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EX-32 - EX-32 - BELO CORP | d79881exv32.htm |
EX-23 - EX-23 - BELO CORP | d79881exv23.htm |
EX-21 - EX-21 - BELO CORP | d79881exv21.htm |
EX-12 - EX-12 - BELO CORP | d79881exv12.htm |
EX-31.2 - EX-31.2 - BELO CORP | d79881exv31w2.htm |
EX-31.1 - EX-31.1 - BELO CORP | d79881exv31w1.htm |
EX-10.2.1(F) - EX-10.2.1(F) - BELO CORP | d79881exv10w2w1xfy.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
[ X ] ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended: December 31, 2010
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 (Address of principal executive offices) |
75202-4841 (Zip Code) |
Registrants
telephone number, including area code:
(214) 977-6606
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Series A Common Stock, $1.67 par value
|
New York Stock Exchange | |
Preferred Share Purchase Rights
|
New York Stock Exchange |
Securities
registered pursuant to Section 12(g) of the
Act: Series B Common Stock, $1.67 par
value
(Title
of
class)
Indicate by check mark if the registrant is a well-known
seasoned issuer (as defined in Rule 405 of the
Act) Yes No X
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act Yes No X
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes X No
Indicate 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 No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
[ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, 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. (Check one):
Large accelerated filer [ ]
|
Accelerated filer [ X ] | |
Non-accelerated filer [ ]
|
Smaller reporting company [ ] |
(Do not
check in a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes No X
The aggregate market value of the registrants voting stock
held by nonaffiliates on June 30, 2010, based on the
closing price for the registrants Series A Common
Stock on such date as reported on the New York Stock Exchange,
was approximately $523,401,404. *
Shares of Common Stock outstanding at February 28, 2011:
103,564,425 shares. (Consisting of 93,291,758 shares
of Series A Common Stock and 10,272,667 shares of
Series B Common Stock.)
* For purposes of this calculation, the market value of a share
of Series B Common Stock was assumed to be the same as the
share of Series A Common Stock into which it is convertible.
Documents
incorporated by reference:
Portions of the registrants Proxy Statement, prepared
pursuant to Regulation 14A, relating to the Annual Meeting
of Shareholders to be held May 10, 2011, are incorporated
by reference into Part III (Items 10, 11, 12, 13 and
14) of this report.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
1
BELO CORP.
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EX-32 |
PAGE
2 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
PART I
Item 1. | Business |
Belo Corp. (Belo or the Company), a Delaware corporation, began
as a Texas newspaper company in 1842 and today is one of the
nations largest publicly-traded pure-play television
companies. 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 owns two local and two regional cable
news channels and held ownership interests in two other cable
news channels in 2010.
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 durable
relationships with viewers, advertisers and online users and
have guided Belos success.
Overview
The Companys television broadcasting operations began in
1950 with the acquisition of
WFAA-TV in
Dallas/Fort Worth, shortly after the station began
operations. Through various subsequent transactions, Belo
acquired 18 additional television stations in 14 markets across
the United States, bringing the total owned television stations
to 19. In February 2007, Belo purchased its 20th television
station. Belo also has joint marketing and shared services
agreements with the owner and operator of
KFWD-TV,
licensed to Fort Worth, Texas.
Belo is one of the nations largest publicly-traded
pure-play television companies. Belo has six stations in the 13
largest U.S. markets and 13 stations in the 50 largest
U.S. markets. Belos stations are concentrated
primarily in three regions: Texas, the Northwest and the
Southwest. Six of the Companys stations are located in the
following four major metropolitan areas in the United States:
| ABC affiliate WFAA-TV in Dallas/Fort Worth; | |
| CBS affiliate KHOU-TV in Houston; | |
| NBC affiliate KING-TV and independent KONG-TV in Seattle/Tacoma; and | |
| Independent KTVK and The CW Network (CW) affiliate KASW-TV in Phoenix. |
Belos television stations have been recognized with
numerous local, state and national awards for outstanding news
coverage and community service. Since 1957, Belos
television stations have garnered 28 Alfred I. duPont-Columbia
Awards, 23 George Foster Peabody Awards, and 42 Edward R. Murrow
Awards the industrys most prestigious honors.
In 2009, WFAA, Belos Dallas/Fort Worth station, made
history as the only local television station to ever receive the
prestigious Alfred I. duPont-Columbia University Gold Baton
award for its ongoing commitment to outstanding investigative
reporting in public service. WFAAs award was also the
first Gold Baton award given since 2003.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
3
Table of Contents
The following table sets forth information for the
Companys television stations and regional cable channels
and their markets as of December 31, 2010:
Number of |
||||||||||||||||
Station/ |
Year Belo |
Commercial |
||||||||||||||
Market |
News |
Acquired/ |
Network |
Stations |
||||||||||||
Market | Rank(1) | Channel | Started | Affiliation | 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
|
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(3)
|
22 | KGW | 1997 | NBC | 8 | |||||||||||
Charlotte
|
23 | WCNC | 1997 | NBC | 8 | |||||||||||
San Antonio
|
37 | KENS | 1997 | CBS | 10 | |||||||||||
Hampton/Norfolk
|
43 | WVEC | 1984 | ABC | 8 | |||||||||||
Austin
|
44 | KVUE | 1999 | ABC | 7 | |||||||||||
Louisville
|
50 | WHAS | 1997 | ABC | 7 | |||||||||||
New
Orleans(4)
|
52 | WWL | 1994 | CBS | 8 | |||||||||||
New
Orleans(5)
|
52 | WUPL | 2007 | MNTV | 9 | |||||||||||
Tucson
|
67 | KMSB | 1997 | FOX | 9 | |||||||||||
Tucson
|
67 | KTTU | 2002 | MNTV | 9 | |||||||||||
Spokane
|
75 | KREM | 1997 | CBS | 7 | |||||||||||
Spokane
|
75 | KSKN | 2001 | CW | 7 | |||||||||||
Boise(6)
|
113 | 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 2010 Nielsen Media Research report. | |
(2) | Represents the number of commercial television stations (both VHF and UHF) broadcasting in the market, excluding public stations, low power broadcast stations and cable channels. | |
(3) | The Company also owns KGWZ-LD, a low power television station in Portland, Oregon. | |
(4) | WWL also produces NewsWatch on Channel 15, a 24-hour daily local news and weather cable channel. | |
(5) | The Company also owns WBXN-CA, a Class A television station in New Orleans, Louisiana. | |
(6) | The Company also owns KTFT-LD (NBC), a low power television station in Twin Falls, Idaho.. |
The principal source of revenue for Belos television
stations is the sale of airtime to local, regional and national
advertisers. Generally, rates for national and local spot
advertising sold by the Company are determined by each station,
and the station receives all of the revenues, net of agency
commissions, for that advertising. Rates are influenced by the
demand for advertising time. This demand is influenced by a
variety of factors, including the size and demographics of the
local population, the concentration of retail stores, local
economic conditions in general, and the popularity of the
stations programming. In 2010, approximately
83.5 percent of the Companys total revenues were
derived from spot advertising with the largest percentage of the
spot advertising revenues generated from the automotive
category, which accounted for approximately 16.5 percent of
total revenues in 2010.
The Companys other sources of revenue primarily include
retransmission revenue and interactive revenue. Pursuant to
Federal Communications Commission (FCC) rules, every three years
local television stations must elect to either (1) require
cable and/or
direct broadcast satellite operators to carry the stations
signal or (2) enter into retransmission consent
negotiations for carriage. At present, Belo has retransmission
consent agreements with the majority of cable operators and the
primary satellite providers for carriage of its television
stations and cable news channels, with some agreements having
terms of more than three years. Revenues for the Companys
interactive media are derived principally from advertising on
the Companys station Web sites. Web sites of each of the
Companys television stations provide consumers with
accurate and timely news and information as well as a variety of
other products and services. Belo obtains immediate feedback
through online communication with its audience, which allows the
Company to tailor the way in which it delivers news and
information to serve the needs of its audience. According to
fourth quarter 2010 .comScore Ratings, the Company has four of
the top 50 visited local television-affiliated Web sites in the
U.S.
The Company has a balanced portfolio of broadcast
network-affiliated stations, with four ABC affiliates, five CBS
affiliates and four NBC affiliates, and at least one
large-market station associated with each network. As such,
Belos revenue streams are not significantly affected by
which broadcast network leads in the primetime ratings. Belo
also owns two independent (IND) stations, two CW affiliates, two
MNTV affiliates, and one FOX affiliate.
The Company has network affiliation agreements with ABC, CBS,
NBC, FOX and CW. The Companys 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. In return, the network has the right to sell most of
the
PAGE
4 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
advertising time during such broadcasts. In the past, some of
the Companys affiliation agreements included network
compensation; however, network compensation received by the
Company has substantially declined in recent years. In
connection with the renewals of these agreements, the Company is
generally required to make cash payments to the networks. Belo
reached agreements in 2010 with: ABC for the renewal of its
network affiliation agreements related to its stations in
Dallas/Fort Worth, Austin, Louisville and Hampton/Norfolk;
and, CBS for its stations in Houston, San Antonio and
New Orleans.
The Company also owns two regional cable news operations, Texas
Cable News (TXCN) in Dallas/Fort Worth, Texas, and
Northwest Cable News (NWCN) in Seattle/Tacoma, Washington, and
two local cable news operations, 24/7 NewsChannel (24/7) in
Boise, Idaho, and NewsWatch on Channel 15 in New Orleans,
Louisiana. These operations provide news coverage in a
comprehensive
24-hour a
day format using the news resources of the Companys
television stations in Texas, Washington, Oregon, Idaho and
Louisiana. Through December 31, 2010, the Company also
operated, through joint ventures, two cable news channels in
partnership with Cox Communications and other parties that
provide local news coverage in Phoenix, Arizona (Arizona
NewsChannel) and Hampton/Norfolk, Virginia (Local News on
Cable). These cable news channels use the news resources of the
television stations owned by the Company in those markets. As of
December 31, 2010, the Hampton/Norfolk agreement expired.
During 2010, approximately two percent of the Companys
revenues were from Belos cable news operations and
consisted primarily of advertising and subscriber-based fees.
Subsequent to the June 2009 national transition to digital
broadcasting, broadcasters may multicast several
digital television programming streams, some of which could be
at lower resolution, in addition to the television
stations primary programming stream. The Company uses its
multicasting capabilities to provide more programming to the
communities its television stations serve, including news,
weather, lifestyle and Hispanic programming.
Competition for audience share and advertising revenues at
Belos television stations and cable news operations is
primarily related to programming content and advertising rates.
The four major national television networks (ABC, CBS, NBC, and
FOX) are represented in each television market in which Belo has
a television station. Competition for advertising sales and
local viewers within each market is intense, particularly among
the network-affiliated television stations. Where Belo owns more
than one television station or cable news operation within a
region or market, such businesses may compete with each other
for national, regional and local advertising and viewers.
Additionally, the Companys competitors include other
broadcast stations, cable and satellite television channels,
local, regional and national newspapers, magazines, telephone
and/or
wireless companies, radio, direct mail, yellow pages, the
Internet and other media. Advertising rates are set based upon a
programs popularity, the size of the market served, the
availability of alternative advertising media and the number of
advertisers competing for the available time.
Discontinued
Operations
On February 8, 2008, the Company completed the spin-off of
its former newspaper businesses and related assets into a
separate public company, A. H. Belo Corporation (A. H. Belo),
which has its own management and board of directors. The
spin-off was accomplished by transferring the subject assets and
liabilities to A. H. Belo and distributing a pro-rata, tax-free
dividend to the Companys shareholders of 0.20 shares
of A. H. Belo Series A common stock for every share of Belo
Series A common stock, and 0.20 shares of A. H. Belo
Series B common stock for every share of Belo Series B
common stock, owned as of the close of business on
January 25, 2008.
Except as noted below, the Company has no further ownership
interest in A. H. Belo or in any newspaper businesses or related
assets, and A. H. Belo has no ownership interest in the Company
or any television station businesses or related assets. Belo has
not recognized any revenues or costs generated by A. H. Belo
that would have been included in its financial results were it
not for the spin-off. Belos relationship with A. H. Belo
is governed primarily by a separation and distribution
agreement, a services agreement, a tax matters agreement, an
employee matters agreement, and certain other agreements between
the two companies or their respective subsidiaries. Belo and A.
H. Belo also co-own certain downtown Dallas, Texas, real estate
through a limited liability company. Belo and A. H. Belo also
co-own other investments in third party businesses and have some
overlap in board members and shareholders. Although the services
related to these agreements generate continuing cash flows
between Belo and A. H. Belo, the amounts are not significant to
the ongoing operations of the Company. In addition, the
agreements and other relationships do not provide Belo with the
ability to significantly influence the operating or financial
policies of A. H. Belo and, therefore, do not constitute
significant continuing involvement.
The historical operations of the newspaper businesses and
related assets are included in discontinued operations in the
Companys financial statements. See Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operations Spin-off of A. H. Belo for
additional information regarding the spin-off.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
5
Table of Contents
FCC
Regulation
General. Belos
television broadcast operations are regulated by the FCC, under
the Communications Act of 1934, as amended. Among other things,
the Communications Act empowers the FCC to (1) issue,
renew, revoke and modify station licenses; (2) regulate
stations technical operations and equipment; and
(3) impose penalties for violations of the Communications
Act or FCC regulations. The Communications Act prohibits the
assignment of a broadcast license or the transfer of control of
a broadcast licensee without prior FCC approval.
Station
Licenses. The FCC grants
television station licenses for terms of up to eight years. A
television license must be renewed if the FCC finds that:
(1) the station has served the public interest,
convenience, and necessity; (2) there have been no serious
violations by the licensee of the Communications Act or the
FCCs rules and regulations; and (3) there have been
no other violations by the licensee of the Communications Act or
the FCCs rules and regulations that, taken together,
constitute a pattern of abuse. License renewal applications for
KHOU, WFAA and KSKN are currently pending. Under the FCCs
rules, a license expiration date is automatically extended
pending review and grant of the renewal application. The current
license expiration dates for each of Belos television
broadcast stations are listed below.
August 1, 2006 February 1, 2007 October 1, 2012 December 1, 2012 June 1, 2013 August 1, 2013 February 1, 2014 August 1, 2014 October 1, 2014 February 1, 2015 |
KHOU, WFAA KSKN WVEC WCNC WWL, WUPL WHAS KMOV KENS, KVUE KASW, KMSB, KTTU, KTVB, KTVK KING, KONG, KGW, KREM |
The FCC license for station KFWD, in the Dallas/Fort Worth
market, expires August 1, 2014. The Company provides KFWD
with certain programming and other services; however, an
unaffiliated third party is the FCC licensee.
Programming and
Operations. Rules and
policies of the FCC and other federal agencies regulate certain
programming practices and other areas affecting the business and
operations of broadcast stations.
The Childrens Television Act of 1990 limits commercial
matter in childrens television programs and requires
stations to provide at least three hours of childrens
educational programming per week on their primary digital
channels. This requirement increases proportionally with each
free video programming stream a station broadcasts
simultaneously (or multicasts). The FCC also restricts
commercialization of childrens programming, including
certain promotions of other programs and displays of Web site
addresses during childrens programming. In October 2009,
the FCC issued a Notice of Inquiry (NOI) seeking comment on a
broad range of issues related to childrens usage of
electronic media and the current regulatory landscape that
governs the availability of electronic media to children. The
NOI remains pending and we cannot predict what recommendations
or further action, if any, will result from it.
The FCC adopted an order imposing new public file and public
interest reporting requirements on broadcasters in 2007. These
new requirements must be approved by the Office of Management
and Budget (OMB) before they become effective, and the OMB has
not yet approved them. Therefore, it is unclear when, if ever,
these rules will be implemented. Pursuant to these new
requirements, stations with Web sites will be obligated to make
certain portions of their public inspection files available
online and broadcast notifications on how to access the public
file. Stations also will be required to file quarterly a new,
standardized form that will track various types and quantities
of local programming. The form will require, among other things,
information about programming related to local civic affairs,
local electoral affairs, public service announcements, and
independently-produced programming. If approved and implemented,
as proposed by the FCC, the new standardized form will
significantly increase recordkeeping requirements for television
broadcasters. Several station owners and other interested
parties have asked the FCC to reconsider the new reporting
requirements and have sought to postpone their implementation.
In addition, the order imposing the new rules is currently on
appeal in the U.S. Court of Appeals for the District of
Columbia Circuit.
In 2007, the FCC issued a Report on Broadcast Localism and a
Notice of Proposed Rulemaking. The report tentatively concluded
that broadcast licensees should be required to have regular
meetings with permanent local advisory boards to ascertain the
needs and interests of their communities. The report also
tentatively adopted specific renewal application processing
guidelines that would require broadcasters to air a minimum
amount of local programming. The report sought comment on a
variety of other issues concerning localism, including potential
changes to the main studio rule, network affiliation rules, and
sponsorship identification rules. To date, the FCC has not
issued a final order on the matter. Belo cannot predict whether
the FCC will codify some or all of the specific localism
initiatives discussed in the 2007 report.
PAGE
6 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
The FCC has increased its enforcement efforts regarding
broadcast indecency and profanity over the past few years. In
2006, the statutory maximum fine for broadcast indecency
material increased from 33 thousand dollars to 325 thousand
dollars per incident. Several judicial appeals of FCC indecency
enforcement actions are currently pending, and the outcome could
affect future FCC policies in this area.
The FCCs Equal Employment Opportunity rules impose job
information dissemination, recruitment, documentation and
reporting requirements. Broadcasters are subject to random
audits to ensure compliance with the Equal Employment
Opportunity rules and could be sanctioned for noncompliance.
Digital
Television. In 1997, the
FCC adopted rules for implementing digital television (DTV)
service. On June 12, 2009, the U.S. transitioned from
analog to digital service, and full-power television stations
ceased analog operations and commenced digital-only operations.
Broadcasters may either provide a single DTV signal or
multicast several lower resolution DTV program
streams. Broadcasters also may use some of their spectrum to
provide non-broadcast ancillary services (i.e.,
subscription video, data transfer or audio signals),
provided broadcasters pay the government a fee of five percent
of gross revenues received from such services.
