XNYS:BLC Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-8598

 

 

Belo Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   75-0135890

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. employer

identification no.)

400 South Record Street

Dallas, Texas

  75202-4841
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (214) 977-6606

Former name, former address and former fiscal year, if changed since last report.

None

 

 

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

   Outstanding at July 31, 2012  

Common Stock, $0.01 par value

     103,112,373

 

* Consisting of 93,452,193 shares of Series A Common Stock and 9,660,180 shares of Series B Common Stock.

 

 

 


Table of Contents

BELO CORP.

FORM 10-Q

TABLE OF CONTENTS

 

         Page  
PART I   FINANCIAL INFORMATION   
Item 1.  

Financial Statements

     2   
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     16   
Item 3.  

Quantitative and Qualitative Disclosures about Market Risk

     22   
Item 4.  

Controls and Procedures

     22   
PART II   OTHER INFORMATION   
Item 1.  

Legal Proceedings

     23   
Item 1A.  

Risk Factors

     23   
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     23   
Item 3.  

Defaults Upon Senior Securities

     23   
Item 4.  

Mine Safety Disclosures

     23   
Item 5.  

Other Information

     23   
Item 6.  

Exhibits

     24   
 

Signatures

     29   

 

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Table of Contents

PART I.

Item 1. Financial Statements

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

Belo Corp. and Subsidiaries

 

     Three months ended
June 30,
    Six months ended
June 30,
 

In thousands, except per share amounts (unaudited)

   2012     2011     2012     2011  

Net Operating Revenues

   $ 177,619      $ 166,379      $ 333,517      $ 317,849   

Operating Costs and Expenses

        

Station salaries, wages and employee benefits

     56,437        54,525        112,136        108,361   

Station programming and other operating costs

     48,074        52,565        93,391        102,761   

Corporate operating costs

     8,550        6,692        16,282        12,991   

Pension settlement charge and contribution reimbursements

     —          —          —          20,466   

Depreciation

     7,472        7,707        14,934        15,631   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     120,533        121,489        236,743        260,210   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

     57,086        44,890        96,774        57,639   

Other Income and (Expense)

        

Interest expense

     (17,714     (18,050     (35,376     (36,033

Other income, net

     1,378        649        1,879        829   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (16,336     (17,401     (33,497     (35,204

Earnings before income taxes

     40,750        27,489        63,277        22,435   

Income taxes

     14,917        9,402        23,152        8,662   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     25,833        18,087        40,125        13,773   

Less: Net (loss) attributable to noncontrolling interests

     (98     —          (98     —     

Net earnings attributable to Belo Corp.

   $ 25,931      $ 18,087      $ 40,223      $ 13,773   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Share

        

Basic

   $ 0.24      $ 0.17      $ 0.38      $ 0.13   

Diluted

   $ 0.24      $ 0.17      $ 0.38      $ 0.13   

Weighted Average Shares Outstanding

        

Basic

     103,774        103,626        103,854        103,515   

Diluted

     104,068        104,022        104,163        103,917   

Dividends declared per share

   $ —        $ 0.05      $ 0.08      $ 0.05   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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Table of Contents

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Belo Corp. and Subsidiaries

 

     Three months ended
June 30,
     Six months ended
June 30,
 

In thousands (unaudited)

   2012     2011      2012     2011  

Net earnings

   $ 25,833      $ 18,087       $ 40,125      $ 13,773   

Other comprehensive income:

         

Amortization of net actuarial loss, net of tax

     624        442         1,248        884   
  

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income

     26,457        18,529         41,373        14,657   

Less: comprehensive (loss) attributable to non-controlling interests

     (98     —           (98     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive income attributable to Belo Corp.

   $ 26,555      $ 18,529       $ 41,471      $ 14,657   
  

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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Table of Contents

CONSOLIDATED CONDENSED BALANCE SHEETS

Belo Corp. and Subsidiaries

 

In thousands, except share and per share amounts (unaudited)

   June 30,
2012
    December 31,
2011
 

Assets

    

Current assets:

    

Cash and temporary cash investments

   $ 125,669      $ 61,118   

Accounts receivable, net

     140,018        149,584   

Income tax receivable

     14        31,629   

Other current assets

     20,591        16,692   
  

 

 

   

 

 

 

Total current assets

     286,292        259,023   

Property, plant and equipment, net

     151,356        157,115   

Intangible assets, net

     725,399        725,399   

Goodwill

     423,873        423,873   

Other assets

     40,355        46,195   
  

 

 

   

 

 

 

Total assets

   $ 1,627,275      $ 1,611,605   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Current portion of long-term debt

   $ 175,810      $ —     

Accounts payable

     17,839        19,677   

Accrued expenses

     36,468        34,961   

Short-term pension obligation

     19,737        19,300   

Accrued interest payable

     10,106        10,378   

Income taxes payable

     5,814        12,922   

Dividends payable

     —          5,189   

Deferred revenue

     5,427        3,435   
  

 

 

   

 

 

 

Total current liabilities

     271,201        105,862   

Long-term debt

     711,638        887,003   

Deferred income taxes

     251,977        244,361   

Pension obligation

     83,968        93,012   

Other liabilities

     11,763        14,164   

Shareholders’ equity:

    

Preferred stock, $0.01 par value. Authorized 5,000,000 shares; none issued

    

Common stock, $0.01 par value. Authorized 450,000,000 shares

    

Series A: Issued 93,314,909 shares at June 30, 2012 and 93,672,489 shares at December 31, 2011

     933        937   

Series B: Issued 9,796,741 shares at June 30, 2012 and 10,115,193 shares at December 31, 2011

     98        101   

Additional paid-in capital

     1,087,014        1,090,513   

Accumulated deficit

     (705,126     (737,007

Accumulated other comprehensive loss

     (86,093     (87,341
  

 

 

   

 

 

 

Total Belo Corp. shareholders’ equity

     296,826        267,203   

Noncontrolling interests

     (98     —     
  

 

 

   

 

 

 

Total shareholders’ equity

     296,728        267,203   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,627,275      $ 1,611,605   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Belo Corp. and Subsidiaries

 

     Six months ended June 30,  

In thousands (unaudited)

   2012     2011  

Operations

    

Net earnings

   $ 40,125      $ 13,773   

Adjustments to reconcile net earnings to net cash provided by operations:

    

Depreciation

     14,934        15,631   

Pension settlement charge

     —          28,699   

Pension contributions

     (8,051     (19,557

Deferred income taxes

     7,476        (1,540

Employee retirement expense

     1,328        1,810   

Share-based compensation

     1,605        1,435   

Other non-cash items

     911        554   

Equity (income) loss from partnerships

     (1,024     (750

Other, net

     667        (844

Net change in operating assets and liabilities:

    

Accounts receivable

     9,242        3,109   

Income tax receivable

     31,615        —     

Other current assets

     749        (2,225

Accounts payable

     (2,123     (4,139

Accrued expenses

     5,084        (13,942

Accrued interest payable

     (272     174   

Income taxes payable

     (7,108     (3,290
  

 

 

   

 

 

 

Net cash provided by operations

     95,158        18,898   
  

 

 

   

 

 

 

Investments

    

Capital expenditures

     (10,788     (6,741

Proceeds from disposition of real estate

     —          5,919   

Other investments, net

     (477     459   
  

 

 

   

 

 

 

Net cash used for investments

     (11,265     (363
  

 

 

   

 

 

 

Financing

    

Net proceeds from revolving debt

     —          32,000   

Payments on revolving debt

     —          (43,000

Dividends paid on common stock

     (13,531     —     

Common stock repurchased

     (5,964     —     

Net proceeds from exercise of stock options

     76        103   

Excess tax benefit from option exercises

     77        114   
  

 

 

   

 

 

 

Net cash used for financing

     (19,342     (10,783
  

 

 

   

 

 

 

Net increase in cash and temporary cash investments

     64,551        7,752   

Cash and temporary cash investments at beginning of period

     61,118        8,309   
  

 

 

   

 

 

 

Cash and temporary cash investments at end of period

   $ 125,669      $ 16,061   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Belo Corp. and Subsidiaries

(in thousands, except per share amounts)

 

Business Organization, Consolidation and Significant Accounting Policies
(1) The accompanying unaudited consolidated condensed financial statements of Belo Corp. and subsidiaries (the Company or Belo) include equity investments, in which Belo owns a greater than 50% interest. The consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

 

Belo considers all highly liquid instruments purchased with a remaining maturity of three months or less to be temporary cash investments. Such temporary cash investments are carried at fair value on a recurring basis using Level 1 inputs.

