Annual Reports

 
Quarterly Reports

  • 10-Q (Oct 31, 2013)
  • 10-Q (Jul 31, 2013)
  • 10-Q (Apr 26, 2013)
  • 10-Q (Oct 31, 2012)
  • 10-Q (Aug 9, 2012)
  • 10-Q (Apr 30, 2012)

 
8-K

 
Other

Belo 10-Q 2013

Documents found in this filing:

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

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 

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

For the quarterly period ended: September 30, 2013

OR

 

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

Commission File No. 1-8598

Belo Corp.

(Exact name of registrant as specified in its charter)

 

Delaware   75-0135890

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. employer

identification no.)

400 South Record Street

Dallas, Texas

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

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

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

None

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

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

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

 

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

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

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

 

Class

 

Outstanding at October 28, 2013

Common Stock, $0.01 par value

  104,120,990*

 

* Consisting of 95,866,339 shares of Series A Common Stock and 8,254,651 shares of Series B Common Stock.

 

 

 


Table of Contents

BELO CORP.

FORM 10-Q

TABLE OF CONTENTS

 

          Page  

PART I

   FINANCIAL INFORMATION   
Item 1.   

Financial Statements

     2   
Item 2.   

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

     17   
Item 3.   

Quantitative and Qualitative Disclosures about Market Risk

     23   
Item 4.   

Controls and Procedures

     24   

PART II

   OTHER INFORMATION   
Item 1.   

Legal Proceedings

     24   
Item 1A.   

Risk Factors

     24   
Item 2.   

Unregistered Sales of Equity Securities and Use of Proceeds

     25   
Item 3.   

Defaults Upon Senior Securities

     25   
Item 4.   

Mine Safety Disclosures

     25   
Item 5.   

Other Information

     25   
Item 6.   

Exhibits

     25   
  

Signatures

     30   

 

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PART I.

 

Item 1. Financial Statements

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

Belo Corp. and Subsidiaries

 

     Three months ended September 30,     Nine months ended September 30,  

In thousands, except per share amounts (unaudited)

   2013     2012     2013     2012  

Net Operating Revenues

   $ 166,192      $ 176,273      $ 500,037      $ 509,790   

Operating Costs and Expenses

        

Station salaries, wages and employee benefits

     55,084        54,776        167,162        166,912   

Station programming and other operating costs

     50,695        50,520        147,615        143,911   

Corporate operating costs

     10,920        7,501        32,477        23,783   

Depreciation

     7,129        7,528        21,232        22,462   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     123,828        120,325        368,486        357,068   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

     42,364        55,948        131,551        152,722   

Other Income and (Expense)

        

Interest expense

     (14,538     (17,683     (43,715     (53,059

Other income, net

     989        497        1,718        2,376   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (13,549     (17,186     (41,997     (50,683

Earnings before income taxes

     28,815        38,762        89,554        102,039   

Income tax expense

     9,720        14,148        31,920        37,300   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     19,095        24,614        57,634        64,739   

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

     —          (203     —          (301

Net earnings attributable to Belo Corp.

   $ 19,095      $ 24,817      $ 57,634      $ 65,040   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Share

        

Basic

   $ 0.18      $ 0.24      $ 0.55      $ 0.62   

Diluted

   $ 0.18      $ 0.24      $ 0.55      $ 0.62   

Weighted Average Shares Outstanding

        

Basic

     104,019        103,120        103,804        103,607   

Diluted

     104,899        103,420        104,566        103,914   

Dividends declared per share

   $ 0.16      $ 0.16      $ 0.24      $ 0.24   

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Belo Corp. and Subsidiaries

 

     Three months ended September 30,     Nine months ended September 30,  

In thousands (unaudited)

   2013      2012     2013      2012  

Net earnings

   $ 19,095       $ 24,614      $ 57,634       $ 64,739   

Other comprehensive income:

          

Amortization of net actuarial loss, net of tax

     771         624        2,313         1,872   
  

 

 

    

 

 

   

 

 

    

 

 

 

Comprehensive income

     19,866         25,238        59,947         66,611   

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

     —           (203     —           (301
  

 

 

    

 

 

   

 

 

    

 

 

 

Comprehensive income attributable to Belo Corp.

   $ 19,866       $ 25,441      $ 59,947       $ 66,912   
  

 

 

    

 

 

   

 

 

    

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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CONSOLIDATED CONDENSED BALANCE SHEETS

Belo Corp. and Subsidiaries

 

In thousands, except per share amounts

(unaudited)

   September 30,
2013
    December 31,
2012
 

Assets

    

Current assets:

    

Cash and temporary cash investments

   $ 28,196      $ 9,437   

Accounts receivable, net

     137,166        140,605   

Other current assets

     15,476        17,757   
  

 

 

   

 

 

 

Total current assets

     180,838        167,799   

Property, plant and equipment, net

     146,314        146,522   

Intangible assets, net

     725,399        725,399   

Goodwill

     423,873        423,873   

Other assets

     36,682        35,999   
  

 

 

   

 

 

 

Total assets

   $ 1,513,106      $ 1,499,592   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 16,099      $ 20,348   

Accrued expenses

     48,920        42,057   

Short-term pension obligation

     8,200        20,000   

Accrued interest payable

     14,142        9,123   

Income taxes payable

     3,607        9,043   

Dividends payable

     8,390        8,331   

Deferred revenue

     3,874        2,911   
  

 

 

   

 

 

 

Total current liabilities

     103,232        111,813   

Long-term debt

     712,599        733,025   

Deferred income taxes

     266,938        257,864   

Pension obligation

     75,659        86,590   

Other liabilities

     11,725        10,576   

Shareholders’ equity:

    

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

    

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

    

Series A: Issued 95,866 shares at September 30, 2013 and 95,036 shares at December 31, 2012

     958        950   

Series B: Issued 8,255 shares at September 30, 2013 and 8,282 shares at December 31, 2012

     83        83   

Additional paid-in capital

     1,097,752        1,089,764   

Accumulated deficit

     (663,789     (696,269

Accumulated other comprehensive loss

     (92,051     (94,364
  

 

 

   

 

 

 

Total Belo Corp. shareholders’ equity

     342,953        300,164   

Noncontrolling interests

     —          (440
  

 

 

   

 

 

 

Total shareholders’ equity

     342,953        299,724   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,513,106      $ 1,499,592   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Belo Corp. and Subsidiaries

 

     Nine months ended September 30,  

In thousands (unaudited)

   2013     2012  

Operations

    

Net earnings

   $ 57,634      $ 64,739   

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

    

Depreciation

     21,232        22,462   

Loss on dissolution of non-controlling interest

     440        —     

Pension contributions

     (20,000     (14,926

Deferred income taxes

     8,087        14,086   

Employee retirement benefit expense

     804        1,992   

Share-based compensation

     8,929        4,094   

Other non-cash items

     1,637        1,684   

Equity income from partnerships

     (2,052     (1,444

Other, net

     642        1,720   

Net change in operating assets and liabilities:

    

Accounts receivable, net

     2,680        13,871   

Income tax receivable

     —          31,615   

Other current assets and other assets

     1,188        2,561   

Accounts payable

     (4,249     (3,291

Accrued expenses

     4,981        10,349   

Accrued interest payable

     5,018        7,722   

Income taxes payable

     (5,435     (8,668
  

 

 

   

 

 

 

Net cash provided by operations

     81,536        148,566   
  

 

 

   

 

 

 

Investments

    

Capital expenditures

     (20,578     (15,483

Other investments, net

     85        (795
  

 

 

   

 

 

 

Net cash used for investments

     (20,493     (16,278
  

 

 

   

 

 

 

Financing

    

Net proceeds from revolving debt

     73,400        —     

Payments on revolving debt

     (94,400     —     

Dividends paid on common stock

     (25,096     (21,780

Common stock repurchased

     —          (5,964

Net proceeds from exercise of stock options

     3,096        124   

Excess tax benefit from option exercises

     716        117   
  

 

 

   

 

 

 

Net cash used for financing

     (42,284     (27,503
  

 

 

   

 

 

 

Net increase in cash and temporary cash investments

     18,759        104,785   

Cash and temporary cash investments at beginning of period

     9,437        61,118   
  

 

 

   

 

 

 

Cash and temporary cash investments at end of period

   $ 28,196      $ 165,903   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Condensed Financial Statements.