Cable and
Satellite Transmission of Local Television
Signals. Under FCC
regulations, cable systems must devote a specified portion of
their channel capacity to the carriage of the signals of local
television stations. Television stations may elect between
must-carry rights or a right to restrict or prevent
cable systems from carrying the stations signal without
the stations permission (retransmission consent). Stations
must make this election once every three years, and did so most
recently on October 1, 2008. All broadcast stations that
made carriage decisions on October 1, 2008, will be bound
by their decisions through the
2009-2011
cycle. The FCC has established a market-specific requirement for
mandatory carriage of local television stations by digital
broadcast satellite (DBS) operators, similar to that applicable
to cable systems, for those markets in which a DBS carrier
provides any local signal. In addition, the FCC has adopted
rules relating to station eligibility for DBS carriage and
subscriber eligibility for receiving signals. There are also
specific statutory requirements relating to satellite
distribution of distant network signals to unserved
households (i.e., households that do not receive at least
a Grade B signal from a local network affiliate). On
May 27, 2010, the President signed into law the Satellite
Television Extension and Localism Act of 2010 (STELA), which
extends the Satellite Home Viewer Extension and Reauthorization
Act of 2004 (SHVERA) and authorizes DBS operators to deliver
distant signals to unserved households through the end of 2014.
The FCC recently adopted regulations to implement STELAs
revisions to SHVERA.
A digital station asserting must-carry rights is entitled to
carriage of only a single programming stream and other
program related content carried on that stream, even
if the station multicasts. Now that the DTV transition for
broadcast television is complete, cable operators must ensure
that all analog cable subscribers continue to be able to receive
the signals of stations electing must-carry status. Cable
operators may choose either to deliver the signal in digital
format for digital customers and down convert the
signal to analog format for analog customers, or to deliver the
signal in digital format to all subscribers but ensure that all
subscribers with analog sets have set-top boxes that convert the
digital signal to analog format. Broadcasters electing
retransmission consent must negotiate for carriage of each of
their digital programming streams.
On March 3, 2011, the FCC issued a Notice of Proposed
Rulemaking (NPRM) to consider changes to the rules governing
negotiation of retransmission consent agreements. The NPRM seeks
comment on whether the rules should be modified to
(i) strengthen standards for good faith
negotiations, (ii) enhance consumer notice provisions, and
(iii) eliminate the network non-duplication and syndicated
exclusivity rules, among other things.
Ownership
Rules. The FCCs
ownership rules affect the number, type and location of
broadcast and newspaper properties that Belo may hold or
acquire. The rules now in effect limit the common ownership,
operation, or control of television stations serving the same
area; television and radio stations serving the same area; and
television stations and daily newspapers serving the same area;
as well as the aggregate national audience of commonly-owned
television stations. The FCCs rules also define the types
of positions and interests that are considered attributable for
purposes of the ownership limits, and thus also apply to certain
Belo principals and investors.
In addition, the Communications Act prohibits direct or indirect
record ownership of a broadcast licensee or the power to vote
more than one-fourth of the stock of a company controlling a
licensee from being held by aliens, foreign governments or their
representatives, or corporations formed under the laws of
foreign countries.
In 2003, the FCC relaxed many of its ownership restrictions.
However, in 2004, the United States Court of Appeals for the
Third Circuit rejected many of the FCCs 2003 rule changes.
The court remanded the rules to the FCC for further proceedings
and extended a stay on the implementation of the new rules that
the court had imposed in 2003. In 2007, the FCC adopted a Report
and Order that left most of the FCCs pre-2003 ownership
restrictions in place, but made modifications to the
newspaper/broadcast cross-ownership restriction. A number of
parties appealed the FCCs order, and those appeals were
consolidated in the Third Circuit in 2008 and remain pending.
The Third Circuit initially stayed implementation of the
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
7
Table of Contents
2007 changes to the newspaper/broadcast cross-ownership ban but
lifted the stay in March 2010. On February 8, 2011, the
Third Circuit issued an order sending certain appeals to the
United States Court of Appeals for the D.C. Circuit. The issues
to be considered by the D.C. Circuit have not been identified.
Oral arguments in the Third Circuit appeals were held on
February 24, 2011. In May 2010, the FCC issued a Notice of
Inquiry, the first step in conducting a comprehensive review of
its broadcast ownership rules pursuant to a statutory obligation
to review the rules every four years in order to determine
whether they remain necessary in the public interest. Belo
cannot predict the outcome of potential appellate litigation or
FCC action in this area.
1. | Local Television Ownership |
The FCCs 2007 action left in place the FCCs pre-2003
local television ownership rules. Under those rules, one entity
may own two commercial television stations in a Designated
Market Area (DMA) if no more than one of those stations is
ranked among the top four stations in the DMA and eight
independently owned, full-power stations will remain in the DMA.
2. | Cross-Media Limits |
The newspaper/broadcast cross-ownership rule generally prohibits
one entity from owning both a commercial broadcast station and a
daily newspaper in the same community. For FCC purposes, the
common officers, directors and five percent or greater voting
shareholders of Belo and A. H. Belo are deemed to hold
attributable interests in each of the companies. As a result,
the business and conduct of one company may have the effect of
limiting the activities or strategic business alternatives
available to the other company.
The radio/television cross-ownership rule allows a party to own
one or two television stations and a varying number of radio
stations within a single market. The FCCs 2007 decision
left the newspaper/broadcast and radio/television
cross-ownership restrictions in place, but provided that the FCC
would evaluate newly proposed newspaper/broadcast combinations
under a non-exhaustive list of four public interest factors and
apply positive or negative presumptions in specific
circumstances. As noted above, the Third Circuit lifted its
previous stay in March 2010, allowing these rule changes to go
into effect.
3. | National Television Station Ownership Cap |
The maximum percentage of U.S. households that a single
owner can reach through commonly owned television stations is
39 percent and is not affected by the FCCs 2007
decision.
Spectrum
Matters. On
March 16, 2010, the FCC delivered to Congress the
National Broadband Plan. Among other things, the
National Broadband Plan makes recommendations regarding the use
of spectrum currently allocated to television broadcasters,
including seeking the voluntary surrender of certain portions of
the television broadcast spectrum and repacking the
currently allocated spectrum to make portions of that spectrum
available for other wireless communications services. Prior to
implementation of the proposals contained in the National
Broadband Plan, further action by the FCC or Congress or both is
necessary. On November 30, 2010, the Commission issued a
Notice of Proposed Rulemaking that proposes preliminary rule
changes to allow a portion of the spectrum currently allocated
to broadcasters to be repurposed for broadband use. These
proposals include, (i) making broadcast spectrum
allocations available for flexible use, (ii) establishing a
licensing framework to allow two or more broadcast stations to
enter into voluntary agreements to share a 6Mhz channel, and
(iii) improving the reception of VHF signals. Belo cannot
predict the outcome of any FCC or other regulatory action or any
Congressional legislation in these matters.
The foregoing does not purport to be a complete summary of the
Communications Act, other applicable statutes or the FCCs
rules, regulations and policies. Proposals for additional or
revised regulations and requirements are pending before, and are
considered by, Congress and federal regulatory agencies from
time to time. For example, the FCC is considering possible
changes to the retransmission consent process and attempts have
been made to modify existing television market designations to
allow additional
out-of-market
stations to be imported into local markets. Belo cannot predict
the effect of existing and proposed federal legislation,
regulations and policies on its business. Also, several of the
foregoing matters (e.g., the media ownership rules and the new
reporting rules) are now, or may become, the subject of
litigation and Belo cannot predict the outcome of any such
litigation or the effect on its business.
PAGE
8 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Employees
As of December 31, 2010, the Company had approximately
2,374 full-time and 362 part-time employees, including
approximately 537 employees represented by various employee
unions. Belo believes its relations with its employees are
satisfactory.
Available
Information
Belo maintains its corporate Web site at www.belo.com.
Belo makes available free of charge on www.belo.com this
Annual Report on
Form 10-K,
the Companys quarterly reports on
Form 10-Q,
the Companys current reports on
Form 8-K,
and amendments to all those reports, all as filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably
practicable after the reports are electronically filed with or
furnished to the Securities and Exchange Commission (SEC).
Item 1A. | Risk Factors |
Sections of this Annual Report on
Form 10-K
and managements public comments and press releases from
time to time may contain forward-looking statements that are
subject to risks and uncertainties. These statements are based
on managements current knowledge and estimates of factors
affecting our operations. Readers are cautioned not to place
undue reliance on such forward-looking information as actual
results may differ materially from those currently anticipated.
The following discussion identifies the known material factors
that may cause actual results to differ materially from
expectations.
If we are unable
to respond to changes in technology and evolving industry
trends, our television businesses may not be able to compete
effectively.
Certain new technologies are affecting our television stations
adversely. Information delivery and programming alternatives
such as cable, direct
satellite-to-home
services,
pay-per-view,
the Internet, telephone company services, mobile devices,
digital video recorders and home video and entertainment systems
have fractionalized television viewing audiences and expanded
the numbers and types of distribution channels for advertisers
to access. Over the past decade, cable television programming
services, other emerging video distribution platforms, and the
Internet have captured an increasing market share, while the
aggregate viewership of the major broadcast television networks
has declined. In addition, the expansion of cable and satellite
television, telephone and wireless companies, the Internet and
other technological changes have increased, and may continue to
increase, the competitive demand for programming. Such increased
demand, together with rising production costs, may increase our
programming costs or impair our ability to acquire or develop
desired programming.
In addition, video compression techniques, now in use with
direct broadcast satellites and potentially soon for cable,
telephone and wireless, are expected to permit greater numbers
of channels to be carried within existing bandwidth. These
compression techniques as well as other technological
developments are applicable to all video delivery systems,
including
over-the-air
broadcasting, and have the potential to provide vastly expanded
programming to targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers
for new channels and encourage the development of increasingly
specialized niche programming, resulting in more audience
fractionalization. This ability to reach very narrowly defined
audiences may alter the competitive dynamics for advertising
expenditures, and competitors who target programming to such
sharply defined markets may increase competition for advertising
dollars. If we are unable to compete with or successfully
respond to these changes in technology, our advertising revenues
could be reduced, which could adversely affect our business,
financial condition and results of operations.
If we are unable
to secure or maintain carriage of our television stations
signals over cable and/or direct broadcast satellite systems,
our television stations may not be able to compete
effectively.
Pursuant to the FCC rules, local television stations must elect
every three years to either (1) require cable
and/or
direct broadcast satellite operators to carry the stations
primary signals or (2) enter into retransmission consent
negotiations for carriage. At present, Belo has retransmission
consent agreements with the majority of cable operators in its
markets and both satellite providers. If our retransmission
consent agreements are terminated or not renewed, or if our
broadcast signals are distributed on less favorable terms than
our competitors, our ability to compete effectively may be
adversely affected, which could adversely affect our business,
financial condition and results of operations.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
9
Table of Contents
The loss or
modification of network affiliation agreements and changes by
the national broadcast television networks in their respective
business models and practices could adversely affect our
business, financial condition and results of
operations.
The non-renewal, termination or material modification of our
network affiliation agreements could have a material adverse
effect on our results of operations. We have four stations
affiliated with ABC, five stations affiliated with CBS, four
stations affiliated with NBC, two stations affiliated with CW,
two stations affiliated with MNTV and one station affiliated
with FOX. Each of ABC, CBS, and NBC generally provide our
affiliated stations with 22 hours of prime time programming
per week. Each of our affiliation agreements has a stated
expiration date. As a condition to the renewal of affiliation
agreements, the networks with which our stations are affiliated
are negotiating for the elimination of network affiliate
compensation that we historically have received for cash
payments from us, and for other modifications of existing
affiliation agreements. Consequently, our affiliation agreements
may not all remain in place under existing terms. Material
modifications to these agreements may adversely affect our
business, financial condition and results of operations.
In recent years, the networks have streamed their programming on
the Internet and other distribution platforms, and in some
cases, in close proximity to network programming broadcast on
local television stations, including those we own. These and
other practices by the networks dilute the exclusivity and value
of network programming originally broadcast by the local
stations and could adversely affect the business, financial
condition and results of operations of our stations.
Decreases in
advertising spending resulting from economic downturns, natural
disasters, war, terrorism or other factors specific to the
communities we serve can adversely affect our financial
condition and results of operations. In addition, our revenues
are subject to seasonal, cyclical and other fluctuations that
could adversely affect our business, financial condition and
results of operations.
A substantial majority of our revenues are generated from the
sale of local, regional and national advertising. Advertisers
generally reduce their advertising spending during economic
downturns, so a recession or economic downturn could adversely
affect our business, financial condition and results of
operations. In 2009, the worldwide economy endured unprecedented
financial turmoil, tightened credit markets, inflation and
deflation concerns, decreased consumer confidence, uncertain
corporate profits and capital spending, uncertain business
conditions, increased liquidity concerns and an increase in
business insolvencies. This turmoil and uncertainty regarding
economic conditions negatively affected, and could continue to
negatively affect, our advertisers and cause them to postpone
their advertising decision-making or decrease their advertising
spending, among other things, which could adversely affect our
business. We cannot predict the timing, magnitude or duration of
any future global economic downturn or subsequent recovery.
Our ability to generate advertising revenues is and will
continue to be affected by financial market conditions, consumer
confidence, advertiser challenges and changes in the national
and sometimes international economy, as well as by regional
economic conditions in each of the markets in which our stations
operate. We have a significant concentration of assets in Texas,
the Northwest and Arizona, which makes the economic condition of
these regions of particular consequence to our financial
condition and results of operations. Advertisers budgets,
the amounts of which are affected by broad economic trends,
affect the broadcast industry in general and the revenues of
individual broadcast television stations in particular.
Our advertising revenues depend upon a variety of other factors
specific to the communities we serve. Changes in those factors
could negatively affect advertising revenues. These factors
include, among others, the size and demographic characteristics
of the local population, the concentration of retail stores and
other businesses, and local economic conditions in general. In
addition, for the year ended December 31, 2010,
19.8 percent of our television advertising revenues were
from the automotive industry. The success of the automotive
manufacturers and dealers in meeting the economic challenges
facing the automotive industry will continue to affect the
amount of their advertising spending, which could have an
adverse effect on our revenues and results of operations.
Our revenues and results of operations are subject to seasonal,
cyclical and other fluctuations that we expect to continue. In
particular, we typically experience fluctuations in our revenues
between even and odd numbered years. During elections for
various state and national offices, which are primarily in even
numbered years, advertising revenues tend to increase because of
political advertising in our markets. Advertising revenues in
odd numbered years tend to be less than in even numbered years
due to the significantly lower level of political advertising in
our markets. Also, since NBC has exclusive rights to broadcast
the Olympics through 2012, our NBC affiliate stations typically
experience increased viewership and revenues during Olympic
broadcasts, which also occur in even numbered years. Other
seasonal and cyclical factors that affect our revenues and
results of operations may be beyond our control, including
changes in the pricing policies of our competitors, the hiring
and retention of key personnel, wage and cost pressures and
general economic factors.
PAGE
10 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Our television
businesses operate in highly competitive markets, and our
ability to maintain market share and generate revenues depends
on how effectively we compete with existing and new
competition.
Our television businesses operate in highly competitive markets.
Our television stations compete for audiences and advertising
revenue with newspapers and other broadcast and cable television
stations, as well as with other media such as magazines,
telephone
and/or
wireless companies, satellite television and the Internet. Many
of our current and potential competitors have greater financial,
marketing, programming and broadcasting resources than we do and
the ability to distribute more targeted advertising. Cable
companies and others have developed national advertising
networks in recent years that increase the competition for
national advertising.
Our television stations compete for audiences and advertising
revenues primarily on the basis of programming content and
advertising rates. Advertising rates are set based upon a
variety of factors, including a programs popularity among
the advertisers target audience, the number of advertisers
competing for the available time, the size and demographic
make-up of
the market served and the availability of alternative
advertising in the market. Our ability to maintain market share
and competitive advertising rates depends in part on audience
acceptance of our network, syndicated and local programming.
Changes in market demographics, the entry of competitive
stations into our markets, the transition to new methods and
technologies for measuring audiences such as Local People
Meters, the introduction of competitive local news or other
programming by cable, satellite, Internet, telephone or wireless
providers, or the adoption of competitive offerings by existing
and new providers could result in lower ratings and adversely
affect our business, financial condition and results of
operations.
The costs of
syndicated television programming may increase, which could
adversely affect our business, financial condition and results
of operations.
Programming is a significant operating cost in our television
businesses. We cannot be certain that we will not be exposed to
future increases in programming costs. Should such increases
occur, it could adversely affect our results of operations.
Acquisitions of program rights for syndicated programming are
usually made two or three years in advance and may require
multi-year commitments, making it difficult to predict
accurately how a program will perform. In addition, any
significant shortfall, now or in the future, in advertising
revenue
and/or the
expected popularity of the programming for which the Company has
acquired rights could lead to less than expected revenues, which
could result in programming write-downs. Additionally, in some
instances, programs must be replaced before their costs have
been fully amortized, resulting in write-offs. These write-offs
increase station operating costs and decrease station results of
operations.
Regulatory
changes may affect our strategy and increase competition and
operating costs in our media businesses.
As described in this Item 1BusinessFCC
Regulation, our television businesses are subject to extensive
and changing federal regulation. For example, federal
regulations affect spectrum, the retransmission consent process,
political advertising rates, indecency on broadcast television
and childrens programming. Changes in current regulations
or the adoption of new laws and policies, including those
involving our spectrum use and modifications to existing
television market designations, could affect our strategy,
increase competition and our operating costs, and adversely
affect our business, financial condition and results of
operations. Among other things, the Communications Act and FCC
rules and policies govern the term, renewal and transfer of our
television broadcasting licenses and limit certain
concentrations of broadcasting control and ownership of multiple
television stations. Relaxation of ownership restrictions may
provide a competitive advantage to those with greater financial
and other resources than we possess.
On May 27, 2010, STELA was signed into law extending SHVERA
and authorizing DBS operators to deliver distant signals to
unserved households through the end of 2014. In December 2010,
the FCC adopted regulations to implement STELAs revisions
to SHVERA. SHVERA established a statutory copyright license to
enable DBS companies to provide programming to local viewers.
