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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: SEPTEMBER 30, 2002
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 (I.R.S. employer
incorporation or organization) identification no.)
P. O. BOX 655237
DALLAS, TEXAS 75265-5237
(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 the 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT OCTOBER 31, 2002
----- -------------------------------
Common Stock, $1.67 par value 112,613,600*
* Consisting of 95,922,554 shares of Series A Common Stock and 16,691,046
shares of Series B Common Stock.
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BELO CORP.
FORM 10-Q
TABLE OF CONTENTS
PAGE
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................................... 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk..................... 14
Item 4. Controls and Procedures........................................................ 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 14
Item 2. Changes in Securities and Use of Proceeds...................................... 14
Item 3. Defaults Upon Senior Securities................................................ 14
Item 4. Submission of Matters to a Vote of Security Holders............................ 14
Item 5. Other Information.............................................................. 14
Item 6. Exhibits and Reports on Form 8-K............................................... 14
Signatures..................................................................... 19
Certifications................................................................. 20
i
PART I.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Belo Corp. and Subsidiaries
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
In thousands, except per share amounts (unaudited) 2002 2001 2002 2001
------------ ------------ ------------ ------------
NET OPERATING REVENUES $ 347,608 $ 322,485 $ 1,033,704 $ 1,015,880
OPERATING COSTS AND EXPENSES
Salaries, wages and employee benefits 127,315 120,555 375,309 374,326
Other production, distribution and operating costs 94,727 91,311 280,321 273,909
Newsprint, ink and other supplies 28,217 37,163 85,111 114,132
Depreciation 23,871 24,876 72,640 75,475
Amortization 2,087 20,176 6,213 60,654
------------ ------------ ------------ ------------
Total operating costs and expenses 276,217 294,081 819,594 898,496
------------ ------------ ------------ ------------
Earnings from operations 71,391 28,404 214,110 117,384
OTHER INCOME AND EXPENSE
Interest expense (24,955) (26,150) (80,374) (85,264)
Other, net (1,072) (395) 5,389 (29,190)
------------ ------------ ------------ ------------
Total other income and expense (26,027) (26,545) (74,985) (114,454)
EARNINGS (LOSS)
Earnings before income taxes 45,364 1,859 139,125 2,930
Income taxes 17,373 2,377 53,853 3,140
------------ ------------ ------------ ------------
Net earnings (loss) $ 27,991 $ (518) $ 85,272 $ (210)
============ ============ ============ ============
NET EARNINGS PER SHARE
Basic $ .25 $ .00 $ .76 $ .00
Diluted $ .25 $ .00 $ .75 $ .00
AVERAGE SHARES OUTSTANDING
Basic 112,225 109,918 111,632 109,708
Diluted 113,857 109,918 113,400 109,708
CASH DIVIDENDS DECLARED PER SHARE $ .15 $ .15 $ .30 $ .30
------------ ------------ ------------ ------------
See accompanying Notes to Consolidated Condensed Financial Statements.
1
CONSOLIDATED CONDENSED BALANCE SHEETS
Belo Corp. and Subsidiaries
In thousands, except share and per share amounts September 30, December 31,
(Current year unaudited) 2002 2001
------------- ------------
ASSETS
Current assets:
Cash and temporary cash investments $ 39,554 $ 35,913
Accounts receivable, net 212,527 231,673
Other current assets 56,995 64,593
------------- ------------
Total current assets 309,076 332,179
Property, plant and equipment, net 565,065 597,106
Intangible assets, net 1,373,318 1,368,385
Goodwill, net 1,255,262 1,255,262
Other assets 90,249 119,293
------------- ------------
Total assets $ 3,592,970 $ 3,672,225
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 54,575 $ 60,347
Accrued expenses 87,946 85,911
Other current liabilities 64,905 39,142
------------- ------------
Total current liabilities 207,426 185,400
Long-term debt 1,489,300 1,696,900
Deferred income taxes 425,515 416,500
Other liabilities 62,905 52,680
Shareholders' equity:
Preferred stock, $1.00 par value. Authorized
5,000,000 shares; none issued
Common stock, $1.67 par value. Authorized
450,000,000 shares:
Series A: Issued 95,613,438 shares at September 30, 2002
and 91,800,402 shares at December 31, 2001 159,675 153,307
Series B: Issued 16,727,185 shares at September 30, 2002
and 18,582,538 shares at December 31, 2001 27,934 31,033
Additional paid-in capital 869,568 837,515
Retained earnings 350,647 298,890
------------- ------------
Total shareholders' equity 1,407,824 1,320,745
------------- ------------
Total liabilities and shareholders' equity $ 3,592,970 $ 3,672,225
============= ============
See accompanying Notes to Consolidated Condensed Financial Statements.
2
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Belo Corp. and Subsidiaries
Nine months ended September 30,
-------------------------------
In thousands (unaudited) 2002 2001
------------ ------------
OPERATIONS
Net earnings (loss) $ 85,272 $ (210)
Adjustments to reconcile net earnings
to net cash provided by operations:
Net gain on sale of investments (1,841) --
Depreciation and amortization 78,853 136,129
Deferred income taxes 15,006 (8,062)
Non-cash charge for write-down of Internet investments -- 28,785
Non-cash expenses 10,678 6,168
Other, net 5,278 (1,725)
Net change in current assets and liabilities:
Accounts receivable 19,609 53,160
Other current assets (4,040) 4,264
Accounts payable (5,824) (23,066)
Accrued expenses 15,412 (17,607)
Other current liabilities 23,773 (63,953)
------------ ------------
Net cash provided by operations 242,176 113,883
INVESTING
Capital expenditures (31,789) (42,521)
Acquisitions (18,000) --
Proceeds from sale of investments 27,000 --
Other investments (11,641) (14,202)
Other, net 398 1,770
------------ ------------
Net cash used for investments (34,032) (54,953)
FINANCING
Borrowings of debt 812,825 733,800
Repayments of debt (1,020,525) (816,410)
Purchase of treasury shares -- (12,621)
Payment of dividends on stock (25,090) (24,676)
Net proceeds from exercise of stock options 28,287 6,717
------------ ------------
Net cash used for financing (204,503) (113,190)
Net increase (decrease) in cash and temporary cash investments 3,641 (54,260)
Cash and temporary cash investments at beginning of period 35,913 87,680
------------ ------------
Cash and temporary cash investments at end of period $ 39,554 $ 33,420
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid, net of amounts capitalized $ 69,601 $ 80,870
Income taxes paid, net of refunds $ 18,548 $ 80,747
See accompanying Notes to Consolidated Condensed Financial Statements.
3
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Belo Corp. and Subsidiaries
(in thousands, except per share amounts)
(1) The accompanying unaudited consolidated condensed financial statements
of Belo Corp. and subsidiaries (the "Company" or "Belo") 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. The balance sheet at December 31, 2001 has been
derived from the audited consolidated financial statements at that date
but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine-month periods
ended September 30, 2002 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2002. 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, 2001.
Certain amounts for the prior periods have been reclassified to conform
to the current year presentation.