 

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Table of Contents

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) include equity investments, in which Belo owns a greater than 50% interest. The consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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

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

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012.

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

 

(2) On June 12, 2013, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with Gannett Co., Inc., (Gannett), and Delta Acquisition Corp., a wholly-owned subsidiary of Gannett (Merger Sub). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (Merger), with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Gannett. The Merger Agreement also contemplates that simultaneous with the completion of the Merger, Gannett will undertake a restructuring whereby certain television stations owned by the Company will be transferred to qualified third-party purchasers under asset purchase and related agreements.

Subject to the terms and conditions in the Merger Agreement, which has been approved by the boards of directors of the Company, Gannett and Merger Sub, and by the Company’s shareholders, at the effective time of the Merger, each outstanding share of the Company’s Series A and Series B common stock, other than shares owned by a shareholder exercising appraisal rights and shares owned by the Company, any Company subsidiary, Gannett or Merger Sub, will be converted into the right to receive $13.75 in cash, without interest. The Merger Agreement also provides that at the effective time of the Merger, each outstanding stock option of the Company, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash without interest equal to the product of the excess, if any, of the merger consideration over the applicable exercise price per share of such stock option multiplied by the number of shares of common stock for which such stock option may be exercised, and each outstanding restricted stock unit (RSU), whether vested or unvested, will be canceled and converted into the right to receive an amount in cash equal to the number of shares of common stock subject to such RSU multiplied by the merger consideration in respect of such share, plus any accrued but unpaid dividend equivalents.

The Merger Agreement contains customary representations and warranties from the Company, Gannett and Merger Sub, and each party has agreed to customary covenants, including, among others, covenants relating to the conduct of the Company’s business during the interim period between the execution of the Merger Agreement and the closing of the transactions contemplated by the Merger Agreement. The Merger Agreement provides certain termination rights for both the Company and Gannett.

 

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Table of Contents

On July 24, 2013, certain media advocacy groups petitioned the FCC to not consent to the Merger. Also on July 24, 2013, a cable association and certain cable and satellite service providers petitioned the FCC to not consent to the Merger or in the alternative, condition the FCC’s consent. The Company believes the petitions are without merit and has opposed them.

On August 22, 2013, the Company and Gannett each received a request for additional information and documents (also known as “second requests”) from the U.S. Department of Justice (DOJ) pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the proposed merger with Gannett. Gannett and Belo are responding promptly to the second requests and continue working cooperatively with the DOJ as it conducts its review of the proposed Merger.

The Company received shareholder approval for the Merger on September 25, 2013. Completion of the Merger is subject to certain customary conditions, including (1) receipt of required regulatory approvals, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and FCC consent for the transactions, (2) completion of the restructuring, and (3) the absence of any order or injunction prohibiting the completion of the transactions. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party and (ii) the performance in all material respects by the other party of its obligations under the Merger Agreement. The Merger is expected to close following the receipt of such required regulatory approvals and other closing conditions.

Certain contingent costs relating to the Merger are not reflected in the Company’s unaudited condensed consolidated financial statements as of September 30, 2013. These contingent costs include a $9,500 transaction fee due to RBC Capital Markets, LLC upon consummation of the Merger.

 

(3) In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI). Companies are also required to present reclassifications by component when reporting changes in AOCI balances. The new standard is effective for annual and interim periods beginning after December 15, 2012. This ASU affects presentation only and has no effect on the Company’s financial condition, results of operations or cash flows.

 

(4) Belo and A. H. Belo Corporation (A. H. Belo), which have three common directors, are considered related parties under accounting rules. The Company has no ownership interest in A. H. Belo or in any of A. H. Belo’s newspaper businesses or related assets, and A. H. Belo has no ownership interest in the Company or any of the Company’s television station businesses or related assets. Subsequent to the Company’s 2008 spin-off of A. H. Belo, the Company’s relationship with A. H. Belo is governed by certain agreements between the two companies or their respective subsidiaries. Although the services provided pursuant to these agreements generated cash flows between Belo and A. H. Belo, the amounts were not significant to the ongoing operations of the Company. Under the services agreements, the Company and A. H. Belo (or their respective subsidiaries) provided each other various services and/or support, substantially all of which have ceased as of September 30, 2013. Belo and A. H. Belo co-own certain investments in third party businesses, which are recorded as either equity or cost method investments and are included in other assets. The amount of income from the third party investments included in the Company’s net earnings is immaterial.

 

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Table of Contents
(5) The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share (EPS) for the three and nine months ended September 30, 2013 and 2012.

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2013     2012     2013     2012  

Income (Numerator)

        

Net earnings attributable to Belo Corp.

   $ 19,095      $ 24,817      $ 57,634      $ 65,040   

Less: Income to participating securities

     (140     (348     (560     (1,014
  

 

 

   

 

 

   

 

 

   

 

 

 

Income available to common shareholders plus assumed conversions

   $ 18,955      $ 24,469      $ 57,074      $ 64,026   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares (Denominator)

        

Weighted average shares outstanding (basic)

     104,019        103,120        103,804        103,607   

Dilutive effect of employee stock options and PBRSUs

     880        300        762        307   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted weighted average shares outstanding

     104,899        103,420        104,566        103,914   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.18      $ 0.24      $ 0.55      $ 0.62   

Diluted

   $ 0.18      $ 0.24      $ 0.55      $ 0.62   

In calculating diluted EPS for the three and nine months ended September 30, 2013, the Company excluded common stock options for 3,806 shares and 3,956 shares, respectively, because to include them would be anti-dilutive. For the three and nine months ended September 30, 2013, the Company also excluded from the diluted EPS calculation 1,254 restricted stock units (RSUs) because they are participating securities. Additionally, for the three and nine months ended September 30, 2013, the Company excluded 433 performance-based RSUs (PBRSUs) because to include them would be anti-dilutive.

In calculating diluted EPS for the three and nine months ended September 30, 2012, the Company excluded common stock options for 6,674 shares and 6,677 shares, respectively, because to include them would be anti-dilutive. Additionally, for the three and nine months ended September 30, 2012, the Company excluded from the diluted EPS calculation 1,253 RSUs because they are participating securities.

 

(6)

At September 30, 2013, Belo had $712,599 in fixed-rate debt securities as follows: $272,599 of 8% Senior Notes due 2016; $200,000 of 7 3/4% Senior Debentures due 2027; and $240,000 of 7 1/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.7%.

At September 30, 2013, Belo had variable-rate debt capacity of $200,000 under a revolving credit agreement (Credit Agreement). The Company is required to maintain certain leverage and interest ratios specified in the Credit Agreement. The leverage ratio is generally defined as the ratio of debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At September 30, 2013, the Company’s leverage ratio was 2.8, its interest coverage ratio was 4.2 and its senior leverage ratio was 0.0. At September 30, 2013, there was no balance outstanding under the Credit Agreement, all funds were available for borrowing and the Company was in compliance with all debt covenant requirements.

At September 30, 2013, the fair value of Belo’s fixed-rate debt was estimated to be $737,350. The Company’s publicly held long-term debt is classified as Level 2 inputs, because the fair value for these instruments is determined using observable inputs in non-active markets.

 

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

 

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Condensed Consolidating Statement of Earnings

For the Three Months Ended September 30, 2013

(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Eliminations     Total  

Net Operating Revenues

   $ —        $ 166,135      $ 57      $ —        $ 166,192   

Operating Costs and Expenses

          

Station salaries, wages and employee benefits

     —          54,830        254        —          55,084   

Station programming and other operating costs

     —          50,594        101        —          50,695   

Corporate operating costs

     9,654        843        423        —          10,920   

Depreciation

     257        6,651        221        —          7,129   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     9,911        112,918        999        —          123,828   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (9,911     53,217        (942     —          42,364   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

          

Interest expense

     (14,525     (13     —          —          (14,538

Intercompany interest

     507        (507     —          —          —     

Other income (expense), net

     (121     1,110        —          —          989   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (14,139     590        —          —          (13,549
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (24,050     53,807        (942     —          28,815   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     8,307        (18,344     317        —          (9,720

Equity in earnings (loss) of subsidiaries

     34,838        —          —          (34,838     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

   $ 19,095      $ 35,463      $ (625   $ (34,838   $ 19,095   

Less: Net (loss) from non-controlling interests

     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable To Belo Corp.

