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8-K

 
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Belo 10-Q 2006

Documents found in this filing:

  1. 10-Q
  2. Ex-12
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32
  6.  
e10vq
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2006
OR
     
o   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.)
     
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 þ            No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one)
         
Large Accelerated Filer þ   Accelerated Filer o   Non Accelerated Filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o            No þ
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, 2006
     
     
Common Stock, $1.67 par value   102,125,689*
*   Consisting of 87,260,935 shares of Series A Common Stock and 14,864,754 shares of Series B Common Stock.
 
 

 


 

BELO CORP.
FORM 10-Q
TABLE OF CONTENTS
             
        Page
  FINANCIAL INFORMATION        
 
           
  Financial Statements     1  
 
           
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     10  
 
           
  Quantitative and Qualitative Disclosures About Market Risk     23  
 
           
  Controls and Procedures     23  
 
           
  OTHER INFORMATION        
 
           
  Legal Proceedings     23  
 
           
  Risk Factors     24  
 
           
  Unregistered Sales of Equity Securities and Use of Proceeds     24  
 
           
  Defaults Upon Senior Securities     25  
 
           
  Submission of Matters to a Vote of Security Holders     25  
 
           
  Other Information     25  
 
           
  Exhibits     25  
 
           
 
  Signatures     29  
 i

 


Table of Contents

PART I.
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Belo Corp. and Subsidiaries
                                 
    Three months ended     Six months ended  
    June 30,     June 30,  
In thousands, except per share amounts (unaudited)   2006     2005     2006     2005  
Net Operating Revenues
  $ 403,557     $ 391,263     $ 775,280     $ 740,414  
 
                               
Operating Costs and Expenses
                               
Salaries, wages and employee benefits
    142,472       136,748       290,838       272,206  
Other production, distribution and operating costs
    123,596       106,025       235,426       203,549  
Newsprint, ink and other supplies
    34,227       34,853       70,905       66,958  
Depreciation
    22,272       22,214       44,088       44,246  
Amortization
    2,087       2,087       4,174       4,206  
     
 
                               
Total operating costs and expenses
    324,654       301,927       645,431       591,165  
     
 
                               
Earnings from operations
    78,903       89,336       129,849       149,249  
 
                               
Other Income and Expense
                               
Interest expense
    (24,430 )     (22,219 )     (48,092 )     (44,512 )
Other income, net
    8,852       485       9,700       841  
     
 
                               
Total other income and expense
    (15,578 )     (21,734 )     (38,392 )     (43,671 )
 
                               
Earnings
                               
Earnings before income taxes
    63,325       67,602       91,457       105,578  
Income taxes
    20,666       25,682       31,498       39,957  
     
 
                               
Net earnings
  $ 42,659     $ 41,920     $ 59,959     $ 65,621  
     
 
                               
Net earnings per share
                               
Basic
  $ .41     $ .37     $ .57     $ .58  
Diluted
  $ .41     $ .36     $ .57     $ .57  
 
                               
Weighted average shares outstanding
                               
Basic
    104,307       113,308       105,219       113,740  
Diluted
    104,474       114,915       105,523       115,365  
 
                               
Dividends declared per share
  $     $     $ .10     $ .10  
See accompanying Notes to Consolidated Condensed Financial Statements.

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CONSOLIDATED CONDENSED BALANCE SHEETS
Belo Corp. and Subsidiaries
                 
In thousands, except share and per share amounts   June 30,     December 31,  
(Current year unaudited)   2006     2005  
Assets
               
 
Current assets:
               
Cash and temporary cash investments
  $ 77,993     $ 33,243  
Accounts receivable, net
    259,595       262,240  
Other current assets
    65,160       60,794  
 
           
Total current assets
    402,748       356,277  
 
               
Property, plant and equipment, net
    523,561       534,112  
Intangible assets, net
    1,341,044       1,345,218  
Goodwill, net
    1,237,348       1,237,348  
Other assets
    115,916       116,258  
 
           
 
               
Total assets
  $ 3,620,617     $ 3,589,213  
 
           
 
               
Liabilities and Shareholders’ Equity
               
 
               
Current liabilities:
               
Short-term portion of long-term debt
  $ 300,000     $  
Accounts payable
    59,510       91,210  
Accrued expenses
    91,701       97,142  
Dividends payable
          10,773  
Other current liabilities
    60,787       48,304  
 
           
Total current liabilities
    511,998       247,429  
 
               
Long-term debt
    1,048,893       1,244,875  
Deferred income taxes
    442,751       445,730  
Other liabilities
    119,625       117,698  
 
               
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 88,205,685 shares at June 30, 2006 and 92,132,169 shares at December 31, 2005
    147,303       153,861  
Series B: Issued 14,913,427 shares at June 30, 2006 and 15,602,253 shares at December 31, 2005
    24,905       26,056  
Additional paid-in capital
    874,451       901,091  
Retained earnings
    491,087       492,869  
Accumulated other comprehensive loss
    (40,396 )     (40,396 )
 
           
 
               
Total shareholders’ equity
    1,497,350       1,533,481  
 
           
 
               
Total liabilities and shareholders’ equity
  $ 3,620,617     $ 3,589,213  
 
           
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)   2006     2005  
Operations
               
Net earnings
  $ 59,959     $ 65,621  
Adjustments to reconcile net earnings to net cash provided by operations:
               
Depreciation and amortization
    48,262       48,452  
Deferred income taxes
    (3,813 )     (204 )
Employee retirement benefit expense
    5,891       8,586  
Share-based compensation
    8,330        
Other non-cash expenses
    5,913       4,639  
Equity in earnings from partnerships
    (632 )     (86 )
Other, net
    (5,499 )     (3,527 )
Net change in operating assets and liabilities:
               
Accounts receivable
    1,710       (5,001 )
Other current assets
    (2,101 )     2,653  
Accounts payable
    (31,700 )     (20,176 )
Accrued expenses and other current liabilities
    (4,609 )     (2,784 )
Interest payable
    1,276       (168 )
Income taxes payable
    9,378       1,397  
 
           
 
               
Net cash provided by operations
    92,365       99,402  
 
               
Investments
               
Capital expenditures
    (34,073 )     (17,754 )
Other investments
    1,091       (8,419 )
Other, net
    537       1,624  
 
           
 
               
Net cash used for investments
    (32,445 )     (24,549 )
 
               
Financing
               
Net proceeds from revolving debt
    296,980       294,175  
Payments on revolving debt
    (441,855 )     (299,825 )
Net proceeds from issuance of senior notes
    248,903        
Payment of dividends
    (21,117 )     (22,764 )
Net proceeds from exercise of stock options
    4,677       9,072  
Purchase of treasury stock
    (103,054 )     (55,749 )
Other
    296       (233 )
 
           
 
               
Net cash used for financing
    (15,170 )     (75,324 )
 
           
 
               
Net increase (decrease) in cash and temporary cash investments
    44,750       (471 )
 
               
Cash and temporary cash investments at beginning of period
    33,243       28,610  
 
           
 
               
Cash and temporary cash investments at end of period
  $ 77,993     $ 28,139  
 
           
 
               
Supplemental Disclosures
               
Interest paid, net of amounts capitalized
  $ 46,805     $ 44,680  
Income taxes paid, net of refunds
  $ 23,507     $ 40,399  
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)
(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, 2005 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 six-month periods ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. 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, 2005.
 
    Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard (“SFAS”) 123R, “Share-Based Payments.” See Note (3) for an explanation of the impact the adoption of this standard has on the Company’s financial statements.
 
    Certain amounts for the preceding year 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 six months ended June 30, 2006 and 2005:
                                 
    Three months ended     Six months ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
Weighted average shares for basic earnings per share
    104,307       113,308       105,219       113,740  
Effect of employee stock options
    167       1,607       304       1,625  
     
Weighted average shares for diluted earnings per share
    104,474       114,915       105,523       115,365  
     
 
                               
Options excluded due to exercise price in excess of average market price
                               
Number outstanding
    9,772       4,685       7,667       4,685  
Weighted average exercise price
  $ 23.42     $ 26.53     $ 24.60     $ 26.53  
     
(3)   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 or performance units, the basis of which is Belo’s long-term performance. 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 bonus awards are also available under the plan. The non-qualified options granted to employees and outside directors under Belo’s long-term incentive plan become exercisable in cumulative installments over periods of one to three years and expire after 10 years. The restricted stock units (“RSUs”) granted to employees and outside directors under the long-term incentive plan have service and/or performance conditions and are issued in installments over periods of one to three years. Shares of common stock reserved for future grants under the plan were 8,270,479 at June 30, 2006.

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    Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R using the modified prospective application method. Under this transition method, compensation cost recognized in the three and six months ended June 30, 2006, includes the applicable amounts of: (a) compensation expense of all share-based payments granted prior to, but not yet vested as of, January 1, 2006 (based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, “Accounting for Stock-Based Compensation,” and previously presented in the pro forma footnote disclosures), and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006 (based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R). Belo uses the Black-Scholes-Merton valuation method to determine the fair value of stock options granted as of the grant date. For the RSUs, Belo uses the stock price as of the grant date to determine the fair value. Results for prior periods have not been adjusted.
 
    The following table summarizes the impact of recognizing compensation expense related to stock options using the fair value recognition provisions of SFAS 123R for the three and six-month periods ended June 30, 2006:
                 
    Three months ended     Six months ended  
    June 30, 2006     June 30, 2006  
 
Share-based compensation expense recognized in salaries, wages and employee benefits (for stock options only)
  $ 2,842     $ 4,788  
Less: income taxes
    (928 )     (1,647 )
 
           
Decrease in net income
  $ 1,914     $ 3,141  
 
           
 
               
Decrease in basic earnings per share
  $ .02     $ .03  
 
           
Decrease in diluted earnings per share
  $ .02     $ .03  
 
           
    Recognition of share-based compensation related to RSUs was not impacted by the adoption of SFAS 123R. Compensation expense, including dividend equivalents, for RSUs totaled $880 and $3,617 for the three and six-month periods ended June 30, 2006, respectively, and is included in salaries, wages and employee benefits expense. Total share-based compensation expense, which includes both expense from stock options and RSUs, including dividend equivalents, totaled $3,722 and $8,405 for the three and six-month periods ended June 30, 2006, respectively. Share-based compensation has been allocated between the Company’s two reporting segments (Television Group and Newspaper Group) and Corporate.
 
    Prior to adopting SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of non-qualified stock options as operating cash flows. SFAS 123R requires the cash flows resulting from excess tax benefits related to stock options to be classified as a part of cash flows from financing activities. As a result of adopting SFAS 123R effective January 1, 2006, $296 of excess tax benefits for the six-months ended June 30, 2006, have been classified as financing cash flows.
 