(2) The following table sets forth the reconciliation between weighted
average shares used for calculating basic and diluted earnings per
share for the three and nine months ended September 30, 2002 and 2001:
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
Weighted average shares for basic earnings
per share 112,225 109,918 111,632 109,708
Effect of employee stock options 1,632 -- 1,768 --
-------- -------- -------- --------
Weighted average shares for diluted earnings
per share 113,857 109,918 113,400 109,708
======== ======== ======== ========
(3) Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets." Under the provisions of SFAS No. 142, goodwill and certain
other intangibles with indefinite lives, namely Federal Communications
Commission ("FCC") licenses, are no longer amortized, but are instead
reviewed at least annually for impairment at the reporting unit level
and written down (expensed against earnings) when the implied fair
value of a reporting unit, including goodwill and other related
intangibles, is less than its carrying amount. Separable intangible
assets that have finite useful lives will continue to be amortized over
their useful lives. For Belo's Television Group, a reporting unit is
defined as an operating cluster of television stations and for Belo's
Newspaper Group, a reporting unit is defined as the newspaper
operations in each individual market.
The Company's review for impairment of goodwill and other intangible
assets performed during the second quarter of 2002 indicated no
impairment of these assets as of January 1, 2002. The Company must make
assumptions regarding estimated future cash flows and other factors to
determine the fair value of the respective assets in assessing the
recoverability of its goodwill and other intangibles. If these
estimates or the related assumptions change, the Company may be
required to record impairment charges for these assets in the future.
4
Prior to the adoption of SFAS No. 142, amortization expense was
recorded for goodwill and other intangibles with indefinite lives. The
following table sets forth a reconciliation of net earnings and net
earnings per share information for the three and nine months ended
September 30, 2002 and 2001 as though SFAS No. 142 had been in effect
at the beginning of fiscal 2001:
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net earnings (loss), as reported $ 27,991 $ (518) $ 85,272 $ (210)
Add back: Goodwill and FCC license
amortization, net of tax -- 12,153 -- 34,435
---------- ---------- ---------- ----------
Net earnings, pro forma $ 27,991 $ 11,635 $ 85,272 $ 34,225
========== ========== ========== ==========
Per share amounts:
Basic net earnings per share, as reported $ .25 $ .00 $ .76 $ .00
Add back: Goodwill and FCC license
amortization, net of tax -- .11 -- .31
---------- ---------- ---------- ----------
Basic net earnings per share, pro forma $ .25 $ .11 $ .76 $ .31
========== ========== ========== ==========
Diluted net earnings per share, as reported $ .25 $ .00 $ .75 $ .00
Add back: Goodwill and FCC license
amortization, net of tax -- .11 -- .31
---------- ---------- ---------- ----------
Diluted net earnings per share, pro forma $ .25 $ .11 $ .75 $ .31
========== ========== ========== ==========
The reported effective tax rates for the third quarter and first nine
months of 2002 were 38.3 percent and 38.7 percent, respectively,
compared to effective tax rates exceeding 100 percent for the quarter
and nine months ended September 30, 2001 primarily due to the
elimination of non-deductible goodwill amortization upon adoption of
SFAS No. 142. The pro forma effective tax rates would have been 42.9
percent and 41.6 percent for the third quarter and first nine months of
2001, respectively, if SFAS No. 142 had been in effect at the beginning
of 2001.
The following table is as of September 30, 2002 and sets out the
identifiable intangible assets that continue to be subject to
amortization and the identifiable intangible assets that are no longer
subject to amortization beginning January 1, 2002:
Weighted
Average
Gross Carrying Accumulated Amortization
Amount Amortization Period
-------------- ------------ ------------
Amortized intangible assets:
Television Group:
Market alliance (1) $ 8,832 $ 883 5 years
Newspaper Group:
Subscriber lists 115,963 41,066 18 years
Unamortized intangible assets:
Television Group:
FCC licenses 1,464,184 173,712
-------------- -----------
Total identifiable intangible assets $ 1,588,979 $ 215,661
----------
(1) Acquired March 12, 2002.
Amortization expense for intangible assets subject to amortization was
$2,087 and $6,213 for the three and nine months ended September 30,
2002, respectively. The annual amortization expense for intangible
assets subject to amortization is estimated to be approximately $8,500
for each of the next five fiscal years.
5
The total carrying amount of goodwill as of January 1, 2002 and
September 30, 2002 is $1,255,262, of which amount $779,987, $470,043
and $5,232 is associated with the Television Group, Newspaper Group and
Other, respectively.
(4) During the third quarter of 2002, Belo evaluated its long-term rate of
return on pension fund assets and reduced the assumed rate of return
from 9.75 percent to 8.75 percent, retroactive to January 1, 2002. As a
result of this revision, the Company will record $6,200 of pension
expense in 2002 compared with $3,000 that would have been recorded
using the 9.75 percent rate of return. During the nine months ended
September 30, 2002, the Company recorded $4,650 of pension expense and
will record an additional $1,550 of pension expense in the fourth
quarter of 2002.
The Company may be required to record an additional minimum liability
in the fourth quarter of 2002 if the accumulated benefit obligation
exceeds the value of the pension fund assets at December 31, 2002. In
accordance with generally accepted accounting principles, this charge
will be reflected in other comprehensive income/(loss) as a reduction
in shareholders' equity. The amount to be recorded will depend upon the
fair value of plan assets and the accumulated benefit obligation at
December 31, 2002.
(5) Belo plans to begin recording compensation expense for stock options
once final accounting standards have been adopted. On a pro forma
basis, if the Company had expensed stock options, earnings per share
for the three and nine-month periods ended September 30, 2002 would
have been 22 cents per share and 67 cents per share, respectively, as
compared to the 25 cents per share and 75 cents per share reported. On
a pro forma basis, earnings per share for the three and nine-month
periods ended September 30, 2001 would have been 8 cents per share and
24 cents per share, respectively, versus 11 cents per share and 31
cents per share on a SFAS No. 142 basis (see Note 3).
6
(6) Net operating revenues, earnings from operations, depreciation and
amortization, operating cash flow by industry segment and consolidated
cash flow information are shown below. Operating cash flow is defined
as earnings from operations plus depreciation and amortization.
Operating cash flow is used in the broadcasting and publishing
industries to analyze and compare companies on the basis of operating
performance and liquidity. Operating cash flow should not be considered
as a measure of financial performance or liquidity under generally
accepted accounting principles and should not be considered in
isolation or as an alternative to net income, cash flows generated by
operating, investing or financing activities or financial statement
data presented in the consolidated condensed financial statements.
Because operating cash flow is not a measurement determined in
accordance with generally accepted accounting principles and is thus
susceptible to varying calculations, operating cash flow as presented
may not be comparable to other similarly titled measures of other
companies.