   $ 19,095      $ 35,463      $ (625   $ (34,838   $ 19,095   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended September 30, 2013

(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
    Eliminations     Total  

Net earnings (loss)

   $ 19,095       $ 35,463       $ (625   $ (34,838   $ 19,095   

Amortization of net actuarial loss, net of tax

     771         —           —          —          771   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     19,866         35,463         (625     (34,838     19,866   

Less: comprehensive (loss) attributable to noncontrolling interests

     —           —           —          —          —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Belo Corp.

   $ 19,866       $ 35,463       $ (625   $ (34,838   $ 19,866   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Condensed Consolidating Statement of Earnings

For the Three Months Ended September 30, 2012

(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Eliminations     Total  

Net Operating Revenues

   $ —        $ 176,273      $ —        $ —        $ 176,273   

Operating Costs and Expenses

          

Station salaries, wages and employee benefits

     —          54,755        21        —          54,776   

Station programming and other operating costs

     —          50,049        471        —          50,520   

Corporate operating costs

     5,906        1,204        391        —          7,501   

Depreciation

     319        6,998        211        —          7,528   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     6,225        113,006        1,094        —          120,325   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (6,225     63,267        (1,094     —          55,948   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

          

Interest expense

     (17,677     (6     —          —          (17,683

Intercompany interest

     752        (752     —          —          —     

Other income (expense), net

     (60     557        —          —          497   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (16,985     (201     —          —          (17,186
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (23,210     63,066        (1,094     —          38,762   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     8,743        (23,290     399        —          (14,148

Equity in earnings (loss) of subsidiaries

     39,284        —          —          (39,284     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     24,817        39,776        (695     (39,284     24,614   

Less: Net (loss) from noncontrolling interests

     —          —          (203     —          (203
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Belo Corp.

   $ 24,817      $ 39,776      $ (492   $ (39,284   $ 24,817   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Three Months Ended September 30, 2012

(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
    Eliminations     Total  

Net earnings (loss)

   $ 24,817       $ 39,776       $ (695   $ (39,284   $ 24,614   

Amortization of net actuarial loss, net of tax

     624         —           —          —          624   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     25,441         39,776         (695     (39,284     25,238   

Less: comprehensive (loss) attributable to noncontrolling interests

     —           —           (203     —          (203
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Belo Corp.

   $ 25,441       $ 39,776       $ (492   $ (39,284   $ 25,441   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

10


Table of Contents

Condensed Consolidating Statement of Earnings

For the Nine Months Ended September 30, 2013

(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Eliminations     Total  

Net Operating Revenues

   $ —        $ 499,980      $ 57      $ —        $ 500,037   

Operating Costs and Expenses

          

Station salaries, wages and employee benefits

     —          166,358        804        —          167,162   

Station programming and other operating costs

     —          147,210        405        —          147,615   

Corporate operating costs

     28,140        3,119        1,218        —          32,477   

Depreciation

     949        19,631        652        —          21,232   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     29,089        336,318        3,079        —          368,486   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (29,089     163,662        (3,022     —          131,551   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

          

Interest expense

     (43,686     (29     —          —          (43,715

Intercompany interest

     1,988        (1,988     —          —          —     

Other income (expense), net

     (1,140     2,840        18        —          1,718   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (42,838     823        18        —          (41,997
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (71,927     164,485        (3,004     —          89,554   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     26,346        (59,337     1,071        —          (31,920

Equity in earnings (loss) of subsidiaries

     103,215        —          —          (103,215     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

   $ 57,634      $ 105,148      $ (1,933   $ (103,215   $ 57,634   

Less: Net (loss) from noncontrolling interests

     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable To Belo Corp.

   $ 57,634      $ 105,148      $ (1,933   $ (103,215   $ 57,634   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Nine Months Ended September 30, 2013

(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
    Eliminations     Total  

Net earnings (loss)

   $ 57,634       $ 105,148       $ (1,933   $ (103,215   $ 57,634   

Amortization of net actuarial loss, net of tax

     2,313         —           —          —          2,313   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     59,947         105,148         (1,933     (103,215     59,947   

Less: comprehensive (loss) attributable to noncontrolling interests

     —           —           —          —          —     
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Belo Corp.

   $ 59,947       $ 105,148       $ (1,933   $ (103,215   $ 59,947   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

11


Table of Contents

Condensed Consolidating Statement of Earnings

For the Nine Months Ended September 30, 2012

(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Eliminations     Total  

Net Operating Revenues

   $ —        $ 509,790      $ —        $ —        $ 509,790   

Operating Costs and Expenses

          

Station salaries, wages and employee benefits

     —          166,891        21        —          166,912   

Station programming and other operating costs

     —          143,240        671        —          143,911   

Corporate operating costs

     19,366        3,050        1,367        —          23,783   

Depreciation

     909        20,921        632        —          22,462   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     20,275        334,102        2,691        —          357,068   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (20,275     175,688        (2,691     —          152,722   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income and (Expense)

          

Interest expense

     (53,030     (29     —          —          (53,059

Intercompany interest

     2,241        (2,241     —          —          —     

Other income, net

     2        2,374        —          —          2,376   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (expense)

     (50,787     104        —          —          (50,683
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

     (71,062     175,792        (2,691     —          102,039   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

     26,796        (65,080     984        —          (37,300

Equity in earnings (loss) of subsidiaries

     109,306        —          —          (109,306     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     65,040        110,712        (1,707     (109,306     64,739   

Less: Net loss from noncontrolling interests

     —          —          (301     —          (301
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Belo Corp.

   $ 65,040      $ 110,712      $ (1,406   $ (109,306   $ 65,040   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statement of Comprehensive Income

For the Nine Months Ended September 30, 2012

(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
    Eliminations     Total  

Net earnings (loss)

   $ 65,040       $ 110,712       $ (1,707   $ (109,306   $ 64,739   

Amortization of net actuarial loss, net of tax

     1,872         —           —          —          1,872   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     66,912         110,712         (1,707     (109,306     66,611   

Less: comprehensive (loss) attributable to noncontrolling interests

     —           —           (301     —          (301
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Belo Corp.

   $ 66,912       $ 110,712       $ (1,406   $ (109,306   $ 66,912   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

12


Table of Contents

Condensed Consolidating Balance Sheet

As of September 30, 2013

(unaudited)

 

     Parent      Guarantors      Non-
Guarantors
     Eliminations     Total  

Assets

             

Current assets:

             

Cash and temporary cash investments

   $ 24,923       $ 3,273       $ —         $ —        $ 28,196   

Accounts receivable, net

     57         137,071         38         —          137,166   

Other current assets

     4,697         10,752         27         —          15,476   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     29,677         151,096         65         —          180,838   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Property, plant and equipment, net

     2,398         130,105         13,811         —          146,314   

Intangible assets, net

     —           725,399         —           —          725,399   

Goodwill

     —           423,873         —           —          423,873   

Deferred income taxes

     36,536         —           —           (36,536     —     

Intercompany receivable

     524,035         —           —           (524,035     —     

Investment in subsidiaries

     586,396         —           —           (586,396     —     

Other assets

     16,101         20,540         41         —          36,682   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,195,143       $ 1,451,013       $ 13,917       $ (1,146,967   $ 1,513,106   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

             

Current liabilities:

             

Accounts payable

   $ 7,522       $ 8,485       $ 92       $ —        $ 16,099   

Accrued expenses

     17,042         31,563         315         —          48,920   

Short-term pension obligation

     8,200         —           —           —          8,200   

Income taxes payable

     3,607         —           —           —          3,607   

Deferred revenue

     —           3,874         —           —          3,874   

Dividends payable

     8,390         —           —           —          8,390   

Accrued interest payable

     14,142         —           —           —          14,142   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     58,903         43,922         407         —          103,232   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Long-term debt

     712,599         —           —           —          712,599   

Deferred income taxes

     —           302,959         515         (36,536     266,938   

Pension obligation

     75,659         —           —           —          75,659   

Intercompany payable

     —           518,192         5,843         (524,035     —     

Other liabilities

     5,029         6,696         —           —          11,725   

Total shareholders’ equity

     342,953         579,244         7,152         (586,396     342,953   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,195,143       $ 1,451,013       $ 13,917       $ (1,146,967   $ 1,513,106   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

13


Table of Contents

Condensed Consolidating Balance Sheet

As of December 31, 2012

 