    Prior to January 1, 2006, the Company accounted for awards granted under the long-term incentive plans following the recognition and measurement principles of Accounting Principles Board Opinion (“APB”) 25 “Accounting for Stock Issued to Employees,” and related Interpretations, as permitted by SFAS 123. Because it is Belo’s policy to grant stock options at the market price on the date of grant, the intrinsic value of these grants was zero and, therefore, no compensation expense was recorded. Under the modified prospective application method, results for prior periods have not been adjusted to reflect the effects of implementing SFAS 123R. The following pro forma information, as required by SFAS 148 “Accounting for Stock-Based Compensation – Transition and Disclosure,” is presented for comparative purposes and illustrates the pro forma effect on net income and earnings per common share for the three and six months ended June 30, 2005, as if the Company had applied the fair value recognition provisions of SFAS 123 to share-based employee compensation prior to January 1, 2006:

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    Three months ended     Six months ended  
    June 30, 2005     June 30, 2005  
 
Net earnings, as reported
  $ 41,920     $ 65,621  
Less: Share-based compensation expense determined under fair value-based method, net of tax
    1,829       3,645  
 
           
Net earnings, pro forma
  $ 40,091     $ 61,976  
 
           
 
               
Per share amounts:
               
Basic net earnings per share, as reported
  $ .37     $ .58  
 
           
Basic net earnings per share, pro forma
  $ .36     $ .55  
 
           
 
               
Diluted net earnings per share, as reported
  $ .36     $ .57  
 
           
Diluted net earnings per share, pro forma
  $ .35     $ .54  
 
           
    The fair values for awards granted for the three months ended June 30, 2005, were estimated using the Black-Scholes-Merton valuation method with the weighted average assumptions listed below:
         
Weighted average grant date fair value
  $ 23.49  
Weighted average assumptions used:
       
Expected volatility
    23.20 %
Expected lives
  5 yrs
Risk-free interest rates
    3.84 %
Expected dividend yields
    1.70 %
(4)   Stock-based activity in the long-term incentive plan related to stock options for the six months ended June 30, 2006, is summarized in the following table:
                 
            Weighted  
    Number of     Average  
    Options     Price  
Outstanding at January 1, 2006
    16,270,228     $ 21.17  
Granted
    208,510     $ 18.99  
Exercised
    (249,529 )   $ 18.74  
Canceled
    (170,050 )   $ 22.53  
 
             
Outstanding at June 30, 2006
    16,059,159     $ 21.17  
 
             
 
               
Exercisable at June 30, 2006
    13,642,549     $ 20.67  
 
             
 
               
Weighted average fair value of options granted
  $ 4.55          
 
             
    The following table summarizes information (net of estimated forfeitures) related to stock options outstanding at June 30, 2006:
                                         
    Number of   Weighted Average   Weighted Average   Number of   Weighted Average
Range of   Options   Remaining   Exercise   Options   Exercise
Exercise Prices   Outstanding(a)   Life (years)   Price   Exercisable   Price
 
$15–18
    6,286,450       3.96     $ 17.64       6,189,190     $ 17.65  
$19-21
    4,550,265       5.81     $ 20.39       3,713,891     $ 20.16  
$22-29
    5,121,427       6.32     $ 26.10       3,660,736     $ 26.17  
 
                                       
$15-29
    15,958,142       5.25     $ 21.14       13,563,817     $ 20.64  
 
(a)   Comprised of Series B shares
    As of June 30, 2006, stock options outstanding and stock options exercisable had no aggregate intrinsic value. During the three and six months ended June 30, 2006, the total intrinsic value of options
 

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    exercised was $845. The amount of the tax benefit realized related to those exercises for the same periods was $296.
 
    The fair values for stock options granted for the three months ended June 30, 2006, were estimated using the Black-Scholes-Merton valuation method with the weighted average assumptions listed below:
         
Weighted average grant date fair value
  $ 17.92  
Weighted average assumptions used:
       
Expected volatility
    22.5 %
Expected lives
  6 yrs
Risk-free interest rates
    4.95 %
Expected dividend yields
    2.79 %
    Volatility is calculated using an analysis of historical volatility. The Company believes that the historical volatility of the Company’s stock is the best method for estimating future volatility. The expected lives of options are determined based on the Company’s historical share option exercise experience using a rolling one-year average. The Company believes the historical experience method is the best estimate of future exercise patterns currently available. The risk-free interest rates are determined using the implied yield currently available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the options. The expected dividend yields are based on the approved annual dividend rate in effect and current market price of the underlying common stock at the time of grant. No assumption for a future rate increase has been included.
 
    Each RSU is exchanged for a share of common stock once the RSU is vested. In the six months ended June 30, 2006, no RSUs became vested and therefore none were exchanged for shares of common stock. There were no RSUs granted in the six months ended June 30, 2005. Stock-based activity in the long-term incentive plan related to RSUs for the six-months ended June 30, 2006, is summarized in the following table.
                 
            Weighted
    Number of   Average
    RSUs   Fair Value
Outstanding at January 1, 2006
    364,900     $ 21.62  
Granted
    224,710     $ 17.96  
Canceled
    (7,800 )   $ 21.62  
 
               
Outstanding at June 30, 2006
    581,810     $ 21.28  
 
               
 
               
Weighted average remaining life (years)
    2.66          
    As of June 30, 2006, there was $18,698 of total unrecognized compensation costs, net of estimated forfeitures, related to all non-vested share-based compensation arrangements granted in the Company’s long-term incentive plans. That cost is expected to be recognized over a weighted-average period of 1.79 years.
 
(5)   The net periodic pension cost for the three and six-months ended June 30, 2006 and 2005 includes the following components:
                                 
    Three months ended   Six months ended
    June 30,   June 30,
    2006   2005   2006   2005
 
Service cost – benefits earned during the period
  $ 3,012     $ 2,744     $ 6,025     $ 5,488  
Interest cost on projected benefit obligation
    7,165       6,845       14,329       13,690  
Expected return on assets
    (8,576 )     (7,783 )     (17,152 )     (15,566 )
Amortization of net loss
    1,720       1,771       3,439       3,542  
Amortization of unrecognized prior service cost
    154       188       308       376  
     
Net periodic pension cost
  $ 3,475     $ 3,765     $ 6,949     $ 7,530  
     

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    In the first six months of 2006, the Company did not make any contributions to its defined benefit pension plan. The Company does not expect to make any contributions to the plan during 2006.
 
(6)   On January 5, 2006, CBS Radio Stations Inc. (formerly Infinity Radio, Inc.), plaintiff and a subsidiary of CBS Corporation, filed a complaint against Belo Corp. and Belo TV, Inc., a subsidiary of Belo Corp., in the Supreme Court of the State of New York, County of New York alleging, among other matters, that Belo breached obligations under the asset purchase agreement between Belo and plaintiff to purchase substantially all of the assets of WUPL-TV in New Orleans, Louisiana, a UPN affiliate, in the aftermath of Hurricane Katrina. Plaintiff’s amended complaint seeks damages in the amount of the difference between the $14,500 purchase price of the station and the station’s market value in December 2005, along with unspecified costs and expenses, interest, attorneys’ fees and court costs. On June 8, 2006, Belo filed its response to the amended complaint, and discovery is ongoing. The Company believes the complaint is without merit and intends to vigorously defend against it.
 
    On June 3, 2005, a shareholder derivative lawsuit was filed by a purported individual shareholder of the Company in the 191st Judicial District Court of Dallas County, Texas, against Robert W. Decherd, Dennis A. Williamson, Dunia A. Shive and John L. Sander, all of whom are executive officers of the Company; James M. Moroney III, an executive officer of The Dallas Morning News; Barry Peckham, a former executive officer of The Dallas Morning News; and Louis E. Caldera, Judith L. Craven, Stephen Hamblett, Dealey D. Herndon, Wayne R. Sanders, France A. Córdova, Laurence E. Hirsch, J. McDonald Williams, Henry P. Becton, Jr., Roger A. Enrico, William T. Solomon, Lloyd D. Ward, M. Anne Szostak and Arturo Madrid, current and former directors of the Company. The lawsuit makes various claims asserting mismanagement and breach of fiduciary duty related to the circulation overstatement at The Dallas Morning News announced by the Company in August 2004. The defendants filed a joint pleading on August 1, 2005, seeking the lawsuit’s dismissal based on the failure of the purported individual shareholder to make demand on Belo to take action on his claims prior to filing the lawsuit. On September 9, 2005, the plaintiff filed its response alleging that demand is legally excused. The defendants replied to plaintiff’s response on September 26, 2005. On September 30, 2005, discovery in this matter was stayed by court order.
 
    On August 23, 2004, August 26, 2004 and October 5, 2004, respectively, three related lawsuits were filed by purported shareholders of the Company in the United States District Court for the Northern District of Texas against the Company, Robert W. Decherd and Barry Peckham. The complaints arise out of the circulation overstatement at The Dallas Morning News, alleging that the overstatement artificially inflated Belo’s financial results and thereby injured investors. The plaintiffs seek to represent a purported class of shareholders who purchased Belo common stock between May 12, 2003 and August 6, 2004. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On October 18, 2004, the court ordered the consolidation of all cases arising out of the same facts and presenting the same claims, and on February 7, 2005, plaintiffs filed an amended, consolidated complaint adding as defendants John L. Sander, Dunia A. Shive, Dennis A. Williamson and James M. Moroney III. On April 8, 2005, plaintiffs filed their unopposed motion for leave to file a first amended consolidated complaint, which motion was granted on April 11, 2005. On August 1, 2005, defendants filed a motion to dismiss. On March 30, 2006, the defendants’ motion to dismiss was granted. On May 11, 2006, plaintiffs replead their allegations in an amended complaint and on July 27, 2006, defendants filed motions to dismiss the amended complaint. No class or classes have been certified and no amount of damages has been specified. The Company believes the complaints are without merit and intends to vigorously defend against them.
 
    In 2005, the Company received subpoenas from the Dallas County District Attorney’s office for documents related to the circulation overstatement at The Dallas Morning News. The Company has cooperated with the Dallas County District Attorney’s office in responding to the subpoenas and will continue to respond to any additional information needs of the District Attorney’s office.
 
    In 2004, the staff of the Securities and Exchange Commission (“SEC”) notified the Company that the staff was conducting a newspaper industry-wide inquiry into circulation practices, and inquired specifically about The Dallas Morning News’ circulation overstatement. The Company has briefed the SEC on The Dallas Morning News circulation situation and related matters. The information voluntarily provided to the SEC relates to The Dallas Morning News, as well as The Providence

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    Journal and The Press-Enterprise. The Company will continue to respond to additional requests for information that the SEC may have.
 
    A number of 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.
 
(7)   Belo now operates its business in two primary reporting segments, the Television Group and the Newspaper Group. In the fourth quarter of 2005, Belo combined the Other Group operations, consisting primarily of the Company’s cable news operations, into the Television Group. As a result, the Company has reclassified the June 30, 2005 previously reported segment amounts to conform to the current year presentation. For the Television Group, Belo’s operating segments are defined as its television stations and cable news channels within a given market. These operating segments are aggregated into the Television Group. For the Newspaper Group, Belo’s operating segments are defined as its newspapers within a given market. These operating segments are aggregated into the Newspaper Group. Belo’s operating segments share content at no cost.
 