On March 16, 2010, the FCC delivered to Congress a
National Broadband Plan. The National Broadband
Plan, among other things, makes recommendations regarding the
use of spectrum currently allocated to television broadcasters,
including seeking the voluntary surrender of certain portions of
the television broadcast spectrum and repacking the currently
allocated spectrum to make portions of that spectrum available
for other wireless communications services. Prior to
implementation of the proposals contained in the National
Broadband Plan, further action by the FCC or Congress or both is
necessary. On November 30, 2010, the Commission issued a
Notice of Proposed Rulemaking that proposes preliminary rule
changes to allow a portion of the spectrum currently allocated
to broadcasters to be repurposed for broadband use. Changes in
the rules governing use of the television broadcasting spectrum
may affect the Company materially.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
11
Table of Contents
Belo cannot predict the outcome of any FCC or other regulatory
action or any Congressional legislation in these matters or the
impact on our business, competition, operating costs and other
financial matters.
If we cannot
renew our FCC broadcast licenses, our broadcast operations will
be impaired.
Our television businesses depend upon maintaining our broadcast
licenses, which are issued by the FCC. Our broadcast licenses
expired or will expire between 2006 and 2015 (although those
that have already expired have been extended by the filing of a
license renewal application with the FCC) and are renewable.
Interested parties may challenge a renewal application. The FCC
has the authority to revoke licenses, not renew them, or renew
them with significant qualifications, including renewals for
less than a full term. Although we expect to renew all our FCC
licenses, we cannot assure investors that our future renewal
applications will be approved, or that the renewals will not
include qualifications that could adversely affect our
operations. Failing to renew any of our stations main
licenses could prevent us from operating the affected stations
which could materially adversely affect our business, financial
condition and results of operations. If we renew our licenses
with substantial qualifications (including renewing one or more
of our licenses for a term of less than the standard term of
eight years), it could have a material adverse effect on our
business, financial condition and results of operations.
We may incur
increased expenses or liabilities if some of the agreements with
A. H. Belo are terminated or if A. H. Belo fails to
perform.
In connection with the spin-off, Belo entered into a services
agreement with A. H. Belo. If the agreement is terminated prior
to the transition of such services to Belo or third parties,
Belo may be required to obtain the needed services earlier than
expected.
Also in connection with the spin-off, Belo and A. H. Belo agreed
to share certain liabilities and expenses and to indemnify each
other for certain expenses and liabilities attributable to one
company or the other. For example, prior to January 1,
2011, Belo agreed to retain complete sponsorship of The G. B.
Dealey Retirement Pension Plan (Pension Plan), which is
currently underfunded, rather than divide the plan into two
separate plans. In return, A. H. Belo was required to reimburse
Belo for approximately 60 percent of all cash contributions
made by Belo to the Pension Plan. This percentage approximates
the pension obligations relating to plan participants associated
with A. H. Belo. In October 2010, the Boards of Directors for
Belo and A. H. Belo agreed to an irrevocable split of the
Pension Plan effective January 1, 2011 whereby the Pension
Plan assets and liabilities were divided into pension plans
separately sponsored by the respective companies.
In addition, at the time of the spin-off, A. H. Belo assumed
Belos liabilities relating to certain ongoing agreements
and other matters. If A. H. Belo does not satisfy these
contingent liabilities when due, it is possible that Belo may be
required to satisfy them. Although Belo is not expecting to be
called on to meet any of these contingent obligations, if it
were to happen, it could adversely affect Belos financial
condition and results of operations.
Certain members
of management, directors and shareholders may face actual or
potential conflicts of interest.
The Company and A. H. Belo have several common directors. The
management and directors of Belo and A. H. Belo may own both
Belo common stock and A. H. Belo common stock. This ownership
overlap and these common directors could create, or appear to
create, potential conflicts of interest when Belos and A.
H. Belos management and directors face decisions that
could have different implications for each company. For example,
potential conflicts of interest could arise in connection with
the resolution of any dispute or indemnification claims between
Belo and A. H. Belo regarding the terms of the agreements
governing the spin-off and the relationship between Belo and A.
H. Belo thereafter. Conflicts of interest could also arise out
of any commercial arrangements that Belo and A. H. Belo may
enter into in the future.
In addition, media properties owned by A. H. Belo are
attributable to Belo for purposes of FCC rules and regulations
limiting ownership of multiple media properties, which could
limit our ability to purchase stations in A. H. Belos
newspaper markets.
We depend on key
personnel, and we may not be able to operate and grow our
businesses effectively if we lose the services of our senior
executive officers or are unable to attract and retain qualified
personnel in the future.
We depend on the efforts of our senior executive officers. The
success of our business depends heavily on our ability to retain
our current management and to attract and retain qualified
personnel in the future. Competition for senior management
personnel is intense and we may not be able to retain our key
personnel. We have not entered into employment agreements with
our key management personnel and we do not have key
person insurance for any of our senior executive officers
or other key personnel.
PAGE
12 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
We have a large
amount of indebtedness. Access to our existing credit facility
requires that we meet several covenants, which could be more
challenging in a difficult operating environment.
We currently use a portion of our operating cash flow for debt
service. We may continue to borrow funds to finance capital
expenditures, bond repurchases, acquisitions or investments or
to refinance debt, as well as for other purposes.
Our level of indebtedness could, for example:
| Require us to use a substantial portion of our cash flow from operations to pay indebtedness and reduce the availability of our cash flow to fund working capital, capital expenditures, bond repurchases, dividends, acquisitions or investments and other general corporate activities; | |
| Limit our ability to obtain additional financing in the future; | |
| Expose us to greater interest rate risk on credit facilities where interest rates vary; and | |
| Impair our ability to successfully withstand a downturn in our business or the economy in general and place us at a disadvantage relative to any of our less leveraged competitors. |
In addition, our debt agreements require us to comply with
certain covenants. At December 31, 2010, the maximum
allowed leverage ratios, minimum required interest coverage
ratios and maximum allowed senior leverage ratios are as follows:
Minimum |
Maximum |
|||||||||||||
Maximum
Allowed |
Required
Interest |
Allowed Senior |
||||||||||||
From | To | Leverage Ratio | Coverage Ratio | Leverage Ratio | ||||||||||
December 31, 2010
|
March 30, 2012 | 7.25 | 1.50 | 1.50 | ||||||||||
March 31, 2012
|
June 29, 2012 | 7.00 | 1.50 | 1.50 | ||||||||||
June 30, 2012
|
September 29, 2012 | 6.75 | 1.75 | 1.50 | ||||||||||
September 30, 2012
|
Thereafter | 6.25 | 1.75 | 1.50 | ||||||||||
While we were well within these limits at December 31,
2010, the failure in the future to comply with the covenants in
the agreements governing the terms of our indebtedness could be
an event of default which, if not cured or waived, would permit
acceleration of all our indebtedness and payment obligations.
See Item 7Managements Discussion and Analysis
of Financial Condition and Results of OperationsLiquidity
and Capital Resources for further discussion on debt service.
Changes in
accounting standards can significantly affect reported earnings
and operating results.
Generally accepted accounting principles and accompanying
pronouncements and implementation guidelines for many aspects of
our business, including those related to intangible assets,
pensions, income taxes, share-based compensation, and broadcast
rights, are complex and involve significant judgments. Changes
in these rules or their interpretation could significantly
change our reported earnings and operating results. See
Item 7Managements Discussion and Analysis of
Financial Condition and Results of OperationsCritical
Accounting Policies and Estimates and the Consolidated Financial
Statements, Note 2Recently Issued Accounting
Standards.
We have a
significant amount of intangible assets, and if we are required
to write down intangible assets in future periods, it would
reduce net income.
Approximately 72.3 percent of our total assets as of
December 31, 2010, consisted of intangible assets,
principally broadcast licenses and goodwill. Generally accepted
accounting standards require, among other things, an annual
impairment testing of broadcast licenses and goodwill.
Additionally, the Company continually evaluates whether current
factors or indicators, such as the prevailing conditions in the
economy and capital markets, require an interim impairment
assessment of those assets, as well as of investments and
long-lived assets. Any significant shortfall in future
advertising revenue could lead to additional downward revisions
in the fair value of certain reporting units. A downward
revision in the fair value of a reporting unit, indefinite-lived
intangible assets, an investment or long-lived asset could
result in an impairment, and a non-cash charge would be
required. Any such charge could be material to the
Companys reported results of operations. See
Item 7Managements Discussion and Analysis of
Financial Condition and Results of OperationsCritical
Accounting Policies and Estimates for further discussion of the
goodwill and intangible asset assessment process and impairment
charges recorded in 2009 and 2008.
Failure of the
spin-off to qualify as a tax-free transaction could result in
substantial liability.
In connection with the spin-off, Belo received a private letter
ruling from the Internal Revenue Service (IRS) to the effect
that, among other things, the spin-off (including certain
related transactions) qualifies as tax-free to Belo and Belo
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
13
Table of Contents
shareholders for United States federal income tax purposes.
Although a private letter ruling generally is binding on the
IRS, if the factual assumptions or representations made by Belo
in the private letter ruling request are untrue or incomplete in
any material respect, then Belo may not be able to rely on the
ruling.
If the spin-off fails to qualify for tax-free treatment, a
substantial corporate tax would be payable by Belo. Further, if
the spin-off is not tax-free, each Belo shareholder generally
would be taxed as if he or she had received a cash distribution
equal to the fair market value of the shares of A. H. Belo
common stock on the date of the spin-off.
Item 1B. | Unresolved Staff Comments |
None.
Item 2. | Properties |
Television
Station Properties
At December 31, 2010, Belo owned broadcast operating
facilities in the following U.S. cities: Austin, Dallas,
Houston and San Antonio, Texas; Seattle and Spokane,
Washington; Phoenix and Tucson, Arizona; Portland, Oregon;
Charlotte, North Carolina; New Orleans, Louisiana; Norfolk,
Virginia; Louisville, Kentucky; and Boise, Idaho. The Company
leases broadcast facilities for operations in St. Louis,
Missouri. Four of the Companys broadcast facilities use
primary broadcast towers that are jointly owned with another
television station in the same market. The Company also leases
broadcast towers in Tucson, Arizona, for the transmission of
KMSB-TV and
KTTU-TV. The
primary broadcast towers associated with the Companys
other television stations are wholly-owned by the Company.
The operations of the Companys regional cable news
businesses, TXCN and NWCN, are conducted from Company-owned
broadcasting facilities in Dallas, Texas, and Seattle,
Washington, respectively.
Corporate
Properties
At December 31, 2010, the Company co-owned with A. H. Belo
a 17-story office building in downtown Dallas, Texas, that
primarily houses the Companys corporate operations. In
connection with the spin-off, this building and other downtown
Dallas real estate were transferred to a limited liability
company that is owned in equal parts by Belo and A. H. Belo. The
Companys 50 percent ownership of the limited
liability company that owns the Dallas, Texas, properties is
accounted for using the equity method and is included in Other
Assets on the Companys consolidated balance sheet.
In addition, WFAA and Belo own and lease under a ground lease
contiguous parcels covering the land and improvements used by
WFAA and TXCN. In addition, WFAA has entered into an
arms-length lease with The Dallas Morning News for
the lease of certain storage facilities in the parking garage
located on Dallas Morning News property.
The Company has additional leasehold and other interests that
are used in its activities, which interests are not material.
The Company believes its properties are in satisfactory
condition, are well maintained and are adequate for present
operations.
Item 3. | Legal Proceedings |
Under the terms of the separation and distribution agreement
between the Company and A. H. Belo, A. H. Belo has agreed to
indemnify the Company for any liability arising out of the
lawsuits described in the following two paragraphs.
On October 24, 2006, 18 former employees of The Dallas
Morning News filed a lawsuit against The Dallas Morning
News, the Company, and others in the United States District
Court for the Northern District of Texas. The plaintiffs
lawsuit mainly consists of claims of unlawful discrimination and
alleged ERISA violations. In June 2007, the court issued a
memorandum order granting in part and denying in part
defendants motion to dismiss. In August 2007 and March
2009, the Court dismissed certain additional claims. A summary
judgment motion seeking dismissal of all remaining claims
against all defendants is pending. A trial date is tentatively
set for September 2011. The Company believes the lawsuit is
without merit and is vigorously defending against it.
On April 13, 2009, four former independent contractor
newspaper carriers of The Press-Enterprise, on behalf of
themselves and other similarly situated individuals, filed a
purported
class-action
lawsuit against A. H. Belo, Belo, Press Enterprise Company, and
as yet unidentified defendants in the Superior Court of the
State of California, County of Riverside. The complaint alleges
that the defendants violated California laws by allegedly
improperly categorizing the plaintiffs and the purported class
PAGE
14 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
members as independent contractors rather than employees, and in
doing so, allegedly failed to pay minimum, hourly and overtime
wages to the purported class members and allegedly failed to
comply with other laws and regulations applicable to an
employer-employee relationship. Plaintiffs and purported class
members sought minimum wages, unpaid regular and overtime wages,
unpaid rest break and meal period compensation, reimbursement of
expenses, penalties, injunctive and other equitable relief, and
reasonable attorneys fees and costs. On May 5, 2010,
A. H. Belo and the other parties to the lawsuit reached a
preliminary agreement to settle the lawsuit. The Court granted
final approval on February 25, 2011. No payment was
required of the Company.
In addition to the proceedings disclosed above, a number of
other legal proceedings are pending against the Company,
including several actions for alleged libel
and/or
defamation. In the opinion of management, liabilities, if any,
arising from these other legal proceedings would not have a
material adverse effect on the consolidated results of
operations, liquidity or financial condition of the Company.
Item 4. | Removed and Reserved |
PART II
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
The Companys authorized common equity consists of
450,000,000 shares of common stock, par value $1.67 per
share. The Company has two series of common stock outstanding,
Series A and Series B. Shares of the two series are
identical in all respects except as noted herein. Series B
shares are entitled to 10 votes per share on all matters
submitted to a vote of shareholders; Series A shares are
entitled to one vote per share. Transferability of the
Series B shares is limited to family members and affiliated
entities of the holder and Series B shares are convertible
at any time on a
one-for-one
basis into Series A shares, and upon a transfer other than
as described above, Series B shares automatically convert
into Series A shares. Shares of the Companys
Series A common stock are traded on the New York Stock
Exchange (NYSE symbol: BLC). There is no established public
trading market for shares of Series B common stock. See the
Consolidated Financial Statements, Note 12Common and
Preferred Stock.
The following table lists the high and low trading prices and
the closing prices for Series A common stock as reported on
the New York Stock Exchange for each of the quarterly periods in
the last two years, and cash dividends declared each quarter for
both the Series A and Series B common stock.
High | Low | Close | Dividends | |||||||||||||||
2010
|
Fourth Quarter | $ | 7.29 | $ | 5.52 | $ | 7.08 | $ | | |||||||||
Third Quarter | $ | 6.77 | $ | 5.04 | $ | 6.20 | $ | | ||||||||||
Second Quarter | $ | 9.45 | $ | 5.67 | $ | 5.69 | $ | | ||||||||||
First Quarter | $ | 7.75 | $ | 5.31 | $ | 6.82 | $ | | ||||||||||
2009
|
Fourth Quarter | $ | 6.18 | $ | 4.20 | $ | 5.44 | $ | | |||||||||
Third Quarter | $ | 5.72 | $ | 1.68 | $ | 5.41 | $ | | ||||||||||
Second Quarter | $ | 2.40 | $ | 0.58 | $ | 1.79 | $ | | ||||||||||
First Quarter | $ | 2.24 | $ | 0.47 | $ | 0.61 | $ | .075 | ||||||||||
On February 28, 2011, the closing price for the
Companys Series A common stock as reported on the New
York Stock Exchange was $7.97. The approximate number of
shareholders of record of the Series A and Series B
common stock at the close of business on such date was 581 and
243, respectively.
The Companys Amended 2009 Credit Agreement contains
covenants limiting the payment of dividends. See
Item 7Managements Discussion and Analysis of
Financial Condition and Results of OperationsLiquidity and
Capital ResourcesFinancing Cash Flows for additional
information on the Amended 2009 Credit Agreement.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
15
Table of Contents
Issuer Purchases
of Equity Securities
The Company did not repurchase any Series A or
Series B common stock during the quarter ended
December 31, 2010. The Amended 2009 Credit Agreement, which
became effective November 15, 2009, does not permit share
repurchases. See Item 7Managements Discussion
and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital ResourcesFinancing
Cash Flows for addition information on the 2009 Credit Agreement
and the Amended 2009 Credit Agreement. See Consolidated
Financial Statements, Note 12Common and Preferred
Stock for share repurchase plan authorization information.
The following Performance Graph and related information shall
not be deemed soliciting material or to be
filed with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933 or Securities Exchange Act of 1934, each
as amended, except to the extent that the Company specifically
incorporates it by reference into such filing.
The following graph compares (1) the annual cumulative
shareholder return on an investment of $100 on December 31,
2005, in Belos Series A common stock, based on the
market price of the Series A common stock and assuming
reinvestment of dividends, with (2) the cumulative total
return of a similar investment in companies on the
Standard & Poors 500 Stock Index, and with
(3) the peer companies selected on a
line-of-business
basis and weighted for market capitalization. The Companys
peer group includes the following companies: LIN TV Corp.;
Gray Television; Nexstar Broadcasting Group, and Sinclair
Broadcasting Group. Belo is not included in the calculation of
peer group cumulative total shareholder return on investment.
Cumulative
Total Returns
on $100 Investment Made on December 31, 2005
on $100 Investment Made on December 31, 2005
PAGE
16 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Item 6. | Selected Financial Data |
The following table presents selected financial data of the
Company for each of the five years in the period ended
December 31, 2010. Certain amounts for the prior years have
been reclassified to conform to the current year presentation.
For a more complete understanding of this selected financial
data, see Item 7Managements Discussion and
Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and the notes thereto.