     Parent      Guarantors      Non-
Guarantors
     Eliminations     Total  

Assets

             

Current assets:

             

Cash and temporary cash investments

   $ 6,833       $ 2,500       $ 104       $ —        $ 9,437   

Accounts receivable, net

     487         140,107         11         —          140,605   

Other current assets

     4,017         13,674         66         —          17,757   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     11,337         156,281         181         —          167,799   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Property, plant and equipment, net

     2,865         129,262         14,395         —          146,522   

Intangible assets, net

     —           725,399         —           —          725,399   

Goodwill

     —           423,873         —           —          423,873   

Deferred income taxes

     42,528         —           —           (42,528     —     

Intercompany receivable

     636,455         —           —           (636,455     —     

Investment in subsidiaries

     483,181         —           —           (483,181     —     

Other assets

     18,297         17,635         67         —          35,999   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,194,663       $ 1,452,450       $ 14,643       $ (1,162,164   $ 1,499,592   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

             

Current liabilities:

             

Accounts payable

   $ 8,154       $ 11,812       $ 382       $ —        $ 20,348   

Accrued expenses

     16,202         25,432         423         —          42,057   

Short-term pension obligation

     20,000         —           —           —          20,000   

Income taxes payable

     9,043         —           —           —          9,043   

Deferred revenue

     —           2,911         —           —          2,911   

Dividends payable

     8,331         —           —           —          8,331   

Accrued interest payable

     9,123         —           —           —          9,123   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     70,853         40,155         805         —          111,813   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Long-term debt

     733,025         —           —           —          733,025   

Deferred income taxes

     —           299,552         840         (42,528     257,864   

Pension obligation

     86,590         —           —           —          86,590   

Intercompany payable

     —           632,543         3,912         (636,455     —     

Other liabilities

     4,471         6,105         —           —          10,576   

Total shareholders’ equity

     299,724         474,095         9,086         (483,181     299,724   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,194,663       $ 1,452,450       $ 14,643       $ (1,162,164   $ 1,499,592   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

14


Table of Contents

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2013

(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Total  

Operations

        

Net cash provided by (used for) operations

   $ (42,226   $ 125,730      $ (1,968   $ 81,536   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investments

        

Capital expenditures

     (474     (20,035     (69     (20,578

Other investments, net

     (141     226        —          85   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investments

     (615     (19,809     (69     (20,493
  

 

 

   

 

 

   

 

 

   

 

 

 

Financing

        

Net proceeds from revolving debt

     73,400        —          —          73,400   

Payments on revolving debt

     (94,400     —          —          (94,400

Dividends paid on common stock

     (25,096     —          —          (25,096

Net proceeds from exercise of stock options

     3,096        —          —          3,096   

Excess tax benefit from option exercises

     716        —          —          716   

Intercompany activity

     103,215        (105,148     1,933        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     60,931        (105,148     1,933        (42,284
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and temporary cash investments

     18,090        773        (104     18,759   

Cash and temporary cash investments at beginning of period

     6,833        2,500        104        9,437   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and temporary cash investments at end of period

   $ 24,923      $ 3,273      $ —        $ 28,196   
  

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2012

(unaudited)

 

     Parent     Guarantors     Non-
Guarantors
    Total  

Operations

        

Net cash provided by (used for) operations

   $ 26,643      $ 123,054      $ (1,131   $ 148,566   
  

 

 

   

 

 

   

 

 

   

 

 

 

Investments

        

Capital expenditures

     (4,721     (10,598     (164     (15,483

Other investments, net

     (795     —          —          (795
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for investments

     (5,516     (10,598     (164     (16,278
  

 

 

   

 

 

   

 

 

   

 

 

 

Financing

        

Dividends paid

     (21,780     —          —          (21,780

Common stock repurchased

     (5,964     —          —          (5,964

Net proceeds from exercise of stock options

     124        —          —          124   

Excess tax benefit from option exercises

     117        —          —          117   

Intercompany activity

     109,306        (110,712     1,406        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     81,803        (110,712     1,406        (27,503
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and temporary cash investments

     102,930        1,744        111        104,785   

Cash and temporary cash investments at beginning of period

     59,339        1,755        24        61,118   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and temporary cash investments at end of period

   $ 162,269      $ 3,499      $ 135      $ 165,903   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(8) 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, restricted stock units, performance shares, performance units and stock appreciation rights. In addition, options may be accompanied by stock appreciation rights and limited stock appreciation rights. Rights and limited rights may also be issued without accompanying options. Cash-based bonus awards are also available under the plan.

 

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Share-based compensation expense for awards to Belo’s employees and non-employee directors was $2,633 and $11,314, for the three and nine months ended September 30, 2013. Share-based compensation expense for awards to Belo’s employees and non-employee directors was $1,980 and $5,893, for the three and nine months ended September 30, 2012.

 

(9) Net periodic pension cost includes the following components for the three and nine months ended September 30, 2013 and 2012:

 

     Three months ended
September 30,
    Nine months ended
September 30,
 
     2013     2012     2013     2012  

Interest cost on projected benefit obligation

   $ 2,985      $ 3,115      $ 8,956      $ 9,345   

Expected return on assets

     (3,895     (3,393     (11,687     (10,178

Amortization of net loss

     1,186        960        3,559        2,880   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost

   $ 276      $ 682      $ 828      $ 2,047   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(10) Effective January 1, 2013, the Company discontinued its ownership in a majority-owned subsidiary. The following table sets forth allocation of equity between controlling and noncontrolling interests as of September 30, 2013:

 

     Belo Corp.     Noncontrolling        
     Shareholders’     Interests     Total  
     Equity     Equity     Equity  

Balance at December 31, 2012

   $ 300,164      $ (440   $ 299,724   

Net earnings (loss)

     57,634        —          57,634   

Dividends declared

     (25,154     —          (25,154

Share-based compensation

     4,184        —          4,184   

Exercise of stock options

     3,096        —          3,096   

Excess tax benefit from long-term incentive plan

     716        —          716   

Other comprehensive income

     2,313        —          2,313   

Other

     —          440        440   
  

 

 

   

 

 

   

 

 

 

Balance at September 30, 2013

   $ 342,953      $ —        $ 342,953   
  

 

 

   

 

 

   

 

 

 

The following table sets forth the changes in Accumulated Other Comprehensive Loss by component for the nine months ended September 30, 2013:

 

     Defined Benefit Plan  

Balance at December 31, 2012

   $ (94,364

Amounts reclassified from AOCL, net of tax

     2,313   
  

 

 

 

Balance at September 30, 2013

   $ (92,051
  

 

 

 

The following tables set forth the reclassifications out of Accumulated Other Comprehensive Loss for the three and nine months ended September 30, 2013:

 

     Amount reclassified     Affected line item in
Details about accumulated other    from accumulated other     the statement where

comprehensive loss components

   comprehensive loss    

net earnings is presented

Three months ended September 30, 2013:

    

Amortization of defined benefit pension items:

    

Actuarial losses, total before tax

   $ 1,186     

Included in net periodic pension costs (Note 9)

     (415  

Deferred tax expense

  

 

 

   
   $ 771     

Net of tax

  

 

 

   

 

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    Amount reclassified     Affected line item in
Details about accumulated other   from accumulated other     the statement where

comprehensive loss components

  comprehensive loss    

net earnings is presented

Nine months ended September 30, 2013:

   

Amortization of defined benefit pension items:

   

Actuarial losses, total before tax

  $ 3,559     

Included in net periodic pension costs (Note 9)

    (1,246  

Deferred tax expense

 

 

 

   
  $ 2,313     

Net of tax

 

 

 

   

 

(11)

On June 14, 2013, a purported class action lawsuit was filed by a purported individual shareholder of the Company in the 68th Judicial District Court of Dallas County, Texas, against the Company, Gannett Co., Inc., and members of the Company’s board of directors. On June 17, 2013, June 24, 2013, and July 16, 2013, respectively, three similar lawsuits were filed by other purported shareholders of the Company in the Chancery Court of the State of Delaware against the Company, members of the Belo board, Gannett Co., Inc. and Gannett’s merger subsidiary. All four lawsuits arise out of the Company’s Merger Agreement with Gannett Co., Inc., announced on June 13, 2013. The four lawsuits challenge the Merger, asserting claims of breach of fiduciary duty against the individual defendants and aiding and abetting breach of this duty against the corporate defendants. The Delaware Court of Chancery ordered the consolidation of the three Delaware actions, and on July 11, 2013, Delaware plaintiffs filed an amended, consolidated complaint. On September 30, 2013, the Delaware plaintiffs voluntarily dismissed the Delaware action without prejudice, which dismissal the Delaware Court of Chancery approved. The plaintiff in the Texas action has indicated that he intends to file an amended petition and has agreed that the defendants are not required to answer or otherwise respond to the current petition. The Company believes the lawsuits are without merit and intends to vigorously defend against them.