Three months ended Nine months ended
September 30, September 30,
------------------------------ ------------------------------
In thousands 2002 2001 2002 2001
------------ ------------ ------------ ------------
NET OPERATING REVENUES
Television Group $ 158,714 $ 133,998 $ 470,412 $ 442,092
Newspaper Group 179,482 181,066 536,675 552,029
Interactive Media 5,009 3,449 13,850 9,716
Other 4,403 3,972 12,767 12,043
------------ ------------ ------------ ------------
Total net operating revenues $ 347,608 $ 322,485 $ 1,033,704 $ 1,015,880
============ ============ ============ ============
EARNINGS FROM OPERATIONS
Television Group $ 53,518 $ 18,068 $ 159,060 $ 90,088
Newspaper Group 34,990 26,529 105,608 84,190
Interactive Media (3,744) (4,890) (10,992) (15,945)
Other (559) (1,226) (2,667) (3,406)
Corporate expenses (12,814) (10,077) (36,899) (37,543)
------------ ------------ ------------ ------------
Total earnings from operations $ 71,391 $ 28,404 $ 214,110 $ 117,384
============ ============ ============ ============
DEPRECIATION AND AMORTIZATION
Television Group $ 11,977 $ 27,319 $ 35,857 $ 82,812
Newspaper Group 11,940 15,201 36,300 45,841
Interactive Media 861 807 2,583 2,209
Other 602 731 1,779 2,071
Corporate 578 994 2,334 3,196
------------ ------------ ------------ ------------
Total depreciation and amortization $ 25,958 $ 45,052 $ 78,853 $ 136,129
============ ============ ============ ============
OPERATING CASH FLOW (SEE DEFINITION ABOVE)
Television Group $ 65,495 $ 45,387 $ 194,917 $ 172,900
Newspaper Group 46,930 41,730 141,908 130,031
Interactive Media (2,883) (4,083) (8,409) (13,736)
Other 43 (495) (888) (1,335)
Corporate (12,236) (9,083) (34,565) (34,347)
------------ ------------ ------------ ------------
Total operating cash flow $ 97,349 $ 73,456 $ 292,963 $ 253,513
============ ============ ============ ============
CONSOLIDATED CASH FLOW INFORMATION (a)
Net cash provided by operations $ 242,176 $ 113,883
Net cash used for investments $ (34,032) $ (54,953)
Net cash used for financing $ (204,503) $ (113,190)
(a) Cash flow information is provided on a consolidated basis and is as
presented in the Consolidated Condensed Statements of Cash Flows included
herein.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Company is an owner and operator of 19 television stations and publisher of
four daily newspapers. The following table sets forth the Company's major media
assets by segment as of September 30, 2002:
Television Group
Network
Market Market Rank(a) Station Affiliation(b) Status Acquired
- ----------------- -------------- ------- -------------- ------ --------------
Dallas/Fort Worth 7 WFAA ABC Owned March 1950
Houston 11 KHOU CBS Owned February 1984
Seattle/Tacoma 12 KING NBC Owned February 1997
Seattle/Tacoma 12 KONG IND Owned March 2000
Phoenix 16 KTVK IND Owned November 1999
Phoenix 16 KASW WB Owned March 2000
St. Louis 22 KMOV CBS Owned June 1997
Portland 23 KGW NBC Owned February 1997
Charlotte 27 WCNC NBC Owned February 1997
San Antonio 37 KENS CBS Owned October 1997
San Antonio 37 KBEJ UPN LMA (c)
Hampton/Norfolk 42 WVEC ABC Owned February 1984
New Orleans 43 WWL CBS Owned June 1994
Louisville 50 WHAS ABC Owned February 1997
Austin 54 KVUE ABC Owned June 1999
Tucson 73 KMSB FOX Owned February 1997
Tucson 73 KTTU UPN Owned March 2002(d)
Spokane 78 KREM CBS Owned February 1997
Spokane 78 KSKN WB(e) Owned October 2001(f)
Boise(g) 121 KTVB NBC Owned February 1997
Newspaper Group
Daily Sunday
Newspaper Location Acquired Circulation(i) Circulation(i)
- ------------------------------- -------------- ------------- -------------- --------------
The Dallas Morning News ("DMN") Dallas, TX (h) 525,532 784,905
The Providence Journal ("PJ") Providence, RI February 1997 164,065 232,040
The Press-Enterprise ("PE") Riverside, CA July 1997 178,994 184,637
Denton Record-Chronicle Denton, TX June 1999 14,783 19,098
Interactive Media
Belo Interactive, Inc. Includes the Web site operations of Belo's operating companies, interactive
alliances and Internet-based products and services.(j)
Other
Northwest Cable News ("NWCN") Cable news channel distributed to over 2.3 million homes in the Pacific Northwest.
Texas Cable News ("TXCN") Cable news channel distributed to over 1.3 million homes in Texas.
(a) Market rank is based on the relative size of the television market, or
Designated Market Area ("DMA"), among the 210 generally recognized DMAs in
the United States, based on May 2002 Nielsen estimates.
(b) Substantially all the revenue of the Company's television stations is
derived from advertising. Less than 4 percent of Television Group revenue
is provided by compensation paid by networks to the television stations for
broadcasting network programming.
(c) Belo entered into an agreement to operate KBEJ under a local marketing
agreement ("LMA") in May 1999; the station's on-air date was August 3,
2000.
(d) Belo acquired KTTU, previously operated under an LMA, on March 12, 2002.
(e) The primary affiliation with UPN expired in September 2002. The station is
now affiliated with the WB network.
(f) Belo acquired KSKN, previously operated under an LMA, on October 1, 2001.
(g) The Company also owns KTFT-LP (NBC), a low power television station in
Twin Falls, Idaho.
(h) The first issue of DMN was published by Belo on October 1, 1885.
(i) Average paid circulation data for DMN and PE is for the six months ended
September 30, 2002 as filed in the Audit Bureau of Circulation's ("ABC")
FAS-FAX report. Circulation data for PJ is for the six months ended March
31, 2002 as filed with the ABC FAS-FAX report. Circulation data for the
Denton Record-Chronicle is taken from the Certified Audit of Circulations
Report for the twelve-month period ended December 31, 2001.
(j) The majority of Belo Interactive's Web sites are associated with the
Company's television stations and newspapers and primarily provide news and
information.
8
RESULTS OF OPERATIONS
Consolidated Results of Operations
Three Months Ended September 30, 2002 and 2001
Total net operating revenues increased $25,123, or 7.8 percent, for the third
quarter of 2002 as compared to the same period in 2001 due to increases of
$24,716, $1,560 and $431 in Television Group, Interactive Media and Other
revenues, respectively, partially offset by a $1,584 decrease in revenues in the
Newspaper Group.
Salaries, wages and employee benefits expense increased $6,760, or 5.6 percent,
for the third quarter of 2002 as compared to the year earlier period due to an
increase of $7,420 in accruals for performance-based bonuses and a $2,156
increase in pension expense, offset somewhat by lower salaries due to fewer
employees in 2002 resulting primarily from a Company-wide reduction in force and
an early retirement program at The Providence Journal in the fourth quarter of
2001. Pension expense increased in the third quarter of 2002 due primarily to a
reduction in the assumed long-term rate of return on pension fund assets. See
Note 4 of the Notes to the Consolidated Condensed Financial Statements.
Other production, distribution and operating costs increased $3,416, or 3.7
percent, in the third quarter of 2002 as compared to the third quarter of 2001
primarily due to increases in outside services ($2,170), cash programming
($1,466), outside solicitation ($994) and advertising and promotion ($971)
expenses, partially offset by a $2,038 decrease in bad debt expense.