In thousands, except per share amounts | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
Net operating revenues
|
$ | 687,395 | $ | 590,267 | $ | 733,470 | $ | 776,956 | $ | 770,539 | ||||||||||
Impairment charges
|
| 242,144 | 662,151 | 14,363 | | |||||||||||||||
All other operating costs and expenses
|
471,857 | 462,775 | 529,284 | 556,737 | 537,858 | |||||||||||||||
Total operating costs and expenses
|
471,857 | 704,919 | 1,191,435 | 571,100 | 537,858 | |||||||||||||||
Earnings (loss) from operations
|
215,538 | (114,652 | ) | (457,965 | ) | 205,856 | 232,681 | |||||||||||||
Other income and expense
|
(76,518 | ) | (51,479 | ) | (63,247 | ) | (88,228 | ) | (86,964 | ) | ||||||||||
Income tax (expense) benefit
|
(52,114 | ) | 57,070 | 67,042 | (44,130 | ) | (50,338 | ) | ||||||||||||
Net earnings (loss) from continuing operations
|
86,906 | (109,061 | ) | (454,170 | ) | 73,498 | 95,379 | |||||||||||||
Earnings (loss) from discontinued operations, net of
tax(a)
|
| | (4,996 | ) | (323,510 | ) | 35,147 | |||||||||||||
Net earnings (loss)
|
$ | 86,906 | $ | (109,061 | ) | $ | (459,166 | ) | $ | (250,012 | ) | $ | 130,526 | |||||||
Net earnings (loss) per shareBasic :
|
||||||||||||||||||||
Earnings (loss) per share from continuing operations
|
$ | .83 | $ | (1.06 | ) | $ | (4.45 | ) | $ | .71 | $ | .91 | ||||||||
Earnings (loss) per share from discontinued
operations(a)
|
| | (.05 | ) | (3.16 | ) | .34 | |||||||||||||
Basic earnings (loss) per share
|
$ | .83 | $ | (1.06 | ) | $ | (4.50 | ) | $ | (2.45 | ) | $ | 1.25 | |||||||
Net earnings (loss) per shareDiluted
|
||||||||||||||||||||
Earnings (loss) per share from continuing operations
|
$ | .83 | $ | (1.06 | ) | $ | (4.45 | ) | $ | .71 | $ | .91 | ||||||||
Earnings (loss) per share from discontinued
operations(a)
|
| | (.05 | ) | (3.16 | ) | .34 | |||||||||||||
Diluted earnings (loss) per share
|
$ | .83 | $ | (1.06 | ) | $ | (4.50 | ) | $ | (2.45 | ) | $ | 1.25 | |||||||
Cash dividends declared
|
$ | | $ | .075 | $ | .30 | $ | .50 | $ | .475 | ||||||||||
Total assets
|
$ | 1,590,390 | $ | 1,584,461 | $ | 1,849,179 | $ | 3,186,834 | $ | 3,605,927 | ||||||||||
Long-term debt
|
$ | 897,111 | $ | 1,028,219 | $ | 1,092,765 | $ | 1,168,140 | $ | 1,283,434 | ||||||||||
(a) | Earnings (loss) from discontinued operations include the operations of the newspaper businesses and related assets that were spun-off to A. H. Belo in February 2008. |
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following information should be read in conjunction with the
other sections of the Annual Report on
Form 10-K,
including Item 1Business, Item 1ARisk
Factors, Item 6Selected Financial Data,
Item 7AQuantitative and Qualitative Disclosures about
Market Risks, Item 9AControls and Procedures and the
Consolidated Financial Statements and the notes thereto.
Managements Discussion and Analysis of Financial Condition
and Results of Operations contains a number of forward-looking
statements, all of which are based on our current expectations
and could be affected by the uncertainties and risk factors
described throughout this filing and particularly in
Item 1ARisk Factors.
All references to earnings per share represent diluted earnings
per share.
OVERVIEW
Belo, a Delaware corporation, began as a Texas newspaper company
in 1842 and today is one of the nations largest
publicly-traded pure-play television companies. 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
affiliates, and their associated Web sites, in 15
highly-attractive markets across the United States. The Company
also owns two local and two regional cable news channels and
held ownership interests in two other cable news channels during
2010.
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 durable
relationships with viewers, readers, advertisers and online
users and have guided Belos success.
On February 8, 2008, the Company completed the spin-off of
its former newspaper businesses and related assets into a
separate public company, A. H. Belo, which has its own
management and board of directors. The spin-off was accomplished
by transferring the subject assets and liabilities to A. H. Belo
and distributing a pro-rata, tax-free dividend to the
Companys shareholders of 0.20 shares of A. H. Belo
Series A common stock for every share of Belo Series A
common stock, and 0.20 shares of A. H. Belo Series B
common stock for every share of Belo Series B common stock,
owned as of the close of business on January 25, 2008. See
Liquidity and Capital ResourcesSpin-off of A. H.
Belo for further discussion on the spin-off.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
17
Table of Contents
Except as otherwise noted in this annual report, the Company has
no further ownership interest in A. H. Belo or in any of the
newspaper businesses or related assets, and A. H. Belo has no
ownership interest in the Company or any television station
businesses or related assets. The historical operations of the
newspaper businesses and related assets are included in
discontinued operations in the Companys financial
statements.
The Company intends for the discussion of its 2010 and prior
period financial condition and results of operations that
follows to provide information that will assist in understanding
the Companys 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
Companys financial statements.
The principal source of the Companys revenue is from the
sale of local, regional and national advertising. Advertisers
generally reduce their advertising spending during economic
downturns, which was seen in the latter part of 2008 and through
most of 2009. The advertising recovery in the industry began in
December 2009 and continued throughout 2010. The Company
experienced spot revenue growth in 2010 for most categories,
with a particularly strong return in the automotive category,
coupled with near-record political revenue during the 2010
non-Presidential election year. Additional discussion regarding
the Companys results of operations in 2010 as compared to
2009, and 2009 as compared to 2008, is provided below.
Results of
Operations
(Dollars
in thousands, except per share amounts)
Consolidated
Results of Operations
Percentage |
Percentage |
|||||||||||||||||||
Year Ended December 31, | 2010 | Change | 2009 | Change | 2008 | |||||||||||||||
Net operating revenues
|
$ | 687,395 | 16.5 | % | $ | 590,267 | (19.5 | )% | $ | 733,470 | ||||||||||
Impairment charges
|
| NM | 242,144 | (63.4 | )% | 662,151 | ||||||||||||||
Other operating costs and expenses
|
471,857 | 2.0 | % | 462,775 | (12.6 | )% | 529,284 | |||||||||||||
Total operating costs and expenses
|
471,857 | (33.1 | )% | 704,919 | (40.8 | )% | 1,191,435 | |||||||||||||
Earnings (loss) from operations
|
215,538 | NM | (114,652 | ) | (75.0 | )% | (457,965 | ) | ||||||||||||
Other income (expense)
|
(76,518 | ) | 48.6 | % | (51,479 | ) | (18.6 | )% | (63,247 | ) | ||||||||||
Earnings (loss) from continuing operations before income taxes
|
139,020 | NM | (166,131 | ) | (68.1 | )% | (521,212 | ) | ||||||||||||
Income tax expense (benefit)
|
52,114 | NM | (57,070 | ) | (14.9 | )% | (67,042 | ) | ||||||||||||
Net earnings (loss) from continuing operations
|
$ | 86,906 | NM | $ | (109,061 | ) | (76.0 | )% | $ | (454,170 | ) | |||||||||
NM is not meaningful
Net Operating
Revenues
Percentage |
Percentage |
|||||||||||||||||||
Year Ended December 31, | 2010 | Change | 2009 | Change | 2008 | |||||||||||||||
Spot advertising revenue
|
$ | 573,638 | 18.0 | % | $ | 485,972 | (23.3 | )% | $ | 633,759 | ||||||||||
Other revenue
|
113,757 | 9.1 | % | 104,295 | 4.6 | % | 99,711 | |||||||||||||
Net operating revenues
|
$ | 687,395 | 16.5 | % | $ | 590,267 | (19.5 | )% | $ | 733,470 | ||||||||||
Spot advertising revenue increased $87,666, or
18.0 percent, in the year ended December 31, 2010,
compared to the year ended December 31, 2009. This increase
is primarily due to a $45,394, or 9.6 percent, increase in
local and national spot revenue and a $42,272 increase in
political spot revenue. Local and national spot revenue
increased in the major categories of automotive, financial
services, retail, grocery and telecommunications. These
increases were partially offset by decreases in the paid
programming and restaurant categories. Political revenues are
generally higher in even-numbered years than in odd-numbered
years due to elections for various state and national offices.
Other revenue increased primarily due to a 14.2 percent
increase in retransmission revenue and a 17.6 percent
increase in Internet revenue, partially offset by declines in
network compensation and other revenue.
Spot advertising revenue decreased $147,787, or
23.3 percent, in the year ended December 31, 2009,
compared to the year ended December 31, 2008. This decrease
is primarily due to a $104,914, or 18.2 percent, decrease
in local and national spot
PAGE
18 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
revenue and a $42,873 decrease in political spot revenue. Local
and national spot revenue decreased in most categories,
including the major categories of automotive, entertainment,
retail, financial services, home construction and improvement,
and restaurants. Two major categories, grocery and healthcare,
showed increases versus the prior year. Political revenues are
generally higher in even-numbered years than in odd-numbered
years due to elections for various state and national offices.
Other revenue increased primarily due to a 28.8 percent
increase in retransmission revenue partially offset by declines
in Internet revenue, network compensation and other revenue.
Operating Costs
and Expenses
For the year ended December 31, 2010, station salaries,
wages and employee benefits increased $18,942, or
9.9 percent, primarily due to increases in bonus expense of
$7,468, a 2009 credit for vacation accruals of $7,473 due to the
second quarter 2009 decision to convert to a paid time off
vacation policy, increases in pension and pension transition
expenses of $4,954 and increases in self-insured medical
insurance costs of $837. These increases were partially offset
by a decrease in 401(k) expense of $1,896. Station programming
and other operating costs remained fairly consistent, with a
$911, or 0.5 percent, decrease from the prior year. In
2005, the FCC allowed a major wireless provider to finance the
replacement of analog newsgathering equipment with digital
equipment in exchange for stations vacating the analog spectrum
earlier than required. Six Belo markets converted to this
digital equipment in 2010 and two Belo markets converted in
2009. For the full year, the credits recognized for the
replacement of analog equipment discussed previously were $7,037
and $2,634 in 2010 and 2009, respectively. In 2010, the credits
were partially offset by a $3,440 increase in national
representation fees due to higher national revenues.
Station salaries, wages and employee benefits decreased $40,253,
or 17.4 percent, for the year ended December 31, 2009,
compared to the year ended December 31, 2008, primarily due
to decreases in salary expense of $17,528, 401(k) plan expense
of $7,271, vacation expense of $7,351 (due to an announced
change to the Companys vacation policy), pension
transition supplement expense of $3,461, sales commissions of
$2,133, bonus expense of $1,419 and self-insured medical
insurance costs of $1,414. Station programming and other
operating costs decreased $18,026, or 8.3 percent, with
decreases in most expense categories, including a $7,336
decrease in advertising and promotion expense and a $3,691
decrease in national representation fees. For the full year, the
credits recognized for the replacement of analog equipment
pursuant to the FCC decision discussed above were $2,634 and
$6,379 in 2009 and 2008, respectively, as two Belo markets
converted to this digital equipment in 2009 versus seven Belo
markets in 2008.
Corporate operating costs increased $6,585, or
22.0 percent, for the year ended December 31, 2010,
compared to the year ended December 31, 2009. This increase
primarily related to 2010 bonus expense of $5,218, pension and
pension transition expenses of $3,705, and a $761 increase
related to the 2009 credit for vacation accruals discussed
above. These increases were partially offset by a decrease in
technology-related expenses of $3,423.
Corporate operating costs decreased $2,333, or 7.2 percent,
for the year ended December 31, 2009, compared to the year
ended December 31, 2008. This decrease is primarily due to
a $4,065 decrease in legal and consulting costs and a decrease
of $4,167 in various other expenses, partially offset by an
increase in pension expense of $2,791 and an increase in
technology costs of $3,108.
Belos current funding policy is to contribute annually to
the Pension Plan amounts sufficient to meet minimum funding
requirements as set forth in employee benefit and tax laws, but
not in excess of the maximum tax-deductible contribution. A. H.
Belo was required to reimburse the Company for approximately
60 percent of each contribution the Company made to the
Pension Plan for the year ended December 31, 2010; during
such period, the Company made Pension Plan contributions of
$14,287 and received reimbursements from A. H. Belo of $8,572.
Pension contribution reimbursements received from A. H. Belo are
classified as a credit to operating costs and expenses in the
consolidated statements of operations.
During the year ended December 31, 2008, the Company
incurred $4,659 in costs related to the spin-off of A. H. Belo.
No spin-off costs were incurred during the years ended
December 31, 2010 and 2009.
In the third quarter 2009, the Company recorded a non-cash
impairment charge of $242,144 related to the decline in the fair
value of its intangible assets associated with FCC licenses. In
the fourth quarter 2008, the Company recorded a non-cash
impairment charge related to goodwill of $350,540 and a non-cash
impairment charge for intangible assets related to FCC licenses
of $311,611. See Critical Accounting Policies and
Estimates below for further discussion of the goodwill and
intangible asset assessment process and related impairment
charges recorded by the Company.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
19
Table of Contents
Other income
(expense)
Interest expense increased $13,975, or 21.9 percent, for
the year ended December 31, 2010, compared to the year
ended December 31, 2009, primarily due to increased
interest costs associated with the November 2009 issuance of
$275,000 of 8% Senior Notes, due in 2016, and the
amortization of the discount and refinancing costs associated
with the note offering and concurrent amendment to the credit
facility. These borrowings were previously included in the
Companys lower-rate revolving credit facility.
Additionally, on August 12, 2010, the Company amended the
Amended 2009 Credit Agreement to decrease the borrowing capacity
under the agreement from $460,750 to $205,000, earlier than
previously scheduled. In connection with the decrease in
borrowing capacity, the Company recorded a charge to interest
expense of $1,225 related to the write-off of debt issuance
costs.
Interest expense decreased $19,173, or 23.1 percent, for
the year ended December 31, 2009, compared to the year
ended December 31, 2008. This decrease was primarily the
result of the repayment of $350,000 of 8% Senior Notes due
November 2008 with borrowings under the lower interest rate
credit facility. Additionally, in fourth quarter 2008 and first
quarter 2009, the Company purchased a total of $74,075 of the
Companys outstanding
63/4% Senior
Notes due 2013 and $10,000 of the Companys outstanding
71/4% Senior
Debentures due 2027 for a total cost of $52,047. The purchases
were also funded with lower rate borrowings under the credit
facility.
Other income (expense), net decreased $11,064, or
88.9 percent, in 2010 primarily due to a 2009 gain of
$14,905 related to the Companys first quarter 2009
purchase of debt securities. The debt securities were purchased
on the open market at a discount.
Other income (expense), net, decreased $7,405, or
37.3 percent, in 2009. A 2009 gain related to the purchase
of the Companys long-term notes was $1,502 less than a
2008 gain related to the purchase of its long-term notes.
Additionally, the Company recorded investment reserves of $3,185
and a $1,273 loss on the sale of a non-operating asset during
2009.
The Company recorded tax expense of $52,114 for the year ended
December 31, 2010, compared to a tax benefit of $57,070 for
the year ended December 31, 2009. In 2009, the tax expense
on the Companys taxable income was offset by an $86,724
tax benefit associated with the impairment charge for FCC
licenses in 2009. The remaining difference is due to higher
taxable income in 2010 versus 2009. The Companys effective
tax rate was 37.5 percent for the year ended
December 31, 2010.
The income tax benefit recorded in 2009 decreased $9,972, or
14.9 percent, compared with the income tax benefit recorded
in 2008. The Company recorded an $86,724 tax benefit associated
with the impairment charge for FCC licenses in 2009 versus a tax
benefit of $139,972 associated with the impairment charge for
FCC licenses and goodwill in 2008. The 2008 tax benefit was
partially offset by a spin-off related tax charge of $18,756
which is described further under Spin-off of A. H.
Belo below. The remaining difference is due to lower
taxable income in 2009 versus 2008. The Companys effective
tax rate was 34.4 percent for the year ended
December 31, 2009.
As a result of the matters discussed above, the Company recorded
net earnings from continuing operations of $86,906, or $0.83 per
share, for 2010, compared with a net loss from continuing
operations of $(109,061), or $(1.06) per share, for 2009, and a
net loss from continuing operations of $(454,170), or $(4.45)
per share, for 2008.
Discontinued
Operations
The historical results of the Companys former newspaper
businesses and related assets are presented as discontinued
operations due to the spin-off of these assets into a separate
public company on February 8, 2008. All prior period
amounts presented in the financial statements and
Managements Discussion and Analysis of Financial Condition
and Results of Operations have been adjusted to reflect this
discontinued operations presentation.
PAGE
20 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Station Adjusted
EBITDA
Percentage |
Percentage |
|||||||||||||||||||
Year Ended December 31, | 2010 | Change | 2009 | Change | 2008 | |||||||||||||||
Station Adjusted EBITDA
|
$ | 278,146 | 39.7 | % | $ | 199,049 | (29.9 | )% | $ | 283,973 | ||||||||||
Corporate operating costs
|
(36,487 | ) | 22.0 | % | (29,902 | ) | (7.2 | )% | (32,235 | ) | ||||||||||
Pension contribution reimbursements
|
8,572 | NM | | NM | | |||||||||||||||
Spin-off related costs
|
| NM | | NM | (4,659 | ) | ||||||||||||||
Depreciation
|
(34,693 | ) | (16.7 | )% | (41,655 | ) | (2.9 | )% | (42,893 | ) | ||||||||||
Impairment charges
|
| NM | (242,144 | ) | (63.4 | )% | (662,151 | ) | ||||||||||||
Earnings (loss) from operations
|
$ | 215,538 | NM | $ | (114,652 | ) | (75.0 | )% | $ | (457,965 | ) | |||||||||
NM is not meaningful
Belos management uses Station Adjusted EBITDA as the
primary measure of profitability to evaluate operating
performance and to allocate capital resources to operating
companies and bonuses to eligible operating company employees.
