial report yesterday, A.H. Belo posted a second-quarter loss of $3.20 million. That represented a 65.99-percent improvement from the preceding quarter’s $9.4 million loss but a substantial decline from the $12.30 million profit recorded for the 2007 second quarter, when the company was the newspaper segment of Belo Corp.

The loss per diluted share amounted to 16 cents in the quarter ended June 30, compared with the first period’s 46-cent-per-share loss and the 2007 second quarter’s 60-cent gain.

A.H. Belo – spun off in early February from Dallas-based Belo Corp. (NYSE: BLC) – owns and operates three major daily newspapers, the Journal, its flagship Dallas Morning News and The Press-Enterprise of Riverside, Calif.; a variety of specialty publications for the youth and Hispanic markets; the Web sites associated with its publications; and direct-mail and commercial printing businesses.

Second-quarter net operating revenue fell 15.09 percent year-over-year to $163.25 million, but increased 1.01 percent more than the first quarter. Internet revenue topped $12 million, accounting for 7.4 percent of the second-quarter total, the company said.

Advertising revenue – including print and Internet revenue – fell 20.52 percent compared with a year ago to $125.34 million, “driven by declines in classified revenue at The Dallas Morning News and The Press-Enterprise” the company said. The Press-Enterprise, which “continues to encounter strong cyclical pressures,” saw total ad revenue fall 25 percent year over year, a slight improvement from the first quarter’s 26-percent year-over-year decline, A.H. Belo added.

Meanwhile, circulation revenue companywide increased 8.54 percent year over year to $30.27 million. And other revenue rose 14.39 percent compared with the 2007 second quarter, “driven by commercial printing revenue,” to $7.64 million, A.H. Belo said.

Second-quarter operating costs shrank 5.26 percent compared with a year ago to $167.36 million. Corporate expenses “declined more than $4 million versus the same period last year,” the company said. “The decline was due primarily to a drop in direct compensation and other operating expense.”

Newspaper expenses were pared by $5.8 million, or 3.9 percent, compared with allocated costs in the 2007 second quarter. Direct compensation fell $2.7 million compared with a year ago, while newsprint expenses were down $1.9 million, thanks to “diligent control of newsprint volume in the increasing newsprint price environment,” the company said.

Among second-quarter highlights, the company “furthered its commitment to maximizing the use of its existing infrastructure, building new partnerships and investing in Internet businesses related to [its] core operations. These initiatives have the potential to develop meaningful and sustainable incremental revenue streams.”

Letters from Decherd to shareholders and colleagues – detailing those initiatives and discussing current operating conditions – can be viewed at www.ahbelo.com/invest. The options under consideration include property sales or other methods of using the company’s real estate holdings to boost revenue; further reductions in the web (paper) width at The Providence Journal and The Press-Enterprise; and cuts in travel, marketing and discretionary expenses.

“Our internal estimate is that property owned outright by AHC in Providence, and property jointly owned with Belo Corp. in downtown Dallas, could produce pre-tax proceeds of about 35 million for AHC. … However, like all real estate transactions, it is difficult to put a time-frame on this process,” Dechard wrote in his letter to shareholders.

The third quarter so far has included an investment, announced last Tuesday, in ResponseLogix. That deal will enable A.H. Belo to sell the technology company’s Internet lead management system to local auto dealers. And in late August, The Dallas Morning News – whose DallasNews.com won this year’s Edward R. Murrow National Award for best Non-Broadcast Affiliated Web site – plans to launch a “condensed” news publication, called Briefing, that will target Dallas-area households with incomes of at least $75,000 per year.

In addition, A.H. Belo said, “the company’s three newspapers have all recently secured contracts to print and/or distribute other publications.” Those contracts, it said, “will contribute at least $4.0 million of incremental revenue in 2008 and another $1.5 million in 2009.”

A.H. Belo Corp. (NYSE: AHC) owns and operates The Dallas Morning News, The Providence Journal and The Press-Enterprise of Riverside, Calif.; a variety of specialty publications for the youth and Hispanic markets; the Web sites associated with its publications; and direct-mail and commercial printing businesses. For more information, visit www.AHBelo.com.

The Providence Newspaper Guild – whose parent organization, the Newspaper Guild, is part of the part of the Communications Workers of America, AFL-CIO – represents 400 workers at The Providence Journal Co. For additional information, including details of A.H. Belo’s buyout offer, visit www.riguild.org.


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