 

The Company’s operating segments are defined as its television stations and cable news channels within a given market. The Company has determined that all of its operating segments meet the criteria under Accounting Standards Codification (ASC) 280-10 to be aggregated into one reporting segment.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

All amounts are in thousands, except per share amounts, unless otherwise indicated.

 

Recently Issued Accounting Standards
(2) In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether quantitative impairment analysis is necessary. Under the amended rule, a company is not required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business). The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. The new standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The value of that goodwill will not be affected by the adoption of this standard. The Company adopted the standard effective January 1, 2012.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011. The FASB subsequently deferred the effective date of certain provisions of this standard pertaining to the reclassification of items out of accumulated other comprehensive income. This ASU impacts presentation only and will have no effect on the Company's financial condition, results of operations or cash flows. The Company adopted the standard effective January 1, 2012.

 

Related Party Transactions
(3)

Belo and A. H. Belo Corporation (A. H. Belo), who have two common directors, are considered related parties under accounting rules. The Company has no ownership interest in A. H. Belo or in any of A. H. Belo’s newspaper businesses or related assets, and A. H. Belo has no ownership interest in the Company or any of the Company’s television station businesses or related assets. Belo’s relationship with A. H. Belo is governed by

 

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Table of Contents
  certain agreements between the two companies or their respective subsidiaries. Although the services provided pursuant to these agreements generate continuing cash flows between Belo and A. H. Belo, the amounts are not significant to the ongoing operations of the Company. Under the services agreements, the Company and A. H. Belo (or their respective subsidiaries) provide each other various services and/or support. Belo and A. H. Belo co-own certain investments in third party businesses, which are recorded as either equity or cost method investments and are included in other assets. The amount of income from the third party investments included in the Company’s net earnings are immaterial. See Note 8 for disclosures related to the 2011 split of The G.B. Dealey Retirement Pension Plan (Pension Plan) by Belo and A. H. Belo.

 

Earning Per Share
(4) The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share (EPS) for the three and six months ended June 30, 2012 and 2011.

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2012     2011     2012     2011  

Income (Numerator)

        

Net earnings attributable to Belo Corp.

   $ 25,931      $ 18,087      $ 40,223      $ 13,773   

Less: Income to participating securities

     (523     (252     (570     (171
  

 

 

   

 

 

   

 

 

   

 

 

 

Income available to common shareholders

   $ 25,408      $ 17,835      $ 39,653      $ 13,602   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares (Denominator)

        

Weighted average shares outstanding (basic)

     103,774        103,626        103,854        103,515   

Dilutive effect of employee stock options

     294        396        309        402   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted weighted average shares outstanding

     104,068        104,022        104,163        103,917   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.24      $ 0.17      $ 0.38      $ 0.13   

Diluted

   $ 0.24      $ 0.17      $ 0.38      $ 0.13   
  

 

 

   

 

 

   

 

 

   

 

 

 

For the three and six months ended June 30, 2012, the Company excluded common stock options for 6,730,475 shares and 6,722,725 shares, respectively because to include them would be anti-dilutive. Additionally, for the three and six months ended June 30, 2012, the Company excluded from the diluted EPS calculation restricted stock units (RSUs) of 1,283,720 because they are participating securities. For the three and six months ended June 30, 2011, the Company excluded common stock options for 8,801,360 shares and 8,803,614 shares, respectively, because to include them would be anti-dilutive. Additionally, for the three and six months ended June 30, 2011, the Company excluded from the diluted EPS calculation RSUs of 994,798 because they are participating securities.

 

Long Term Debt
(5)

At June 30, 2012, Belo had $887,448 in fixed-rate debt securities as follows: $175,810 of 6 3/4% Senior Notes due 2013; $271,638 of 8% Senior Notes due 2016; $200,000 of 7 3/4% Senior Debentures due 2027; and $240,000 of 7 1/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.5%.

At June 30, 2012, Belo had variable-rate debt capacity of $200,000 under a revolving credit agreement (2011 Credit Agreement). As of June 30, 2012, the Company did not have an outstanding balance under the 2011 Credit Agreement, and all unused borrowings were available for borrowing. The Company is required to maintain certain leverage and interest ratios specified in the 2011 Credit Agreement. The leverage ratio is generally defined as the ratio of debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At June 30, 2012, the Company’s leverage ratio was 3.9, its interest coverage ratio was 3.2 and its senior leverage ratio was 0.0. At June 30, 2012, the Company was in compliance with all debt covenant requirements.

The Company reclassified the balance for the 6 3/4% Senior Notes due May 30, 2013, from long-term debt to short-term debt because the debt is due in less than one year. The Company expects to repay the notes on or before their due date with available cash and funds from the 2011 Credit Agreement.

 

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At June 30, 2012 and 2011, the fair value of Belo’s fixed-rate debt was estimated to be $909,595 and $886,029, respectively. The Company’s publicly held long-term debt is classified as Level 2 inputs, because the fair value for these instruments is determined utilizing observable inputs in non-active markets.

 

Schedule of Condensed Financial Statements
(6) The Company’s 8% Senior Notes are fully and unconditionally guaranteed by each of the Company’s 100%-owned subsidiaries as of the date of issuance. Accordingly, the following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of operations and comprehensive income (loss) and consolidated statements of cash flows of Belo as parent, the guarantor subsidiaries consisting of Belo’s 100%-owned subsidiaries as of the date of issuance, non-guarantor subsidiaries consisting of subsidiaries subsequent to the date of issuance, and eliminations necessary to arrive at the Company’s information on a consolidated basis. These statements are presented in accordance with the disclosure requirements under Securities and Exchange Commission Regulation S-X, Rule 3-10.

 

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2012

(in thousands)(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Eliminations     Total  

Net Operating Revenues

   $ —        $ 177,619      $ —        $ —        $ 177,619   

Operating Costs and Expenses

          

Station salaries, wages and employee benefits

     —          56,437        —          —          56,437   

Station programming and other operating costs

     —          47,874        200        —          48,074   

Corporate operating costs

     6,759        1,048        743        —          8,550   

Depreciation

     313        6,945        214        —          7,472   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     7,072        112,304        1,157        —          120,533   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (7,072     65,315        (1,157     —          57,086   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

          

Interest expense

     (17,705     (9     —          —          (17,714

Intercompany interest

     745        (745     —          —          —     

Other income (expense), net

     (35     1,413        —          —          1,378   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (16,995     659        —          —          (16,336
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (24,067     65,974        (1,157     —          40,750   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     9,086        (24,427     424        —          (14,917

Equity in earnings (loss) of subsidiaries

     40,912        —          —          (40,912     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     25,931        41,547        (733     (40,912     25,833   

Less: Net (loss) from noncontrolling interests

     —          —          (98     —          (98
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Belo Corp.

   $ 25,931      $ 41,547      $ (635   $ (40,912   $ 25,931   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended June 30, 2012

(in thousands)(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
    Eliminations     Total  

Net earnings (loss)

   $ 25,931       $ 41,547       $ (733   $ (40,912   $ 25,833   

Amortization of net actuarial loss,net of tax

     624         —           —          —          624   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     26,555         41,547         (733     (40,912     26,457   

Less: comprehensive (loss) attributable to noncontrolling interests

     —           —           (98     —          (98
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Belo Corp.

   $ 26,555       $ 41,547       $ (635   $ (40,912   $ 26,555   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2011

(in thousands)(unaudited)

 

     Parent     Guarantors     Eliminations     Total  

Net Operating Revenues

   $ —        $ 166,379      $ —        $ 166,379   

Operating Costs and Expenses

        

Station salaries, wages and employee benefits

     —          54,525        —          54,525   

Station programming and other operating costs

     —          52,565        —          52,565   

Corporate operating costs

     5,862        830        —          6,692   

Pension settlement charge and contribution reimbursements

     —          —          —          —     

Depreciation

     317        7,390        —          7,707   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     6,179        115,310        —          121,489   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (6,179     51,069        —          44,890   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

        

Interest expense

     (18,028     (22     —          (18,050

Intercompany interest

     1,114        (1,114     —          —     

Other income (expense), net

     (26     675        —          649   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (16,940     (461     —          (17,401
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (23,119     50,608        —          27,489   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     20,016        (29,418     —          (9,402

Equity in earnings of subsidiaries

     21,190        —          (21,190     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 18,087      $ 21,190      $ (21,190   $ 18,087   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended June 30, 2011

(in thousands)(unaudited)

 

     Parent      Guarantors      Eliminations     Total  

Net earnings

   $ 18,087       $ 21,190       $ (21,190   $ 18,087   

Amortization of net actuarial loss, net of tax

     442         —           —          442   
  

 