Station Adjusted EBITDA represents the Companys earnings
from operations before interest expense, income taxes,
depreciation, amortization, impairment charges, pension
contribution reimbursements, corporate operating costs and
spin-off related 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 used by investors,
financial analysts and rating agencies to evaluate financial
performance.
For the year ended December 31, 2010, Station Adjusted
EBITDA increased $79,097, or 39.7 percent, compared with
the year ended December 31, 2009. As discussed above, this
increase was primarily due to higher 2010 spot revenues,
including political spot revenues, partially offset by increases
in station salaries, wages and employee benefits, and station
programming and other operating costs. For the year ended
December 31, 2009, Station Adjusted EBITDA decreased
$84,924, or 29.9 percent, compared with the year ended
December 31, 2008. As discussed above, this decrease was
primarily due to lower 2009 revenues partially offset by
reductions in station salaries, wages and employee benefits, and
station programming and other operating costs.
Forward-Looking
Statements
Statements in Items 7 and 7A and elsewhere in this Annual
Report on
Form 10-K
concerning Belos business outlook or future economic
performance, anticipated profitability, revenues, expenses,
capital expenditures, 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
described throughout this filing, and particularly in
Item 1A Risk Factors, that could cause actual
results to differ materially from those statements.
Such risks, uncertainties and factors include, but are not
limited to, uncertainties regarding the costs, consequences
(including tax consequences) and other effects of the
Companys spin-off distribution of its newspaper businesses
and related assets to A. H. Belo and the various associated
agreements between the Company and A. H. Belo relating to
various matters; changes in capital market conditions and
prospects, and other factors such as changes in advertising
demand, interest rates and programming and production costs;
changes in viewership patterns and demography, and actions by
Nielsen; changes in the network-affiliate business model for
broadcast television; technological changes, and the development
of new systems 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 actions and changes; adoption of
new accounting standards or changes in existing accounting
standards by the Financial Accounting Standards Board or other
accounting standard-setting bodies or authorities; the effects
of Company acquisitions, dispositions, co-owned ventures and
investments; pension plan matters; general economic conditions;
and significant armed conflict, as well as other risks detailed
in Belos other public disclosures and filings with the SEC
and elsewhere in this Annual Report on
Form 10-K.
Critical
Accounting Policies and Estimates
Belos financial statements are based on the selection and
application of accounting policies that require management to
make significant estimates and assumptions. The Company believes
that the following are some of the more critical accounting
policies currently affecting Belos financial position and
results of operations. See the Consolidated Financial
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
21
Table of Contents
Statements, Note 1Summary of Significant Accounting
Policies, for additional information concerning significant
accounting policies.
Revenue
Recognition Broadcast
advertising revenue is recorded, net of agency commissions, when
commercials are aired. Advertising revenues for Internet Web
sites are recorded, net of agency commissions, ratably over the
period of time the advertisement is placed on Web sites.
Retransmission revenues are recognized in the period earned.
Program
Rights Program rights
represent the right to air various forms of first-run and
existing second-run programming. Program rights and the
corresponding contractual obligations are recorded when the
license period begins and the programs are available for use.
Program rights are carried at the lower of unamortized cost or
estimated net realizable value on a
program-by-program
basis. Program rights and the corresponding contractual
obligations are classified as current or long-term based on
estimated usage and payment terms, respectively. Costs of
off-network
syndicated programs, first-run programming and feature films are
amortized on a straight-line basis over the future number of
showings allowed in the contract.
Impairment of
Property, Plant and
Equipment The Company
reviews the carrying amount of property, plant and equipment for
impairment whenever events and circumstances indicate that the
carrying amount of an asset may not be recoverable.
Recoverability of property and equipment is measured by
comparison of the carrying amount to the future undiscounted net
cash flows the property and equipment is expected to generate.
Based on assessments performed during the years ended
December 31, 2010, 2009 and 2008, the Company did not
record any impairment losses related to property, plant and
equipment.
Impairment of
Goodwill and Intangible
Assets The Company
classifies the FCC licenses apart from goodwill as separate
indefinite-lived intangible assets. Goodwill and
indefinite-lived intangible assets (FCC licenses) are required
to be tested at least annually for impairment or between annual
tests if an event occurs or circumstances change that would,
more likely than not, reduce the fair value of a reporting unit
below its carrying amount. The Companys indefinite-lived
intangible assets represent FCC licenses in markets (as defined
by Nielsen Media Researchs Designated Market Area report)
where the Companys stations operate. Goodwill is evaluated
by reporting unit, with each reporting unit consisting of the
television station(s) and cable news operations within a market.
The Company measures the fair value of goodwill and
indefinite-lived intangible assets annually as of
December 31.
Goodwill impairment is determined using a two-step process. The
first step is to identify if a potential impairment exists by
comparing the fair value of a reporting unit with its carrying
amount, including goodwill. If the fair value of a reporting
unit exceeds its carrying amount, goodwill of the reporting unit
is not considered to be impaired and the second step of the
impairment test is not necessary. If the carrying amount exceeds
the fair value, a second step is performed to calculate the
implied fair value of the goodwill of the reporting unit by
deducting the fair value of all of the individual assets and
liabilities of the reporting unit from the respective fair
values of the reporting unit as a whole. To the extent the
calculated implied fair value of the goodwill is less than the
recorded goodwill, an impairment charge is recorded for the
difference.
In assessing the fair value of the Companys goodwill and
indefinite-lived intangible assets, the Company must make
assumptions regarding future cash flow projections and other
factors to estimate the fair value of the reporting units and
intangible assets. Necessarily, estimates of fair value are
subjective in nature, involve uncertainties and matters of
significant judgment, and are made at a specific point in time.
Thus, changes in key assumptions from period to period could
significantly affect the estimates of fair value. The
Companys estimates of the fair value of its reporting
units and indefinite-lived intangible assets are primarily
determined using discounted projected cash flows. Significant
assumptions used in these estimates include projected revenues
and related growth rates over time and in perpetuity (for 2010,
perpetuity growth rates used ranged from 2.0% to 3.0%),
forecasted operating margins, estimated tax rates, capital
expenditures, required working capital needs, and an appropriate
risk-adjusted weighted-average cost of capital (for 2010, the
weighted-average cost of capital used was 9.75%). Additionally,
for the Companys FCC licenses, significant assumptions
include costs and time associated with
start-up,
initial capital investments, and forecasts related to overall
market performance over time.
Based upon the assessments performed as of December 31,
2010, after applying the first step of the goodwill impairment
tests, the estimated fair value of all of the Companys 15
reporting units exceeded their carrying amounts and the second
step tests to measure goodwill impairment were not necessary.
Additionally, based on assessments performed as of
December 31, 2010, the estimated fair value of the
Companys FCC licenses exceeded their carrying amounts and
no impairments of FCC licenses were identified.
Fair value estimates are inherently sensitive, particularly with
respect to FCC licenses. At December 31, 2010, in five of
the Companys 15 markets, the estimated fair value of the
FCC licenses is less than 25 percent greater than their
respective carrying values, with the closest market having an
excess of estimated fair value over carrying value of
15 percent. A significant reduction in the fair value of
the FCC licenses in any of these five markets could result in an
impairment charge.
PAGE
22 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
As of December 31, 2010, the carrying value of the FCC
licenses in those five markets represents approximately $483,112
of the Companys total $725,399 of FCC licenses. If some or
all of the aforementioned key estimates or assumptions change in
the future, the Company may be required to record impairment
charges related to its indefinite-lived intangible assets.
As of December 31, 2010, goodwill at the Companys
reporting units is somewhat less sensitive as, collectively,
reporting units with estimated fair values exceeding their
carrying values by more than 20% represent over 90% of the total
investments in goodwill, and impairment charges related to FCC
licenses that are recorded in any period will reduce the
carrying values of those applicable reporting units prior to the
goodwill impairment evaluation. If some or all of the
aforementioned key estimates or assumptions change in the
future, the Company may be required to record additional
impairment charges related to its goodwill.
Based on interim assessments performed as of September 30,
2009, the Company recorded a non-cash impairment charge of
$242,144 in the prior year third quarter reflecting the
reduction in the fair value of the Companys FCC licenses
in 10 of its markets. Of this amount, $84,584 related to the
Phoenix, Arizona market, $52,727 related to the Seattle,
Washington market, $27,807 related to the Portland, Oregon
market, $13,133 related to the St. Louis, Missouri market,
$14,383 related to the Louisville, Kentucky market, $10,518
related to the Austin, Texas market, $10,212 related to the
San Antonio, Texas market, $10,128 related to the Tucson,
Arizona market, $9,597 related to the Spokane, Washington
market, and $9,055 related to the Boise, Idaho market. Based on
its annual assessments performed as of December 31, 2009,
no additional impairments of FCC licenses were identified.
Based on assessments performed as of December 31, 2008, the
Company recorded a non-cash impairment charge related to FCC
licenses of $311,611. Of this amount, $91,170 related to the
San Antonio, Texas market, $76,435 related to the Seattle,
Washington market, $53,221 related to the Austin, Texas market,
$28,758 related to the Louisville, Kentucky market, $28,506
related to the St. Louis, Missouri market, $14,305 related
to the Portland, Oregon market, $11,139 related to the Spokane,
Washington market and $8,077 related to the Tucson, Arizona
market.
The impairment charges related to FCC licenses in 2009 resulted
primarily from a decline in the fair value of the individual
businesses due to lower projected cash flows versus historical
estimates, particularly in the first few years of projection,
and an increase in prevailing average costs of capital from
2008. The impairment charges related to FCC licenses in 2008
resulted primarily from a decline in the fair value of the
individual businesses due to lower projected cash flows versus
historical estimates, particularly in the first few years of
projection. These lower projected cash flows reflected generally
slower expected growth due to the current recessionary
environment and related advertising downturn.
Contingencies Belo
is involved in certain claims and litigation related to its
operations. In the opinion of management, liabilities, if any,
arising from these claims and litigation should not have a
material adverse effect on Belos consolidated financial
position, liquidity or results of operations. The Company is
required to assess the likelihood of any adverse judgments or
outcomes to these matters as well as potential ranges of
probable losses. A determination of the amount of reserves
required, if any, for these contingencies is made after careful
analysis of each individual matter. The required reserves may
change in the future due to new developments in each matter or
changes in approach such as a change in settlement strategy in
dealing with these matters.
Share-Based
Compensation The Company
records compensation expense related to its share-based
compensation awards according to ASC 718. The Company
records compensation expense related to its options using the
fair value as of the date of grant as calculated using the
Black-Scholes-Merton method. The Company records the
compensation expense related to its restricted stock units
(RSUs) using the fair value as of the date of grant, as
adjusted, for a portion of the RSUs to reflect liabilities
expected to be settled in cash.
Employee
Benefits Belo is, in
effect, self-insured for employee-related health care benefits.
A third-party administrator is used to process all claims.
Belos employee health insurance liability is based on the
Companys historical claims experience and is developed
from actuarial valuations. Belos reserves associated with
the exposure to the self-insured liabilities are monitored by
management for adequacy. However, actual amounts could vary
significantly from such estimates.
Pension
Benefits Belos
pension costs and obligations are calculated using various
actuarial assumptions and methodologies as prescribed under
ASC 715. To assist in developing these assumptions and
methodologies, Belo uses the services of an independent
consulting firm. To determine the benefit obligations, the
assumptions the Company uses include, but are not limited to,
the selection of the discount rate. In determining the discount
rate assumption of 5.89 percent, the Company used a
measurement date of December 31, 2010, and constructed a
portfolio of bonds to match the benefit payment stream that is
projected to be paid from the Companys pension plans.
To compute the Companys pension expense in the year ended
December 31, 2010, the Company used actuarial assumptions
that included a discount rate and an expected long-term rate of
return on plan assets. The discount rate of 6.18 percent,
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
23
Table of Contents
used in this calculation, was the rate used in computing the
benefit obligation as of December 31, 2009. The expected
long-term rate of return on plan assets of 8.50 percent is
based on the weighted average expected long-term returns for the
target allocation of plan assets as of the measurement date, the
end of the year, and was developed through analysis of
historical market returns, current market conditions and the
pension plan assets past experience. Although the Company
believes that the assumptions used are appropriate, differences
between assumed and actual experience may affect the
Companys operating results. See the Consolidated Financial
Statements, Note 7Defined Benefit Pension and Other
Post Retirement Plans, for additional information regarding the
Companys pension plan.
Recent Accounting
Pronouncements
On January 1, 2010, the Company adopted the amendment to
ASC 820-10,
which expands fair value disclosure requirements. These
disclosures are effective for fiscal years beginning after
December 15, 2009. This amendment affects disclosure
requirements only and has no effect on the Companys
financial position or results of operations.
On December 15, 2009, the Company adopted the amendment to
ASC 715-20,
which expands disclosure requirements about assets held in a
defined benefit pension or other post retirement plan. These
disclosures are effective for fiscal years ending after
December 15, 2009. This amendment affects disclosure
requirements only and has no effect on the Companys
financial position or results of operations.
On January 1, 2009, the Company adopted
ASC 805-10
which establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree. The
statement also provides guidance for recognizing and measuring
the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the
business combination. The standard is effective for financial
statements issued for fiscal years beginning after
December 15, 2008. Accordingly, any business combinations
Belo engaged in prior to January 1, 2009, were recorded and
disclosed following existing accounting principles until
January 1, 2009. The Company expects that the standard will
affect Belos consolidated financial statements but the
nature and magnitude of the specific effects will depend upon
the nature, terms and size of the acquisitions, if any, Belo
consummates after January 1, 2009.
In June 2009, the FASB issued
ASC 105-10.
The FASB Accounting Standards Codification (Codification) has
become the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities
in the preparation of financial statements in accordance with
U.S. generally accepted accounting principles (GAAP). All
existing accounting standard documents are superseded by the
Codification and any accounting literature not included in the
Codification will not be authoritative. However, rules and
interpretive releases of the SEC issued under the authority of
federal securities laws will continue to be the source of
authoritative generally accepted accounting principles for SEC
registrants. The Codification did not change or alter existing
GAAP and, therefore, the Companys adoption of references
to the Codification did not affect the Companys financial
position, results of operations or cash flows.
Liquidity And
Capital Resources
(Dollars
in thousands, except per share amounts)
Operating Cash
Flows
Net cash provided by operations, bank borrowings and term debt
are Belos primary sources of liquidity. Net cash provided
by operations was $143,465, $79,922 and $109,328 in the years
ended December 31, 2010, 2009 and 2008, respectively. The
2010 operating cash flows were provided primarily by net
earnings, adjusted for non-cash charges, and net cash provided
by routine changes in the Companys working capital
requirements, partially offset by pension contributions. The
2009 operating cash flows were provided primarily by net losses
adjusted for non-cash charges, and partially offset by net cash
used for routine changes in the Companys working capital
requirements. The 2008 operating cash flows consisted of
$127,649 provided by continuing operations and $18,321 used for
discontinued operations. The 2008 cash flows from continuing
operations were provided primarily by net losses adjusted for
non-cash charges, and benefited from a decrease in accounts
receivable partially offset by net cash used for routine changes
in the Companys working capital requirements.
In 2007, Belo applied for a change in accounting method with the
Internal Revenue Service (IRS) related to the deduction of
amortization expense associated with certain intangibles. In
November of 2010, the Company received a consent letter from the
IRS approving the change in accounting method and subsequently
filed an amendment to its 2007 federal tax return. Pending final
review by the IRS and related authorities, the amended return is
expected to result in a tax refund of approximately $30,000 for
the Company. The 2010 year-end balance sheet reflects the
effects of the tax refund receivable. The refund did not have
any effect on cash flow or earnings in 2010, other than interest
income related to the refund. The
PAGE
24 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
refund will be reflected in cash provided by operations in the
period in which the refund is received, which is currently
expected to be in the latter half of 2011. Additionally, any
difference in the final amount of the refund versus our current
estimate will be recorded in earnings in the same period.
On October 6, 2010, the Company and A. H. Belo entered into
a Pension Plan Transfer Agreement (Transfer Agreement) providing
for the split of the Pension Plan between the Company and A. H.
Belo effective January 1, 2011. As of December 31,
2010, the Company, as the sole sponsor of the Pension Plan,
would have been required, under current actuarial calculations,
to contribute $36,571 to its defined benefit pension plan in
2011, which includes contributions associated with A. H.
Belos current and former employees. Under the employee
matters agreement with A. H. Belo, A. H. Belo would have been
required to reimburse the Company for approximately
60 percent of the required contributions. Effective
January 1, 2011, the Pension Plan assets and liabilities
related to A. H. Belos current and former employees were
divided and transferred into separate plans sponsored entirely
by A. H. Belo. A. H. Belo assumed full responsibility for their
plans. For all plan years beginning on or after January 1,
2011, Belo Corp. and A. H. Belo shall each be solely responsible
for contributions made to their respective plans. In addition,
under the employee matters agreement which was amended in
connection with the Transfer Agreement, A. H. Belo remains
responsible for its portion of the required contributions made
in 2011 that relate to the 2010 plan year. The pension split
transaction will not change the amount of benefits that any
participant has accrued or is currently receiving. After taking
the split into consideration, Belos portion of the
expected contributions in 2011 for its current and former
employees only is approximately $15,909. For discussion on the
Companys liquidity requirements subsequent to the Pension
Plan split, see Pension Split Accounting below.
Investing Cash
Flows
Net cash flows used in investing activities were $8,148, $6,149
and $25,731 in 2010, 2009 and 2008, respectively. The 2008
investing cash flows consisted of $25,427 used in continuing
operations investing activities and $304 used in discontinued
operations investing activities. These cash flows are primarily
attributable to capital expenditures as more fully described
below.
Capital
Expenditures
Total capital expenditures for continuing operations were
$14,968, $9,189 and $25,359 in 2010, 2009 and 2008,
respectively. These were primarily for television station
equipment and corporate-driven technology initiatives. As of
December 31, 2010, projected capital expenditures for 2011
related to Belos television businesses and related assets
are approximately $16,000. Belo expects to finance future
capital expenditures using cash generated from operations and,
when necessary, borrowings under the revolving credit facility.