    Management uses segment EBITDA as the primary measure of profitability to evaluate operating performance and to allocate capital resources and bonuses to eligible operating company employees. Segment EBITDA represents a segment’s earnings before interest expense, income taxes, depreciation and amortization. Other income (expense), net is not allocated to the Company’s operating segments because it consists primarily of equity earnings (losses) from investments in partnerships and joint ventures and other non-operating income (expense).
 
    Net operating revenues and segment EBITDA by segment, along with a reconciliation of total segment EBITDA to net earnings, for the three and six months ended June 30, 2006 and 2005 are shown below.
                                 
    Three months ended     Six months ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
 
Net Operating Revenues
                               
Television Group
  $ 193,326     $ 183,142     $ 368,018     $ 344,288  
Newspaper Group
    210,231       208,121       407,262       396,126  
 
                       
Total net operating revenues
  $ 403,557     $ 391,263     $ 775,280     $ 740,414  
 
                       
 
                               
Segment EBITDA
                               
Television Group
  $ 83,511     $ 76,207     $ 150,158     $ 134,437  
Newspaper Group
    45,239       52,434       72,815       93,406  
Corporate
    (25,488 )     (15,004 )     (44,862 )     (30,142 )
 
                       
Total segment EBITDA
  $ 103,262     $ 113,637     $ 178,111     $ 197,701  
Other income (expense), net
    8,852       485       9,700       841  
Depreciation and amortization
    (24,359 )     (24,301 )     (48,262 )     (48,452 )
Interest expense
    (24,430 )     (22,219 )     (48,092 )     (44,512 )
Income taxes
    (20,666 )     (25,682 )     (31,498 )     (39,957 )
 
                       
Net earnings
  $ 42,659     $ 41,920     $ 59,959     $ 65,621  
 
                       
(8)   In May 2006, Belo issued $250,000 of 6-3/4% Senior Notes due May 30, 2013 at a premium of approximately $1,118. Interest on these 6-3/4% Senior Notes is due semi-annually on November 30 and May 30 of each year. The 6-3/4% Senior Notes are unsubordinated and unsecured obligations ranking equally with all of the Company’s existing and future unsubordinated and unsecured obligations. The Company may redeem the 6-3/4% Senior Notes at its option at any time in whole or from time to time in part at a redemption price calculated in accordance with the indenture under which the notes were issued. The net proceeds were used to repay debt previously outstanding under Belo’s revolving credit facility with the remaining proceeds invested in short-term investments for working capital needs at June 30, 2006. The $1,118 premium associated with the issuance of these 6-3/4%

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    Senior Notes is being amortized over the term of the 6-3/4% Senior Notes using the effective interest rate method.
 
(9)   On June 7, 2006, the Company entered into an Amended and Restated $1,000,000 Five-Year Competitive Advance and Revolving Credit Facility Agreement with JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Banc of America Securities LLC, Bank of America, N.A. and other lenders (the “Credit Agreement”). The Credit Agreement amends and restates the Company’s existing $1,000,000 Five-Year Credit Agreement by, among other things, extending the term of the existing facility to June 2011. The facility may be used for working capital and other general corporate purposes, including letters of credit. Revolving credit borrowings under the Credit Agreement bear interest at a variable interest rate based on either LIBOR or a base rate, in either case plus an applicable margin that varies depending upon the rating of the Company’s senior unsecured long-term, non-credit enhanced debt. Competitive advance borrowings bear interest at a rate obtained from bids selected in accordance with JPMorgan Chase Bank’s standard competitive advance procedures. Commitment fees depending on the Company’s credit rating, of up to .25 percent per year of the total unused commitment, accrue and are payable under the facility. The Credit Agreement contains usual and customary covenants for credit facilities of this type, including covenants limiting liens, mergers and substantial asset sales. The Company is required to maintain certain leverage and interest coverage ratios specified in the agreement. As of June 30, 2006, the Company was in compliance with all debt covenant requirements. As of June 30, 2006, there were no borrowings outstanding under the Credit Agreement and all unused borrowings were available for borrowing.
 
(10)   In May 2006, the State of Texas enacted legislation replacing its franchise tax with a new margin tax. Despite an effective date of January 1, 2008, the signing into law of the Tax Reform Bill represents a change in tax law and SFAS 109, “Accounting for Income Taxes” requires that effects of the change must be reflected in the financial statements in the quarter in which the new tax is enacted. The enactment of the new margin tax resulted in a one-time net reduction in deferred income taxes and income tax expense for the three and six months ended June 30, 2006 of approximately $3,813.
 
(11)   In December 2005, the Company entered into a construction contract with Austin Commercial, L.P. relating to the new distribution and production center for The Dallas Morning News in southern Dallas, Texas. The contract provides for total payments of approximately $16,500. Approximately $4,056 has been paid since the inception of the contract with approximately $3,500 paid in the six months ended June 30, 2006. William T. Solomon, a member of Belo’s Board of Directors, is Chairman of Austin Industries, Inc., the parent company of Austin Commercial, L.P.
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except 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. Belo today is one of the nation’s largest media companies with a diversified group of market-leading television broadcasting, newspaper publishing, cable news and interactive media operations. A Fortune 1000 company with $1.52 billion in revenues for the year ended December 31, 2005, Belo operates news and information franchises in some of America’s most dynamic markets and regions. The Company owns 19 television stations (six in the top 15 U.S. markets) that reach 14 percent of U.S. television households, and manages one television station through a local marketing agreement (“LMA”). In addition, Belo owns one local and two regional cable news channels and holds ownership interests in four others. Belo’s daily newspapers are The Dallas Morning News, The Providence Journal, The Press-Enterprise (Riverside, CA) and the Denton Record-Chronicle (Denton, TX). Belo operates more than 30 Web sites, participates in several interactive alliances and offers a broad range of Internet-based products.
Belo now operates its business in two primary reporting segments, the Television Group and the Newspaper Group. In the fourth quarter 2005, Belo combined the Other Group operations, consisting primarily of the

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Company’s cable news operations, into the Television Group. As a result, the Company has reclassified the previously reported segment amounts for the three and six-months ended June 30, 2005 to conform to the current year presentation. The Television Group consists of the Company’s 19 television stations, one station operated under an LMA and three wholly-owned cable news channels, along with its ownership interests in four other cable news channels. The Newspaper Group consists of the Company’s four daily newspapers, various niche publications in the same markets and Belo’s commercial printing businesses. Both segments operate within the United States and compete against similar and other types of media on a local, regional and national basis.
The following tables set forth the Company’s major media assets by segment as of June 30, 2006:
Television Group
                                                                 
                    Year                   Number of           Station
            Station/   Belo                   Commercial   Station   Audience
    Market   News   Acquired/   Network   Analog   Stations in   Rank in   Share in
Market   Rank(1)   Channel   Started   Affiliation   Channel   Market(2)   Market(3)   Market(4)
 
Dallas/Fort Worth
    7     WFAA     1950     ABC     8       16       1       10  
Dallas/Fort Worth
    7     TXCN     1999     IND     N/A       N/A       N/A       N/A  
Houston
    10     KHOU     1984     CBS     11       15       1 *     11  
Seattle/Tacoma
    13     KING     1997     NBC     5       13       1       13  
Seattle/Tacoma
    13     KONG     2000     IND     16       13       5 *     2  
Seattle/Tacoma
    13     NWCN     1997     IND     N/A       N/A       N/A       N/A  
Phoenix
    14     KTVK     1999     IND     3       13       1 *     8  
Phoenix
    14     KASW     2000     WB     61       13       7 *     3  
St. Louis
    21     KMOV     1997     CBS     4       8       2       13  
Portland
    23     KGW     1997     NBC     8       8       1       11  
Charlotte
    27     WCNC     1997     NBC     36       8       3 *     8  
San Antonio
    37     KENS     1997     CBS     5       10       1       13  
San Antonio(5)
    37     KCWX         UPN     2       10       8 *     1  
Hampton/Norfolk
    42     WVEC     1984     ABC     13       8       1       12  
New Orleans
    43 (6)   WWL     1994     CBS     4       8       1 (6)     18 (6)
Louisville
    50     WHAS     1997     ABC     11       7       1 *     11  
Austin
    53     KVUE     1999     ABC     24       7       1       11  
Tucson
    71     KMSB     1997     FOX     11       9       4 *     4  
Tucson
    71     KTTU     2002     UPN     18       9       5       2  
Spokane
    78     KREM     1997     CBS     2       7       2       14  
Spokane
    78     KSKN     2001     WB     22       7       4 *     3  
Boise(7)
    119     KTVB     1997     NBC     7       7       1       23  
Boise(8)
    119     KTVB-DT     2003     IND     7.2       7       7       1  
 
 
(1)   Market rank is based on the relative size of the television market Designated Market Area (“DMA”), among the 210 generally recognized DMAs in the United States, based on the November 2005 Nielsen Media Research report.
 
(2)   Represents the number of analog television stations (both VHF and UHF) broadcasting in the market, excluding public stations, low power broadcast stations and cable channels.
 
(3)   Station rank is derived from the station’s rating, which is based on the May 2006 Nielsen Media Research report of the number of television households tuned to the Company’s station for the Sunday-Saturday 5:00 a.m. to 2:00 a.m. period (“sign-on/sign-off”) as a percentage of the number of television households in the market.
 
(4)   Station audience share is based on the May 2006 Nielsen Media Research report of the number of television households tuned to the station as a percentage of the number of television households with sets in use in the market for the sign-on/sign-off period.
 
(5)   Effective April 7, 2006, KBEJ-TV changed its call letters to KCWX-TV. Belo entered into an agreement to operate KCWX (formerly KBEJ) through a local marketing agreement (“LMA”) in May 1999; the station’s on-air date was August 3, 2000.
 
(6)   Represents WWL and New Orleans information as of the July 2005 Nielsen Media Research report, prior to Hurricane Katrina. More recent information is unavailable because Nielsen has not included New Orleans in its ratings since July 2005.
 
(7)   The Company also owns KTFT-LP (NBC), a low power television station in Twin Falls, Idaho.
 
(8)   Utilizing its digital multicast capabilities, KTVB launched “24/7 Local News Channel,” an around-the-clock local news and weather channel.
 
* Tied with one or more stations in the market.
Newspaper Group
                                 
            Belo Acquired   Daily   Sunday
Newspaper   Location   /Started   Circulation (1)   Circulation
 
The Dallas Morning News
  Dallas, TX   October 1885     475,489 (2)     649,709 (2)
The Providence Journal
  Providence, RI   February 1997     159,896 (3)     218,388 (3)
The Press-Enterprise
  Riverside, CA   July 1997     183,234 (3)     185,099 (3)
Denton Record-Chronicle
  Denton, TX   June 1999     13,484 (4)     16,888 (4)
 
(1)   Daily circulation is defined as a Monday through Saturday six-day average.
 