 

    

 

 

    

 

 

   

 

 

 

Comprehensive income

   $ 18,529       $ 21,190       $ (21,190   $ 18,529   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2012

(in thousands)(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Eliminations     Total  

Net Operating Revenues

   $ —        $ 333,517      $ —        $ —        $ 333,517   

Operating Costs and Expenses

          

Station salaries, wages and employee benefits

     —          112,136        —          —          112,136   

Station programming and other operating costs

     —          93,191        200        —          93,391   

Corporate operating costs

     13,460        1,846        976        —          16,282   

Depreciation

     590        13,923        421        —          14,934   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     14,050        221,096        1,597        —          236,743   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (14,050     112,421        (1,597     —          96,774   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

          

Interest expense

     (35,353     (23     —          —          (35,376

Intercompany interest

     1,489        (1,489     —          —          —     

Other income, net

     62        1,817        —          —          1,879   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (33,802     305        —          —          (33,497
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (47,852     112,726        (1,597     —          63,277   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     18,053        (41,790     585        —          (23,152

Equity in earnings (loss) of subsidiaries

     70,022        —          —          (70,022     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     40,223        70,936        (1,012     (70,022     40,125   

Less: Net loss from noncontrolling interests

     —          —          (98     —          (98
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Belo Corp.

   $ 40,223      $ 70,936      $ (914   $ (70,022   $ 40,223   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Six Months Ended June 30, 2012

(in thousands)(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
    Eliminations     Total  

Net earnings (loss)

   $ 40,223       $ 70,936       $ (1,012   $ (70,022   $ 40,125   

Amortization of net actuarial loss, net of tax

     1,248         —           —          —          1,248   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     41,471         70,936         (1,012     (70,022     41,373   

Less: comprehensive (loss) attributable to noncontrolling interests

     —           —           (98     —          (98
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Belo Corp.

   $ 41,471       $ 70,936       $ (914   $ (70,022   $ 41,471   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2011

(in thousands)(unaudited)

 

     Parent     Guarantors     Eliminations     Total  

Net Operating Revenues

   $ —        $ 317,849      $ —        $ 317,849   

Operating Costs and Expenses

        

Station salaries, wages and employee benefits

     —          108,361        —          108,361   

Station programming and other operating costs

     —          102,761        —          102,761   

Corporate operating costs

     11,566        1,425        —          12,991   

Pension settlement charges and contribution reimbursements

     20,466        —          —          20,466   

Depreciation

     623        15,008        —          15,631   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     32,655        227,555        —          260,210   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (32,655     90,294        —          57,639   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

        

Interest expense

     (35,986     (47     —          (36,033

Intercompany interest

     2,798        (2,798     —          —     

Other income (expense), net

     (65     894        —          829   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (33,253     (1,951     —          (35,204
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (65,908     88,343        —          22,435   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     26,526        (35,188     —          (8,662

Equity in earnings of subsidiaries

     53,155        —          (53,155     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 13,773      $ 53,155      $ (53,155   $ 13,773   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Six Months Ended June 30, 2011

(in thousands)(unaudited)

 

     Parent      Guarantors      Eliminations     Total  

Net earnings

   $ 13,773       $ 53,155       $ (53,155   $ 13,773   

Amortization of net actuarial loss, net of tax

     884         —           —          884   
  

 

 

    

 

 

    

 

 

   

 

 

 

Comprehensive income

   $ 14,657       $ 53,155       $ (53,155   $ 14,657   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Condensed Consolidating Balance Sheet

As of June 30, 2012

(in thousands)(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
     Eliminations     Total  

Assets

             

Current assets:

             

Cash and temporary cash investments

   $ 123,075       $ 2,544       $ 50       $ —        $ 125,669   

Accounts receivable, net

     142         139,876         —           —          140,018   

Income tax receivable

     14         —           —           —          14   

Other current assets

     6,421         14,142         28         —          20,591   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     129,652         156,562         78         —          286,292   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Property, plant and equipment, net

     4,131         132,626         14,599         —          151,356   

Intangible assets, net

     —           725,399         —           —          725,399   

Goodwill

     —           423,873         —           —          423,873   

Deferred income taxes

     43,633         —           —           (43,633     —     

Intercompany receivable

     598,531         —           —           (598,531     —     

Investment in subsidiaries

     533,602         —           —           (533,602     —     

Other assets

     19,795         20,493         67         —          40,355   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,329,344       $ 1,458,953       $ 14,744       $ (1,175,766   $ 1,627,275   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

             

Current liabilities:

             

Current portion of long-term debt

   $ 175,810       $ —         $ —         $ —        $ 175,810   

Accounts payable

     8,053         9,609         177         —          17,839   

Accrued expenses

     13,871         22,401         196         —          36,468   

Short-term pension obligation

     19,737         —           —           —          19,737   

Income taxes payable

     5,814         —           —           —          5,814   

Deferred revenue

     —           5,427         —           —          5,427   

Dividends payable

     —           —           —           —          —     

Accrued interest payable

     10,106         —           —           —          10,106   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     233,391         37,437         373         —          271,201   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Long-term debt

     711,638         —           —           —          711,638   

Deferred income taxes

     —           294,803         807         (43,633     251,977   

Pension obligation

     83,968         —           —           —          83,968   

Intercompany payable

     —           598,216         315         (598,531     —     

Other liabilities

     3,619         8,144         —           —          11,763   

Total shareholders’ equity

     296,728         520,353         13,249         (533,602     296,728   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,329,344       $ 1,458,953       $ 14,744       $ (1,175,766   $ 1,627,275   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Condensed Consolidating Balance Sheet

As of December 31, 2011

(in thousands)

 

     Parent      Guarantors      Non-
Guarantors
     Eliminations     Total  

Assets

             

Current assets:

             

Cash and temporary cash investments

   $ 59,339       $ 1,755       $ 24       $ —        $ 61,118   

Accounts receivable, net

     166         149,418         —           —          149,584   

Income tax receivable

     31,629         —           —           —          31,629   

Other current assets

     4,621         12,071         —           —          16,692   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     95,755         163,244         24         —          259,023   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Property, plant and equipment, net

     3,683         139,335         14,097         —          157,115   

Intangible assets, net

     —           725,399         —           —          725,399   

Goodwill

     —           423,873         —           —          423,873   

Deferred income taxes

     45,831         —           —           (45,831     —     

Intercompany receivable

     687,324         —           —           (687,324     —     

Investment in subsidiaries

     463,580         —           —           (463,580     —     

Other assets

     23,908         22,220         67         —          46,195   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,320,081       $ 1,474,071       $ 14,188       $ (1,196,735   $ 1,611,605   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

             

Current liabilities:

             

Accounts payable

   $ 8,387       $ 11,266       $ 24       $ —        $ 19,677   

Accrued expenses

     12,975         21,986         —           —          34,961   

Short-term pension obligation

     19,300         —           —           —          19,300   

Income taxes payable

     12,922         —           —           —          12,922   

Deferred revenue

     —           3,435         —           —          3,435   

Dividends payable

     5,189         —           —           —          5,189   

Accrued interest payable

     10,378         —           —           —          10,378   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     69,151         36,687         24         —          105,862   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Long-term debt

     887,003         —           —           —          887,003   

Deferred income taxes

     —           290,192         —           (45,831     244,361   

Pension obligation

     93,012         —           —           —          93,012   

Intercompany payable

     —           687,324         —           (687,324     —     

Other liabilities

     3,712         10,452         —           —          14,164   

Total shareholders’ equity

     267,203         449,416         14,164         (463,580     267,203   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,320,081       $ 1,474,071       $ 14,188       $ (1,196,735   $ 1,611,605   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2012

(in thousands)(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Total  

Operations

        

Net cash provided by (used for) operations

   $ 17,728      $ 78,206      $ (776   $ 95,158   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investments

        

Capital expenditures

     (4,195     (6,481     (112     (10,788

Other investments, net

     (477     —          —          (477
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investments

     (4,672     (6,481     (112     (11,265
  

 

 

   

 

 

   

 

 

   

 

 

 

Financing

        

Dividends paid

     (13,531     —          —          (13,531

Common stock repurchased

     (5,964     —          —          (5,964

Net proceeds from exercise of stock options

     76        —          —          76   

Excess tax benefit from option exercises

     77        —          —          77   

Intercompany activity

     70,022        (70,936     914        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     50,680        (70,936     914        (19,342
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and temporary cash investments

     63,736        789        26        64,551   

Cash and temporary cash investments at beginning of period

     59,339        1,755        24        61,118   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and temporary cash investments at end of period