Newsprint, ink and other supplies decreased $8,946, or 24.1 percent, in the
third quarter of 2002 as compared to the year earlier period primarily due to a
decrease in the average cost per metric ton of newsprint. The average cost per
metric ton of newsprint decreased 25.6 percent in the third quarter of 2002 as
compared to the year earlier period. Newsprint consumption increased less than 1
percent in the third quarter of 2002 as compared to the year earlier period.
Depreciation expense decreased $1,005 in the third quarter of 2002, from $24,876
in the third quarter of 2001 to $23,871 in the third quarter of 2002.
Amortization expense decreased from $20,176 in third quarter of 2001 to $2,087
in the third quarter of 2002 due to the Company's adoption of SFAS No. 142
effective January 1, 2002. See Note 3 of the Notes to the Consolidated Condensed
Financial Statements.
Interest expense for the third quarter of 2002 of $24,955 was 4.6 percent lower
than third quarter 2001 expense of $26,150, reflecting lower average debt
levels.
The effective tax rate for the third quarter of 2002 was 38.3 percent. The
Company recorded tax expense of $2,377 for the third quarter of 2001 on earnings
before income taxes of $1,859. The third quarter 2001 tax provision assumed a
projected annual effective tax rate in excess of 100 percent, resulting from
non-deductible goodwill amortization (which was eliminated in 2002 upon adoption
of SFAS No. 142) and lower projected annual pretax earnings. The effective tax
rate would have been 42.9 percent for the third quarter of 2001 if SFAS No. 142
had been in effect at the beginning of 2001.
As a result of the factors discussed above, net earnings of $27,991 (25 cents
per share) were reported for the three months ended September 30, 2002, compared
with a net loss of $518 (0 cents per share) for the same period in 2001. Net
earnings for the three months ended September 30, 2001 would have been $11,635
(11 cents per share) if SFAS No. 142 had been in effect at the beginning of
2001.
9
Nine Months Ended September 30, 2002 and 2001
Total net operating revenues increased $17,824, or 1.8 percent, for the nine
months ended September 30, 2002 as compared to the same period in 2001 due to
increases of $28,320, $4,134 and $724 in Television Group, Interactive Media and
Other revenues, respectively, partially offset by a $15,354 decrease in revenues
for the Newspaper Group.
Salaries, wages and employee benefits expense was flat for the nine months ended
September 30, 2002 when compared to the year earlier period. Increases in
performance-based bonus accruals ($14,930) and pension expense ($3,921) were
offset by lower salary expense ($18,041) due largely to fewer employees in 2002
resulting primarily from a Company-wide reduction in force and an early
retirement program at The Providence Journal in the fourth quarter of 2001.
Salaries, wages and employee benefits expense in the first nine months of 2001
included a charge of $4,461 for early retirement costs and corporate staff
reductions. Pension expense increased in the first nine months of 2002 due
primarily to a reduction in the assumed long-term rate of return on pension fund
assets (see Note 4 of the Notes to the Consolidated Condensed Financial
Statements).
Other production, distribution and operating costs increased $6,412, or 2.3
percent, in the first nine months of 2002 as compared to the first nine months
of 2001, primarily due to increases in outside services ($3,542), cash
programming ($3,022), outside solicitation ($2,364) and distribution ($2,217)
expenses, partially offset by a $4,274 decrease in bad debt expense.
Newsprint, ink and other supplies decreased $29,021, or 25.4 percent, in the
nine months ended September 30, 2002 as compared to the year earlier period. The
average cost per metric ton of newsprint decreased 25.3 percent in the first
nine months of 2002 as compared to the year earlier period. Newsprint
consumption decreased 2.5 percent as compared to the year earlier period.
Depreciation expense decreased $2,835, from $75,475 in the first nine months of
2001 to $72,640 in the first nine months of 2002.
Amortization expense decreased from $60,654 in the nine months ended September
30, 2001 to $6,213 in the nine months ended September 30, 2002 due to the
Company's adoption of SFAS No. 142 effective January 1, 2002. See Note 3 of the
Notes to the Consolidated Condensed Financial Statements.
Interest expense for the nine months ended September 30, 2002 was $80,374, or
5.7 percent, lower than the year earlier period expense of $85,264, due
primarily to lower average debt levels.
Other, net increased from expense of $29,190 for the nine month period ended
September 30, 2001 to income of $5,389 in the first nine months of 2002
primarily due to a $28,785 charge in 2001 related to the write-down of the
Company's investments in certain Internet-related companies, a $4,787 credit in
2002 related to the favorable resolution of certain contingencies associated
with the Company's sales in the fourth quarter of 2000 of KOTV in Tulsa,
Oklahoma, the Messenger-Inquirer in Owensboro, Kentucky, The Gleaner in
Henderson, Kentucky and The Eagle in Bryan/College Station, Texas and a $2,375
gain in the first quarter of 2002 on the sale of Belo's interest in the Dallas
Mavericks and the American Airlines Center.
The provision for income taxes is computed utilizing the Company's expected
annual effective income tax rate. The effective tax rate for the nine months
ended September 30, 2002 was 38.7 percent. The effective tax rate for the nine
months ended September 30, 2001 was 107.2 percent. The lower rate in 2002 is due
to the elimination of non-deductible goodwill amortization upon adoption of SFAS
No. 142 and higher estimated pretax earnings. The effective tax rate would have
been 41.6 percent for the first nine months of 2001 if SFAS No. 142 had been in
effect at the beginning of 2001.
As a result of the factors discussed above, net earnings for the nine months
ended September 30, 2002 were $85,272 (75 cents per share) as compared to a net
loss of $210 (0 cents per share) for the nine months ended September 30, 2001.
Net earnings for the nine months ended September 30, 2001 would have been
$34,225 (31 cents per share) if SFAS No. 142 had been in effect at the beginning
of 2001.
10
Segment Results of Operations
Television Group
Television Group revenues for the third quarter of 2002 were $158,714, an 18.4
percent increase compared to third quarter 2001 revenues of $133,998.
Year-to-date Television Group revenues increased 6.4 percent, from $442,092 in
2001 to $470,412 in the current year. Total spot revenues including political
revenue increased 20.0 percent and 7.0 percent for the quarter and nine-month
periods ended September 30, 2002, respectively, as compared to the prior year
periods. Local advertising revenues were up 8.8 percent for the third quarter of
2002 and 1.4 percent for the first nine months of the year with the most
significant increases in the Dallas, Houston and Phoenix markets. National
advertising revenues increased 15.4 percent in the third quarter of 2002 as
compared to the third quarter of 2001 and 4.8 percent for the year-to-date
period comparisons. The largest increases in national advertising revenues were
in the Phoenix, St. Louis and Portland markets.
Political advertising revenues increased $11,073 in the third quarter and
$18,263 in the first nine months of 2002 versus the same periods in 2001
primarily due to certain election campaigns in Texas, Missouri, Arizona and
Louisiana. Revenues for the first nine months of 2002 included approximately
$9,000 of advertising revenues generated by the Company's NBC affiliates from
their broadcast of the Winter Olympics in February 2002. The quarter and
nine-month periods ended September 30, 2001 included revenue losses of
approximately $9,000 related to the events of September 11.