(2)   Average paid circulation data for The Dallas Morning News is according to the Audit Bureau of Circulations’ (the “Audit Bureau”) Publisher’s Statement for the six months ended March 31, 2006.
 
(3)   Average paid circulation data for The Providence Journal and The Press-Enterprise is according to the Audit Bureau’s FAS-FAX report for the six months ended March 31, 2006.
 
(4)   Circulation data for the Denton Record-Chronicle is taken from the Certified Audit of Circulations (“CAC”) Publisher’s Statement for the six months ended March 31, 2006.

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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 discussion of results of operations at the consolidated level is followed by a more detailed discussion of results of operations by segment.
Results of Operations
(Dollars in thousands, except per share amounts)
Consolidated Results of Operations
                                                 
    Three months ended June 30,     Six months ended June 30,  
            Percentage                     Percentage        
    2006     Change     2005     2006     Change     2005  
 
Net operating revenues
  $ 403,557       3.1 %   $ 391,263     $ 775,280       4.7 %   $ 740,414  
Operating costs and expenses
    324,654       7.5 %     301,927       645,431       9.2 %     591,165  
 
                                       
Earnings from operations
    78,903       (11.7 %)     89,336       129,849       (13.0 %)     149,249  
Other income (expense)
    (15,578 )     (28.3 %)     (21,734 )     (38,392 )     (12.1 %)     (43,671 )
 
                                       
Earnings before income taxes
    63,325       (6.3 %)     67,602       91,457       (13.4 %)     105,578  
Income taxes
    (20,666 )     (19.5 %)     (25,682 )     (31,498 )     (21.2 %)     (39,957 )
 
                                       
Net earnings
  $ 42,659       1.8 %   $ 41,920     $ 59,959       (8.6 %)   $ 65,621  
 
                                       
Total net operating revenue increased $12,294, or 3.1 percent, from $391,263 in the three months ended June 30, 2005 to $403,557 in the three months ended June 30, 2006 due to an increase of $10,184 in the Television Group primarily related to increases in advertising and political revenues and an increase of $2,110 in the Newspaper Group primarily related to the change in distribution methods at The Dallas Morning News.
Total net operating revenue increased $34,866, or 4.7 percent, from $740,414 in the six months ended June 30, 2005 to $775,280 in the six months ended June 30, 2006 due to an increase of $23,730 in the Television Group primarily related to increases in advertising and political revenues and an increase of $11,136 in the Newspaper Group primarily related to the change in distribution methods at The Dallas Morning News and an increase in advertising revenues.
Operating costs and expenses increased $22,727, or 7.5 percent, from $301,927 in the three months ended June 30, 2005 to $324,654 in the three months ended June 30, 2006. Salaries, wages and employee benefits expense increased $5,725, or 4.2 percent, in the three months ended June 30, 2006 as compared to the prior year period, primarily due to an increase in full time salaries of $3,001 and incremental expenses of $3,722 in share-based compensation, including dividend equivalents, partially offset by a decrease in benefits and payroll taxes of $1,008. Other production, distribution and operating costs increased $17,571, or 16.6 percent, in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005, due to an increase of $10,536 in outside services primarily attributable to consulting costs, and an increase of $6,265 in distribution expenses primarily related to the change in distribution methods at The Dallas Morning News. Belo expects the consulting costs to continue throughout 2006. The increase in distribution costs will also continue though they will have less of an incremental effect beginning in 2007, as the change will have been effective for more than a year. Newsprint, ink and other supplies decreased $626, or 1.8 percent, in the three months ended June 30, 2006 as compared to the year-earlier period. The average cost per metric ton of newsprint increased approximately 15.3 percent in the three months ended June 30, 2006 compared to the three months ended June 30, 2005. Newsprint consumption decreased 15.8 percent compared to the year-earlier period.
Operating costs and expenses increased $54,266, or 9.2 percent, from $591,165 in the six-months ended June 30, 2005 to $645,431 in the six-months ended June 30, 2006. Salaries, wages and employee benefits expense increased $18,632, or 6.8 percent, in the six months ended June 30, 2006 as compared to the prior year period, primarily due to an increase in full time salaries of $8,410, and incremental expenses of $8,405 in share-based compensation. Other production, distribution and operating costs increased $31,877, or 15.7 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005, due to an increase of $16,025 in outside services primarily attributable to consulting costs, and an increase of $13,498 in distribution expenses

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primarily related to the change in distribution methods at The Dallas Morning News. Belo expects the consulting costs to continue throughout 2006. The increase in distribution costs will also continue though they will have less of an incremental effect beginning in 2007. Newsprint, ink and other supplies increased $3,947, or 5.9 percent, in the six months ended June 30, 2006 as compared to the year-earlier period. The average cost per metric ton of newsprint increased approximately 14.8 percent in the six months ended June 30, 2006 compared to the six months ended June 30, 2005. Newsprint consumption decreased 8.4 percent compared to the year-earlier period.
Total other income (expense), net decreased $6,156, or 28.3 percent, for the three months ended June 30, 2006 and $5,279, or 12.1 percent, for the six months ended June 30, 2006 as compared with same periods in the prior year primarily because the Company recorded a one-time gain of $7,536 in miscellaneous income related to a payment associated with a change in control provision in one of Belo’s vendor contracts.
Income taxes decreased $5,016, or 19.5 percent, for the three months ended June 30, 2006 and $8,459, or 21.2 percent, for the six months ended June 30, 2006 as compared with the same periods in the prior year primarily due to a $3,813 reduction in tax expense related to Texas state tax reforms. In May 2006, the State of Texas enacted legislation replacing its franchise tax with a new margin tax. Despite an effective date of January 1, 2008, the signing into law of the Tax Reform Bill represents a change in tax law and SFAS 109, “Accounting for Income Taxes” requires that effects of the change must be reflected in the financial statements in the quarter in which the new tax is enacted. The enactment of the new margin tax resulted in a one-time net reduction in deferred income taxes and income tax expense for the three and six months ended June 30, 2006 of approximately $3,813.
As a result of the factors discussed above, net earnings for the three months ended June 30, 2006 increased to $42,659 (41 cents per share) from $41,920 (36 cents per share) for the three months ended June 30, 2005. Net earnings for the six months ended June 30, 2006 decreased to $59,959 (57 cents per share) from $65,621 (57 cents per share) for the six months ended June 30, 2005.
The Company defines Consolidated EBITDA as net earnings before interest expense, income taxes, depreciation and amortization. Consolidated EBITDA is not a measure of financial performance under GAAP. Management uses Consolidated EBITDA in internal analyses as a supplemental measure of the financial performance of the Company to assist it with determining consolidated performance targets and performance comparisons against its peer group of companies, as well as capital spending and other investing decisions. Consolidated EBITDA is also a common alternative measure of performance used by investors, financial analysts, and rating agencies to evaluate financial performance. Consolidated EBITDA should not be considered in isolation or as a substitute for net earnings, operating income, cash flows provided by operating activities or other income or cash flow data prepared in accordance with U.S. GAAP, and this non-GAAP measure may not be comparable to similarly titled measures of other companies.
The following table presents a reconciliation of Consolidated EBITDA to net earnings for the three and six-months ended June 30, 2006 and 2005:
                                                 
    Three months ended June 30,     Six months ended June 30,  
            Percentage                     Percentage        
    2006     Change     2005     2006     Change     2005  
 
Consolidated EBITDA
  $ 112,114       (1.8 %)   $ 114,122     $ 187,811       (5.4 %)   $ 198,542  
Depreciation and amortization
    (24,359 )     0.2 %     (24,301 )     (48,262 )     (0.4 %)     (48,452 )
Interest expense
    (24,430 )     10.0 %     (22,219 )     (48,092 )     8.0 %     (44,512 )
Income taxes
    (20,666 )     (19.5 %)     (25,682 )     (31,498 )     (21.2 %)     (39,957 )
 
                                       
Net earnings
  $ 42,659       1.8 %   $ 41,920     $ 59,959       (8.6 %)   $ 65,621  
 
                                       
Consolidated EBITDA decreased $2,008, or 1.8 percent, in the three months ended June 30, 2006 compared to the three months ended June 30, 2005, primarily due to an increase in Corporate expenses of $10,485 and a decrease of $7,195 in Newspaper Group segment EBITDA, partially offset by an increase in Television Group segment EBITDA of $7,304.
Consolidated EBITDA decreased $10,731, or 5.4 percent, in the six months ended June 30, 2006 compared to the six months ended June 30, 2005, primarily due to an increase in Corporate expenses of $14,721 and a decrease of

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$20,591 in Newspaper Group segment EBITDA, partially offset by an increase of $15,721 in Television Group segment EBITDA.
Television Group
The following discussion reviews segment results for the Company’s Television Group, which currently consists of 19 owned stations and one station operated through an LMA, plus three wholly-owned cable news channels. The Television Group’s operating results for the three and six months ended June 30, 2006 as compared with the three and six months ended June 30, 2005 were as follows:
                                                 
    Three months ended June 30,     Six months ended June 30,  
            Percentage                     Percentage        
    2006     Change     2005     2006     Change     2005  
 
Net operating revenues
  $ 193,326       5.6 %   $ 183,142     $ 368,018       6.9 %   $ 344,288  
Segment costs and expenses
    109,815       2.7 %     106,935       217,860       3.8 %     209,851  
 
                                       
Segment EBITDA(a)
  $ 83,511       9.6 %   $ 76,207     $ 150,158       11.7 %   $ 134,437  
 
                                       
 
Note:   Certain amounts for the prior year have been reclassified to conform to the current year presentation.
 