   $ 123,075      $ 2,544      $ 50      $ 125,669   
  

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2011

(in thousands)(unaudited)

 

     Parent     Guarantors     Total  

Operations

      

Net cash provided by (used for) operations

   $ (31,426   $ 50,324      $ 18,898   
  

 

 

   

 

 

   

 

 

 

Investments

      

Capital expenditures

     (1,476     (5,265     (6,741

Proceeds from disposition of real estate

     —          5,919        5,919   

Other investments, net

     (159     618        459   
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) investments

     (1,635     1,272        (363
  

 

 

   

 

 

   

 

 

 

Financing

      

Net proceeds from revolving debt

     32,000        —          32,000   

Payments on revolving debt

     (43,000     —          (43,000

Net proceeds from exercise of stock options

     103        —          103   

Excess tax benefit from option exercises

     114        —          114   

Intercompany activity

     53,155        (53,155     —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     42,372        (53,155     (10,783
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and temporary cash investments

     9,311        (1,559     7,752   

Cash and temporary cash investments at beginning of period

     5,290        3,019        8,309   
  

 

 

   

 

 

   

 

 

 

Cash and temporary cash investments at end of period

   $ 14,601      $ 1,460      $ 16,061   
  

 

 

   

 

 

   

 

 

 

 

Long-Term Incentive Plan
(7) Belo has a long-term incentive plan under which awards may be granted to employees and outside directors in the form of non-qualified stock options, incentive stock options, restricted shares, RSUs, performance shares, performance units and stock appreciation rights. In addition, options may be accompanied by stock appreciation rights and limited stock appreciation rights. Rights and limited rights may also be issued without accompanying options. Cash-based bonus awards are also available under the plan.

Share-based compensation cost for awards to Belo’s employees and non-employee directors was $1,218 and $3,913, for the three and six months ended June 30, 2012. Share-based compensation cost for awards to Belo’s employees and non-employee directors was $1,291 and $3,722, for the three and six months ended June 30, 2011.

 

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Defined Benefit Pension and Other Post Retirement Plans
(8) In February 2008, the Company spun-off its newspaper businesses and related assets to a separate company, A. H. Belo. Subsequent to the spin-off, Belo retained sponsorship of Pension Plan. As the sole plan sponsor for the Pension Plan, Belo continued to administer benefits for Belo and A. H. Belo current and former employees. In October 2010, Belo and A. H. Belo agreed to split the Pension Plan into separately-sponsored pension plans effective January 1, 2011. Under the agreement, participant benefit liabilities and assets allocable to approximately 5,100 current and former employees of A. H. Belo and its related newspaper businesses were transferred to two new defined benefit pension plans created, sponsored, and managed by or on behalf of A. H. Belo. Effective January 1, 2011, the new A. H. Belo plans were solely responsible for paying participant benefits for the current and former employees of A. H. Belo, and the Company is no longer responsible for those liabilities. The participant benefit liabilities and assets pertaining to current and former employees of Belo, and its related television businesses, continue to be held by the Pension Plan sponsored by and managed by or on behalf of Belo Corp.

For Belo, the pension split transaction was treated as a settlement under ASC 715. Under settlement accounting for pensions, the split of the Company’s Pension Plan resulted in the transfer of $238,833 in Pension Plan assets, and $339,799 in Pension Plan liabilities to the plans sponsored by A. H. Belo. This resulted in a reduction in the net unfunded liability of $100,966, which was recorded as a non-cash settlement gain, and recognition of actuarial losses of $129,665 previously recognized in accumulated other comprehensive loss, which was recorded as a non-cash settlement charge. This settlement gain and charge resulted in a net non-cash settlement charge of $28,699. This charge was partially offset by a final net pension contribution reimbursement of $8,233 received from A. H. Belo as discussed below. The combined result of all pension transactions in the first quarter 2011 is a net charge before taxes of $20,466. Additionally, the Company’s effective tax rate for the first quarter 2011 reflects the impact of deferred tax adjustments of $7,143 in pension settlement items.

Belo’s funding policy is to contribute annually to the Pension Plan amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws, but not in excess of the maximum tax-deductible contribution. For the six months ended June 30, 2012, the Company made contributions totaling $8,051 to the Pension Plan. During the remaining six months of 2012, the Company expects to make contributions of approximately $11,154 to the Pension Plan. No plan assets are expected to be returned to the Company during the year ending December 31, 2012. For the six months ended June 30, 2011, the Company made contributions totaling $19,557 to the Pension Plan related to the 2010 and 2011 plan years and A. H. Belo reimbursed the Company $8,233. A. H. Belo has no further obligation to reimburse the Company for any contributions after the 2010 plan year.

 

Net periodic pension cost includes the following components for the three and six months ended June 30, 2012 and 2011:

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2012     2011     2012     2011  

Interest cost on projected benefit obligation

   $ 3,115      $ 3,415      $ 6,230      $ 6,830   

Expected return on assets

     (3,393     (3,018     (6,785     (6,037

Amortization of net loss

     960        680        1,920        1,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost before settlement charge

     682        1,077        1,365        2,153   

Settlement charge

     —          —          —          28,699   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost

   $ 682      $ 1,077      $ 1,365      $ 30,852   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Stockholder's Equity
(9) On May 8, 2012, the shareholders of the Company approved amendments to, and the restatement of, the Company's Certificate of Incorporation to, among other things, reduce the par value of Belo's common stock from $1.67 per share to $0.01 per share and reduce the par value of Belo’s preferred stock from $1.00 per share to $0.01 per share. The Company has reflected the change in par values at June 30, 2012, and has retrospectively restated the Consolidated Condensed Balance Sheet as of December 31, 2011, to reflect the change in par values.

 

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Noncontrolling interests on the Condensed Consolidated Balance Sheets relate to a newly formed majority-owned subsidiary. Earnings or losses are recorded each period to the Consolidated Condensed Statement of Earnings for the noncontrolling interests’ proportionate share of the subsidiary’s earnings or losses.

 

Equity is allocated between controlling and noncontrolling interests as follows:

 

     Belo Corp.
Shareholders’
Equity
    Noncontrolling
Interests
Equity
    Total
Equity
 

Balance at December 31, 2011

   $ 267,203      $ —        $ 267,203   

Net earnings (loss)

     40,223        (98     40,125   

Dividends declared

     (8,342     —          (8,342

Common stock repurchased

     (5,964     —          (5,964

Share-based compensation

     2,305        —          2,305   

Accumulated other comprehensive income

     1,248        —          1,248   

Other

     153        —          153   
  

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

   $ 296,826      $ (98   $ 296,728   
  

 

 

   

 

 

   

 

 

 

 

Commitment and Contingencies
(10) Under the terms of the separation and distribution agreement between the Company and A. H. Belo, A. H. Belo has agreed to indemnify the Company for any liability arising out of the lawsuit described in the following paragraph.

On October 24, 2006, 18 former employees of The Dallas Morning News filed a lawsuit against The Dallas Morning News, the Company, and others in the United States District Court for the Northern District of Texas. The plaintiffs’ lawsuit mainly consists of claims of unlawful discrimination and alleged ERISA violations. On March 28, 2011, the Court granted defendants summary judgment and dismissed all claims. On July 15, 2011, the plaintiffs appealed the decision to the United States Court of Appeals for the Fifth Circuit. A hearing on the appeal is set for August 9, 2012. The Company believes the lawsuit is without merit and is vigorously defending against it.

In addition to the proceeding disclosed above, other legal proceedings are pending against the Company, including several actions for alleged libel and/or defamation. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on the consolidated results of operations and comprehensive income (loss), liquidity or financial position of the Company.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except share and per share amounts)

The following information should be read in conjunction with the Company’s Consolidated Condensed Financial Statements and related Notes filed as part of this report.

Overview

Belo Corp. (Belo or the Company), a Delaware corporation, began as a Texas newspaper company in 1842 and today is a publicly-traded pure-play television company. The Company owns 20 television stations (nine in the top 25 U.S. markets) that reach more than 14 percent of U.S. television households, including ABC, CBS, NBC, FOX, CW and MyNetwork TV (MNTV) affiliates, and their associated Web sites, in 15 highly-attractive markets across the United States. The Company owns two local and two regional cable news channels and holds an ownership interest in one other cable news channel.

The Company believes the success of its media franchises is built upon providing the highest quality local and regional news, entertainment programming and service to the communities in which they operate. These principles have built relationships with viewers, readers, advertisers and online users and have guided Belo’s success.

