Tuesday, July 29, 2008

July 28, 2008

To: All Employees

From: Ron Redfern

Dear Colleagues,

Today, as you know, our chairman, Robert Decherd, announced a number of initiatives that A. H. Belo Corporation is undertaking in response to the current adverse business environment that the newspaper industry is struggling with in this fast-changing media environment.

At our recent town hall meetings in June we shared with you the challenges that the current economic climate continues to have on our business here in the Inland region of Southern California. Because of our dependence on housing and construction, we have been hit worse than most newspapers across the country. However, our sister newspapers, The Dallas Morning News and The Providence Journal, are experiencing similar performance struggles as a result of this downturn.

Thanks to your efforts over the past 18 months we have been successful in making significant improvements to our business operations that have reduced expenses without compromising the quality of our products. However, as we noted in our town hall sessions, these improvements have not outpaced the declines we continue to experience in classified ad revenues nor the significant increases in newsprint prices. Unfortunately, the outlook for the foreseeable future over the next 12 to 18 months continues to remain bleak for our business, particularly on the revenue front.

Consequently, as Jim Moroney announced today, the Corporation, and thus our Company, must continue to look for ways to reduce overall expenses. One of the steps announced directly affects all of us as fellow employees here at the Press-Enterprise Company. The Corporation is making a voluntary severance offer to many of the employees in A. H. Belo’s Companies. As noted in the communications you received today, this voluntary program will provide enhanced severance benefits as well as outplacement services and a COBRA opportunity for eligible employees who elect to accept it and whose acceptance is confirmed by our Company.

This offer is being made to a large number of employees possible across the Company. It is our hope that this offer will encourage a substantial voluntary workforce reduction within the Company. Should that not occur, the Company will need to implement an involuntary reduction in force with a lesser severance package than the voluntary severance offer. However, if more eligible employees accept the offer than business conditions allow, the actual number of eligible employees allowed to participate in the voluntary severance program will be determined on a first come, first served basis.

In addition to the initiatives that are being announced at the corporate level, we find it is necessary for the Company to undertake additional actions locally to further reduce expenses here as well. As was mentioned at our June meetings, we have been evaluating a number of options to do this. Over the next three months we will be implementing several of them, a few of which are noted below:

· We will be implementing action plans to further conserve newsprint and reduce distribution and circulation expenses. These will include reducing our current web width from 48” to 46,” cutting back circulation in the Desert, and moving NIE from print to solely an online service. These initiatives and others will provide significant cost savings.

· On the news and content side for print and online we will be reducing syndicate and wire services, consolidating business content resources, and continuing to rethink entertainment content as well as structural changes in news and online we might make to reduce expenses and maintain optimum focus on local news coverage.

· We will be making changes in page layout and ad production, and realigning our production workflow to extend ad deadlines to reduce expenses and provide more selling time to capture additional revenue on a daily basis. And we will be looking at outsourcing more functions.

Unfortunately, the circumstances in which we are operating require the Company to make these very difficult decisions to reduce our workforce and expenses. We are sensitive to the impact our decisions will have on some of our fellow employees; however, we can’t be na├»ve and sugarcoat our current business situation. Our ultimate responsibility is to ensure we remain financially viable so we can sustain this business, preserve our civic mission and continue to publish this newspaper and the many other products in our portfolio now, and those that will be created in the future.

There are some who say our industry is facing its demise, but tell that to the 124 million people in this country who still read a newspaper or use our websites. For 130 years, The Press-Enterprise has weathered economic downturns and still we continue to deliver the best local news in our region, in more ways than ever, to a market of over 4 million people and growing.

While we’re struggling from a financial standpoint, it is important to remember that the fundamentals of our media franchise in this Inland region are exceptionally strong. Our audience has grown 33% from last year to 1.2 million people. Our products reach 65% of the total adults in the region. The readership of our core newspaper product is up 6% year-over-year; in fact, ours is the only one of the top five circulation newspapers in the L.A. DMA to show readership growth this year. Overall penetration for our newspaper remains in excess of 30%, second highest in all of Southern California. The number of local retail businesses advertising with us has increased 8% over last year. And the recent outpouring of positive support for our Local Plus section demonstrates that our strategy to be the preeminent local/local news provider in the region is working.

The Press-Enterprise continues to maintain a stable and growing audience and advertiser base. Add to that a diverse local economy and the expected future population growth of 13% in our region over the next five years, and our Company is positioned for future success, in spite of the challenges we’re working through now.

Starting today and continuing through August 8, 2008 vice presidents, directors and managers will be having department meetings with employees to discuss the voluntary severance offer. At that time eligible employees will be provided with individual letters regarding the voluntary severance offer. The letter will include the specific dollar amount of the severance and the COBRA opportunity for each employee eligible.

On behalf of senior management of the company, I want to thank each and every one of you for your steadfast commitment and contribution to The Press-Enterprise at this time of significant challenge.


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