(a)   Belo’s management uses segment EBITDA as the primary measure of profitability to evaluate operating performance and to allocate capital resources and bonuses to eligible operating company employees. Segment EBITDA represents a segment’s earnings before interest expense, income taxes, depreciation and amortization. Other income (expense), net is not allocated to the Company’s operating segments because it consists primarily of equity earnings (losses) from investments in partnerships and joint ventures and other non-operating income (expense).
Net Operating Revenues
Television Group revenues increased 5.6 percent and 6.9 percent for the three and six months ended June 30, 2006 over the three and six months ended June 30, 2005, respectively. The table below presents the components of net operating revenues for the three and six months ended June 30, 2006 as compared with the three and six months ended June 30, 2005:
                                                 
    Three months ended June 30,     Six months ended June 30,  
            Percentage                     Percentage        
    2006     Change     2005     2006     Change     2005  
 
Local and national advertising
  $ 175,681       3.4 %   $ 169,851     $ 337,463       5.5 %   $ 319,768  
Political advertising
    5,094       175.1 %     1,852       7,913       229.6 %     2,401  
Other
    12,551       9.7 %     11,439       22,642       2.4 %     22,119  
 
                                       
Net operating revenues
  $ 193,326       5.6 %   $ 183,142     $ 368,018       6.9 %   $ 344,288  
 
                                       
Local and national advertising revenues increased $5,830, or 3.4 percent, in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005. This increase is a combination of a $3,993, or 2.4 percent, increase in spot revenue and a $1,812, or 62.3 percent, increase in revenue generated from the Television Group’s Web sites as compared with the three months ended June 30, 2005. Spot revenue increases in the healthcare, telecommunications and automotive categories were partially offset by decreases in the grocery and insurance categories. Political advertising revenues increased $3,242, or 175.1 percent, in the three months ended June 30, 2006 as compared with the three months ended June 30, 2005 primarily due to local political advertising in the New Orleans and Dallas/Fort Worth markets. Political revenues generally are higher in even numbered years than in odd numbered years due to elections for various state and national offices. Additionally, in other revenue there was a $1,142, or 192.2 percent, increase in retransmission revenue partially offset by a decrease in network compensation of $353, or 6.3 percent.
Local and national advertising revenues increased $17,695, or 5.5 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005. This increase is a combination of a $14,450, or 4.7 percent, increase in local and national spot revenue primarily from the 2006 Super Bowl and Winter Olympics and a $3,502, or 66.7 percent, increase in revenue generated from the Television Group’s Web sites as compared with the six months ended June 30, 2005. Spot revenue increases in the healthcare, telecommunications and

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automotive categories were partially offset by decreases in the grocery and internet categories. Political advertising revenues increased $5,512, or 229.6 percent, in the six months ended June 30, 2006 as compared with the six months ended June 30, 2005 primarily due to local political advertising in the New Orleans and Dallas/Fort Worth markets. Political revenues generally are higher in even numbered years than in odd numbered years due to elections for various state and national offices. Additionally, in other revenue there was a $1,473, or 122.8 percent, increase in retransmission revenue offset by a decrease in network compensation of $1,357, or 12 percent.
Segment Costs and Expenses
Television Group segment costs and expenses increased $2,880, or 2.7 percent, in the three months ended June 30, 2006 compared to the year-earlier period, primarily due to increases in salaries, wages and employee benefits due to the recognition of share-based compensation. Segment EBITDA for the Television Group increased 9.6 percent in the three months ended June 30, 2006 compared to the prior year period primarily as a result of the increase in revenues.
Television Group segment costs and expenses increased $8,009, or 3.8 percent, in the six months ended June 30, 2006 compared to the year-earlier period, primarily due to increases in salaries, wages and employee benefits due to the recognition of share-based compensation. Segment EBITDA for the Television Group increased 11.7 percent in the six months ended June 30, 2006 compared to the prior year period primarily as a result of the increase in revenues.
Newspaper Group
The following discussion reviews segment results for the Company’s Newspaper Group, which consists of four daily newspapers, various niche publications and commercial printing. Discussion of the three major newspapers generally includes the operations of the related niche publications and products within their respective markets. The Newspaper Group’s operating results for the three and six months ended June 30, 2006 as compared to the three and six months ended June 30, 2005 were as follows:
                                                 
    Three months ended June 30,     Six months ended June 30,  
            Percentage                     Percentage        
    2006     Change     2005     2006     Change     2005  
 
Net operating revenues
  $ 210,231       1.0 %   $ 208,121     $ 407,262       2.8 %   $ 396,126  
Segment costs and expenses
    164,992       6.0 %     155,687       334,447       10.5 %     302,720  
 
                                       
Segment EBITDA(a)
  $ 45,239       (13.7 %)   $ 52,434     $ 72,815       (22.0 %)   $ 93,406  
 
                                       
 
Note:   Certain amounts for the prior year have been reclassified to conform to the current year presentation.
 
(a)   Belo’s management uses segment EBITDA as the primary measure of profitability to evaluate operating performance and to allocate capital resources and bonuses to eligible operating company employees. Segment EBITDA represents a segment’s earnings before interest expense, income taxes, depreciation and amortization. Other income (expense), net is not allocated to the Company’s operating segments because it consists primarily of equity earnings (losses) from investments in partnerships and joint ventures and other non-operating income (expense).
Net Operating Revenues
Newspaper Group revenues increased 1.0 percent and 2.8 percent in the three and six months ended June 30, 2006, respectively, as compared with the three and six months ended June 30, 2005. The table below presents the components of Newspaper Group net operating revenues for those periods:
                                                 
    Three months ended June 30,     Six months ended June 30,  
            Percentage                     Percentage        
    2006     Change     2005     2006     Change     2005  
 
Advertising
  $ 174,415       (0.7 %)   $ 175,642     $ 335,176       0.9 %   $ 332,108  
Circulation
    28,737       15.7 %     24,842       57,921       19.2 %     48,580  
Other
    7,079       (7.3 %)     7,637       14,165       (8.2 %)     15,438  
 
                                       
Net operating revenues
  $ 210,231       1.0 %   $ 208,121     $ 407,262       2.8 %   $ 396,126  
 
                                       

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Advertising revenues accounted for approximately 82 percent of total Newspaper Group revenues for the three and six months ended June 30, 2006 compared to approximately 84 percent for the three and six months ended June 30, 2005. Circulation revenue accounted for approximately 14 percent of total Newspaper Group revenues for the three and six months ended June 30, 2006 compared to approximately 12 percent for the three and six months ended June 30, 2005. For both periods, commercial printing made up most of the remainder of Newspaper Group revenues.
Net operating revenues for The Dallas Morning News increased by $2,003, or 1.6 percent, in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005. Advertising revenues decreased by $2,544, or 2.4 percent, in the three months ended June 30, 2006 when compared to the three months ended June 30, 2005. General advertising revenues were relatively unchanged in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005. Retail advertising revenue decreased $2,722, or 11.1 percent, in the three months ended June 30, 2006 compared to the three months ended June 30, 2005, primarily due to decreases in the department store, furniture, entertainment, electronics, sporting goods and general merchandise categories. Classified advertising revenues decreased $2,017, or 5.5 percent, primarily due to decreases in the automotive and real estate categories. These decreases were partially offset by an increase in circulation revenue. At The Dallas Morning News, circulation revenue increased $4,585, or 35.9 percent, in the three months ended June 30, 2006 as compared with the three months ended June 30, 2005, primarily due to an estimated $7,900 related to the change in distribution methods from a buy-sell arrangement to a fee-for-delivery arrangement. This increase was partially offset by a decrease of approximately $2,168 related to a promotional campaign to increase subscribers and by a decrease of $1,147 related to lower circulation.
Net operating revenues for The Dallas Morning News increased by $10,190, or 4.3 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005. Total advertising revenues were relatively flat in the six months ended June 30, 2006 when compared to the six months ended June 30, 2005. General advertising revenues increased $1,613, or 5.3 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005, primarily due to increases in the financial category, partially offset by decreases in the automotive and telecommunications categories. These increases were offset by decreases in retail advertising revenue of $4,527, or 9.8 percent, in the six months ended June 30, 2006 compared to the six months ended June 30, 2005, primarily due to decreases in the furniture category. Additionally, classified advertising revenue decreased $1,589, or 2.2 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005, primarily due to decreases in the automotive and real estate categories, partially offset by an increase in the employment category. At The Dallas Morning News, circulation revenue increased $10,680, or 43.8 percent, in the six months ended June 30, 2006 as compared with the six months ended June 30, 2005, primarily due to an estimated $16,400 related to the change in distribution methods from a buy-sell arrangement to a fee-for-delivery arrangement. The increase in circulation revenues attributable to the change in distribution methods is expected to continue. The Dallas Morning News has experienced a decrease in circulation over the past few years. Efforts to improve the circulation include a promotional campaign involving discounts of approximately $3,696 for the six months ended June 30, 2006. The decreases in circulation revenue due to the discounts partially offset the increases in circulation revenue due to the change in distribution methods. The Dallas Morning News is moving towards concentrating its circulation efforts on its core readership. Belo expects circulation and circulation revenue to fluctuate during this process.
Net operating revenues for The Providence Journal decreased by $364, or 0.9 percent, in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005. Advertising revenues increased $221, or 0.6 percent, in the three months June 30, 2006 compared to the three months ended June 30, 2005. Classified advertising revenue remained relatively unchanged with decreases in employment and automotive categories offset by increases in the real estate category in the three months ended June 30, 2006 compared to the three months ended June 30, 2005. Additionally, TMC and preprint revenue increased $806, or 10.9 percent, in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005 due to increases in general merchandise, grocery and electronics categories. These increases were partially offset by decreases in retail and general advertising revenues. Retail advertising revenues decreased $517, or 4.5 percent, due to decreases in the automotive and furniture and home accessories categories. General advertising revenues decreased $449, or 38.3 percent, in the three months ended June 30, 2006 compared to the three months ended June 30, 2005, primarily due to decreases in the automotive, pharmaceuticals and travel categories. Circulation revenue declined $548, or 7.6 percent, in the three months ended June 30, 2006 compared to the