 

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The following table sets forth the Company’s major media assets as of June 30, 2012:

 

Market

   Market
Rank(1)
     Station/
News
Channel
     Year Belo
Acquired/
Started
     Network
Affiliation
     Number of
Commercial
Stations in
Market(2)
 

Dallas/Fort Worth

     5         WFAA         1950         ABC         16   

Dallas/Fort Worth

     5         TXCN         1999         N/A         N/A   

Houston

     10         KHOU         1984         CBS         15   

Seattle/Tacoma

     12         KING         1997         NBC         13   

Seattle/Tacoma

     12         KONG         2000         IND         13   

Seattle/Tacoma

     12         NWCN         1997         N/A         N/A   

Phoenix

     13         KTVK         1999         IND         13   

Phoenix

     13         KASW         2000         CW         13   

St. Louis

     21         KMOV         1997         CBS         8   

Portland(3)

     22         KGW         1997         NBC         8   

Charlotte

     23         WCNC         1997         NBC         8   

San Antonio

     36         KENS         1997         CBS         10   

Hampton/Norfolk

     43         WVEC         1984         ABC         8   

Austin

     47         KVUE         1999         ABC         7   

Louisville

     48         WHAS         1997         ABC         7   

New Orleans(4)

     52         WWL         1994         CBS         8   

New Orleans(5)

     52         WUPL         2007         MNTV         8   

Tucson

     70         KMSB         1997         FOX         9   

Tucson

     70         KTTU         2002         MNTV         9   

Spokane

     73         KREM         1997         CBS         7   

Spokane

     73         KSKN         2001         CW         7   

Boise(6)

     112         KTVB         1997         NBC         5   

 

(1) Market rank is based on the relative size of the television market Designated Market Area (DMA), among the 210 DMAs generally recognized in the United States, based on the September 2011 Nielsen Media Research report.
(2) Represents the number of commercial television stations (both VHF and UHF) broadcasting in the market, excluding public stations, low power broadcast stations and cable channels.
(3) The Company also owns KGWZ-LD, a low power television station in Portland, Oregon.
(4) WWL also produces “NewsWatch on Channel 15,” a 24-hour daily local news and weather cable channel.
(5) The Company also owns WBXN-CA, a Class A television station in New Orleans, Louisiana.
(6) The Company also owns KTFT-LP (NBC), a low power television station in Twin Falls, Idaho.

The Company intends, for the discussion of its financial condition and results of operations that follows, to provide information that will assist in understanding the Company’s 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 the Company’s financial statements.

The Company has network affiliation agreements with ABC, CBS, NBC, FOX and CW. The Company’s network affiliation agreements generally provide the station with the exclusive right to broadcast over the air in its local service area all programs transmitted by the network with which the station is affiliated. As part of these agreements, the network has the right to sell most of the advertising time during such broadcasts and has historically paid the Company cash compensation. In 2011, some of the Company’s affiliation agreements included network compensation totaling $2,989. Beginning in 2012, the Company no longer receives cash payments for network compensation. As affiliation agreements have renewed, cash payments to the networks are included in these affiliation agreements for compensation related to programming provided by such networks. The Company renewed one of its network affiliation agreements in 2010 and another in 2011; a third major network affiliation agreement expires in the fourth quarter of 2012. The Company’s two renewed agreements provide for payments to the networks and the third agreement is also expected to include payments to the network in 2013. Cash payments for reverse compensation to networks are included in programming expense.

The principal source of the Company’s revenue is from the sale of local, regional and national advertising. In even numbered years, the Company’s revenue also includes significant revenue from political advertising. Additional discussion regarding the Company’s results of operations for the three and six months ended June 30, 2012, as compared to the three and six months ended June 30, 2011, is provided below.

 

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Results of Operations

(Dollars in thousands)

 

    

Three months ended June 30,

Percentage

   

Six months ended June 30,

Percentage

 
     2012     Change     2011     2012     Change     2011  

Net operating revenues

   $ 177,619        6.8   $ 166,379      $ 333,517        4.9   $ 317,849   

Pension settlement charge and contribution reimbursements

     —          —          —          —          NM        20,466   

Other operating costs and expenses

     120,533        (0.8 %)      121,489        236,743        (1.3 %)      239,744   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     120,533        (0.8 %)      121,489        236,743        (9.0 %)      260,210   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

     57,086        27.2     44,890        96,774        67.9     57,639   

Other income and (expense)

     (16,336     (6.1 %)      (17,401     (33,497     (4.8 %)      (35,204
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations before income taxes

     40,750        48.2     27,489        63,277        182.0     22,435   

Income tax expense

     (14,917     58.7     (9,402     (23,152     167.3     (8,662
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     25,833        42.8     18,087        40,125        191.3     13,773   

Less: Net (loss) attributable to non-controlling interests

     (98     NM        —          (98     NM        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Belo Corp.

   $ 25,931        43.4   $ 18,087      $ 40,223        192.0   $ 13,773   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
NM is not meaningful             
Net Operating Revenues             
     Three months ended June 30,
Percentage
    Six months ended June 30,
Percentage
 
     2012     Change     2011     2012     Change     2011  

Spot advertising revenue

   $ 144,710        5.6   $ 137,039      $ 269,934        3.9   $ 259,820   

Other

     32,909        12.2     29,340        63,583        9.6     58,029   
  

 

 

     

 

 

   

 

 

     

 

 

 

Net operating revenues

   $ 177,619        6.8   $ 166,379      $ 333,517        4.9   $ 317,849   
  

 

 

     

 

 

   

 

 

     

 

 

 

Spot advertising revenue increased $7,671, or 5.6 percent, in the three months ended June 30, 2012, as compared to the three months ended June 30, 2011. This increase is due to an $8,317 increase in political advertising revenue. Political revenues are generally higher in even-numbered years than in odd-numbered years due to elections for various state and national offices. The increase from political revenue was partially reduced by a slight decrease in core spot advertising. Two major categories, automotive and financial services, grew during the quarter, while other significant categories, including telecommunications, retail and entertainment declined. Other revenue increased primarily due to a 19.2 percent increase in retransmission revenue and a 15.2 percent increase in Internet revenue. A decline of $1,263 in network compensation was offset by an increase of $1,432 related to cable copyright royalty payments.

Spot advertising revenue increased $10,114, or 3.9 percent, in the six months ended June 30, 2012, as compared to the six months ended June 30, 2011. This increase is primarily due to a $9,541 increase in political advertising revenue. Additionally, the Company had increases in the automotive, financial services and travel and tourism categories, partially offset by decreases in the telecommunications, entertainment, grocery and healthcare categories. The increase in other revenue is due primarily to a 20.2 percent increase in retransmission revenue, a 13.5 percent increase in Internet revenue, and a $1,432 increase in cable copyright royalty payments, partially offset by a decline of $2,989 in network compensation.

Operating Costs and Expenses

Station salaries, wages and employee benefits increased $1,912, or 3.5 percent, in the three months ended June 30, 2012, compared to the three months ended June 30, 2011, primarily due to an increase of $988 related to sales commissions on higher revenue and increases in accrued performance-based bonus expense of $584. Station programming and other operating costs decreased $4,491, or 8.5 percent, in the three months ended June 30, 2012,

 

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compared to the three months ended June 30, 2011, primarily related to a $6,988 decrease in programming costs. The decrease in programming costs was mostly related to savings in syndicated programming expenses, which were partially offset by a less significant increase in programming payments to the networks. The decrease in programming expense was partially offset by increases in spending for interactive services and an increase in advertising and promotion expense.

Station salaries, wages and employee benefits increased $3,775, or 3.5 percent, in the six months ended June 30, 2012, compared to the six months ended June 30, 2011, due primarily to an increase of $2,566 related to annual merit increases and sales commissions on higher revenue and increases in accrued performance-based bonus expense of $637. Station programming and other operating costs decreased $9,370, or 9.1 percent, in the six months ended June 30, 2012, compared to the six months ended June 30, 2011, primarily related to a $13,999 decrease in programming costs. The decrease in programming costs was mostly related to savings in syndicated programming expenses, which were partially offset by a less significant increase in programming payments to the networks. The decrease in programming expense was partially offset by increases in spending for interactive services and an increase in advertising and promotion expense.

Corporate operating costs increased $1,858, or 27.8 percent, in the three months ended June 30, 2012, compared to the three months ended June 30, 2011, with the most significant variance being an increase in performance-based accrued bonus expense of $933. Corporate operating costs increased $3,291, or 25.3 percent, in the six months ended June 30, 2012, compared to the six months ended June 30, 2011, primarily related to annual merit increases, share-based compensation increases and an increase in accrued performance-based bonus expense, all totaling $2,006.