Television Group cash operating expenses for the quarter and nine months ended
September 30, 2002 increased $4,608, or 5.2 percent, and $6,303, or 2.3 percent,
respectively, from the comparable periods in 2001 as a result of increases in
accruals for performance-based bonuses, programming costs and pension expense.
Television Group operating cash flow for the quarter and nine months ended
September 30, 2002 increased $20,108, or 44.3 percent, and $22,017, or 12.7
percent, respectively, when compared to the prior year periods. Television Group
operating cash flow margins improved from 33.9 percent in the third quarter of
2001 to 41.3 percent in the third quarter of 2002 and from 39.1 percent in the
first nine months of 2001 to 41.4 percent in the same period of 2002.
Newspaper Group
Newspaper Group revenues decreased $1,584, or approximately 1 percent, and
$15,354, or 2.8 percent, for the quarter and nine months ended September 30,
2002, respectively, as compared to the prior year periods. In the third quarter
of 2002, there was one fewer Sunday than in the third quarter of 2001. After
adjusting for the effects of the extra Sunday in the third quarter of 2001,
Newspaper Group revenues increased 1.2 percent for the third quarter of 2002.
DMN reported decreases in total revenues of 1.8 percent and 4.4 percent for the
third quarter and first nine months of 2002 as compared to the year earlier
periods with declines in advertising revenue of 1.6 percent and 5.1 percent in
the respective periods. Classified advertising revenues declined 9.7 percent in
the third quarter and 15.2 percent in the first nine months of 2002 as compared
to the year earlier periods, due to decreases in classified employment volume.
Excluding classified employment revenues, advertising revenues were up 2.4
percent in the third quarter and 1.8 percent in the first nine months of 2002.
General advertising revenues declined 10.8 percent and 8.1 percent for the
quarter and nine months ended September 30, 2002. Retail advertising revenues
increased 4.6 percent and 2.0 percent for the third quarter and first nine
months of 2002, respectively, as compared to the year earlier periods. Other
advertising revenues improved by 12.0 percent and 9.3 percent for the quarter
and year-to-date periods, respectively, due to increases in preprints and TMC
revenues.
Total revenues for PJ were flat for the third quarter and first nine months of
2002 as compared to the same periods in 2001. Gains in retail, general and other
advertising revenues were offset by declines in classified advertising and
circulation revenues.
Total revenues at PE increased 2.5 percent for the third quarter and were flat
for the nine months ended September 30, 2002 when compared to the prior year
periods. Higher general and retail advertising revenues and increased revenues
from commercial printing were offset somewhat by decreases in classified
advertising and circulation revenues.
11
Newspaper Group cash operating expenses decreased 4.9 percent and 6.5 percent
for the quarter and nine months ended September 30, 2002, respectively, as
compared to the prior year periods, primarily due to lower newsprint expense.
Newsprint expense decreased 25.9 percent and 27.1 percent for the quarter and
year-to-date periods in 2002, respectively, from the comparable periods in 2001.
Newspaper Group operating cash flow for the third quarter of 2002 was $46,930,
an increase of 12.5 percent over third quarter 2001 operating cash flow of
$41,730. For the year-to-date period, 2002 operating cash flow was $141,908, or
9.1 percent higher than the same period in 2001. Newspaper Group operating cash
flow margins improved from 23.0 percent and 23.6 percent for the quarter and
nine-month periods ended September 30, 2001, respectively, to 26.1 percent and
26.4 percent in the same periods of 2002.
Interactive Media
Interactive Media revenues, which are principally derived from advertising,
increased $1,560, or 45.2 percent, in the third quarter of 2002 and $4,134, or
42.5 percent, in the first nine months of 2002 when compared to the year earlier
periods. Interactive Media cash expenses increased 4.8 percent for the third
quarter of 2002 as compared to the third quarter of 2001, primarily due to
increases in performance-based bonuses and outside services. Interactive Media
cash expenses decreased 5.1 percent in the first nine months of 2002 as compared
to the first nine months of 2001, due primarily to expense reduction initiatives
begun in the third quarter of 2001 in response to the softening economy. As a
result, Interactive Media's operating cash flow deficits improved from $4,083 in
the third quarter of 2001 to $2,883 in the same period of 2002, and from a
deficit of $13,736 in the first nine months of 2001 to a deficit of $8,409 in
the 2002 comparable period.
Other
Other revenues consist primarily of Belo's regional cable news operations, NWCN
and TXCN. Other revenues increased 10.9 percent, from $3,972 in the third
quarter of 2001 to $4,403 in the third quarter of 2002. For the nine-month
period, Other revenues increased 6.0 percent, from $12,043 in 2001 to $12,767 in
2002. Cash expenses decreased 2.4 percent during the third quarter and increased
2.1 percent during the first nine months of 2002 when compared to the prior year
periods. Operating cash flow improved from a deficit of $495 in the third
quarter of 2001 to a surplus of $43 in the third quarter of 2002 and improved
from a deficit of $1,335 in the first nine months of 2001 to a deficit of $888
for the 2002 comparable period. Operating cash flow at NWCN increased during the
third quarter of 2002 as compared to the third quarter of 2001 but decreased
slightly in the first nine months of 2002 as compared to the prior year period.
TXCN reported decreases in cash flow deficits in both the quarter and nine
months ended September 30, 2002 as compared to the comparable prior year
periods.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations, bank borrowings and term debt are the Company's
primary sources of liquidity. During the first nine months of 2002, net cash
provided by operations was $242,176, compared with $113,883 for the same period
in 2001. Higher net earnings and lower working capital requirements for income
taxes, bonus payments and interest in the first nine months of 2002 as compared
to the year earlier period, contributed to the increase in cash provided by
operations. Total debt decreased $207,700 from December 31, 2001 to September
30, 2002.
On June 3, 2002, the Company repaid $250,000 of Senior Notes due 2002 utilizing
borrowings under its existing credit facility. At September 30, 2002, the
Company had $1,100,000 in fixed-rate debt securities as follows: $300,000 of
7-1/8 percent Senior Notes due 2007; $350,000 of 8 percent Senior Notes due
2008; $200,000 of 7-3/4 percent Senior Debentures due 2027; and $250,000 of
7-1/4 percent Senior Debentures due 2027. The weighted average effective
interest rate for the fixed-rate debt instruments is 7.5 percent.
At September 30, 2002, the Company had borrowings of $370,000 under a $720,000
variable-rate revolving credit facility. Borrowings under the credit facility
mature upon expiration of the agreement on November 29, 2006. In addition, the
Company had $12,900 of short-term unsecured notes outstanding at September 30,
2002. These borrowings may be converted at the Company's option to revolving
debt. Accordingly, such borrowings are classified as long-term in the Company's
financial statements.
12
The Company is required to maintain certain ratios as of the end of each
quarter, as defined in its revolving credit agreement. As of September 30, 2002,
the Company was in compliance with all debt covenant requirements.
The Company also has $150,000 of additional debt securities available for
issuance under a shelf registration statement filed in April 1997. Future
issuances of fixed-rate debt may be used to refinance variable-rate debt in
whole or in part or for other corporate needs as determined by management.
On January 30, 2002, the Company sold its interest in the Dallas Mavericks and
the American Airlines Center for $27,000 which resulted in a pretax gain of
approximately $2,375.