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three months ended June 30, 2005, primarily due to lower circulation and an increase in discounts related to an overall promotional campaign to improve circulation.
Net operating revenues for The Providence Journal increased by $404, or 0.5 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005. Advertising revenues increased $1,436, or 2.2 percent, in the six months ended June 30, 2006 compared to the six months ended June 30, 2005. Classified advertising revenue increased $891, or 3.7 percent, in the six months ended June 30, 2006 compared to the six months ended June 30, 2005, primarily due to increases in the real estate category partially offset by decreases in the employment and automotive categories. Additionally, TMC and preprint revenue increased $1,285, or 9.3 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005, primarily due to increases in general merchandise, grocery and electronic categories. These increases were partially offset by decreases in retail and general advertising revenues. Retail advertising revenues decreased $702, or 3.2 percent, due to decreases in the automotive and furniture categories for the six months ended June 30, 2006, compared to the six months ended June 30, 2005. General advertising revenues decreased $824, or 33.8 percent, for the six months ended June 30, 2006, compared to the six months ended June 30, 2005, primarily due to decreases in the automotive, pharmaceuticals and travel categories. Circulation revenue declined $966, or 6.7 percent, in the six months ended June 30, 2006 compared to the six months ended June 30, 2005, primarily due to lower overall circulation and an increase in discounts related to an overall promotional campaign to improve circulation.
Net operating revenues for The Press-Enterprise increased by $471, or 1.2 percent, in the three months ended June 30, 2006 as compared to the three months ended June 30, 2005. Total advertising revenues increased $1,096, or 3.2 percent, in the three months ended June 30, 2006 compared with the three months ended June 30, 2005. Classified advertising revenues increased $744, or 4.7 percent, primarily due to increases in the real estate category, partially offset by decreases in the automotive and employment categories. Preprints and TMC revenues increased $298, or 6.1 percent, primarily due to increases in the pharmaceutical and home furnishings categories. Retail advertising revenues increased $220, or 4.2 percent, in the three months ended June 30, 2006 compared with the three months ended June 30, 2005 primarily due to increases in the furniture and entertainment categories. Offsetting these increases was a decrease in general advertising revenues. General advertising revenues decreased $220, or 6.4 percent, in the three months ended June 30, 2006 when compared with the three months ended June 30, 2005, primarily due to decreases in the automotive and telecommunications categories. Circulation revenue at The Press-Enterprise declined $142, or 2.9 percent, when comparing the three months ended June 30, 2006 to the three months ended June 30, 2005. Commercial printing and other revenue at The Press-Enterprise declined $483, or 25.2 percent, for the three months ended June 30, 2006 compared to the three months ended June 30, 2005.
Net operating revenues for The Press-Enterprise increased by $541, or 0.7 percent, in the six months ended June 30, 2006 as compared to the six months ended June 30, 2005. Total advertising revenues increased $1,884, or 2.9 percent, in the six months ended June 30, 2006 compared with the six months ended June 30, 2005. Classified advertising revenues increased $2,122, or 6.9 percent, primarily due to increases in the real estate and employment categories, partially offset by a decrease in the automotive category. Preprints and TMC revenues increased $631, or 6.8 percent, due to strong gains in the pharmaceutical and home furnishing categories. Offsetting these increases was a decrease in general advertising revenues. General advertising revenues decreased $819, or 12.3 percent, in the six months ended June 30, 2006 when compared with the six months ended June 30, 2005, primarily due to decreases in the telecommunications and financial categories. Circulation revenue at The Press-Enterprise declined $373, or 3.8 percent, when comparing the six months ended June 30, 2006 to the six months ended June 30, 2005. Commercial printing and other revenue at The Press-Enterprise declined $970, or 24.3 percent, for the six months ended June 30, 2006 compared to the six months ended June 30, 2005.
Segment Costs and Expenses
Newspaper Group segment costs and expenses increased $9,305, or 6.0 percent, in the three months ended June 30, 2006 as compared to the prior year period primarily due to increases in distribution costs and outside services. The increase in distribution costs is due to approximately $6,600 in additional costs related to the change in distribution methods at The Dallas Morning News. Belo expects this increased level of distribution costs at The Dallas Morning News to continue. Outside services increased primarily due to increased consulting expenses. Belo expects the consulting expenses to continue for the remainder of 2006. The increase due to the incremental expense from share-based compensation was offset by a decrease in accrued bonuses. Segment

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EBITDA for the Newspaper Group decreased 13.7 percent from $52,434 in the three months ended June 30, 2005 to $45,239 in the three months ended June 30, 2006.
Newspaper Group segment costs and expenses increased $31,727, or 10.5 percent, in the six months ended June 30, 2006 as compared to the prior year period primarily due to increases in distribution costs, salaries, wages and benefits, production expenses and outside services. The increase in distribution costs is due to approximately $13,700 in additional costs related to the change in distribution methods at The Dallas Morning News. Belo expects this increased level of distribution costs at The Dallas Morning News to continue. The increase in salaries, wages and benefits is due to increased headcount in the group, merit increases and additional incremental expenses related to share-based compensation. The increase in production expenses is related to a $2,766 increase in newsprint costs and a $1,293 increase in purchased supplements. Outside services increased primarily due to increased consulting expenses. Belo expects the consulting costs to continue throughout 2006. Segment EBITDA for the Newspaper Group decreased 22 percent from $93,406 in the six months ended June 30, 2005 to $72,815 in the six months ended June 30, 2006.
Corporate
Corporate operating costs and expenses increased $10,485, or 70 percent, in the three months ended June 30, 2006 compared to the three months ended June 30, 2005, primarily due to incremental expenses of $6,748 in consulting fees and $2,228 in share-based compensation. Belo expects consulting fees to continue throughout 2006 with a higher concentration in the third quarter. During the three months ended June 30, 2006, the Company recorded a one-time gain of $7,536 in miscellaneous income related to a payment associated with a change-in-control provision in one of Belo’s vendor contracts. Additionally, Belo recorded a one time net reduction of $3,813 in tax expense related to the enactment of the new State of Texas margin tax discussed above.
Corporate operating costs and expenses increased $14,721, or 48.8 percent, in the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to incremental expenses of $8,150 in consulting fees and $5,638 in share-based compensation. Belo expects consulting fees to continue throughout 2006 with a higher concentration in the third quarter. During the six months ended June 30, 2006, the Company recorded a one-time gain of $7,536 in miscellaneous income related to a payment associated with a change-in-control provision in one of Belo’s vendor contracts. Additionally, Belo recorded a one-time net reduction of $3,813 in tax expense related to the enactment of the new State of Texas margin tax discussed above.
Liquidity and Capital Resources
Operating Cash Flows
Net cash provided by operations, bank borrowings and term debt are Belo’s primary sources of liquidity. Net cash provided by operations was $92,365 in the six months ended June 30, 2006 compared with $99,402 in the six months ended June 30, 2005. The changes in cash flows from operations are primarily caused by lower net earnings and normal changes in its working capital requirements. The Company used net cash provided by operations and proceeds from stock option exercises to purchase treasury shares, fund capital expenditures and dividend payments, and pay debt.
The Company did not make any contributions to its defined benefit pension plan in the six months ended June 30, 2006. In the second quarter 2006, the Company reviewed its pension requirements and does not expect to make any contributions in 2006.
Recent pension reform legislation approved by congress is expected to significantly increase the costs and funding requirements of defined benefit retirement plans like Belo’s pension plan. Belo is considering structural changes to its pension plan that could involve freezing its plan for some or all participants in favor of an enhanced defined contribution plan. If Belo were to adopt any such changes, these could be implemented as early as 2007.
As of June 30, 2006, the balance sheet reflects a negative working capital position with current liabilities in excess of current assets. The reclassification from long-term to short-term of $300,000 in 7-1/8% Senior Notes due June 1, 2007 is the reason for the negative position. The Company expects to repay the Senior Notes due June 1, 2007 with borrowings under its credit facility. The Company believes its current financial condition and credit relationships are adequate to fund both its current obligations as well as near-term growth.
Investing Cash Flows
Net cash flows used in investing activities were $32,445 in the six months ended June 30, 2006 compared with $24,549 in the six months ended June 30, 2005. These cash uses are primarily attributable to capital expenditures as more fully described below.

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Capital Expenditures
Total capital expenditures were $34,073 in the six months ended June 30, 2006 compared with $17,754 in the six months ended June 30, 2005. These were primarily for Television Group and Newspaper Group facilities and equipment.
On April 13, 2006, the Company broke ground for a new distribution and production center in southern Dallas for The Dallas Morning News. The total cost of the land, building and land improvements, and equipment is projected to be approximately $55,000 over a three-year period, of which approximately $6,441 was incurred in the six months ended June 30, 2006 and approximately $19,917 has been incurred since the beginning of the project through June 30, 2006.
On January 20, 2006, the Company announced plans to build a state-of-the-art media center building for The Press-Enterprise. The 150,000 square foot, five-story office building will centralize all news, editorial, advertising, sales and marketing, technology, production support and administrative functions for the organization’s operations. The new building will be adjacent to the newspaper’s current building. Construction began in the first quarter 2006 and the new building is scheduled to be completed and ready for occupation in the first half of 2007. The cost of the new building is projected to be approximately $40,000 of which approximately $6,404 was incurred in the six months ended June 30, 2006 and approximately $10,756 has been incurred since the beginning of the project through June 30, 2006.
The Company is reexamining its major capital expenditure plans for the remainder of 2006 through 2009, based on current competitive conditions and anticipated changes in operating requirements. The Company plans to reduce total capital spending to approximately $75,000 per year for 2007 through 2009, down from the approximately $120,000 per year estimated previously. Capital expenditures for 2006 are expected to be less than the previously announced estimate of approximately $120,000.
Financing Cash Flows
Net cash flows used in financing activities were $15,170 in the six months ended June 30, 2006 compared to $75,324 in the six months ended June 30, 2005. These cash flows are primarily attributable to borrowings and repayments under the Company’s revolving credit facility, issuance of the Company’s 6-3/4% Senior Notes, dividends on common stock, proceeds from exercises of stock options and purchases of treasury stock as more fully described below.
Long-Term Debt
In May 2006, Belo issued $250,000 of 6-3/4% Senior Notes due May 30, 2013 at a premium of approximately $1,118. Interest on these 6-3/4% Senior Notes is due semi-annually on November 30 and May 30 of each year. The 6-3/4% Senior Notes are unsubordinated and unsecured obligations ranking equally with all of the Company’s existing and future unsubordinated and unsecured obligations. The Company may redeem the 6-3/4% Senior Notes at its option at any time in whole or from time to time in part at a redemption price calculated in accordance with the indenture under which the notes were issued. The net proceeds were used to repay debt then outstanding under Belo’s revolving credit facility and for working capital needs. The $1,118 premium associated with the issuance is being amortized over the term of the 6-3/4% Senior Notes using the effective interest rate method. As of June 30, 2006, there is approximately $48,049 of unused proceeds in short-term investments.
On June 1, 2006, the Company reclassified $300,000 of 7-1/8% Senior Notes due June 1, 2007, 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 funds from the credit facility.
On June 7, 2006, the Company entered into an Amended and Restated $1,000,000 Five-Year Competitive Advance and Revolving Credit Facility Agreement with JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Banc of America Securities LLC, Bank of America, N.A. and other lenders (the “Credit Agreement”). The Credit Agreement amends and restates the Company’s existing $1,000,000 Five-Year Credit Agreement by, among other things, extending the term of the existing facility to June 2011. The facility may be used for working capital and other general corporate purposes, including letters of credit. Revolving credit borrowings