Effective January 1, 2011, Belo split The G. B. Dealey Retirement Pension Plan (Pension Plan), transferring the benefit liabilities and assets pertaining to the current and former employees of A. H. Belo Corporation (A. H. Belo) to plans sponsored and administered by A. H. Belo. The participant benefit liabilities and assets pertaining to current and former employees of Belo, and its related television businesses, continue to be held by the Pension Plan sponsored by and managed by or on behalf of Belo. For Belo, the pension split transaction was treated as a settlement under ASC 715, which resulted in the transfer of $238,833 in Pension Plan assets and $339,799 in Pension Plan liabilities to the plans sponsored by A. H. Belo. These transfers resulted in a net non-cash settlement charge of $28,699. This charge was partially offset by a final net pension contribution reimbursement of $8,233 related to the 2010 plan year received from A. H. Belo. A. H. Belo has no further obligation to reimburse the Company for any contributions after the 2010 plan year. The combined result of all pension settlement transactions in the first quarter of 2011 is a net charge before taxes of $20,466.

Other Income (Expense)

Interest expense decreased $336 and $657 in the three and six months ended June 30, 2012, respectively, due primarily to decreased amortization of financing costs associated with the variable rate debt related to the amendment of the Company’s credit facility in December 2011.

Income Tax Expense

Income taxes increased $5,515, for the three months ended June 30, 2012, compared with the three months ended June 30, 2011, primarily due to higher pretax earnings in 2012. Income taxes increased $14,490, for the six months ended June 30, 2012, compared with the six months ended June 30, 2011, primarily due to the $7,143 tax benefit in 2011 related to deferred tax adjustments for the pension settlement charge and higher pretax earnings in 2012.

Noncontrolling Interest

In the second quarter 2012, the Company entered into a newly formed subsidiary in which the Company owns a greater than 50% interest.

 

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Station Adjusted EBITDA

 

     Three months ended June 30,
Percentage
   

Six months ended June 30,

Percentage

 
     2012     Change     2011     2012     Change     2011  

Station Adjusted EBITDA

   $ 73,108        23.3   $ 59,289      $ 127,990        19.9   $ 106,727   

Corporate operating costs and expenses

     (8,550     27.8     (6,692     (16,282     25.3     (12,991

Depreciation

     (7,472     (3.1 %)      (7,707     (14,934     (4.5 %)      (15,631

Pension settlement charge and contribution reimbursements

     —          —          —          —          NM        (20,466
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

   $ 57,086        27.2   $ 44,890      $ 96,774        67.9   $ 57,639   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NM is not meaningful

Belo’s management uses Station Adjusted EBITDA as the primary measure of profitability to evaluate operating performance and to allocate capital resources and bonuses to eligible operating company employees. Station Adjusted EBITDA represents the Company's earnings from operations before interest expense, income taxes, depreciation, amortization, impairment charges, pension settlement charge and contribution reimbursements and corporate operating costs and expenses. Other income (expense), net is not allocated to television station earnings from operations because it consists primarily of equity in earnings (losses) from investments in partnerships and joint ventures and other non-operating income (expense). Station Adjusted EBITDA is a common alternative measure of performance used by investors, financial analysts and rating agencies to evaluate financial performance.

For the three months ended June 30, 2012, Station Adjusted EBITDA increased $13,819, or 23.3 percent, compared with the three months ended June 30, 2011. For the six months ended June 30, 2012, Station Adjusted EBITDA increased $21,263, or 19.9 percent, compared with the six months ended June 30, 2011. These increases were due to higher revenues and a reduction in expenses, including a decrease in programming costs, all discussed above.

Liquidity and Capital Resources

Net cash provided by operations, bank borrowings and long-term debt are Belo’s primary sources of liquidity.

Operating Cash Flows

Net cash provided by operations was $95,158 in the six months ended June 30, 2012, compared with $18,898 in the six months ended June 30, 2011. The 2012 operating cash flows were provided primarily by net earnings adjusted for non-cash items, receipt of a $31,615 federal income tax refund, and routine changes in working capital. The 2011 operating cash flows were primarily provided by net earnings adjusted for non-cash and pension-related items, pension contributions and routine changes in working capital. The increase in net cash provided by operations in 2012 as compared to 2011, is primarily due to higher earnings, related in large part to the net pension settlement charge in first quarter 2011, the receipt of the federal income tax refund, and lower pension contributions.

The Company contributed $8,051 to its Pension Plan during the six months ended June 30, 2012 compared to contributions of $19,557 during the six months ended June 30, 2011. As previously discussed, A. H. Belo was obligated to reimburse the Company for its portion of contributions related to the 2010 plan year the Company made to the Pension Plan. Such reimbursements totaled $8,233 during the six months ended June 30, 2011. A. H. Belo has no further obligation to reimburse the Company for any contributions after the 2010 plan year.

Investing Cash Flows

Net cash flows used for investing activities were $11,265 in the six months ended June 30, 2012, compared to $363 in the six months ended June 30, 2011. The 2012 investing cash flows were primarily used for capital expenditures. The 2011 investing cash flows were primarily used for capital expenditures, mostly offset by proceeds from the sale of certain real estate.

Property Transaction

In June 2011, the Company received $5,919 in proceeds from the sale of real estate it had purchased in 2005 for potential construction and recorded an immaterial gain on the sale.

 

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Capital Expenditures

Total capital expenditures were $10,788 in the first six months of 2012 compared with $6,741 in the first six months of 2011.

Financing Cash Flows

Net cash flows used for financing activities were $19,342 in the six months ended June 30, 2012 compared with $10,783 in the six months ended June 30, 2011. The 2012 financing cash flows consisted primarily of dividends paid and common stock repurchased. The 2011 financing cash flows consisted primarily of borrowings and repayments under the Company’s revolving credit facility.

Long-Term Debt

At June 30, 2012, Belo had $887,448 in fixed-rate debt securities as follows: $175,810 of 6 3/4% Senior Notes due 2013; $271,638 of 8% Senior Notes due 2016; $200,000 of 7 3/4% Senior Debentures due 2027; and $240,000 of 7 1/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.5%.

At June 30, 2012, Belo also had variable-rate debt capacity of $200,000 under a credit agreement (2011 Credit Agreement). As of June 30, 2012, the Company did not have an outstanding balance under the 2011 Credit Agreement, and all unused borrowings were available for borrowing. The Company is required to maintain certain leverage and interest ratios specified in the 2011 Credit Agreement. The leverage ratio is generally defined as the ratio of debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At June 30, 2012, the Company’s leverage ratio was 3.9, its interest coverage ratio was 3.2 and its senior leverage ratio was 0.0. At June 30, 2012, the Company was in compliance with all debt covenant requirements.

The Company reclassified the balance for the 6 3/4% Senior Notes due May 30, 2013, from long-term debt to short-term debt because the debt is due in less than one year. The Company expects to repay the notes on or before their due date with available cash and funds from the 2011 Credit Agreement.

Dividends

On July 26, 2012, the Company declared a quarterly dividend of eight cents per share on Series A and Series B common stock outstanding, to be paid on September 7, 2012, to shareholders of record on August 17, 2012.

On June 1, 2012, the Company paid a quarterly dividend of $8,330, or eight cents per share, on Series A and Series B common stock outstanding as of the record date of May 11, 2012.

On March 2, 2012, the Company paid a quarterly dividend of $5,201, or five cents per share, on Series A and Series B common stock outstanding as of the record date of February 10, 2012.

On April 26, 2011, the Company declared a quarterly dividend of five cents per share on Series A and Series B common stock outstanding, paid on September 2, 2011, to shareholders of record on August 12, 2011.

Share Repurchase

In the second quarter 2012, the Company purchased 1,020,653 shares of its Series A common stock pursuant to an authorization from Belo’s Board of Directors originally given in December 2005. There is no expiration date for this authorization. The remaining authorization for the repurchase of shares as of June 30, 2012, was 12,010,063 shares. The total cost of the shares purchased in the second quarter 2012 was $5,964. All shares repurchased in the second quarter 2012 were retired as of June 30, 2012.

Other

On May 8, 2012, the shareholders of the Company approved amendments to, and the restatement of, the Company’s Certificate of Incorporation to, among other things, reduce the par value of Belo’s common stock from $1.67 per share to $0.01 per share and the par value of Belo’s preferred stock from $1.00 per share to $0.01 per share. The Company has reflected the change in par values at June 30, 2012, and has retrospectively restated the Consolidated Condensed Balance Sheet as of December 31, 2011, to reflect the change in par values.