Investments
The Company received $7,366 in cash distributions from its
investments for the year ended December 31, 2010.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
25
Table of Contents
Financing Cash
Flows
Net cash flows used in financing activities were $131,808,
$74,743 and $96,807 in the years ended December 31, 2010,
2009 and 2008, respectively. The 2010 financing cash flows
consisted primarily of borrowings and repayments under the
Companys revolving credit facility. The 2009 financing
cash flows consisted primarily of borrowings and repayments
under the Companys revolving credit facility, issuance of
the Companys 8% Senior Notes due 2016, repurchase of
Belo debt securities and dividends on common stock as described
below. The 2008 financing cash flows consisted primarily of
borrowings and repayments under the Companys revolving
credit facility, redemption of the Companys 8% Senior
Notes due 2008, dividends on common stock and repurchase of Belo
debt securities as described below.
Long-Term
Debt
Long-term debt consists of the following at December 31,
2010 and 2009:
2010 | 2009 | |||||||||
63/4% Senior
Notes due May 30, 2013
|
175,623 | 175,499 | ||||||||
8% Senior Notes due November 15, 2016
|
270,488 | 269,720 | ||||||||
73/4% Senior
Debentures due June 1, 2027
|
200,000 | 200,000 | ||||||||
71/4% Senior
Debentures due September 15, 2027
|
240,000 | 240,000 | ||||||||
Fixed-rate debt
|
886,111 | 885,219 | ||||||||
Revolving credit facility, including short-term unsecured notes
|
11,000 | 143,000 | ||||||||
Total
|
$ | 897,111 | $ | 1,028,219 | ||||||
The combined weighted average effective interest rate for these
debt instruments was 7.4 percent and 7.0 percent as of
December 31, 2010 and 2009, respectively. The weighted
average effective interest rate for the fixed rate debt was
7.5 percent as of December 31, 2010 and 2009.
On August 12, 2010, the Company amended the Amended 2009
Credit Agreement to decrease the borrowing capacity under the
agreement from $460,750 to $205,000, earlier than previously
scheduled.
On November 16, 2009, the Company entered into an Amended
and Restated $460,750 Competitive Advance and Revolving Credit
Facility Agreement with JPMorgan Chase Bank, N.A.,
J.P. Morgan Securities Inc., Banc of America Securities
LLC, Bank of America, N.A. and other lenders, which matures upon
expiration of the agreement on December 31, 2012 (the
Amended 2009 Credit Agreement). The Amended 2009 Credit
Agreement amended and restated the Companys existing
Amended and Restated $550,000 Five-Year Competitive Advance and
Revolving Credit Facility Agreement described below (the 2009
Credit Agreement). The amendment reduced the total amount of the
Credit Agreement to $460,750 through June 7, 2011, then to
$205,000 through the end of the agreement. Additionally, it
modified certain other terms and conditions. The facility may be
used for working capital and other general corporate purposes,
including letters of credit. The Amended 2009 Credit Agreement
is guaranteed by the 100%-owned subsidiaries of the Company.
Revolving credit borrowings under the Amended 2009 Credit
Agreement bear interest at a variable interest rate based on
either LIBOR or a base rate, in either case plus an applicable
margin that varies depending upon the Companys leverage
ratio. Competitive advance borrowings bear interest at a rate
obtained from bids selected in accordance with JPMorgan Chase
Banks standard competitive advance procedures. Commitment
fees of up to 0.75 percent per year of the total unused
commitment, depending on the Companys leverage ratio,
accrue and are payable under the facility.
The Company is required to maintain certain leverage and
interest ratios specified in the 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. For the remaining term of the agreement,
the maximum allowed leverage ratios, minimum required interest
coverage ratios and maximum allowed senior leverage ratios are
as follows:
Minimum |
Maximum |
|||||||||||||
Maximum
Allowed |
Required
Interest |
Allowed Senior |
||||||||||||
From | To | Leverage Ratio | Coverage Ratio | Leverage Ratio | ||||||||||
December 31, 2010
|
March 30, 2012 | 7.25 | 1.50 | 1.50 | ||||||||||
March 31, 2012
|
June 29, 2012 | 7.00 | 1.50 | 1.50 | ||||||||||
June 30, 2012
|
September 29, 2012 | 6.75 | 1.75 | 1.50 | ||||||||||
September 30, 2012
|
Thereafter | 6.25 | 1.75 | 1.50 | ||||||||||
While Belo was well within these limits at December 31,
2010, the failure in the future to comply with the covenants in
the agreements governing the terms of our indebtedness could be
an event of default which, if not cured or waived, would
PAGE
26 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
permit acceleration of all our indebtedness and payment
obligations. The Amended 2009 Credit Agreement contains
additional covenants that are usual and customary for credit
facilities of this type, including limits on dividends, bond
repurchases, acquisitions and investments. The Amended 2009
Credit Agreement does not permit share repurchases. Under the
covenant related to dividends, the Company may declare its usual
and customary dividend if its leverage ratio is then below 4.75.
At a leverage ratio between 4.75 and 5.25, the Company may
declare a dividend not to exceed 50 percent of the usual
and customary amount. The Company may not declare a dividend if
its leverage ratio exceeds 5.25.
At December 31, 2010, the Companys leverage ratio was
3.7, its interest coverage ratio was 3.2 and its senior leverage
ratio was 0.04. As of December 31, 2010, the balance
outstanding under the Amended 2009 Credit Agreement was $11,000,
the weighted average interest rate was three percent, and all
unused borrowings were available for borrowing. At
December 31, 2010, the Company was in compliance with all
debt covenant requirements.
In November 2009, Belo issued $275,000 of 8% Senior Notes
due November 15, 2016 at a discount of approximately
$5,346. Interest on these 8% Senior Notes is due
semi-annually on November 15 and May 15 of each year. The
8% Senior Notes are guaranteed by the 100%-owned
subsidiaries of the Company. The net proceeds were used to repay
debt previously outstanding under Belos revolving credit
facility. The $5,346 discount associated with the issuance of
these 8% Senior Notes is being amortized over the term of
the 8% Senior Notes using the effective interest rate
method. As of December 31, 2010, the unamortized discount
was $4,512. The Company may redeem the 8% Senior Notes at
its option at any time in whole or from time to time in part at
a redemption price calculated in accordance with the indenture
under which the notes were issued.
In 2009, the Company purchased $40,500 of its outstanding
63/4% Senior
Notes due May 30, 2013 for a total cost of $25,260 and a
net gain of $14,905. These purchases were funded with borrowings
under the credit facility.
On February 26, 2009, the Company entered into an Amended
and Restated $550,000 Five-Year Competitive Advance and
Revolving Credit Facility Agreement with JPMorgan Chase Bank,
N.A., J.P. Morgan Securities Inc., Banc of America
Securities LLC, Bank of America, N.A. and other lenders. The
2009 Credit Agreement amended and restated the Companys
existing Amended and Restated $600,000 Five-Year Competitive
Advance and Revolving Credit Facility Agreement (the 2008 Credit
Agreement). The amendment reduced the total amount of the Credit
Agreement and modified certain other terms and conditions. The
facility was available for working capital and other general
corporate purposes, including letters of credit. The 2009 Credit
Agreement was guaranteed by the material subsidiaries of the
Company. Revolving credit borrowings under the 2009 Credit
Agreement bore interest at a variable interest rate based on
either LIBOR or a base rate, in either case plus an applicable
margin that varied depending upon the Companys leverage
ratio. Competitive advance borrowings bore interest at a rate
obtained from bids selected in accordance with JPMorgan Chase
Banks standard competitive advance procedures. Commitment
fees of up to 0.5 percent per year of the total unused
commitment, depending on the Companys leverage ratio,
accrued and were payable under the facility. This 2009 Credit
Agreement was amended and restated in November 2009, as
discussed above.
In 2008, the Company redeemed its 8% Senior Notes due
November 1, 2008 with borrowings under the credit facility.
Additionally in 2008, the Company purchased $33,575 of its
outstanding
63/4% Senior
Notes due May 30, 2013 and $10,000 of the outstanding
71/4% Senior
Debentures due September 15, 2027 for a total cost of
$26,787 and a net gain of $16,407. These repurchases were funded
with borrowings under the credit facility.
Dividends
The following table presents dividend information for the years
ended December 31, 2009 and 2008. No dividends were paid
for the year ended December 31, 2010.
2009 | 2008 | |||||||||
Dividends paid
|
$ | 15,375 | $ | 35,767 | ||||||
Dividends declared per share
|
.075 | .30 | ||||||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
27
Table of Contents
Exercise of Stock
Options
The following table presents stock option exercise information
for the years ended December 31, 2010 and 2009. There were
no stock options exercised in the year ended December 31,
2008:
2010 | 2009 | |||||||||
Options exercised
|
56,185 | 62,740 | ||||||||
Exercisable options
|
8,576,261 | 9,808,387 | ||||||||
Net proceeds received from the exercise of stock options (in
thousands)
|
$ | 99 | $ | 118 | ||||||
Share Repurchase
Program
The Company has a stock repurchase program pursuant to
authorization from Belos Board or Directors on
December 9, 2005. There is no expiration date for this
repurchase program. The remaining authorization for the
repurchase of shares as of December 31, 2010, under this
authority was 13,030,716 shares. The Amended 2009 Credit
Agreement, which became effective November 16, 2009, does
not permit share repurchases. There were no share repurchases in
2010 or 2009. The total cost of the treasury shares purchased in
2008 was $2,203. All shares repurchased were retired in the year
of purchase.
Contractual
Obligations
The table below summarizes the following specified commitments
of the Company as of December 31, 2010. See the
Consolidated Financial Statements,
Note 15Commitments, for more information on
contractual obligations:
Nature of Commitment | Total | 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | ||||||||||||||||||||||||||||
Long-term debt (principal only)
|
$ | 897,111 | $ | | $ | 11,000 | $ | 175,623 | $ | | $ | | $ | 710,488 | |||||||||||||||||||||
Interest on long-term debt(a)
|
704,070 | 67,105 | 67,105 | 59,848 | 54,900 | 54,900 | 400,212 | ||||||||||||||||||||||||||||
Broadcast rights and programming
|
131,007 | 56,591 | 31,475 | 25,205 | 16,086 | 1,650 | | ||||||||||||||||||||||||||||
Capital expenditures and licenses
|
110 | 110 | | | | | | ||||||||||||||||||||||||||||
Non-cancelable operating leases
|
12,467 | 2,408 | 2,223 | 1,588 | 1,316 | 1,026 | 3,906 | ||||||||||||||||||||||||||||
Total
|
$ | 1,744,765 | $ | 126,214 | $ | 111,803 | $ | 262,264 | $ | 72,302 | $ | 57,576 | $ | 1,114,606 | |||||||||||||||||||||
(a) | Represents the annual interest on fixed rate debt at the applicable stated rates and interest on variable rate debt at the interest rates in effect at December 31, 2010. |
The contractual obligations table does not include actuarially
projected minimum funding requirements of the Companys
Pension Plan due to significant uncertainties regarding the
assumptions involved in making such minimum funding projections,
including (i) interest rate levels; (ii) asset
returns, and (iii) what, if any, changes will occur to
regulation requirements. In October 2010, Belo and A. H. Belo
agreed to split the Pension Plan into separately-sponsored
pension plans effective January 1, 2011. For all plan years
beginning on or after January 1, 2011, Belo and A. H. Belo
shall each be solely responsible for contributions made to their
respective plans. While subject to change, the contribution
amounts for the Pension Plan for 2011 and 2012, under current
regulations, and before the
agreed-upon
split of the Pension Plan, would have been $36,571 and $54,816,
respectively. After consideration of the split of the Pension
Plan on January 1, 2011, the contribution amounts for the
Pension Plan for 2011 and 2012, related to Belo current and
former employees only, are estimated to be $15,909 and $23,836,
respectively. Further contributions are currently projected for
2013 through 2018 but amounts cannot be reasonably estimated due
to the uncertainties listed above. As of December 31, 2010,
the Companys total net pension obligation as reflected on
the Consolidated Balance Sheet was $192,081, with such amount to
be significantly reduced effective with the split of the Pension
Plan. See Pension Split Disclosure below and the Consolidated
Financial Statements, Note 7 Defined Benefit
Pension and Other Post Retirement Plans.
Pension Split
Disclosure
As discussed above, Belo and A. H. Belo agreed to split the
Pension Plan into separately-sponsored pension plans effective
January 1, 2011. Immediately following the split of the
Pension Plan, the Companys remaining net unfunded
liability is expected to be approximately $80,000 to $85,000,
which is the net unfunded pension liability for Belo current and
former employees who participate in the Pension Plan. The
pension split will also affect estimated pension expense,
required pension contributions and estimated benefit payments,
as subsequent to the pension split these amounts will relate
solely to Belo current and former employees for all plan years
beginning January 1, 2011 and thereafter.
PAGE
28 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
For purposes of recording net periodic benefit cost for the year
ending December 31, 2011, the Company expects to use the
discount rate of 5.89 percent. The estimated net actuarial
loss for the Pension Plan that will be amortized from
accumulated other comprehensive income into net periodic benefit
cost in 2011 is $2,719.
Also, subsequent to the pension split, the expected benefit
payments, net of administrative expenses, under the plan are
expected to be as follows:
2011
|
$ | 10,872 | ||
2012
|
11,415 | |||
2013
|
12,214 | |||
2014
|
12,970 | |||
2015
|
13,677 | |||
Subsequent to the pension split, the Company expects to make
pension contributions in 2011 related to Belo current and former
employees only totaling approximately $15,909.
For Belo, the pension split transaction will be accounted for as
a settlement under ASC 715. Under settlement accounting for
pensions, the split of the Companys Pension Plan is
expected to result in a significant reduction to Belos net
unfunded pension liability, as discussed above, with an
associated reduction in previously unrecognized actuarial
pension losses recorded as part of accumulated other
comprehensive income. Additionally, pension-related deferred tax
assets will be reduced with an associated offset to accumulated
other comprehensive income and pension related deferred tax
liabilities will be reduced with an associated decrease in tax
expense.
Based upon information available to date as of December 31,
2010, Belo currently expects to report a non-cash charge
associated with the split of the Pension Plan in the first
quarter of 2011 in the range of $19,000 to $23,000 with an
associated tax benefit in the range of $5,000 to $7,000;
however, the actual amount of the non-cash charge and associated
tax benefit is subject to change and may be more or less than
these ranges.
The non-cash charge has two primary components: the settlement
gain referred to above related to the transfer to A. H. Belo of
its portion of the net unfunded pension liability and the
settlement loss referred to above related to the immediate
recognition, upon the transfer of the Plans assets and
liabilities, of previously unrecognized actuarial pension
losses. These unrecognized losses were previously recorded as
part of accumulated other comprehensive income.
Spin-off of A. H.
Belo
On February 8, 2008, the Company completed the spin-off of
its former newspaper businesses and related assets into a
separate public company, A. H. Belo Corporation (A. H. Belo),
which has its own management and board of directors. The
spin-off was accomplished by transferring the subject assets and
liabilities to A. H. Belo and distributing a pro-rata, tax-free
dividend to the Companys shareholders of 0.20 shares
of A. H. Belo Series A common stock for every share of Belo
Series A common stock, and 0.20 shares of A. H. Belo
Series B common stock for every share of Belo Series B
common stock, owned as of the close of business on
January 25, 2008.
Except as noted below, the Company has no further ownership
interest in A. H. Belo or in any newspaper businesses or related
assets, and A. H. Belo has no ownership interest in the Company
or any television station businesses or related assets. Belo did
not recognize any revenues or costs generated by A. H. Belo that
would have been included in its financial results were it not
for the spin-off. Belos relationship with A. H. Belo is
governed primarily by a separation and distribution agreement, a
services agreement, a tax matters agreement, an employee matters
agreement, and certain other agreements between the two
companies or their respective subsidiaries as further discussed
below. Belo and A. H. Belo also co-own certain downtown Dallas,
Texas real estate and other investment assets and have some
overlap in board members and shareholders. Although the services
related to these agreements generate continuing cash flows
between Belo and A. H. Belo, the amounts are not significant to
the ongoing operations of either company. In addition, the
agreements and other relationships do not provide Belo with the
ability to significantly influence the operating or financial
policies of A. H. Belo and, therefore, do not constitute
significant continuing involvement.
The historical operations of the newspaper businesses and
related assets are included in discontinued operations in the
Companys financial statements.
In the separation and distribution agreement between Belo and A.
H. Belo, effective as of the spin-off date, A. H. Belo and Belo
indemnified each other and certain related parties, from all
liabilities existing or arising from acts and events occurring,
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
29
Table of Contents
or failing to occur (or alleged to have occurred or to have
failed to occur) regarding each others businesses, whether
occurring before, at or after the effective time of the spin-off.
Under the services agreement, the Company and A. H. Belo (or
their respective subsidiaries) provide each other various
services
and/or
support. Payments made or other consideration provided in
connection with all continuing transactions between the Company
and A. H. Belo will be on an arms-length basis.
The tax matters agreement sets out each partys rights and
obligations with respect to deficiencies and refunds, if any, of
federal, state, local, or foreign taxes for periods before and
after the spin-off and related matters such as the filing of tax
returns and the conduct of IRS and other audits. Under this
agreement, the Company will be responsible for all income taxes
prior to the spin-off, except that A. H. Belo is responsible for
its share of income taxes paid on a consolidated basis for the
period of January 1, 2008 through February 8, 2008. A.
H. Belo is also be responsible for its income taxes incurred
after the spin-off. In addition, even though the spin-off
otherwise qualifies for tax-free treatment to shareholders, the
Company (but not its shareholders) recognized for tax purposes
approximately $51,900 of previously deferred intercompany gains
in connection with the spin-off, resulting in a federal income
tax obligation of $17,954, and a state tax of $802 both of which
were provided for in 2008. If such gains are adjusted in the
future, then the Company and A. H. Belo shall be responsible for
paying the additional tax associated with any increase in such
gains in the ratio of one-third and two-thirds, respectively.
With respect to all other taxes, the Company is responsible for
taxes attributable to the television businesses and related
assets, and A. H. Belo is responsible for taxes attributable to
the newspaper businesses and related assets. In addition, the
Company will indemnify A. H. Belo and A. H. Belo will indemnify
the Company, for all taxes and liabilities incurred as a result
of post-spin-off actions or omissions by the indemnifying party
that affect the tax consequences of the spin-off, subject to
certain exceptions.