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under the Credit Agreement bear interest at a variable interest rate based on either LIBOR or a base rate, in either case plus an applicable margin that varies depending upon the rating of the Company’s senior unsecured long-term, non-credit enhanced debt. Competitive advance borrowings bear interest at a rate obtained from bids selected in accordance with JPMorgan Chase Bank’s standard competitive advance procedures. Commitment fees depending on the Company’s credit rating, of up to .25 percent per year of the total unused commitment accrue and are payable under the facility. The Credit Agreement contains usual and customary covenants for credit facilities of this type, including covenants limiting liens, mergers and substantial asset sales. The Company is required to maintain certain leverage and interest coverage ratios specified in the agreement. As of June 30, 2006, the Company was in compliance with all debt covenant requirements. As of June 30, 2006, no borrowings were outstanding under the Credit Agreement and all unused borrowings were available for borrowing.
At June 30, 2006, Belo had $1,350,000 in fixed-rate debt securities as follows: $300,000 of 7-1/8% Senior Notes due 2007; $350,000 of 8% Senior Notes due 2008; $250,000 of 6-3/4% Senior Notes due 2013; $200,000 of 7-3/4% Senior Debentures due 2027; and $250,000 of 7-1/4% Senior Debentures due 2027. The weighted average effective annual interest rate for the fixed-rate debt instruments is 7.4 percent. Future borrowings of variable-rate debt are expected to be used to pay down fixed-rate debt in whole or in part or for other corporate needs as determined by management.
In addition, the Company has uncommitted lines of credit of $60,000, at June 30, 2006, of which there were no borrowings outstanding. The uncommitted lines of credit have variable interest rates. These borrowings may be converted at the Company’s option to revolving debt. Accordingly, such borrowings would be classified as long-term debt in the Company’s financial statements. All unused borrowings under the Company’s uncommitted lines of credit were available for borrowing as of June 30, 2006.
Dividends
In the second quarter 2006, the Company paid first quarter 2006 dividends of $10,501 on Series A and Series B common stock outstanding, to shareholders of record on May 12, 2006. In the first quarter 2006, the Company paid $10,616 relating to dividends declared in the fourth quarter 2005.
On July 28, 2006, the Company declared second quarter dividends of 12.5 cents per share on Series A and Series B common stock outstanding, to be paid on September 1, 2006 to shareholders of record on August 11, 2006. This dividend reflects the 25 percent increase in the Company’s annual cash dividend rate announced May 9, 2006.
Share Repurchase Programs
In the six months ended June 30, 2006, the Company purchased 5,120,000 shares of its Series A common stock under a stock repurchase program pursuant to authorization from Belo’s Board of Directors in July 2000. On December 9, 2005, the Board of Directors authorized the repurchase of an additional 15,000,000 shares of common stock. As of June 30, 2006, no shares were repurchased under the December 9, 2005 authorization. The remaining authorization for the repurchase of shares as of June 30, 2006 under both these authorities was 16,479,219 shares. In addition, the Company has a stock repurchase program authorizing the purchase of up to $2,500 of common stock annually. During the six months ended June 30, 2006, no shares were repurchased under this program. There is no expiration date for these repurchase programs. The total cost of the treasury shares purchased in the six months ended June 30, 2006 was $103,054. All shares repurchased in the six months ended June 30, 2006 were retired as of June 30, 2006.

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Contractual Obligations
     The table below summarizes the following specified commitments of the Company as of June 30, 2006:
                                                         
Nature of Commitment   Total     2006     2007     2008     2009     2010     Thereafter  
 
Broadcast rights
  $ 297,126     $ 28,695     $ 57,849     $ 61,644     $ 60,903     $ 64,118     $ 23,917  
Capital expenditures and licenses
    67,713       45,464       20,273       655       659       662        
Non-cancelable operating leases
    42,958       5,279       10,011       8,042       6,024       4,044       9,558  
Long-term debt (principal only)
    1,350,000             300,000       350,000                   700,000  
Interest on long-term debt(1)
    952,250       58,375       99,875       78,500       50,500       50,500       614,500  
 
Total
  $ 2,710,047     $ 137,813     $ 488,008     $ 498,841     $ 118,086     $ 119,324     $ 1,347,975  
 
(1)   Represents the annual interest rate an fixed rate debt as of June 30, 2006, there were no outstanding balances on the Company’s variable rate debt, therefore no projections for variable rate interest was included.
Other
The Company has various options available to meet its 2006 capital and operating commitments, including cash on hand, short-term investments, internally generated funds and the $1,000,000 revolving credit facility. The Company believes its resources are adequate to meet its foreseeable needs.
Recent Accounting Pronouncements
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS 123R, “Share-Based Payments,” using the modified prospective application method. Under this transition method, compensation cost recognized in the three and six months ended June 30, 2006, includes the applicable amounts of: (a) compensation expense of all share-based payments granted prior to, but not yet vested as of, January 1, 2006 (based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, “Accounting for Stock-Based Compensation,” and previously presented in the pro forma footnote disclosures), and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006 (based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R). Results for prior periods have not been adjusted. See Note (3) to the Consolidated Condensed Financial Statements in Part I, Item 1, for a description of share-based awards.
The following is the effect for the three and six months ended June 30, 2006 of adopting SFAS 123R on January 1, 2006:
                 
    Three months ended     Six months ended  
    June 30, 2006     June 30, 2006  
 
Share-based compensation expense recognized in salaries, wages and employee benefits (for stock options only)
  $ 2,842     $ 4,788  
Less: income taxes
    (928 )     (1,647 )
 
           
Decrease in net income
  $ 1,914       3,141  
 
           
 
               
Decrease in basic earnings per share
  $ .02     $ .03  
 
           
Decrease in diluted earnings per share
  $ .02     $ .03  
 
           
The amounts above include the impact of recognizing compensation expense related to stock options. Compensation expense related to restricted stock units (“RSUs”) was recognized before implementation of SFAS 123R. Compensation expense for RSUs, including dividend equivalents, totaled $880 and $3,617 for the three and six-month periods ended June 30, 2006, respectively, and is included in salaries, wages and employee benefits expense. Total share-based compensation expense, which includes both expense from stock options and RSUs, including dividend equivalents, totaled $3,722 and $8,405 for the three and six-month periods ended June 30, 2006, respectively. Share-based compensation has been allocated among the Company’s two segments (Television Group and Newspaper Group) and Corporate.
Prior to adopting SFAS 123R, the Company presented all tax benefits of deductions resulting from the exercise of non-qualified stock options as operating cash flows. SFAS 123R requires the cash flows resulting from

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excess tax benefits related to stock options to be classified as a part of cash flows from financing activities. As a result of adopting SFAS 123R effective January 1, 2006, $296 of excess tax benefits for the six months ended June 30, 2006, have been classified as financing cash flows.
Other Matters
On January 5, 2006, CBS Radio Stations Inc. (formerly Infinity Radio, Inc.), plaintiff and a subsidiary of CBS Corporation, filed a complaint against Belo Corp. and Belo TV, Inc., a subsidiary of Belo Corp., in the Supreme Court of the State of New York, County of New York alleging, among other matters, that Belo breached obligations under the asset purchase agreement between Belo and plaintiff to purchase substantially all of the assets of WUPL-TV in New Orleans, Louisiana, a UPN affiliate, in the aftermath of Hurricane Katrina. Plaintiff’s amended complaint seeks damages in the amount of the difference between the $14,500 purchase price of the station and the station’s market value in December 2005, along with unspecified costs and expenses, interest, attorneys’ fees and court costs. On June 8, 2006, Belo filed its response to the amended complaint, and discovery is ongoing. The Company believes the complaint is without merit and intends to vigorously defend against it.
On June 3, 2005, a shareholder derivative lawsuit was filed by a purported individual shareholder of the Company in the 191st Judicial District Court of Dallas County, Texas, against Robert W. Decherd, Dennis A. Williamson, Dunia A. Shive and John L. Sander, all of whom are executive officers of the Company; James M. Moroney III, an executive officer of The Dallas Morning News; Barry Peckham, a former executive officer of The Dallas Morning News; and Louis E. Caldera, Judith L. Craven, Stephen Hamblett, Dealey D. Herndon, Wayne R. Sanders, France A. Córdova, Laurence E. Hirsch, J. McDonald Williams, Henry P. Becton, Jr., Roger A. Enrico, William T. Solomon, Lloyd D. Ward, M. Anne Szostak and Arturo Madrid, current and former directors of the Company. The lawsuit makes various claims asserting mismanagement and breach of fiduciary duty related to the circulation overstatement at The Dallas Morning News announced by the Company in August 2004. The defendants filed a joint pleading on August 1, 2005, seeking the lawsuit’s dismissal based on the failure of the purported individual shareholder to make demand on Belo to take action on his claims prior to filing the lawsuit. On September 9, 2005, the plaintiff filed its response alleging that demand is legally excused. The defendants replied to plaintiff’s response on September 26, 2005. On September 30, 2005, discovery in this matter was stayed by court order.
On August 23, 2004, August 26, 2004 and October 5, 2004, respectively, three related lawsuits were filed by purported shareholders of the Company in the United States District Court for the Northern District of Texas against the Company; Robert W. Decherd and Barry Peckham. The complaints arise out of the circulation overstatement at The Dallas Morning News, alleging that the overstatement artificially inflated Belo’s financial results and thereby injured investors. The plaintiffs seek to represent a purported class of shareholders who purchased Belo common stock between May 12, 2003 and August 6, 2004. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On October 18, 2004, the court ordered the consolidation of all cases arising out of the same facts and presenting the same claims, and on February 7, 2005, plaintiffs filed an amended, consolidated complaint adding as defendants John L. Sander, Dunia A. Shive, Dennis A. Williamson and James M. Moroney III. On April 8, 2005, plaintiffs filed their unopposed motion for leave to file a first amended consolidated complaint, which motion was granted on April 11, 2005. On August 1, 2005, defendants filed a motion to dismiss. On March 30, 2006, the defendants’ motion to dismiss was granted. On May 11, 2006, plaintiffs replead their allegations in an amended complaint and on July 27, 2006, defendants filed motions to dismiss the amended complaint. No class or classes have been certified and no amount of damages has been specified. The Company believes the complaints are without merit and intends to vigorously defend against them.
In 2005, the Company received subpoenas from the Dallas County District Attorney’s office for documents related to the circulation overstatement at The Dallas Morning News. The Company has cooperated with the Dallas County District Attorney’s office in responding to the subpoenas and will continue to respond to any additional information needs of the District Attorney’s office.
In 2004, the staff of the Securities and Exchange Commission (“SEC”) notified the Company that the staff was conducting a newspaper industry-wide inquiry into circulation practices, and inquired specifically about The Dallas Morning News’ circulation overstatement. The Company has briefed the SEC on The Dallas Morning News circulation situation and related matters. The information voluntarily provided to the SEC relates to The

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Dallas Morning News, as well as The Providence Journal and The Press-Enterprise. The Company will continue to respond to additional requests for information that the SEC may have.
A number of 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.
Forward-Looking Statements
Statements in this Form 10-Q concerning Belo’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; newspaper circulation matters, including changes in readership, and audits and related actions (including the censure of The Dallas Morning News) by the Audit Bureau of Circulations; technological changes, including the transition to digital television and the development of new systems to distribute television and other audio-visual content; 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; the recovery of the New Orleans market (where the Company owns and operates television station WWL-TV, the CBS affiliate) from the effects of Hurricane Katrina; general economic conditions; and significant armed conflict, as well as other risks detailed in Belo’s other public disclosures, and filings with the SEC, including the 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 fiscal year ended December 31, 2005.
Item 4. Controls and Procedures
During the quarter ended June 30, 2006, 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 Chairman of the Board, President and Chief Executive Officer and Executive Vice President/Chief Financial Officer, 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 Chairman of the Board, President and Chief Executive Officer and Executive Vice President/Chief Financial Officer 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 Chairman of the Board, President and Chief Executive Officer and Executive Vice President/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
PART II.
Item 1. Legal Proceedings
In addition to the proceedings disclosed below and those previously disclosed (see Note (6) to the Consolidated Condensed Financial Statements in Part I, Item 1), for which there are no material developments to report, a number of other legal proceedings are pending against the Company, including several actions for alleged libel