 

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The Company has various sources available to meet its 2012 capital and operating commitments, including cash on hand, short-term investments, internally-generated funds and the $200,000 2011 Credit Agreement. The Company believes its resources are adequate to meet its foreseeable needs.

Forward-Looking Statements

Statements in this Form 10-Q concerning Belo’s business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures, dividends, investments, future financings, impairments, pension matters, 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 matters include, but are not limited to, uncertainties regarding changes in capital market conditions and prospects, and other factors such as changes in advertising demand, interest and discount rates and programming and production costs; changes in viewership patterns and demography, and actions by Nielsen and its competitors; changes in the network-affiliate business model for broadcast television; technological changes, and the development of new systems and devices to distribute and consume television and other audio-visual content; changes in the ability to secure, and in the terms of, carriage of Belo programming on cable, satellite, telecommunications and other program distribution methods; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; Federal Communications Commission and other regulatory, tax and legal changes, including changes regarding spectrum; 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, co-owned ventures and investments; Pension Plan matters; general economic conditions; and significant armed conflict, as well as other risks detailed in Belo’s other public disclosures and filings with the Securities and Exchange Commission (“SEC”), including Belo’s Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Other than as disclosed, there have been no material changes in the Company’s exposure to market risk from the disclosure included in the Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4. Controls and Procedures

During the quarter ended June 30, 2012, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Belo’s internal control over financial reporting.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s president and Chief Executive Officer and senior vice president/Chief Financial Officer and Treasurer, of the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based upon that evaluation, the president and Chief Executive Officer and senior vice president/Chief Financial Officer and Treasurer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective such that information relating to the Company (including its consolidated subsidiaries) required to be disclosed in the Company’s SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to the Company’s management, including the president and Chief Executive Officer and senior vice president/Chief Financial Officer and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.

 

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PART II.

Item 1. Legal Proceedings

In addition to the proceeding previously described (see Note 10 to the Consolidated Condensed Financial Statements in Part I, Item 1) for which there are no material developments to report, other legal proceedings are pending against the Company, including several actions for alleged libel and/or defamation. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on the results of operations, liquidity or financial position of the Company.

Item 1A. Risk Factors

There have been no material changes in the Company’s risk factors from the disclosure included in the Company’s Annual Report on Form-10-K for the year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There have been no unregistered sales of equity securities in the last three years. All repurchases of securities detailed below were retired in the quarter they were repurchased.

Issuer Purchases of Equity Securities

The following table sets forth the Company’s Series A common stock repurchases during the three months ended June 30, 2012. The Company did not repurchase any shares of Series B common stock during the quarter ended June 30, 2012.

 

Period

   (a)
Total Number of
Shares Purchased
     (b)
Average Price Paid
per Share
     (c)
Total Number of  Shares
Purchased as Part of
Publicly Announced
Plans or Programs
     (d)
Maximum Number  of
Shares that May Yet be
Purchased Under the
Plans or Programs (1)
 

April 1, 2012 through April 30, 2012

     —           —           —           13,030,716   

May 1, 2012 through May 31, 2012

     324,500       $ 5.92         324,500         12,706,216   

June 1, 2012 through June 30, 2012

     696,153       $ 5.76         696,153         12,010,063   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,020,653       $ 5.81         1,020,653         12,010,063   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) In December 2005, the Company’s Board of Directors authorized the repurchase of up to 15,000,000 shares of common stock. As of June 30, 2012, the Company had 12,010,063 remaining shares under the December 2005 repurchase authority. There is no expiration date for this repurchase authority.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

 

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Table of Contents
Item 6. Exhibits

 

  Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. All other documents are filed with this report. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

 

Exhibit

Number

   

Description

  2.1      *   

Separation and Distribution Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2008 (Securities and Exchange Commission File No. 001-08598)(the “February 12, 2008 Form 8-K”))

 

  3.1      *    Amended and Restated Certificate of Incorporation of the Company dated May 9, 2012 (Exhibit 3.1(i) to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2012 (Securities and Exchange Commission File No. 001-08598)(the May 10, 2012 Form 8-K”))
  3.2      *    Certificate of Designation of Series B Common Stock of the Company dated May 9, 2012 (Exhibit 3.1(i) to the May 10, 2012 Form 8-K)
  3.3      *    Amended and Restated Bylaws of the Company, effective March 9, 2009 (Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 11, 2009 (Securities and Exchange Commission File No. 001-08598)(the “March 11, 2009 Form 8-K”))
  3.4      *    Amendment No. 1 to the Bylaws of Belo Corp. (as amended and restated effective March 9, 2009) (Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2011 (Securities and Exchange Commission File No 001-08598))
  3.5      *    Amendment No. 2 to the Bylaws of Belo Corp. (as amended and restated effective March 9, 2009)(Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 23, 2011 (Securities and Exchange Commission File No. 001-08598))
  4.1         Certain rights of the holders of the Company’s Common Stock are set forth in Exhibits 3.1-3.5 above
  4.2      *    Specimen Form of Certificate representing shares of the Company’s Series A Common Stock (Exhibit 4.1 to the May 10, 2012 Form 8-K)
  4.3      *    Specimen Form of Certificate representing shares of the Company’s Series B Common Stock (Exhibit 4.2 to the May 10, 2012 Form 8-K)
  4.4         Instruments defining rights of debt securities:
     (1)   *    Indenture dated as of June 1, 1997 between the Company and The Chase Manhattan Bank, as Trustee (the “Indenture”)(Exhibit 4.6(1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (Securities and Exchange Commission File No. 002-74702)(the “2nd Quarter 1997 Form 10-Q”))
     (2)   *    $200 million 7 3/4% Senior Debenture due 2027 (Exhibit 4.6(4) to the 2nd Quarter 1997 Form 10-Q)
     (3)   *    Officers’ Certificate dated June 13, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(5) to the 2nd Quarter 1997 Form 10-Q)
     (4)   *   

(a)    $200 million 7 1/4% Senior Debenture due 2027 (Exhibit 4.6(6)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (Securities and Exchange Commission File No. 002-74702)(the “3rd Quarter 1997 Form 10-Q”))

 

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Table of Contents
       *   

(b)    $50 million 7 1/4% Senior Debenture due 2027 (Exhibit 4.6(6)(b) to the 3rd Quarter 1997 Form 10-Q)

     (5)   *    Officers’ Certificate dated September 26, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(7) to the 3rd Quarter 1997 Form 10-Q)
     (6)   *    Form of Belo Corp. 6 3/4% Senior Notes due 2013 (Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2006 (Securities and Exchange Commission File No. 001-08598)(the “May 26, 2006 Form 8-K”))
     (7)   *    Officers’ Certificate dated May 26, 2006 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.2 to the May 26, 2006 Form 8-K)
     (8)   *    Underwriting Agreement Standard Provisions (Debt Securities), dated May 24, 2006 (Exhibit 1.1 to the May 26, 2006 Form 8-K)
     (9)   *    Underwriting Agreement, dated May 24, 2006, between the Company, Banc of America Securities LLC and JPMorgan Securities, Inc. (Exhibit 1.2 to the May 26, 2006 Form 8-K)
     (10)   *    Form of Belo Corp. 8% Senior Notes due 2016 (Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2009 (Securities and Exchange Commission File No. 001-08598)(the “November 16, 2009 Form 8-K”))
     (11)   *    Supplemental Indenture, dated November 16, 2009 among the Company, the Guarantors of the Notes and The Bank of New York Mellon Trust Company, N.A., as Trustee (Exhibit 4.1 to the November 16, 2009 Form 8-K)
     (12)   *    Underwriting Agreement, dated November 10, 2009, between the Company, the Guarantors of the Notes and JPMorgan Securities, Inc. (Exhibit 1.1 to the November 16, 2009 Form 8-K)
10.1      Financing agreements:
     (1)   *    Amendment and Restatement Agreement, dated as of November 16, 2009 to Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement, dated as of February 26, 2009, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto (Exhibit 10.1 to the November 16, 2009 Form 8-K)
     (2)   *    Guarantee Agreement dated as of February 26, 2009, among Belo Corp., the Subsidiaries of Belo Corp. identified therein and JPMorgan Chase Bank, N.A. (Exhibit 10.1(4) to the Company’s Annual Report on Form 10-K dated March 2, 2009 (Securities and Exchange Commission File No. 001-08598)
     (3)   *    Form of Supplement, dated as of November 16, 2009, to the Guarantee Agreement dated as of February 26, 2009, among the Company, the Subsidiaries of the Company from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Exhibit 10.2 to the November 16, 2009 Form 8-K)
     (4)   *    First Amendment dated as of August 11, 2010, to its Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of February 26, 2009, as further amended and restated as of November 16, 2009, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 13, 2010 (Securities and Exchange Commission File No. 001-08598))
     (5)   *    Amendment and Restated Revolving Credit Facility Agreement, dated as of December 21, 2011, among the Company, as Borrower; JPMorgan Chase Bank, N.A., as Administrative Agent; JPMorgan Securities LLC, Suntrust Robinson Humphrey, Inc., and RBC Capital Markets, as Joint Lead Arrangers and Joint Bookrunners; Suntrust Bank and Royal Bank of Canada as Co-Syndication agents, The Northern Trust Company and Capital One N.A. as Co-Documentation Agents (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2011 (Securities and Exchange file No. 001-08598)(the “December 22, 2011 Form 8-K))