In the third quarter 2009, the Company and A. H. Belo amended
the tax matters agreement to allow A. H. Belos tax loss
for the year ended December 31, 2008, to be carried back
against the Companys 2007 consolidated tax return. After
the tax matters agreement was amended, the Company amended the
previously filed 2007 tax return to generate an $11,978 federal
income tax refund. The Company and A. H. Belo agreed that the
refund would be held by the Company on A. H. Belos behalf
and applied towards A. H. Belos future obligations to
reimburse the Company for a portion of its contributions to the
Company-sponsored Pension Plan. The refund covered the 2010
pension contribution reimbursements due to the Company from A.
H. Belo. Further, in the fourth quarter 2010, the Company and A.
H. Belo agreed to allow A. H. Belos tax loss for the year
ended December 31, 2009 to be carried back against the
Companys 2008 consolidated federal tax return. The amended
2008 tax return is expected to generate a $4,732 federal income
tax refund that will be allocated between the parties as
determined in the agreement.
The employee matters agreement allocates liabilities and
responsibilities relating to employee compensation and benefits
plans and programs and other related matters in connection with
the spin-off, including, without limitation, the treatment of
outstanding Belo equity awards, certain outstanding annual and
long-term incentive awards, existing deferred compensation
obligations, and certain retirement and welfare benefit
obligations.
The Companys Dallas/Fort Worth television station,
WFAA, and The Dallas Morning News, owned by A. H. Belo,
provide media content, cross-promotion, and other services to
the other on a mutually agreed upon basis. That sharing is
expected to continue for the foreseeable future under the
agreements discussed above. In addition, the Company and A. H.
Belo co-own certain downtown Dallas, Texas real estate through a
limited liability company formed in connection with the spin-off
and several investments in third-party businesses.
Other
The Company has various options available to meet its 2010
capital and operating commitments, including cash on hand, short
term investments, internally generated funds and a $205,000
revolving credit facility. The Company believes its current
financial condition and credit relationships are adequate to
fund both its current obligations as well as near-term growth.
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
The market risk inherent in the financial instruments issued by
Belo represents the potential loss arising from adverse changes
in interest rates. See the Consolidated Financial Statements,
Note 10 Long-Term Debt, for information
concerning the contractual interest rates of Belos debt.
At December 31, 2010 and 2009, the fair value of
Belos fixed-rate debt was estimated to be $865,482 and
$796,984, respectively, using quoted market prices and yields
obtained through independent pricing sources, taking into
consideration the underlying terms of the debt, such as the
coupon rate and term to maturity. The increase in the fair value
is related to improvement in the Companys operating
performance and overall market conditions. The carrying amount
of fixed-rate debt was $886,111 and $885,219 at
December 31, 2010 and 2009, respectively.
PAGE
30 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Various financial instruments issued by Belo are sensitive to
changes in interest rates. Interest rate changes would result in
gains or losses in the market value of Belos fixed-rate
debt due to differences between the current market interest
rates and the rates governing these instruments. A hypothetical
10 percent decrease in interest rates would increase the
fair value of the Companys fixed-rate debt by $47,018 at
December 31, 2010 ($59,600 at December 31, 2009). With
respect to the Companys variable-rate debt, a
10 percent change in interest rates for the years ended
December 31, 2010 or 2009, would have resulted in an
immaterial annual change to Belos pretax earnings and cash
flows.
Item 8. | Financial Statements and Supplementary Data |
The Consolidated Financial Statements, together with the Reports
of Independent Registered Public Accounting Firm, are included
elsewhere in this Annual Report on
Form 10-K
(Form 10-K).
Financial statement schedules have been omitted because the
required information is contained in the Consolidated Financial
Statements or related Notes, or because such information is not
applicable.
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls and Procedures |
During the quarter ended December 31, 2010, there were no
changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably
likely to materially affect, Belos internal control over
financial reporting.
The Company carried out an evaluation under the supervision and
with the participation of the Companys management,
including the Companys President and Chief Executive
Officer and Senior Vice President/Chief Financial Officer and
Treasurer, of the effectiveness of the Companys disclosure
controls and procedures, as of the end of the period covered by
this Annual Report on
Form 10-K.
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 Companys disclosure controls and
procedures were effective such that information relating to the
Company (including its consolidated subsidiaries) required to be
disclosed in the Companys 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 Companys 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.
Managements
Report on Internal Control over Financial Reporting
SEC rules implementing Section 404 of the Sarbanes-Oxley
Act of 2002 require our 2010 Annual Report on
Form 10-K
to contain managements report regarding the effectiveness
of internal control and an independent accountants
attestation on managements assessment of our internal
control over financial reporting. As a basis for our report, we
tested and evaluated the design, documentation, and operating
effectiveness of internal control.
Management is responsible for establishing and maintaining
effective internal control over financial reporting, as such
term is defined in Exchange Act
rules 13a-15(f)
and
15d-15(f),
of Belo Corp. (the Company). There are inherent limitations in
the effectiveness of any internal control, including the
possibility of human error and the circumvention or overriding
of controls. Accordingly, even effective internal controls can
provide only reasonable assurance with respect to financial
statement preparation. Further, because of changes in
conditions, the effectiveness of internal control may vary over
time.
Management has evaluated the Companys internal control
over financial reporting as of December 31, 2010. This
assessment was based on criteria for effective internal control
over financial reporting described in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes that
Belo maintained effective internal control over financial
reporting as of December 31, 2010.
Ernst & Young LLP, the Companys Independent
Registered Public Accounting Firm, has issued an attestation
report on the effectiveness of the Companys internal
control over financial reporting. That report appears
immediately following this report.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
31
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Belo Corp.
We have audited Belo Corp.s internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
Belo Corp.s management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Belo Corp. maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Belo Corp. as of
December 31, 2010 and 2009, and the related consolidated
statements of operations, shareholders equity, and cash
flows for each of the three years in the period ended
December 31, 2010 and our report dated March 11, 2011
expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 11, 2011
PAGE
32 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Item 9B.
Other Information
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information set forth under the headings Belo Corp.
Stock OwnershipSection 16(a) Beneficial Ownership
Reporting Compliance, Proposal One: Election of
Directors, Corporate GovernanceCommittees of
the BoardAudit Committee, Corporate
GovernanceCommittees of the BoardNominating and
Corporate Governance Committee, and Executive
Officers contained in the definitive Proxy Statement for
the Companys Annual Meeting of Shareholders to be held on
May 10, 2011, is incorporated herein by reference.
Belo has a Code of Business Conduct and Ethics that applies to
all directors, officers and employees, which can be found at the
Companys Web site, www.belo.com. The Company will
post any amendments to the Code of Business Conduct and Ethics,
as well as any waivers that are required to be disclosed by the
rules of either the SEC or the New York Stock Exchange, on the
Companys Web site. Information on Belos Web site is
not incorporated by reference into this Annual Report on
Form 10-K.
The Companys Board of Directors has adopted Corporate
Governance Guidelines and charters for the Audit, Compensation,
and Nominating and Governance Committees of the Board of
Directors. These documents can be found at the Companys
Web site, www.belo.com.
A shareholder can also obtain, without charge, a printed copy of
any of the materials referred to above by contacting the Company
at the following address:
Belo Corp.
400 South Record Street
Dallas, Texas 75202-4841
Attn: Corporate Secretary
Telephone: (214) 977-6606
400 South Record Street
Dallas, Texas 75202-4841
Attn: Corporate Secretary
Telephone: (214) 977-6606
Item 11.
Executive Compensation
The information set forth under the headings Executive
CompensationCompensation Discussion and
Analysis,Compensation Committee Interlocks and Insider
Participation, - Compensation Committee Report,Summary
Compensation Table,Grants of Plan-Based Awards in 2010, -
Belo Corp. Outstanding Equity Awards at Fiscal Year-End
2010,Option Exercises and Stock Vested in
2010,Post-Employment Benefits,Pension Benefits at
December 31, 2010,Non-Qualified Deferred
Compensation,Change In Control Arrangements and Other
Agreements Upon Termination of Employment,Potential
Payments on Change in Control or Upon Termination of Employment
at December 31, 2010,Director Compensation and
Corporate GovernanceCommittees of the Board -
Compensation Committee contained in the definitive Proxy
Statement for the Companys Annual Meeting of Shareholders
to be held on May 10, 2011, is incorporated herein by
reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
The information set forth under the heading Belo Corp.
Stock Ownership contained in the definitive Proxy
Statement for the Companys Annual Meeting of Shareholders
to be held on May 10, 2011, is incorporated herein by
reference.
Information regarding the number of shares of common stock
available under the Companys equity compensation plans is
included in the Consolidated Financial Statements,
Note 5Long-Term Incentive Plan.
Item 13.
Certain Relationships and Related Transactions, and Director
Independence
The information set forth under the heading Certain
Relationships and Corporate Governance
Director Independence contained in the
definitive Proxy Statement for the Companys Annual Meeting
of Shareholders to be held on May 10, 2011, is incorporated
herein by reference.
Item 14.
Principal Accountant Fees and Services
The information set forth under the heading
Proposal Two: Ratification of the Appointment of
Independent Registered Public Accounting Firm contained in
the definitive Proxy Statement for the Companys Annual
Meeting of Shareholders to be held on May 10, 2011, is
incorporated herein by reference.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
33
Table of Contents
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a) (1) | The financial statements listed in the Index to Financial Statements included in the table of contents are filed as part of this report. | |
(2) | The financial schedules required by Regulation S-X are either not applicable or are included in the information provided in the Consolidated Financial Statements or related Notes, which are filed as part of this report. | |
(3) | 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 or compensatory plans, 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 Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2008 (Securities and Exchange Commission File No. 001-08598)(the February 12, 2008 Form 8-K)) | |||||||||
3 | .1 * | Certificate of Incorporation of the Company (Exhibit 3.1 to the Companys Annual Report on Form 10-K dated March 15, 2000 (Securities and Exchange Commission File No. 001-08598) (the 1999 Form 10-K)) | |||||||||
3 | .2* | Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (Exhibit 3.2 to the 1999 Form 10-K) | |||||||||
3 | .3* | Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 (Exhibit 3.3 to the 1999 Form 10-K) | |||||||||
3 | .4* | Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 (Exhibit 3.4 to the 1999 Form 10-K) | |||||||||
3 | .5* | Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 (Exhibit 3.5 to the 1999 Form 10-K) | |||||||||
3 | .6* | Certificate of Amendment of Certificate of Incorporation of the Company dated May 13, 1998 (Exhibit 3.6 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (Securities and Exchange Commission File No. 002-74702)(the 2nd Quarter 1998 Form 10-Q)) | |||||||||
3 | .7* | Certificate of Ownership and Merger, dated December 20, 2000, but effective as of 11:59 p.m. on December 31, 2000 (Exhibit 99.2 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2000 (Securities and Exchange Commission File No. 001-08598)) | |||||||||
3 | .8* | Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (Exhibit 3.7 to the 1999 Form 10-K) | |||||||||
3 | .9* | Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (Exhibit 3.8 to the 1999 Form 10-K) | |||||||||
3 | .10* | Amended and Restated Bylaws of the Company, effective March 9, 2009 (Exhibit 3.1 to the Companys 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)) | |||||||||
4 | .1 | Certain rights of the holders of the Companys Common Stock are set forth in Exhibits 3.1-3.10 above | |||||||||
4 | .2* | Specimen Form of Certificate representing shares of the Companys Series A Common Stock (Exhibit 4.2 to the Companys Annual Report on Form 10-K dated March 13, 2001 (Securities and Exchange Commission File No. 001-08598)(the 2000 Form 10-K)) | |||||||||
4 | .3* | Specimen Form of Certificate representing shares of the Companys Series B Common Stock (Exhibit 4.3 to the 2000 Form 10-K) | |||||||||
4 | .4 | Instruments defining rights of debt securities: | |||||||||
(1) | * | Indenture dated as of June 1, 1997 between the Company and The Chase Manhattan Bank, as Trustee (the Indenture)(Exhibit 4.6(1) to the Companys 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 73/4% 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 71/4% Senior Debenture due 2027 (Exhibit 4.6(6)(a) to the Companys 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 71/4% 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) |
PAGE
34 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Exhibit Number | Description | ||||||||||
(6) | * | Form of Belo Corp. 63/4% Senior Notes due 2013 (Exhibit 4.3 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2006 (Securities and Exchange Commission File No. 001-08598)(the May 26, 2006 Form 8-K)) | |||||||||
(7) | * | Officers Certificate dated May 26, 2006 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.2 to the May 26, 2006 Form 8-K) | |||||||||
(8) | * | Underwriting Agreement Standard Provisions (Debt Securities), dated May 24, 2006 (Exhibit 1.1 to the May 26, 2006 Form 8-K) | |||||||||
(9) | * | Underwriting Agreement, dated May 24, 2006, between the Company, Banc of America Securities LLC and JPMorgan Securities, Inc. (Exhibit 1.2 to the May 26, 2006 Form 8-K) | |||||||||
(10) | * | Form of Belo Corp. 8% Senior Notes due 2016 (Exhibit 4.2 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2009 (Securities and Exchange Commission File No. 001-08598)(the November 16, 2009 Form 8-K)) | |||||||||
(11) | * | Supplemental Indenture, dated November 16, 2009 among the Company, the Guarantors of the Notes and The Bank of New York Mellon Trust Company, N.A., as Trustee (Exhibit 4.1 to the November 16, 2009 Form 8-K) | |||||||||
(12) | * | Underwriting Agreement, dated November 10, 2009, between the Company, the Guarantors of the Notes and JPMorgan Securities, Inc. (Exhibit 1.1 to the November 16, 2009 Form 8-K) | |||||||||
10 | .1 | Financing agreements: | |||||||||
(1) | * | Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of June 7, 2006 among the Company, as Borrower; JPMorgan Chase Bank, N.A., as Administrative Agent; J.P. Morgan Securities Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Bookrunners; Bank of America, N.A., as Syndication Agent; and SunTrust Bank, The Bank of New York, and BNP Paribas, as Documentation Agents; and Mizuho Corporate Bank, Ltd., as Co-Documentation Agent (Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on June 7, 2006 (Securities and Exchange Commission File No. 001-08598)) | |||||||||
(2) | * | First Amendment dated as of February 4, 2008 to the Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of June 7, 2006 among the Company and the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Exhibit 99.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2008 (Securities and Exchange Commission File No. 001-08598)) | |||||||||
(3) | * | Second Amendment dated as of February 26, 2009 to the Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of June 7, 2006 among the Company and the Lenders party thereto and JPMorgan Chase Bank, N.A. as Administrative Agent (Exhibit 10.1(3) to the Companys Annual Report on Form 10-K dated March 2, 2009 (Securities and Exchange Commission File No. 001-08598)(the 2008 Form 10-K)) | |||||||||
(4) | * | Guarantee Agreement dated as of February 26, 2009, among Belo Corp., the Subsidiaries of Belo Corp. identified therein and JPMorgan Chase Bank, N.A. (Exhibit 10.1(4) to the 2008 Form 10-K) | |||||||||
(5) | * | Amendment and Restatement Agreement, dated as of November 16, 2009 to Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement, dated as of February 26, 2009, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto (Exhibit 10.1 to the November 16, 2009 Form 8-K) | |||||||||
(6) | * | Form of Supplement, dated as of November 16, 2009, to the Guarantee Agreement dated as of February 26, 2009, among the Company, the Subsidiaries of the Company from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Exhibit 10.2 to the November 16, 2009 Form 8-K) | |||||||||
(7) | * | First Amendment dated as of August 11, 2010, to its Amended and Restated Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of February 26, 2009, as further amended and restated as of November 16, 2009, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other parties thereto (Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on August 13, 2010 (Securities and Exchange Commission File No. 001-08598)) | |||||||||
~10 | .2 | Compensatory plans: | |||||||||
~(1) | Belo Savings Plan: | ||||||||||
* | (a) | Belo Savings Plan Amended and Restated effective January 1, 2008 (Exhibit 99.1 to the Companys 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 Companys 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 2008 Form 10-K) |
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
35
Table of Contents
Exhibit Number | Description | ||||||||||
* | (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 Companys 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 | ||||||||||
~(2) | Belo 1986 Long-Term Incentive Plan: | ||||||||||
* | (a) | Belo Corp. 1986 Long-Term Incentive Plan (Effective May 3, 1989, as amended by Amendments 1, 2, 3, 4 and 5) (Exhibit 10.3(2) to the Companys Annual Report on Form 10-K dated March 10, 1997 (Securities and Exchange Commission File No. 001-08598)(the 1996 Form 10-K)) | |||||||||
* | (b) | Amendment No. 6 to 1986 Long-Term Incentive Plan, dated May 6, 1992 (Exhibit 10.3(2)(b) to the Companys Annual Report on Form 10-K dated March 19, 1998 (Securities and Exchange Commission File No. 002-74702)(the 1997 Form 10-K)) | |||||||||
* | (c) | Amendment No. 7 to 1986 Long-Term Incentive Plan, dated October 25, 1995 (Exhibit 10.2(2)(c) to the 1999 Form 10-K) | |||||||||
* | (d) | Amendment No. 8 to 1986 Long-Term Incentive Plan, dated July 21, 1998 (Exhibit 10.3(2)(d) to the 2nd Quarter 1998 Form 10-Q) | |||||||||
~(3) | * | Belo 1995 Executive Compensation Plan, as restated to incorporate amendments through December 4, 1997 (Exhibit 10.3(3) to the 1997 Form 10-K) | |||||||||
* | (a) | Amendment to 1995 Executive Compensation Plan, dated July 21, 1998 (Exhibit 10.2(3)(a) to the 2nd Quarter 1998 Form 10-Q) | |||||||||
* | (b) | Amendment to 1995 Executive Compensation Plan, dated December 16, 1999 (Exhibit 10.2(3)(b) to the 1999 Form 10-K) | |||||||||
* | (c) | Amendment to 1995 Executive Compensation Plan, dated December 5, 2003 (Exhibit 10.3(3)(c) to the Companys 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 Companys Annual Report on Form 10-K dated March 6, 2006 (Securities and Exchange Commission File No. 001-08598)(the 2005 Form 10-K)) | |||||||||
~(4) | * | Management Security Plan (Exhibit 10.3(1) to the 1996 Form 10-K) | |||||||||
* | (a) | Amendment to Management Security Plan of Belo Corp. and Affiliated Companies (as restated effective January 1, 1982)(Exhibit 10.2(4)(a) to the 1999 Form 10-K) | |||||||||
~(5) | Belo Supplemental Executive Retirement Plan | ||||||||||
* | (a) | Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2004 (Exhibit 10.2(5)(a) to the 2003 Form 10-K) | |||||||||
* | (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) | |||||||||
~(6) | * | 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 Companys 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 Companys 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)) | |||||||||
~(7) | * | Belo 2000 Executive Compensation Plan (Exhibit 4.15 to the Companys 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 Companys 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 10.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2011 (Securities and Exchange Commission File No. 001-08598)) |
PAGE
36 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Exhibit Number | Description | ||||||||||
~(8) | * | Belo Amended and Restated 2004 Executive Compensation Plan (Exhibit 10.2(8) to the Companys 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 Executive Time-Based Restricted Stock Unit Awards (Exhibit 10.1 to the Companys 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) (the March 2, 2006 Form 8-K)) | |||||||||
* | (b) | Form of Belo 2004 Executive Compensation Plan Award Notification for Employee Awards (Exhibit 10.2 to the March 2, 2006 Form 8-K) | |||||||||
* | (c) | Form of Award Notification under the Belo 2004 Executive Compensation Plan for Non-Employee Director Awards (Exhibit 10.2 to the Companys 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)) | |||||||||
~(9) | * | Summary of Non-Employee Director Compensation (Exhibit 10.2(9) to the 2009 Form 10-K) | |||||||||
~(10) | * | Belo Corp. Change In Control Severance Plan (Exhibit 10.2(10) to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (Securities and Exchange Commission File No. 001-08598)) | |||||||||
10 | .3 | Agreements relating to the spin-off distribution of A. H. Belo: | |||||||||
(1) | * | Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of February 8, 2008 (Exhibit 10.1 to the February 12, 2008 Form 8-K) | |||||||||
* | (a) | First Amendment to Tax Matters Agreement by and between Belo Corp. and A. H. Belo Corporation dated as of September 14, 2009 (Exhibit 10.1 to the Companys 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)) | |||||||||
(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 Companys 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 October 8, 2010 Form 8-K) | |||||||||
12 | Statement re Computation of Ratios | ||||||||||
21 | Subsidiaries of the Company | ||||||||||
23 | Consent of Ernst & Young LLP | ||||||||||
24 | Power of Attorney (set forth on the signature page(s) hereof) | ||||||||||
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 |
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
37
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BELO CORP.