On March 12, 2002, Belo completed the purchase of KTTU, the UPN affiliate in the
Tucson, Arizona television market, for $18,000 in cash. Belo had previously
operated KTTU under a local marketing agreement.
In the first nine months of 2002, the Company paid dividends of $25,090, or 22.5
cents per share, on Series A and Series B common stock outstanding, compared
with $24,676, or 22.5 cents per share, in the first nine months of 2001.
Capital expenditures in the first nine months of 2002 were $31,789. Expenditures
were primarily for Television Group equipment purchases, including those for
equipment to be used in the transmission of digital television, and Newspaper
Group equipment purchases.
During 2000 and 2001, Belo announced the formation of a series of cable news
partnerships with Time Warner Cable ("Time Warner"). The Time Warner agreements
call for the creation of 24-hour cable news channels in Houston and San Antonio,
Texas and Charlotte, North Carolina. As of September 30, 2002, investments
totaling $26,950 ($12,700 of which was invested in the first nine months of
2002) had been made related to the Time Warner partnerships which will be used
to fund capital expenditures and operating costs. The on-air date of the news
channel in Charlotte, North Carolina was June 14, 2002. The projected on-air
dates of the news channels in Houston and San Antonio, Texas are late 2002 and
early 2003, respectively.
Other Matters
The Company expects 2003 pension expense to exceed the $6,200 expense recorded
in 2002, but the ultimate amount will depend upon several factors, most notably
plan asset values and interest rates at the end of 2002. Additionally, the
Company may be required to record an additional minimum liability in the fourth
quarter of 2002 if the accumulated benefit obligation exceeds the value of the
pension fund assets at December 31, 2002. In accordance with generally accepted
accounting principles, this charge will be reflected in other comprehensive
income/(loss) as a reduction in shareholders' equity. The amount to be recorded
will depend upon the fair value of plan assets and the accumulated benefit
obligation at December 31, 2002.
Newsprint prices are expected to be higher in 2003 than in 2002, but the amount
and the timing of any increase cannot be predicted with certainty.
Forward-Looking Statements
Statements in this Form 10-Q concerning the Company's business outlook or future
economic performance, anticipated profitability, revenues, expenses, capital
expenditures, investments, future financings or 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 factors include, but are not limited to, changes
in capital market conditions and prospects, and other factors such as changes in
advertising demand, interest rates and newsprint prices; technological changes;
development of Internet commerce; industry cycles; changes in pricing or other
actions by competitors and suppliers; regulatory changes; 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 and dispositions; and
general economic conditions, as well as other risks detailed in the Company's
filings with the Securities and Exchange Commission ("SEC"), including the
Annual Report on Form 10-K and in the Company's periodic press releases.
13
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 Belo's report on Form
10-K for the fiscal year ended December 31, 2001.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the filing date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chairman of the Board, President
and Chief Executive Officer and Executive Vice President/Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chairman of the Board, President and Chief Executive
Officer and Executive Vice President/Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings.
There have been no significant changes in the Company's internal controls or in
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
PART II.
ITEM 1. LEGAL PROCEEDINGS
A number of legal proceedings are pending against the Company, including several
actions for alleged libel. In the opinion of management, liabilities, if any,
arising from these actions would not have a material adverse effect on the
results of operations, liquidity or financial position of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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. Exhibits marked with a tilde (~) are
management contracts or compensatory plan contracts or arrangements
filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other
documents are filed with this report.
3.1 * Certificate of Incorporation of the Company (Exhibit 3.1 to
the Company's Annual Report on Form 10-K dated March 15, 2000
(the "1999 Form 10-K"))
3.2 * Certificate of Correction to Certificate of Incorporation
dated May 13, 1987 (Exhibit 3.2 to the 1999 Form 10-K)
14
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.3 * Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company dated April 16, 1987 (Exhibit
3.3 to the 1999 Form 10-K)
3.4 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 4, 1988 (Exhibit 3.4 to the 1999 Form
10-K)
3.5 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 3, 1995 (Exhibit 3.5 to the 1999 Form
10-K)
3.6 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 13, 1998 (Exhibit 3.6 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1998 (the "2nd Quarter 1998 Form 10-Q"))
3.7 * Certificate of Ownership and Merger, dated December 20,
2000, but effective as of 11:59 p.m. on December 31, 2000
(Exhibit 99.2 to Belo's Current Report on Form 8-K filed with
the Commission on December 29, 2000)
3.8 * Amended Certificate of Designation of Series A Junior
Participating Preferred Stock of the Company dated May 4, 1988
(Exhibit 3.7 to the 1999 Form 10-K)
3.9 * Certificate of Designation of Series B Common Stock of the
Company dated May 4, 1988 (Exhibit 3.8 to the 1999 Form 10-K)
3.10 * Amended and Restated Bylaws of the Company, effective
December 31, 2000 (Exhibit 3.10 to the Company's Annual Report
on Form 10-K dated March 13, 2001 (the "2000 Form 10-K"))
4.1 Certain rights of the holders of the Company's Common Stock
are set forth in Exhibits 3.1-3.10 above
4.2 * Specimen Form of Certificate representing shares of the
Company's Series A Common Stock (Exhibit 4.2 to the 2000 Form
10-K)
4.3 * Specimen Form of Certificate representing shares of the
Company's Series B Common Stock (Exhibit 4.3 to the 2000 Form
10-K)
4.4 * Amended and Restated Form of Rights Agreement as of February
28, 1996 between the Company and Chemical Mellon Shareholder
Services, L.L.C., a New York banking corporation (Exhibit 4.4
to the 1999 Form 10-K)
4.5 * Supplement No. 1 to Amended and Restated Rights Agreement
between the Company and The First National Bank of Boston
dated as of November 11, 1996 (Exhibit 4.5 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996)
4.6 * Supplement No. 2 to Amended and Restated Rights Agreement
between the Company and The First National Bank of Boston
dated as of June 5, 1998 (Exhibit 4.6 to the 2000 Form 10-K)
4.7 Instruments defining rights of debt securities:
(1) * Indenture dated as of June 1, 1997 between the
Company and The Chase Manhattan Bank, as Trustee
(Exhibit 4.6(1) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30,
1997 (the "2nd Quarter 1997 Form 10-Q"))
15
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(2) * (a) $200 million 7-1/8% Senior Note due 2007 (Exhibit
4.6(3)(a) to the 2nd Quarter 1997 Form 10-Q)
* (b) $100 million 7-1/8% Senior Note due 2007 (Exhibit
4.6(3)(b) to the 2nd Quarter 1997 Form 10-Q)
(3) * $200 million 7-3/4% Senior Debenture due 2027
(Exhibit 4.6(4) to the 2nd Quarter 1997 Form 10-Q)
(4) * 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)
(5) * (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 quarterly period
ended September 30, 1997 (the "3rd Quarter 1997
Form 10-Q"))
* (b) $50 million 7-1/4% Senior Debenture due 2027
(Exhibit 4.6(6)(b) to the 3rd Quarter 1997 Form
10-Q)
(6) * 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)
(7) * $350 million 8.00% Senior Note due 2008 (Exhibit
4.6(8) to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2001
(the "3rd Quarter 2001 Form 10-Q"))
(8) * Officers' Certificate dated November 1, 2001
establishing terms of debt securities pursuant to
Section 3.1 of the Indenture (Exhibit 4.6(9) to the
3rd Quarter 2001 Form 10-Q)
10.1 Financing agreements:
(1) * Five-year Credit Agreement dated as of November 29,
2001 among the Company, as Borrower; J.P. Morgan
Chase Bank, as Administrative Agent and as
Competitive Advance Facility Agent; J.P. Morgan
Securities Inc. and Banc of America Securities LLC,
as Co-Advisors, Co-Arrangers and Joint Bookrunners;
Bank of America, N.A., Fleet National Bank and the
Bank of New York, as Co-Syndication Agents; BNP
Paribas, as Documentation Agent; and the Fuji Bank
Limited and SunTrust Bank, as Senior Managing Agents
(Exhibit 10.1(1) to the Company's Annual Report on
Form 10-K dated March 15, 2002)
10.2 Compensatory plans:
~(1) Belo Savings Plan:
* (a) Belo Savings Plan Amended and Restated July 1,
2000 (Exhibit 10.2(1) to the Company's Quarterly
Report on Form 10-Q for the quarterly period
ended June 30, 2000 (the "2nd Quarter 2000 Form
10-Q"))
* (b) First Amendment to the Belo Savings Plan
effective December 31, 2000 (Exhibit 10.2(1)(b)
to the 2000 Form 10-K)
16
EXHIBIT
NUMBER DESCRIPTION
------- -----------
* (c) Second Amendment to Belo Savings Plan effective
as of January 1, 2002 (Exhibit 4.16(c) to the
Company's Registration Statement on Form S-8 (No.