 

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Table of Contents
     (6)   *    Guarantee Agreement dated as of December 21, 2011, among Belo Corp., the Subsidiaries of Belo Corp. identified therein and JPMorgan Chase Bank, N.A. (Exhibit 10.2 to the December 22, 2011 Form 8-K)
  ~10.2         Compensatory plans:
     ~(1)      Belo Savings Plan:
       *   

(a)    Belo Savings Plan Amended and Restated effective January 1, 2008 (Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 11, 2007 (Securities and Exchange Commission File No. 001-08598)(the “December 11, 2007 Form 8-K”))

       *   

(b)    First Amendment to the Amended and Restated Belo Savings Plan effective as of January 1, 2008 (Exhibit 10.2(1)(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 (Securities and Exchange Commission File No. 001-08598))

       *   

(c)    Second Amendment to the Amended and Restated Belo Savings Plan effective as of January 1, 2009 (Exhibit 10.2(1)(c) to the Company’s Annual Report on Form 10-K dated March 2, 2009 (Securities and Exchange Commission File No 001-08598)( the “2008 Form 10-K”))

       *   

(d)    Third Amendment to the Amended and Restated Belo Savings Plan effective as of April 12, 2009 (Exhibit 10.1 to the March 11, 2009 Form 8-K)

       *   

(e)    Fourth Amendment to the Amended and Restated Belo Savings Plan effective as of September 10, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2009 (Securities and Exchange Commission File No 001-08598))

       *   

(f)     Fifth Amendment to the Amended and Restated Belo Savings Plan dated December 3, 2010 (Exhibit 10.2.1(f) to the Company’s Annual Report on Form 10-K dated March 11, 2011 (Securities and Exchange Commission file No. 001-08598))

     ~(2)   *    Belo 1995 Executive Compensation Plan, as restated to incorporate amendments through December 4, 1997 (Exhibit 10.3(3) to the Company’s Annual Report on Form 10-K dated March 19, 1998 (Securities and Exchange Commission File No. 002-74702))
       *   

(a)    Amendment to 1995 Executive Compensation Plan, dated July 21, 1998 (Exhibit 10.2(3)(a) to the Company’s Quarterly report on form 10-Q for the quarter ended June 30, 1998 (Securities and Exchange Commission File No. 002-74702))

       *   

(b)    Amendment to 1995 Executive Compensation Plan, dated December 16, 1999 (Exhibit 10.2(3)(b) to the Company’s Annual Report on Form 10-K dated March 15, 2000 (Securities and Exchange Commission File No. 001-08598)(the “1999 Form 10-K”))

       *   

(c)    Amendment to 1995 Executive Compensation Plan, dated December 5, 2003 (Exhibit 10.3(3)(c) to the Company’s Annual Report on Form 10-K dated March 4, 2004 (Securities and Exchange Commission File No. 001-08598)(the “2003 Form 10-K”))

       *   

(d)    Form of Belo Executive Compensation Plan Award Notification for Employee Awards (Exhibit 10.2(3)(d) to the Company’s Annual Report on Form 10-K dated March 6, 2006 (Securities and Exchange Commission File No. 001-08598)(the “2005 Form 10-K”))

     ~(3)   *    Management Security Plan (Exhibit 10.3(1) to the Company’s Annual Report on Form 10-K dated March 12, 1997 (Securities and Exchange Commission No. 001-08598))
       *   

(a)    Amendment to Management Security Plan of Belo Corp. and Affiliated Companies (as restated effective January 1, 1982)(Exhibit 10.2(4)(a) to the 1999 Form 10-K)

     ~(4)      Belo Supplemental Executive Retirement Plan
       *   

(a)    Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2004 (Exhibit 10.2(5)(a) to the 2003 Form 10-K)

       *   

(b)    Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2007 (Exhibit 99.6 to the December 11, 2007 Form 8-K)

 

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Table of Contents
       *   

(c)    Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2008 (Exhibit 10.2(5)(c) to the 2008 Form 10-K)

     ~(5)   *    Belo Pension Transition Supplement Restoration Plan effective April 1, 2007 (Exhibit 99.5 to the December 11, 2007 Form 8-K)
       *   

(a)    First Amendment to the Belo Pension Transition Supplement Restoration Plan, dated May 12, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009 (Securities and Exchange Commission File No. 001-08598))

       *   

(b)    Second Amendment to the Belo Pension Transition Supplement Restoration Plan, dated March 5, 2010 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2010 (Securities and Exchange Commission file No. 001-08598))

     ~(6)   *    Belo 2000 Executive Compensation Plan (Exhibit 4.15 to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 4, 2000 (Securities and Exchange Commission File No. 333-43056))
       *   

(a)    First Amendment to Belo 2000 Executive Compensation Plan effective as of December 31, 2000 (Exhibit 10.2(6)(a) to the Company’s Annual Report on Form 10-K dated March 12, 2003 (Securities and Exchange Commission File No. 001-08598 (the “2002 Form 10-K”))

       *   

(b)    Second Amendment to Belo 2000 Executive Compensation Plan dated December 5, 2002 (Exhibit 10.2(6)(b) to the 2002 Form 10-K)

       *   

(c)    Third Amendment to Belo 2000 Executive Compensation Plan dated December 5, 2003 (Exhibit 10.2(6)(c) to the 2003 Form 10-K)

       *   

(d)    Form of Belo Executive Compensation Plan Award Notification for Employee Awards (Exhibit 10.2(6)(c) to the 2005 Form 10-K)

     ~(7)   *    Belo Amended and Restated 2004 Executive Compensation Plan (Exhibit 10.2(8) to the Company’s Annual Report on Form 10-K dated March 12, 2010 (Securities and Exchange Commission File No. 001-08598)(the “2009 Form 10-K”))
       *   

(a)    Form of Belo 2004 Executive Compensation Plan Award Notification for Employee Option Awards (Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2006 (Securities and Exchange Commission File No. 001-08598))

       *   

(b)    Form of Belo 2004 Executive Compensation Plan Award Notification for Employee Time-Based Restricted Stock Unit Awards (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 5, 2012 (Securities and Exchange Commission file No. 001-08598))

       *   

(c)    Form of Award Notification under the Belo 2004 Executive Compensation Plan for Non-Employee Director Awards (Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 12, 2005 (Securities and Exchange Commission File No. 001-08598))

     ~(8)   *    Summary of Non-Employee Director Compensation (Exhibit 10.2(9) to the 2009 Form 10-K)
     ~(9)   *    Belo Corp. Change In Control Severance Plan (Exhibit 10.2(10) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (Securities and Exchange Commission File No. 001-08598))
10.3      Agreements relating to the spin-off distribution of A. H. Belo:
     (1)   *    Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.1 to the February 12, 2008 Form 8-K)
       *   

(a)    First Amendment to Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of September 14, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2009 (Securities and Exchange Commission File No. 001-08598))

 

27


Table of Contents
     (2)   *    Employee Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.2 to the February 12, 2008 Form 8-K)
       *   

(a)    Amendment to Employee Matters Agreement as set forth in the Pension Plan Transfer Agreement dated as of October 6, 2010 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 8, 2010 (Securities and Exchange Commission File No. 001-08598)(the “October 8, 2010 Form 8-K”))

     (3)   *    Services Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.3 to the February 12, 2008 Form 8-K)
     (4)   *    Pension Plan Transfer Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of October 6, 2010 (Exhibit 10.1 to the October 8, 2010 Form 8-K)

 

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

¥101.INS    XBRL Instance Document
¥101.SCH    XBRL Taxonomy Extension Schema Document
¥101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
¥101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
¥101.LAB    XBRL Taxonomy Extension Labels Linkbase Document
¥101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

28


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    BELO CORP.
August 9, 2012     By:   /s/ Carey P. Hendrickson
      Carey P. Hendrickson
      Senior Vice President/Chief Financial Officer and Treasurer
      (Principal Financial and Accounting Officer)

 

29

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