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

 

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

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

Proposed Merger with Gannett Co., Inc.

On June 12, 2013, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with Gannett Co., Inc., (Gannett), and Delta Acquisition Corp., a wholly-owned subsidiary of Gannett (Merger Sub). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (Merger), with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Gannett. The Merger Agreement also contemplates that simultaneous with the completion of the Merger, Gannett will undertake a restructuring whereby certain television stations owned by the Company will be transferred to qualified third-party purchasers under asset purchase and related agreements.

Subject to the terms and conditions in the Merger Agreement, which has been approved by the boards of directors of the Company, Gannett and Merger Sub, and by the Company’s shareholders, at the effective time of the Merger, each outstanding share of the Company’s Series A and Series B common stock, other than shares owned by a shareholder exercising appraisal rights and shares owned by the Company, any Company subsidiary, Gannett or Merger Sub, will be converted into the right to receive $13.75 in cash, without interest. The Merger Agreement also provides that at the effective time of the Merger, each outstanding stock option of the Company, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash without interest equal to the product of the excess, if any, of the merger consideration over the applicable exercise price per share of such stock option multiplied by the number of shares of common stock for which such stock option may be exercised, and each

 

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outstanding restricted stock unit (RSU), whether vested or unvested, will be canceled and converted into the right to receive an amount in cash equal to the number of shares of common stock subject to such RSU multiplied by the merger consideration in respect of such share, plus any accrued but unpaid dividend equivalents.

The Merger Agreement contains customary representations and warranties from the Company, Gannett and Merger Sub, and each party has agreed to customary covenants, including, among others, covenants relating to the conduct of the Company’s business during the interim period between the execution of the Merger Agreement and the closing of the transactions contemplated by the Merger Agreement. The Merger Agreement provides certain termination rights for both the Company and Gannett.

On July 24, 2013, certain media advocacy groups petitioned the FCC to not consent to the Merger. Also on July 24, 2013, a cable association and certain cable and satellite service providers petitioned the FCC to not consent to the Merger or in the alternative, condition the FCC’s consent. The Company believes the petitions are without merit and has opposed them.

On August 22, 2013, the Company and Gannett each received a request for additional information and documents (also known as “second requests”) from the U.S. Department of Justice (DOJ) pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the proposed merger with Gannett. Gannett and Belo are responding promptly to the second requests and continue working cooperatively with the DOJ as it conducts its review of the proposed Merger.

The Company received shareholder approval for the Merger on September 25, 2013. Completion of the Merger is subject to certain customary conditions, including (1) receipt of required regulatory approvals, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and FCC consent for the transactions, (2) completion of the restructuring, and (3) the absence of any order or injunction prohibiting the completion of the transactions. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party and (ii) the performance in all material respects by the other party of its obligations under the Merger Agreement. The Merger is expected to close following the receipt of such required regulatory approvals and other closing conditions.

Certain contingent costs relating to the Merger are not reflected in the Company’s unaudited condensed consolidated financial statements as of September 30, 2013. These contingent costs include a $9,500 transaction fee due to RBC Capital Markets, LLC upon consummation of the Merger.

Overview

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

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

 

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The following table sets forth the Company’s major media assets as of September 30, 2013:

 

Market

   Market
Rank(1)
     Station/ News
Channel
   Year Belo
Acquired/
Started
   Network
Affiliation
  

Number of
Commercial
Stations in
Market(2)

 

Dallas/Fort Worth

     5         WFAA    1950    ABC      16     

Dallas/Fort Worth

     5         TXCN    1999    N/A      N/A     

Houston

     10         KHOU    1984    CBS      15     

Phoenix(3)

     12         KTVK    1999    IND      13     

Phoenix

     12         KASW    2000    CW      13     

Seattle/Tacoma

     13         KING    1997    NBC      13     

Seattle/Tacoma

     13         KONG    2000    IND      13     

Seattle/Tacoma

     13         NWCN    1997    N/A      N/A     

St. Louis

     21         KMOV    1997    CBS      8     

Portland(4)

     22         KGW    1997    NBC      8     

Charlotte

     25         WCNC    1997    NBC      8     

San Antonio

     36         KENS    1997    CBS      10     

Austin

     40         KVUE    1999    ABC      7     

Hampton/Norfolk

     45         WVEC    1984    ABC      8     

Louisville

     49         WHAS    1997    ABC      7     

New Orleans(5)

     51         WWL    1994    CBS      8     

New Orleans(6)

     51         WUPL    2007    MNTV      8     

Tucson

     71         KMSB    1997    FOX      9     

Tucson

     71         KTTU    2002    MNTV      9     

Spokane

     73         KREM    1997    CBS      7     

Spokane

     73         KSKN    2001    CW      7     

Boise(7)(8)

     110         KTVB    1997    NBC      5     

 

(1) Market rank is based on the relative size of the television market Designated Market Area (DMA), among the 210 DMAs generally recognized in the United States, based on the September 2013 Nielsen Media Research report.
(2) Represents the number of commercial television stations (both VHF and UHF) broadcasting in the market, excluding public stations, low power broadcast stations and cable channels.
(3) KTVK also produces “3TV 24/7,” a 24-hour daily local news and weather channel.
(4) The Company also owns KGWZ-LD, a low power television station in Portland, Oregon.
(5) WWL also produces “NewsWatch on Channel 15,” a 24-hour daily local news and weather channel.
(6) The Company also owns WBXN-CA, a Class A television station in New Orleans, Louisiana.
(7) The Company also owns KTFT-LD (NBC), a low power television station in Twin Falls, Idaho.
(8) KTVB also produces “24/7 Newschannel,” a 24-hour daily local news and weather channel.

The Company intends, for the discussion of its financial condition and results of operations that follows, to provide information that will assist in understanding the Company’s financial statements, the changes in certain key items in those statements from period to period and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect the Company’s financial statements.

The Company has network affiliation agreements with ABC, CBS, NBC, FOX, CW and MNTV. The Company’s network affiliation agreements generally provide the station with the exclusive right to broadcast over the air in its local service area all programs transmitted by the network with which the station is affiliated. As part of these agreements, the network has the right to sell most of the advertising time during such broadcasts. As affiliation agreements renew, cash payments are made by the Company to the networks for compensation related to programming provided by such networks. Most of the Company’s current affiliation agreements provided for payments to the respective network in 2012 and effective January 1, 2013, one additional network began receiving compensation payments from the Company. Cash payments to networks under the affiliation agreements are included in programming expense.

 

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The principal source of the Company’s revenue is from the sale of local, regional and national advertising. In even numbered years, the Company’s revenue also includes significant revenue from political advertising. Additional discussion regarding the Company’s results of operations for the three and nine months ended September 30, 2013, as compared to the three and nine months ended September 30, 2012, is provided below.

Results of Operations

(Dollars in thousands)

 

     Three months ended September 30,     Nine months ended September 30,  
      2013     Percentage
Change
    2012     2013     Percentage
Change
    2012  

Net operating revenues

   $ 166,192        (5.7 %)    $ 176,273      $ 500,037        (1.9 %)    $ 509,790   

Operating costs and expenses

     123,828        2.9     120,325        368,486        3.2     357,068   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

     42,364        (24.3 %)      55,948        131,551        (13.9 %)      152,722   

Other income and (expense)

     (13,549     (21.2 %)      (17,186     (41,997     (17.1 %)      (50,683
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations before income taxes

     28,815        (25.7 %)      38,762        89,554        (12.2 %)      102,039   

Income tax expense

     (9,720     (31.3 %)      (14,148     (31,920     (14.4 %)      (37,300
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     19,095        (22.4 %)      24,614        57,634        (11.0 %)      64,739   

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

     —          NM        (203     —          NM        (301
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Belo Corp.