333-88030) filed with the Securities and Exchange
Commission on May 10, 2002)
* (d) Third Amendment to Belo Savings Plan effective as
of May 7, 2002 (Exhibit 4.16(d) to the Company's
Registration Statement on Form S-8 (No.
333-88030) filed with the Securities and Exchange
Commission on May 10, 2002)
(e) Fourth Amendment to Belo Savings Plan effective
as of August 23, 2002.
(f) Fifth Amendment to Belo Savings Plan effective as
of September 27, 2002.
~(2) Belo 1986 Long-Term Incentive Plan:
* (a) Belo Corp. 1986 Long-Term Incentive Plan
(Effective May 3, 1989, as amended by Amendments
1, 2, 3, 4 and 5) (Exhibit 10.3(2) to the
Company's Annual Report on Form 10-K dated March
10, 1997 (the "1996 Form 10-K"))
* (b) Amendment No. 6 to 1986 Long-Term Incentive Plan
(Exhibit 10.3(2)(b) to the Company's Annual
Report on Form 10-K dated March 19, 1998 (the
"1997 Form 10-K"))
* (c) Amendment No. 7 to 1986 Long-Term Incentive Plan
(Exhibit 10.2(2)(c) to the 1999 Form 10-K)
* (d) Amendment No. 8 to 1986 Long-Term Incentive Plan
(Exhibit 10.3(2)(d) to the 2nd Quarter 1998 Form
10-Q)
~(3) * Belo 1995 Executive Compensation Plan, as restated
to incorporate amendments through December 4, 1997
(Exhibit 10.3(3) to the 1997 Form 10-K)
* (a) Amendment to 1995 Executive Compensation Plan,
dated July 21, 1998 (Exhibit 10.3(3)(a) to the
2nd Quarter 1998 Form 10-Q)
* (b) Amendment to 1995 Executive Compensation Plan,
dated December 16, 1999 (Exhibit 10.3(3)(b) to
the 1999 Form 10-K)
~(4) * Management Security Plan (Exhibit 10.3(1) to the 1996
Form 10-K)
* (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)
~(5) Belo Supplemental Executive Retirement Plan
* (a) Belo Supplemental Executive Retirement Plan As
Amended and Restated Effective January 1, 2000
(Exhibit 10.2(5)(a) to the 1999 Form 10-K)
* (b) First Amendment to Belo Supplemental Executive
Retirement Plan as Amended and Restated Effective
January 1, 2000, dated July 27, 2000 (Exhibit
10.2(5) to the 2nd Quarter 2000 Form 10-Q)
~(6) * Belo 2000 Executive Compensation Plan (Exhibit 4.15
to the Company's Registration Statement on Form S-8
(No. 333-43056) filed with the Securities and
Exchange Commission on August 4, 2000)
~(7) * Retirement Agreement between the Company and Burl
Osborne, dated June 27, 2001 (Exhibit 10.2(8) to
Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2001)
~(8) * Retirement Agreement between the Company and
Michael J. McCarthy, dated March 15, 2002 (Exhibit
10.2(8) to Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2002)
17
EXHIBIT
NUMBER DESCRIPTION
------- -----------
12 Ratio of Earnings to Fixed Charges
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
On August 9, 2002, Belo filed a current report on Form 8-K, reporting
under Item 9 that the Company's Principal Executive Officer and
Principal Financial Officer filed sworn statements with the SEC
pursuant to SEC Order No. 4-460.
18
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.