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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.
On January 5, 2006, CBS Radio Stations Inc. (formerly Infinity Radio, Inc.), plaintiff and a subsidiary of CBS Corporation, filed a complaint against Belo Corp. and Belo TV, Inc., a subsidiary of Belo Corp., in the Supreme Court of the State of New York, County of New York alleging, among other matters, that Belo breached obligations under the asset purchase agreement between Belo and plaintiff to purchase substantially all of the assets of WUPL-TV in New Orleans, Louisiana, a UPN affiliate, in the aftermath of Hurricane Katrina. Plaintiff’s amended complaint seeks damages in the amount of the difference between the $14,500 purchase price of the station and the station’s market value in December 2005, along with unspecified costs and expenses, interest, attorneys’ fees and court costs. On June 8, 2006, Belo filed its response to the amended complaint, and discovery is ongoing. The Company believes the complaint is without merit and intends to vigorously defend against it.
On August 23, 2004, August 26, 2004 and October 5, 2004, respectively, three related lawsuits were filed by purported shareholders of the Company in the United States District Court for the Northern District of Texas against the Company, Robert W. Decherd and Barry Peckham. The complaints arise out of the circulation overstatement at The Dallas Morning News, alleging that the overstatement artificially inflated Belo’s financial results and thereby injured investors. The plaintiffs seek to represent a purported class of shareholders who purchased Belo common stock between May 12, 2003 and August 6, 2004. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On October 18, 2004, the court ordered the consolidation of all cases arising out of the same facts and presenting the same claims, and on February 7, 2005, plaintiffs filed an amended, consolidated complaint adding as defendants John L. Sander, Dunia A. Shive, Dennis A. Williamson and James M. Moroney III. On April 8, 2005, plaintiffs filed their unopposed motion for leave to file a first amended consolidated complaint, which motion was granted on April 11, 2005. On August 1, 2005, defendants filed a motion to dismiss. On March 30, 2006, the defendants’ motion to dismiss was granted. On May 11, 2006, plaintiffs replead their allegations in an amended complaint and on July 27, 2006, defendants filed motions to dismiss the amended complaint. No class or classes have been certified and no amount of damages has been specified. The Company believes the complaints are without merit and intends to vigorously defend against them.
Item 1A. Risk Factors
There have been no material changes in the Company’s risk factors from the disclosure included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
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 provides information about the Company’s Series A Common Stock repurchases during the quarter ended June 30, 2006. The Company did not repurchase any shares of Series B Common Stock during the quarter ended June 30, 2006.
                                 
                    (c)   (d)
                    Total Number of Shares   Maximum Number of
    (a)   (b)   Purchased as Part of   Shares that May Yet be
    Total Number of   Average Price Paid   Publicly Announced   Purchased Under the
Period   Shares Purchased   per Share   Plans or Programs   Plans or Programs (1)
 
April 1, 2006 through April 30, 2006
    300,000     $ 19.50       300,000       18,279,219  
May 1, 2006 through May 31, 2006
    820,000     $ 17.14       820,000       17,459,219  
June 1, 2006 through June 30, 2006
    980,000     $ 17.21       980,000       16,479,219  
 
Total
    2,100,000     $ 17.51       2,100,000       16,479,219  
 

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(1)   In July 2000, the Company’s Board of Directors authorized the repurchase of up to 25,000,000 shares of common stock. In December 2005, the Company’s Board of Directors authorized the repurchase of an additional 15,000,000 shares of common stock. As of June 30, 2006, the Company had 16,479,219 remaining shares under these purchase authorities. In addition, Belo has a stock repurchase program authorizing the purchase of up to $2,500 of Company stock annually. There is no expiration date for these repurchase programs. Pursuant to these authorizations, on June 2, 2006, Belo adopted a Rule10b5-1 stock repurchase plan to effect open market purchases by the Company of its Series A common stock for a period that will end in the third quarter of 2006.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company’s shareholders was held on May 9, 2006. All nominees standing for election as directors were elected. The following chart indicates the number of votes cast with respect to each nominee for director:
                 
            Withheld
Nominee   For   Authority
Henry P. Becton, Jr.
    221,489,988       1,634,213  
Roger A. Enrico
    221,301,947       1,822,254  
William T. Solomon
    221,287,353       1,836,848  
Lloyd D. Ward
    221,966,038       1,158,163  
In addition to those directors elected at the Annual Meeting, the following directors continue in office: Louis E. Caldera, France A. Córdova, Ph.D., Judith L. Craven, M.D., M.P.H., Robert W. Decherd, Dealey D. Herndon, Laurence E. Hirsch, Wayne R. Sanders, M. Anne Szostak, and J. McDonald Williams.
At the Annual Meeting, a proposal to approve the ratification of the appointment of Ernst & Young LLP as Belo’s independent registered public accounting firm was approved by the Company’s shareholders. The following chart indicates the number of votes cast for and against and the number of abstentions with respect to this proposal. There were no broker nonvotes.
                         
    For   Against   Abstain
Proposal II
    222,282,725       440,276       401,200  
No other matters were submitted to a vote of security holders at the Annual Meeting.
Item 5. Other Information
None.
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
 
       
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 (Securities and Exchange Commission File No. 001-08598) (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)

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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 quarter ended June 30, 1998 (Securities and Exchange Commission File No. 002-74702)(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 the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2000)(Securities and Exchange Commission File No. 001-08598)
 
       
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 (Securities and Exchange Commission File No. 001-08598)(the “2000 Form 10-K”))
 
       
3.11
  *   Amendment No. 1 to Amended and Restated Bylaws of the Company, effective February 7, 2003 (Exhibit 3.11 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”))
 
       
3.12
  *   Amendment No. 2 to Amended and Restated Bylaws of the Company, effective May 9, 2005 (Exhibit 3.12 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005)(Securities and Exchange Commission File No. 001-08598)(the “1st Quarter 2005 Form 10-Q”)
 
       
4.1
      Certain rights of the holders of the Company’s Common Stock are set forth in Exhibits 3.1-3.12 above
 
       
4.2
  *   Specimen Form of Certificate representing (Exhibit 4.2 to the 2000 Form 10-K) 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
      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)   *  
(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)

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Exhibit        
Number     Description
 
  (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 quarter ended September 30, 1997 (Securities and Exchange Commission File No. 002-74702) (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 4.7(8) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001(Securities and Exchange Commission File No. 001-08598)(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 4.7(9) to the 3rd Quarter 2001 Form 10-Q)
 
               
 
  (9)   *   Form of Belo Corp. 6.75% Senior Notes due May 30, 2013 (Exhibit 4.3 to the Company’s Current Report on Form 8-K filed May 26, 2006, (Securities and Exchange Commission File No. 001-08598)(the “May 26, 2006 Form 8-K”))
 
               
 
  (10)   *   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)
 
               
 
  (11)   *   Underwriting Agreement Standard Provisions (Debt Securities), dated May 24, 2006 (Exhibit 1.1 to the May 26, 2006 Form 8-K)
 
               
 
  (12)   *   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)
         
10.1
      Financing agreements:
                 
 
  (1)   *   Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of June 7, 2006 among the Company, as Borrower; JPMorgan Chase Bank, N.A., as Administrative Agent; J.P. Morgan Securities Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Bookrunners; Bank of America, N.A., as Syndication Agent; and SunTrust Bank, The Bank of New York, and BNP Paribas, as Documentation Agents; and Mizuho Corporate Bank, Ltd., as Co-Documentation Agent (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 7, 2006 (Securities and Exchange Commission File No. 001-08598))
         
10.2
      Compensatory plans:
             
 
  ~(1)       Belo Savings Plan:
 
           
 
      *  
(a)     Belo Savings Plan Amended and Restated effective August 1, 2004 (Exhibit 10.2(1)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (Securities and Exchange Commission File No. 001-08598)(the “2nd Quarter 2004 Form 10-Q”))

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Exhibit  
Number   Description
 
      *  
(b)     First Amendment to the Belo Savings Plan (as Amended and Restated effective August 1, 2004)(Exhibit 10.2(1)(b) to the Company’s Quarterly report on Form 10-Q for the quarter ended March 31, 2006, (Securities and Exchange Commission File No. 001-08598)(the “1st Quarter 2006 Form 10-Q”))
 
           
 
      *  
(c)     Second Amendment to the Belo Savings Plan (as Amended and Restated effective August 1, 2004)(Exhibit 10.2(1)(c) to the 1st Quarter 2006 Form 10-Q)
 
           
 
  ~(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 (Securities and Exchange Commission File No. 001-08598)(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 (Securities and Exchange Commission File No. 002-74702)(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 10.2(3)(a) to the 2nd Quarter 1998 Form 10-Q)
 
           
 
      *  
(b)     Amendment to 1995 Executive Compensation Plan, dated December 16, 1999 (Exhibit 10.2(3)(b) to 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”))
 
           
 
  ~(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, 2004 (Exhibit 10.2(5)(a) to the 2003 Form 10-K)
 
           
 
  ~(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)
 
           
 
      *  
(a)     First Amendment to Belo 2000 Executive Compensation Plan effective as of December 31, 2000 (Exhibit 10.2(6)(a) to 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)(d) to the 2005 Form 10-K)
 
           
 
  ~(7)   *   Belo 2004 Executive Compensation Plan (Exhibit 10.2(6) to the 2nd Quarter 2004 Form 10-Q)

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Exhibit  
Number   Description
 
           
 
      *  
(a)     Form of Belo 2004 Executive Compensation Plan Award Notification for Executive Time-Based Restricted Stock Unit Awards (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 2, 2006(Securities and Exchange Commission File No. 001-08598)(the “March 2, 2006 Form 8-K”))
 
           
 
      *  
(b)     Form of Belo 2004 Executive Compensation Plan Award Notification for Employee Awards (Exhibit 10.2 to the March 2, 2006 Form 8-K)
 
           
 
      *  
(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 December 12, 2005(Securities and Exchange Commission File No. 001-08598) (the “December 12, 2005 Form 8-K”))
 
           
 
  ~(8)   *   Summary of Non-employee Director Compensation (Exhibit 10.3 to the December 12, 2005 Form 8-K)
             
     
12
    Statements re: Computation of Ratios
 
           
 
    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

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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 7, 2006  By:   /s/ Dennis A. Williamson    
    Dennis A. Williamson   
    Executive Vice President/ Chief Financial Officer
(Authorized Officer and Principal Financial Officer) 
 
 
     
August 7, 2006  By:   /s/ Alison K. Engel    
    Alison K. Engel   
    Vice President/Corporate Controller
(Principal Accounting Officer) 
 
 

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