   $ 19,095        (23.1 %)    $ 24,817      $ 57,634        (11.4 %)    $ 65,040   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NM is not meaningful

Net Operating Revenues

 

     Three months ended September 30,      Nine months ended September 30,  
      2013      Percentage
Change
    2012      2013      Percentage
Change
    2012  

Spot advertising revenue

   $ 128,162         (11.5 %)    $ 144,846       $ 393,067         (5.2 %)    $ 414,780   

Other

     38,030         21.0     31,427         106,970         12.6     95,010   
  

 

 

      

 

 

    

 

 

      

 

 

 

Net operating revenues

   $ 166,192         (5.7 %)    $ 176,273       $ 500,037         (1.9 %)    $ 509,790   
  

 

 

      

 

 

    

 

 

      

 

 

 

Spot advertising revenue decreased $16,684, or 11.5 percent, in the three months ended September 30, 2013, as compared to the three months ended September 30, 2012. This decrease is mostly due to a $15,067 decrease in political advertising revenue. The 2012 third quarter also had $13,412 in Olympics revenue. Political revenues are generally higher in even-numbered years than in odd-numbered years due to elections for various state and national offices. Core spot advertising decreased $1,617, or 1.3 percent with decreases in the retail, restaurant and grocery categories. These decreases were mostly offset by increases in the automotive, furniture and travel and tourism categories. Other revenue increased during the quarter, primarily due to a 19.6 percent increase in Internet revenue and a 28.3 percent increase in retransmission revenue.

Spot advertising revenue decreased $21,713, or 5.2 percent, in the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012. This decrease is primarily due to a $24,353 decrease in political advertising revenue. The decrease from political revenue was partially offset by an increase of $2,640 or 0.7 percent, in core spot advertising. Increases in the automotive, telecommunications, general services and furniture categories were partially offset by decreases in the healthcare, retail, restaurant and education categories. The increase in other revenue was primarily due to a 20.7 percent increase in Internet revenue and a 15.4 percent increase in retransmission revenue.

Operating Costs and Expenses

Station salaries, wages and employee benefits and station programming and other operating costs for the three months ended September 30, 2013, were consistent with those costs for the three months ended September 30, 2012. Increases in compensation and sales commissions were offset by decreases in pension-related expenses. Increases in network-related programming expense and spending for interactive services associated with the Company’s increase in Internet revenue were partially offset by decreases in repairs and maintenance expenses, advertising and promotion expenses and lower national representation fees related to the decrease in political revenues.

Station salaries, wages and employee benefits for the nine months ended September 30, 2013, were consistent with those costs for the nine months ended September 30, 2012. Increases in equity-based compensation, resulting from

 

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the increase in the Company’s share price during the quarter on previously awarded long-term incentives, and increases in sales commissions were offset by decreases in pension-related expenses. Station programming and other operating costs increased $3,704, or 2.6 percent, in the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, primarily related to programming payments to the networks.

Corporate operating costs increased $3,419, or 45.6 percent, in the three months ended September 30, 2013, compared to the three months ended September 30, 2012, primarily due to costs associated with the merger.

Corporate operating costs increased $8,694, or 36.6 percent, in the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, primarily due to increases in equity-based compensation, resulting from the increase in the Company’s share price during the quarter on previously awarded long-term incentives, and other costs associated with the merger.

Other Income (Expense)

Interest expense decreased $3,145 and $9,344 in the three and nine months ended September 30, 2013, respectively, due primarily to the early redemption in November 2012 of the Company’s Senior Notes originally due May 2013. Other income, net, increased in the three months ended September 30, 2013, primarily due to the write-off of certain investments in the third quarter 2012. Other income, net, decreased in the nine months ended September 30, 2013, primarily due to the write-off of certain Company investments in 2013.

Income Tax Expense

Income taxes decreased $4,428 and $5,380 for the three and nine months ended September 30, 2013, respectively, primarily due to lower pre-tax earnings.

Noncontrolling Interest

The Company decided during the second quarter of 2013 to discontinue its interest and write-off the investment in a majority-owned subsidiary that resulted in noncontrolling interest disclosures in 2012.

Station-Adjusted EBITDA

 

     Three months ended September 30,     Nine months ended September 30,  
      2013     Percentage
Change
    2012     2013     Percentage
Change
    2012  

Station-Adjusted EBITDA

   $ 60,413        (14.9 %)    $ 70,977      $ 185,260        (6.9 %)    $ 198,967   

Corporate operating costs and expenses

     (10,920     45.6     (7,501     (32,477     36.6     (23,783

Depreciation

     (7,129     (5.3 %)      (7,528     (21,232     (5.5 %)      (22,462
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from operations

   $ 42,364        (24.3 %)    $ 55,948      $ 131,551        (13.9 %)    $ 152,722   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

For the three months ended September 30, 2013, Station-Adjusted EBITDA decreased $10,564, or 14.9 percent, compared with the three months ended September 30, 2012. For the nine months ended September 30, 2013, Station-Adjusted EBITDA decreased $13,707, or 6.9 percent, compared with the nine months ended September 30, 2012. As discussed above, this decrease was primarily due to decreases in political spot revenue and Olympics revenue and increases in programming costs.

 

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Liquidity and Capital Resources

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

Operating Cash Flows

Net cash provided by operations was $81,536 in the nine months ended September 30, 2013, compared with $148,566 in the nine months ended September 30, 2012. The 2013 operating cash flows were primarily provided by net earnings adjusted for non-cash and pension-related items, and routine changes in working capital. The 2012 operating cash flows were provided primarily by net earnings adjusted for non-cash and pension-related items, receipt of a $31,615 federal income tax refund, and routine changes in working capital. The decrease in net cash provided by operations is primarily due to the receipt of the federal income tax refund in the first quarter 2012, increase in pension contributions and fluctuations in working capital due to the normal differences between political and non-political years.

Investing Cash Flows

Net cash flows used for investing activities were $20,493 in the nine months ended September 30, 2013, compared to $16,278 in the nine months ended September 30, 2012. The 2013 and 2012 investing cash flows were primarily used for capital expenditures.

Capital Expenditures

Total capital expenditures were $20,578 in the first nine months of 2013 compared with $15,483 in the first nine months of 2012.

Financing Cash Flows

Net cash flows used for financing activities were $42,284 in the nine months ended September 30, 2013 compared with $27,503 in the nine months ended September 30, 2012. The 2013 financing cash flows consisted primarily of borrowings and repayments under the Company’s revolving credit facility and dividends paid. The 2012 financing cash flows consisted primarily of dividends paid and common stock repurchased.

Long-Term Debt

At September 30, 2013, Belo had $712,599 in fixed-rate debt securities as follows: $272,599 of 8% Senior Notes due 2016; $200,000 of 7 3/4% Senior Debentures due 2027; and $240,000 of 7 1/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.7%.

At September 30, 2013, Belo had variable-rate debt capacity of $200,000 under a revolving credit agreement (Credit Agreement). The Company is required to maintain certain leverage and interest ratios specified in the Credit Agreement. The leverage ratio is generally defined as the ratio of debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At September 30, 2013, the Company’s leverage ratio was 2.8, its interest coverage ratio was 4.2 and its senior leverage ratio was 0.0. At September 30, 2013, there was no balance outstanding under the Credit Agreement, all funds were available for borrowing and the Company was in compliance with all debt covenant requirements.

Dividends

On September 26, 2013, the Company declared a quarterly dividend of eight cents per share on Series A and Series B common stock outstanding, to be paid on December 6, 2013, to shareholders of record on October 15, 2013.

On September 6, 2013, the Company paid a quarterly dividend of $8,389, or eight cents per share, on Series A and Series B common stock outstanding as of the record date of August 16, 2013.

 

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On May 31, 2013, the Company paid a quarterly dividend of $8,345, or eight cents per share, on Series A and Series B common stock outstanding as of the record date of May 10, 2013.

On March 1, 2013, the Company paid a quarterly dividend of $8,362, or eight cents per share, on Series A and Series B common stock outstanding as of the record date of February 8, 2013.

Share Repurchase

The Company has a stock repurchase program pursuant to authorization from Belo’s Board of Directors in December 2005. There is no expiration date for this repurchase program. The remaining authorization for the repurchase of shares as of September 30, 2013, under this authority was 12,010 shares. During the nine months ended September 30, 2013, no shares were repurchased.