November 11, 2002 By: /s/ Dunia A. Shive
---------------------------------
Dunia A. Shive
Executive Vice President/
Chief Financial Officer
(Authorized Officer and Principal
Financial and Accounting Officer)
19
CERTIFICATIONS
I, Robert W. Decherd, Chairman of the Board, President and Chief Executive
Officer of Belo Corp., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Belo Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 11, 2002 By: /s/ Robert W. Decherd
----------------------------------------
Robert W. Decherd
Chairman of the Board,
President and Chief Executive Officer
20
I, Dunia A. Shive, Executive Vice President/Chief Financial Officer of Belo
Corp., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Belo Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 11, 2002 By: /s/ Dunia A. Shive
--------------------------------
Dunia A. Shive
Executive Vice President/
Chief Financial Officer
21
INDEX TO EXHIBIT
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 * Certificate of Incorporation of the Company (Exhibit 3.1 to
the Company's Annual Report on Form 10-K dated March 15, 2000
(the "1999 Form 10-K"))
3.2 * Certificate of Correction to Certificate of Incorporation
dated May 13, 1987 (Exhibit 3.2 to the 1999 Form 10-K)
3.3 * Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company dated April 16, 1987 (Exhibit
3.3 to the 1999 Form 10-K)
3.4 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 4, 1988 (Exhibit 3.4 to the 1999 Form
10-K)
3.5 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 3, 1995 (Exhibit 3.5 to the 1999 Form
10-K)
3.6 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 13, 1998 (Exhibit 3.6 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1998 (the "2nd Quarter 1998 Form 10-Q"))
3.7 * Certificate of Ownership and Merger, dated December 20,
2000, but effective as of 11:59 p.m. on December 31, 2000
(Exhibit 99.2 to Belo's Current Report on Form 8-K filed with
the Commission on December 29, 2000)
3.8 * Amended Certificate of Designation of Series A Junior
Participating Preferred Stock of the Company dated May 4, 1988
(Exhibit 3.7 to the 1999 Form 10-K)
3.9 * Certificate of Designation of Series B Common Stock of the
Company dated May 4, 1988 (Exhibit 3.8 to the 1999 Form 10-K)
3.10 * Amended and Restated Bylaws of the Company, effective
December 31, 2000 (Exhibit 3.10 to the Company's Annual Report
on Form 10-K dated March 13, 2001 (the "2000 Form 10-K"))
4.1 Certain rights of the holders of the Company's Common Stock
are set forth in Exhibits 3.1-3.10 above
4.2 * Specimen Form of Certificate representing shares of the
Company's Series A Common Stock (Exhibit 4.2 to the 2000 Form
10-K)
4.3 * Specimen Form of Certificate representing shares of the
Company's Series B Common Stock (Exhibit 4.3 to the 2000 Form
10-K)
4.4 * Amended and Restated Form of Rights Agreement as of February
28, 1996 between the Company and Chemical Mellon Shareholder
Services, L.L.C., a New York banking corporation (Exhibit 4.4
to the 1999 Form 10-K)
4.5 * Supplement No. 1 to Amended and Restated Rights Agreement
between the Company and The First National Bank of Boston
dated as of November 11, 1996 (Exhibit 4.5 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996)
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.6 * Supplement No. 2 to Amended and Restated Rights Agreement
between the Company and The First National Bank of Boston
dated as of June 5, 1998 (Exhibit 4.6 to the 2000 Form 10-K)
4.7 Instruments defining rights of debt securities:
(1) * Indenture dated as of June 1, 1997 between the
Company and The Chase Manhattan Bank, as Trustee
(Exhibit 4.6(1) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30,
1997 (the "2nd Quarter 1997 Form 10-Q"))
(2) * (a) $200 million 7-1/8% Senior Note due 2007 (Exhibit
4.6(3)(a) to the 2nd Quarter 1997 Form 10-Q)
* (b) $100 million 7-1/8% Senior Note due 2007 (Exhibit
4.6(3)(b) to the 2nd Quarter 1997 Form 10-Q)
(3) * $200 million 7-3/4% Senior Debenture due 2027
(Exhibit 4.6(4) to the 2nd Quarter 1997 Form 10-Q)
(4) * 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)
(5) * (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 quarterly period
ended September 30, 1997 (the "3rd Quarter 1997
Form 10-Q"))
* (b) $50 million 7-1/4% Senior Debenture due 2027
(Exhibit 4.6(6)(b) to the 3rd Quarter 1997 Form
10-Q)
(6) * 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)
(7) * $350 million 8.00% Senior Note due 2008 (Exhibit
4.6(8) to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2001
(the "3rd Quarter 2001 Form 10-Q"))
(8) * Officers' Certificate dated November 1, 2001
establishing terms of debt securities pursuant to
Section 3.1 of the Indenture (Exhibit 4.6(9) to the
3rd Quarter 2001 Form 10-Q)
10.1 Financing agreements:
(1) * Five-year Credit Agreement dated as of November 29,
2001 among the Company, as Borrower; J.P. Morgan
Chase Bank, as Administrative Agent and as
Competitive Advance Facility Agent; J.P. Morgan
Securities Inc. and Banc of America Securities LLC,
as Co-Advisors, Co-Arrangers and Joint Bookrunners;
Bank of America, N.A., Fleet National Bank and the
Bank of New York, as Co-Syndication Agents; BNP
Paribas, as Documentation Agent; and the Fuji Bank
Limited and SunTrust Bank, as Senior Managing Agents
(Exhibit 10.1(1) to the Company's Annual Report on
Form 10-K dated March 15, 2002)
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.2 Compensatory plans:
~(1) Belo Savings Plan:
* (a) Belo Savings Plan Amended and Restated July 1,
2000 (Exhibit 10.2(1) to the Company's Quarterly
Report on Form 10-Q for the quarterly period
ended June 30, 2000 (the "2nd Quarter 2000 Form
10-Q"))
* (b) First Amendment to the Belo Savings Plan
effective December 31, 2000 (Exhibit 10.2(1)(b)
to the 2000 Form 10-K)
* (c) Second Amendment to Belo Savings Plan effective
as of January 1, 2002 (Exhibit 4.16(c) to the
Company's Registration Statement on Form S-8 (No.
333-88030) filed with the Securities and Exchange
Commission on May 10, 2002)
* (d) Third Amendment to Belo Savings Plan effective as
of May 7, 2002 (Exhibit 4.16(d) to the Company's
Registration Statement on Form S-8 (No.
333-88030) filed with the Securities and Exchange
Commission on May 10, 2002)
(e) Fourth Amendment to Belo Savings Plan effective
as of August 23, 2002.
(f) Fifth Amendment to Belo Savings Plan effective as
of September 27, 2002.
~(2) Belo 1986 Long-Term Incentive Plan:
* (a) Belo Corp. 1986 Long-Term Incentive Plan
(Effective May 3, 1989, as amended by Amendments
1, 2, 3, 4 and 5) (Exhibit 10.3(2) to the
Company's Annual Report on Form 10-K dated March
10, 1997 (the "1996 Form 10-K"))
* (b) Amendment No. 6 to 1986 Long-Term Incentive Plan
(Exhibit 10.3(2)(b) to the Company's Annual
Report on Form 10-K dated March 19, 1998 (the
"1997 Form 10-K"))
* (c) Amendment No. 7 to 1986 Long-Term Incentive Plan
(Exhibit 10.2(2)(c) to the 1999 Form 10-K)
* (d) Amendment No. 8 to 1986 Long-Term Incentive Plan
(Exhibit 10.3(2)(d) to the 2nd Quarter 1998 Form
10-Q)
~(3) * Belo 1995 Executive Compensation Plan, as restated
to incorporate amendments through December 4, 1997
(Exhibit 10.3(3) to the 1997 Form 10-K)
* (a) Amendment to 1995 Executive Compensation Plan,
dated July 21, 1998 (Exhibit 10.3(3)(a) to the
2nd Quarter 1998 Form 10-Q)
* (b) Amendment to 1995 Executive Compensation Plan,
dated December 16, 1999 (Exhibit 10.3(3)(b) to
the 1999 Form 10-K)
~(4) * Management Security Plan (Exhibit 10.3(1) to the 1996
Form 10-K)
* (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)
~(5) Belo Supplemental Executive Retirement Plan
* (a) Belo Supplemental Executive Retirement Plan As
Amended and Restated Effective January 1, 2000
(Exhibit 10.2(5)(a) to the 1999 Form 10-K)
* (b) First Amendment to Belo Supplemental Executive
Retirement Plan as Amended and Restated Effective
January 1, 2000, dated July 27, 2000 (Exhibit
10.2(5) to the 2nd Quarter 2000 Form 10-Q)
~(6) * Belo 2000 Executive Compensation Plan (Exhibit 4.15
to the Company's Registration Statement on Form S-8
(No. 333-43056) filed with the Securities and
Exchange Commission on August 4, 2000)
EXHIBIT
NUMBER DESCRIPTION
------- -----------
~(7) * Retirement Agreement between the Company and Burl
Osborne, dated June 27, 2001 (Exhibit 10.2(8) to
Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2001)
~(8) * Retirement Agreement between the Company and
Michael J. McCarthy, dated March 15, 2002 (Exhibit
10.2(8) to Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2002)
12 Ratio of Earnings to Fixed Charges
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002