Other

The Company has various sources available to meet its 2013 capital and operating commitments, including cash on hand, short-term investments, internally-generated funds and the $200,000 Credit Agreement. The Company believes its resources are adequate to meet its foreseeable needs.

Forward-Looking Statements

Statements in this Form 10-Q concerning Belo’s business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures, dividends, investments, future financings, impairments, pension matters, and other financial and non-financial items that are not historical facts, are “forward-looking statements” as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. Belo undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Such risks, uncertainties and factors include, but are not limited to, uncertainties regarding changes in capital market conditions and prospects, and other factors such as changes in advertising demand, interest and discount rates and programming and production costs; changes in viewership patterns and demography, and actions by viewership measurement services; changes in the network-affiliate business model for broadcast television; technological changes, and the development of new systems and devices to distribute and consume television and other audio-visual content; changes in the ability to secure, and in the terms of, carriage of Belo programming on cable, satellite, telecommunications and other program distribution methods; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; FCC and other regulatory, tax and legal changes, including changes regarding spectrum; adoption of new accounting standards or changes in existing accounting standards by the Financial Accounting Standards Board or other accounting standard-setting bodies or authorities; the effects of Company acquisitions, dispositions, co-owned ventures and investments; pension plan matters; general economic conditions; significant armed conflict; the ability to meet the conditions to closing the transactions with Gannett, including receipt of regulatory approvals and clearances, within the time frame contemplated or at all; the effect of transaction-related costs and expenses; the potentially adverse effect of the transactions on the ability of Belo to retain employees and maintain business relationships; as well as other risks detailed in Belo’s other public disclosures and filings with the Securities and Exchange Commission (“SEC”), including Belo’s Annual Report on Form 10-K.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Other than as disclosed, there have been no material changes in the Company’s exposure to market risk from the disclosure included in the Annual Report on Form 10-K for the year ended December 31, 2012.

 

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Item 4. Controls and Procedures

During the quarter ended September 30, 2013, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Belo’s internal control over financial reporting.

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

PART II.

 

Item 1. Legal Proceedings

On June 14, 2013, a purported class action lawsuit was filed by a purported individual shareholder of the Company in the 68th Judicial District Court of Dallas County, Texas, against the Company, Gannett Co., Inc., and members of the Company’s board of directors. On June 17, 2013, June 24, 2013, and July 16, 2013, respectively, three similar lawsuits were filed by other purported shareholders of the Company in the Chancery Court of the State of Delaware against the Company, members of the Belo board, Gannett Co., Inc. and Gannett’s merger subsidiary. All four lawsuits arise out of the Company’s Merger Agreement with Gannett Co., Inc., announced on June 13, 2013. The four lawsuits challenge the Merger, asserting claims of breach of fiduciary duty against the individual defendants and aiding and abetting breach of this duty against the corporate defendants. The Delaware Court of Chancery ordered the consolidation of the three Delaware actions, and on July 11, 2013, Delaware plaintiffs filed an amended, consolidated complaint. On September 30, 2013, the Delaware plaintiffs voluntarily dismissed the Delaware action without prejudice, which dismissal the Delaware Court of Chancery approved. The plaintiff in the Texas action has indicated that he intends to file an amended petition and has agreed that the defendants are not required to answer or otherwise respond to the current petition. The Company believes the lawsuits complaints are without merit and intends to vigorously defend against them.

In addition to the proceedings disclosed above, other legal proceedings are pending against the Company, including matters relating to alleged libel and/or defamation. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on the consolidated results of operations, liquidity or financial condition of the Company.

 

Item 1A. Risk Factors

Set forth below is a discussion of the material changes in the Company’s risk factors as previously disclosed in Item 1A of Part I of the Company’s Annual Report on Form-10-K for the year ended December 31, 2012 (2012 10-K). The information presented below updates, and should be read in conjunction with, the risk factors and other information disclosed the 2012 10-K.

On June 12, 2013, the Company entered into a Merger Agreement with Gannett Co., Inc., and Delta Acquisition Corp., a wholly-owned subsidiary of Gannett. Consummation of the Merger is subject to several conditions, including (1) receipt of required regulatory approvals, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Act, and FCC consent for the transactions, (2) completion of the restructuring, and (3) the absence of any order or injunction prohibiting the completion of the transactions. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party and (ii) the performance in all material respects by the other party of its obligations under the Merger Agreement. There can be no assurance that the Merger will occur in accordance with the announced plan or at all, and there are uncertainties regarding the execution, timing, costs, consequences, and other effects of the Merger.

 

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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.

Issuer Purchases of Equity Securities

None.

 

Item 3. Defaults Upon Senior Securities

None.

 

Item 4. Mine Safety Disclosures

None.

 

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

     2.1

 

*

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

     2.2

 

*

   Agreement and Plan of Merger by and among Belo Corp., Gannett Co., Inc., and Delta Acquisition Corp. dated as of June 12, 2013 (Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 18, 2013 (Securities and Exchange Commission File No. 001-08598)(the “June 18, 2013 Form 8-K”))

     3.1

 

*

   Amended and Restated Certificate of Incorporation of the Company dated May 9, 2012 (Exhibit 3.1(i) to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2012 (Securities and Exchange Commission File No. 001-08598)(the May 10, 2012 Form 8-K”))

     3.2

 

*

   Certificate of Designation of Series B Common Stock of the Company dated May 9, 2012 (Exhibit 3.1(i) to the May 10, 2012 Form 8-K)

     3.3

 

*

   Amended and Restated Bylaws of the Company, effective March 9, 2009 (Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 11, 2009 (Securities and Exchange Commission File No. 001-08598)(the “March 11, 2009 Form 8-K”))

     3.4

 

*

   Amendment No. 1 to the Bylaws of Belo Corp. (as amended and restated effective March 9, 2009) (Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 29, 2011 (Securities and Exchange Commission File No 001-08598))

 

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     3.5   *    Amendment No. 2 to the Bylaws of Belo Corp. (as amended and restated effective March 9, 2009)(Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 23, 2011 (Securities and Exchange Commission File No. 001-08598))
     4.1      Certain rights of the holders of the Company’s Common Stock are set forth in Exhibits 3.1-3.5 above
     4.2   *    Specimen Form of Certificate representing shares of the Company’s Series A Common Stock (Exhibit 4.1 to the May 10, 2012 Form 8-K)
     4.3   *    Specimen Form of Certificate representing shares of the Company’s Series B Common Stock (Exhibit 4.2 to the May 10, 2012 Form 8-K)
     4.4      Instruments defining rights of debt securities:
     (1)   *    Indenture dated as of June 1, 1997 between the Company and The Chase Manhattan Bank, as Trustee (the “Indenture”)(Exhibit 4.6(1) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (Securities and Exchange Commission File No. 002-74702)(the “2nd Quarter 1997 Form 10-Q”))
     (2)   *    $200 million 7 3/4% Senior Debenture due 2027 (Exhibit 4.6(4) to the 2nd Quarter 1997 Form 10-Q)
     (3)   *    Officers’ Certificate dated June 13, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(5) to the 2nd Quarter 1997 Form 10-Q)
     (4)   *    (a) $200 million 7 1/4% Senior Debenture due 2027 (Exhibit 4.6(6)(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (Securities and Exchange Commission File No. 002-74702)(the “3rd Quarter 1997 Form 10-Q”))
       *    (b) $50 million 7 1/4% Senior Debenture due 2027 (Exhibit 4.6(6)(b) to the 3rd Quarter 1997 Form 10-Q)
     (5)   *    Officers’ Certificate dated September 26, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(7) to the 3rd Quarter 1997 Form 10-Q)
     (6)   *    Form of Belo Corp. 8% Senior Notes due 2016 (Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2009 (Securities and Exchange Commission File No. 001-08598)(the “November 16, 2009 Form 8-K”))
     (7)   *    Supplemental Indenture, dated November 16, 2009 among the Company, the Guarantors of the Notes and The Bank of New York Mellon Trust Company, N.A., as Trustee (Exhibit 4.1 to the November 16, 2009 Form 8-K)
     (8)   *    Underwriting Agreement, dated November 10, 2009, between the Company, the Guarantors of the Notes and JPMorgan Securities, Inc. (Exhibit 1.1 to the November 16, 2009 Form 8-K)

10.1

    

Financing agreements:

     (1)   *    Amendment and Restated Revolving Credit Facility Agreement, dated as of December 21, 2011, among the Company, as Borrower; JPMorgan Chase Bank, N.A., as Administrative Agent; JPMorgan Securities LLC, Suntrust Robinson Humphrey, Inc., and RBC Capital Markets, as Joint Lead Arrangers and Joint Bookrunners; Suntrust Bank and Royal Bank of Canada as Co-Syndication agents, The Northern Trust Company and Capital One N.A. as Co-Documentation Agents (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2011 (Securities and Exchange file No. 001-08598)(the “December 22, 2011 Form 8-K”))
     (2)   *    Guarantee Agreement dated as of December 21, 2011, among Belo Corp., the Subsidiaries of Belo Corp. identified therein and JPMorgan Chase Bank, N.A. (Exhibit 10.2 to the December 22, 2011 Form 8-K)

 

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~10.2

    

Compensatory plans:

     ~ (1)      Belo Savings Plan:
       *    (a)    Belo Savings Plan Amended and Restated effective January 1, 2008 (Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 11, 2007 (Securities and Exchange Commission File No. 001-08598)(the “December 11, 2007 Form 8-K”))
       *    (b)    First Amendment to the Amended and Restated Belo Savings Plan effective as of January 1, 2008 (Exhibit 10.2(1)(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 (Securities and Exchange Commission File No. 001-08598))
       *    (c)    Second Amendment to the Amended and Restated Belo Savings Plan effective as of January 1, 2009 (Exhibit 10.2(1)(c) to the Company’s Annual Report on Form 10-K dated March 2, 2009 (Securities and Exchange Commission File No 001-08598)( the “2008 Form 10-K”))
       *    (d)    Third Amendment to the Amended and Restated Belo Savings Plan effective as of April 12, 2009 (Exhibit 10.1 to the March 11, 2009 Form 8-K)
       *    (e)    Fourth Amendment to the Amended and Restated Belo Savings Plan effective as of September 10, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2009 (Securities and Exchange Commission File No 001-08598))
       *    (f)    Fifth Amendment to the Amended and Restated Belo Savings Plan dated December 3, 2010 (Exhibit 10.2.1(f) to the Company’s Annual Report on Form 10-K dated March 11, 2011 (Securities and Exchange Commission file No. 001-08598))
     ~ (2)   *    Belo 1995 Executive Compensation Plan, as restated to incorporate amendments through December 4, 1997 (Exhibit 10.3(3) to the Company’s Annual Report on Form 10-K dated March 19, 1998 (Securities and Exchange Commission File No. 002-74702))
       *    (a)    Amendment to 1995 Executive Compensation Plan, dated July 21, 1998 (Exhibit 10.2(3)(a) to the Company’s Quarterly report on form 10-Q for the quarter ended June 30, 1998 (Securities and Exchange Commission File No. 002-74702))
       *    (b)    Amendment to 1995 Executive Compensation Plan, dated December 16, 1999 (Exhibit 10.2(3)(b) to the Company’s Annual Report on Form 10-K dated March 15, 2000 (Securities and Exchange Commission File No. 001-08598)(the “1999 Form 10-K”))
       *    (c)    Amendment to 1995 Executive Compensation Plan, dated December 5, 2003 (Exhibit 10.3(3)(c) to the Company’s Annual Report on Form 10-K dated March 4, 2004 (Securities and Exchange Commission File No. 001-08598)(the “2003 Form 10-K”))
       *    (d)    Form of Belo Executive Compensation Plan Award Notification for Employee Awards (Exhibit 10.2(3)(d) to the Company’s Annual Report on Form 10-K dated March 6, 2006 (Securities and Exchange Commission File No. 001-08598)(the “2005 Form 10-K”))
          (e)    Amendment to 1995 Executive Compensation Plan, dated June 12, 2013.
     ~ (3)   *    Management Security Plan (Exhibit 10.3(1) to the Company’s Annual Report on Form 10-K dated March 12, 1997 (Securities and Exchange Commission No. 001-08598))
       *    (a)    Amendment to Management Security Plan of Belo Corp. and Affiliated Companies (as restated effective January 1, 1982)(Exhibit 10.2(4)(a) to the 1999 Form 10-K)
     ~ (4)      Belo Supplemental Executive Retirement Plan
       *    (a)    Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2004 (Exhibit 10.2(5)(a) to the 2003 Form 10-K)
       *    (b)    Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2007 (Exhibit 99.6 to the December 11, 2007 Form 8-K)
       *    (c)    Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2008 (Exhibit 10.2(5)(c) to the 2008 Form 10-K)

 

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     ~ (5)   *    Belo Pension Transition Supplement Restoration Plan effective April 1, 2007 (Exhibit 99.5 to the December 11, 2007 Form 8-K)
       *    (a)    First Amendment to the Belo Pension Transition Supplement Restoration Plan, dated May 12, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009 (Securities and Exchange Commission File No. 001-08598))
       *    (b)    Second Amendment to the Belo Pension Transition Supplement Restoration Plan, dated March 5, 2010 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2010 (Securities and Exchange Commission file No. 001-08598))
     ~ (6)   *    Belo 2000 Executive Compensation Plan (Exhibit 4.15 to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 4, 2000 (Securities and Exchange Commission File No. 333-43056))
       *    (a)    First Amendment to Belo 2000 Executive Compensation Plan effective as of December 31, 2000 (Exhibit 10.2(6)(a) to the Company’s Annual Report on Form 10-K dated March 12, 2003 (Securities and Exchange Commission File No. 001-08598 (the “2002 Form 10-K”))
       *    (b)    Second Amendment to Belo 2000 Executive Compensation Plan dated December 5, 2002 (Exhibit 10.2(6)(b) to the 2002 Form 10-K)
       *    (c)    Third Amendment to Belo 2000 Executive Compensation Plan dated December 5, 2003 (Exhibit 10.2(6)(c) to the 2003 Form 10-K)
       *    (d)    Form of Belo Executive Compensation Plan Award Notification for Employee Awards (Exhibit 10.2(6)(c) to the 2005 Form 10-K)
     ~ (7)   *    Belo Amended and Restated 2004 Executive Compensation Plan (Exhibit 10.2(8) to the Company’s Annual Report on Form 10-K dated March 12, 2010 (Securities and Exchange Commission File No. 001-08598)(the “2009 Form 10-K”))
       *    (a)    Form of Belo 2004 Executive Compensation Plan Award Notification for Employee Option Awards (Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2006 (Securities and Exchange Commission File No. 001-08598))
       *    (b)    Form of Belo 2004 Executive Compensation Plan Award Notification for Employee Time-Based Restricted Stock Unit Awards (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 5, 2012 (Securities and Exchange Commission file No. 001-08598))
       *    (c)    Form of Award Notification under the Belo 2004 Executive Compensation Plan for Non-Employee Director Awards (Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 12, 2005 (Securities and Exchange Commission File No. 001-08598))
     ~ (8)   *    Summary of Non-Employee Director Compensation (Exhibit 10.2(9) to the 2009 Form 10-K)
     ~ (9)   *    Belo Corp. Change In Control Severance Plan (Exhibit 10.2(10) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (Securities and Exchange Commission File No. 001-08598))
          (a)    Form of Exhibit A (Separation Agreement and General Release) to Change in Control Severance Plan.
   10.3      Agreements relating to the spin-off distribution of A. H. Belo:
     (1)   *    Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.1 to the February 12, 2008 Form 8-K)
       *    (a) First Amendment to Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of September 14, 2009 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2009 (Securities and Exchange Commission File No. 001-08598))

 

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     (2)   *    Employee Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.2 to the February 12, 2008 Form 8-K)
       *    (a) Amendment to Employee Matters Agreement as set forth in the Pension Plan Transfer Agreement dated as of October 6, 2010 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 8, 2010 (Securities and Exchange Commission File No. 001-08598)(the “October 8, 2010 Form 8-K”))
     (3)   *    Services Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.3 to the February 12, 2008 Form 8-K)
     (4)   *    Pension Plan Transfer Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of October 6, 2010 (Exhibit 10.1 to the October 8, 2010 Form 8-K)
   10.4      Agreements relating to the merger with Gannett Co., Inc., and Delta Acquisition Corp:
     (1)   *    Form of Voting and Support Agreement and Irrevocable Proxy dated as of June 12, 2013 (Exhibit 10.1 to the June 18, 2013 Form 8-K)
   31.1      Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   31.2      Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   32      Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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

 

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