By: |
/s/ Dunia
A. Shive
|
Dunia A. Shive
President, Chief Executive Officer and Director
Dated: March 11, 2011
POWER OF
ATTORNEY
The undersigned hereby constitute and appoint Dunia A. Shive,
Carey P. Hendrickson and Guy H. Kerr, and each of them and their
substitutes, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities
indicated below any and all amendments to this report and to
file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, and hereby ratify and confirm all that such
attorneys-in-fact, or any of them, or their substitutes shall
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Company and in the capacities and on the dates
indicated:
Signature | Title | Date | ||||
/s/ Robert
W. Decherd Robert W. Decherd |
Chairman of the Board | March 11, 2011 | ||||
/s/ Dunia
A. Shive Dunia A. Shive |
President, Chief Executive Officer and Director |
March 11, 2011 | ||||
/s/ Henry
P. Becton, Jr. Henry P. Becton, Jr. |
Director | March 11, 2011 | ||||
/s/ Judith
L. Craven, M.D., M.P.H. Judith L. Craven, M.D., M.P.H. |
Director | March 11, 2011 | ||||
/s/ Dealey
D. Herndon Dealey D. Herndon |
Director | March 11, 2011 | ||||
/s/ James
M. Moroney III James M. Moroney III |
Director | March 11, 2011 | ||||
/s/ Wayne
R. Sanders Wayne R. Sanders |
Director | March 11, 2011 | ||||
/s/ M.
Anne Szostak M. Anne Szostak |
Director | March 11, 2011 | ||||
/s/ McHenry
T. Tichenor, Jr. McHenry T. Tichenor, Jr. |
Director | March 11, 2011 |
PAGE
38 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Signature | Title | Date | ||||
/s/ Lloyd
D. Ward Lloyd D. Ward |
Director | March 11, 2011 | ||||
/s/ Carey
P. Hendrickson Carey P. Hendrickson |
Senior Vice President/ Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
March 11, 2011 |
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
39
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Belo Corp.
We have audited the accompanying consolidated balance sheets of
Belo Corp. as of December 31, 2010 and 2009, and the
related consolidated statements of operations,
shareholders equity, and cash flows for each of the three
years in the period ended December 31, 2010. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Belo Corp. at December 31, 2010 and
2009, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2010, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Belo
Corp.s internal control over financial reporting as of
December 31, 2010, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 11, 2011 expressed an
unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 11, 2011
PAGE
40 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Consolidated
Statements of Operations
Years ended December 31, | ||||||||||||||
In thousands, except share and per share amounts | 2010 | 2009 | 2008 | |||||||||||
Net Operating Revenues
|
$ | 687,395 | $ | 590,267 | $ | 733,470 | ||||||||
Operating Costs and Expenses
|
||||||||||||||
Station salaries, wages and employee benefits
|
209,945 | 191,003 | 231,256 | |||||||||||
Station programming and other operating costs
|
199,304 | 200,215 | 218,241 | |||||||||||
Corporate operating costs
|
36,487 | 29,902 | 32,235 | |||||||||||
Spin-off related costs
|
| | 4,659 | |||||||||||
Pension contribution reimbursements
|
(8,572 | ) | | | ||||||||||
Depreciation
|
34,693 | 41,655 | 42,893 | |||||||||||
Impairment charges
|
| 242,144 | 662,151 | |||||||||||
Total operating costs and expenses
|
471,857 | 704,919 | 1,191,435 | |||||||||||
Earnings (loss) from operations
|
215,538 | (114,652 | ) | (457,965 | ) | |||||||||
Other Income and (Expense)
|
||||||||||||||
Interest expense
|
(77,895 | ) | (63,920 | ) | (83,093 | ) | ||||||||
Other income, net
|
1,377 | 12,441 | 19,846 | |||||||||||
Total other income and (expense)
|
(76,518 | ) | (51,479 | ) | (63,247 | ) | ||||||||
Earnings (loss) from continuing operations before income taxes
|
139,020 | (166,131 | ) | (521,212 | ) | |||||||||
Income tax expense (benefit)
|
52,114 | (57,070 | ) | (67,042 | ) | |||||||||
Net earnings (loss) from continuing operations
|
86,906 | (109,061 | ) | (454,170 | ) | |||||||||
Loss from discontinued operations, net of tax
|
| | (4,996 | ) | ||||||||||
Net earnings (loss)
|
$ | 86,906 | $ | (109,061 | ) | $ | (459,166 | ) | ||||||
Net earnings (loss) per shareBasic:
|
||||||||||||||
Earnings (loss) per share from continuing operations
|
$ | 0.83 | $ | (1.06 | ) | $ | (4.45 | ) | ||||||
Loss per share from discontinued operations
|
$ | | $ | | $ | (0.05 | ) | |||||||
Net earnings (loss) per share
|
$ | 0.83 | $ | (1.06 | ) | $ | (4.50 | ) | ||||||
Net earnings (loss) per shareDiluted:
|
||||||||||||||
Earnings (loss) per share from continuing operations
|
$ | 0.83 | $ | (1.06 | ) | $ | (4.45 | ) | ||||||
Loss per share from discontinued operations
|
$ | | $ | | $ | (0.05 | ) | |||||||
Net earnings (loss) per share
|
$ | 0.83 | $ | (1.06 | ) | $ | (4.50 | ) | ||||||
Dividends declared per share
|
$ | | $ | 0.075 | $ | 0.30 | ||||||||
See accompanying
Notes to Consolidated Financial Statements.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
41
Table of Contents
Consolidated
Balance Sheets
Assets | December 31, | |||||||||
In thousands | 2010 | 2009 | ||||||||
Current assets:
|
||||||||||
Cash and temporary cash investments
|
$ | 8,309 | $ | 4,800 | ||||||
Accounts receivable (net of allowance of $3,693 and $4,634 at
December 31, 2010 and 2009, respectively)
|
144,992 | 139,911 | ||||||||
Income tax receivable
|
37,921 | 501 | ||||||||
Deferred income taxes
|
1,913 | 8,072 | ||||||||
Short-term broadcast rights
|
7,408 | 8,132 | ||||||||
Prepaid and other current assets
|
10,253 | 14,708 | ||||||||
Total current assets
|
210,796 | 176,124 | ||||||||
Property, plant and equipment, at cost:
|
||||||||||
Land
|
39,404 | 39,404 | ||||||||
Buildings and improvements
|
122,955 | 120,294 | ||||||||
Broadcast equipment
|
354,459 | 359,244 | ||||||||
Other
|
110,531 | 110,451 | ||||||||
Advance payments on property, plant and equipment
|
4,269 | 3,308 | ||||||||
Total property, plant and equipment
|
631,618 | 632,701 | ||||||||
Less accumulated depreciation
|
(467,179 | ) | (455,226 | ) | ||||||
Property, plant and equipment, net
|
164,439 | 177,475 | ||||||||
Intangible assets, net
|
725,399 | 725,399 | ||||||||
Goodwill
|
423,873 | 423,873 | ||||||||
Other assets
|
65,883 | 81,590 | ||||||||
Total assets
|
$ | 1,590,390 | $ | 1,584,461 | ||||||
See accompanying
Notes to Consolidated Financial Statements.
PAGE
42 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Consolidated
Balance Sheets (continued)
Liabilities and Shareholders Equity | December 31, | |||||||||
In thousands, except share and per share amounts | 2010 | 2009 | ||||||||
Current liabilities:
|
||||||||||
Accounts payable
|
$ | 20,744 | $ | 20,736 | ||||||
Accrued compensation and benefits
|
26,560 | 13,242 | ||||||||
Short-term film obligations
|
7,928 | 11,036 | ||||||||
Other accrued expenses
|
17,786 | 17,644 | ||||||||
Short-term pension obligation
|
36,571 | 14,277 | ||||||||
Income taxes payable
|
13,701 | 12,052 | ||||||||
Deferred revenue
|
3,505 | 4,228 | ||||||||
Accrued interest payable
|
10,405 | 10,682 | ||||||||
Total current liabilities
|
137,200 | 103,897 | ||||||||
Long-term debt
|
897,111 | 1,028,219 | ||||||||
Deferred income taxes Note 1
|
206,765 | 158,857 | ||||||||
Pension obligation
|
155,510 | 182,065 | ||||||||
Other liabilities
|
23,162 | 28,561 | ||||||||
Commitments and contingent liabilities
|
||||||||||
Shareholders equity:
|
||||||||||
Preferred stock, $1.00 par value. Authorized
5,000,000 shares; none issued.
|
||||||||||
Common stock, $1.67 par value. Authorized
450,000,000 shares
|
||||||||||
Series A: Issued and outstanding 92,916,960 and
90,956,337 shares at December 31, 2010 and 2009,
respectively;
|
155,172 | 151,897 | ||||||||
Series B: Issued and outstanding 10,272,679 and
11,642,354 shares at December 31, 2010 and 2009,
respectively
|
17,155 | 19,443 | ||||||||
Additional paid-in capital
|
915,014 | 911,989 | ||||||||
Retained earnings (deficit) Note 1
|
(773,976 | ) | (860,882 | ) | ||||||
Accumulated other comprehensive loss
|
(142,723 | ) | (139,585 | ) | ||||||
Total shareholders equity
|
170,642 | 82,862 | ||||||||
Total liabilities and shareholders equity
|
$ | 1,590,390 | $ | 1,584,461 | ||||||
See accompanying
Notes to Consolidated Financial Statements.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
43
Table of Contents
Consolidated
Statements of Shareholders Equity
Dollars in thousands | Three years ended December 31, 2010 | |||||||||||||||||||||||||||
COMMON STOCK | ||||||||||||||||||||||||||||
Accumulated |
||||||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||||||
Shares |
Shares |
Paid-in |
Retained |
Comprehensive |
||||||||||||||||||||||||
Series A | Series B | Amount | Capital | Earnings | Income (Loss) | Total | ||||||||||||||||||||||
Balance at December 31, 2007 as previously reported
|
88,016,220 | 14,243,141 | $ | 170,773 | $ | 905,589 | $ | 196,810 | $ | (8,663 | ) | $ | 1,264,509 | |||||||||||||||
Prior period adjustment Note 1
|
| | | | 11,031 | | 11,031 | |||||||||||||||||||||
Adjusted Balance at December 31, 2007
|
88,016,220 | 14,243,141 | 170,773 | 905,589 | 207,841 | (8,663 | ) | 1,275,540 | ||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Net loss
|
| | | | (459,166 | ) | | (459,166 | ) | |||||||||||||||||||
Change in pension liability adjustment, net of tax
|
| | | | | (128,273 | ) | (128,273 | ) | |||||||||||||||||||
Total comprehensive loss
|
(587,439 | ) | ||||||||||||||||||||||||||
Conversion of RSUs
|
135,839 | | 227 | (227 | ) | | | | ||||||||||||||||||||
Share-based compensation
|
| | | 6,130 | | | 6,130 | |||||||||||||||||||||
Purchases and subsequent retirement of treasury stock
|
(191,000 | ) | | (319 | ) | (1,695 | ) | (189 | ) | | (2,203 | ) | ||||||||||||||||
Spin-off distribution of A. H. Belo
|
| | | | (463,432 | ) | | (463,432 | ) | |||||||||||||||||||
Dividends
|
| | | | (30,662 | ) | | (30,662 | ) | |||||||||||||||||||
Conversion of Series B to Series A
|
1,223,408 | (1,223,408 | ) | | | | | | ||||||||||||||||||||
Balance at December 31, 2008
|
89,184,467 | 13,019,733 | $ | 170,681 | $ | 909,797 | $ | (745,608 | ) | $ | (136,936 | ) | $ | 197,934 | ||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Net loss
|
| | | | (109,061 | ) | | (109,061 | ) | |||||||||||||||||||
Change in pension liability adjustment, net of tax
|
| | | | | (2,649 | ) | (2,649 | ) | |||||||||||||||||||
Total comprehensive loss
|
(111,710 | ) | ||||||||||||||||||||||||||
Exercise of stock options
|
62,340 | 400 | 105 | 13 | | | 118 | |||||||||||||||||||||
Excess tax benefit from long-term incentive plan
|
| | | 67 | | | 67 | |||||||||||||||||||||
Conversion of RSUs
|
331,751 | | 554 | (554 | ) | | | | ||||||||||||||||||||
Share-based compensation
|
| | | 2,666 | | | 2,666 | |||||||||||||||||||||
Dividends
|
| | | | (7,710 | ) | | (7,710 | ) | |||||||||||||||||||
Spin-off distribution of A. H. Belo
|
| | | | 1,497 | | 1,497 | |||||||||||||||||||||
Conversion of Series B to Series A
|
1,377,779 | (1,377,779 | ) | | | | | | ||||||||||||||||||||
Balance at December 31, 2009
|
90,956,337 | 11,642,354 | $ | 171,340 | $ | 911,989 | $ | (860,882 | ) | $ | (139,585 | ) | $ | 82,862 | ||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net earnings
|
| | | | 86,906 | | 86,906 | |||||||||||||||||||||
Change in pension liability adjustment, net of tax
|
| | | | | (3,138 | ) | (3,138 | ) | |||||||||||||||||||
Total comprehensive income
|
83,768 | |||||||||||||||||||||||||||
Exercise of stock options
|
56,185 | | 94 | 5 | | | 99 | |||||||||||||||||||||
Excess tax benefit from long-term incentive plan
|
| | | 93 | | | 93 | |||||||||||||||||||||
Conversion of RSUs
|
534,763 | | 893 | (893 | ) | | | | ||||||||||||||||||||
Share-based compensation
|
| | | 3,820 | | | 3,820 | |||||||||||||||||||||
Conversion of Series B to Series A
|
1,369,675 | (1,369,675 | ) | | | | | | ||||||||||||||||||||
Balance at December 31, 2010
|
92,916,960 | 10,272,679 | $ | 172,327 | $ | 915,014 | $ | (773,976 | ) | $ | (142,723 | ) | $ | 170,642 | ||||||||||||||
See accompanying
Notes to Consolidated Financial Statements.
PAGE
44 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Consolidated
Statements of Cash Flows
Cash Provided (Used) | Years ended December 31, | |||||||||||||
In thousands | 2010 | 2009 | 2008 | |||||||||||
Operations
|
||||||||||||||
Net earnings (loss)
|
$ | 86,906 | $ | (109,061 | ) | $ | (459,166 | ) | ||||||
Adjustments to reconcile net earnings (loss) to net cash
provided by operations:
|
||||||||||||||
Net loss from discontinued operations
|
| | 4,996 | |||||||||||
Gain on repurchase of senior notes
|
| (14,905 | ) | (16,407 | ) | |||||||||
Depreciation
|
34,693 | 41,655 | 42,893 | |||||||||||
Impairment charges
|
| 242,144 | 662,151 | |||||||||||
Pension contributions
|
(14,287 | ) | | | ||||||||||
Deferred income taxes
|
55,756 | (63,619 | ) | (114,343 | ) | |||||||||
Employee retirement benefit expense
|
5,171 | (554 | ) | (6,345 | ) | |||||||||
Share-based compensation
|
3,054 | 4,808 | 3,842 | |||||||||||
Other non-cash items
|
(3,705 | ) | 4,712 | (7,987 | ) | |||||||||
Equity income (loss) from partnerships
|
138 | 356 | (102 | ) | ||||||||||
Other, net
|
(3,127 | ) | (2,094 | ) | 744 | |||||||||
Net changes in operating assets and liabilities:
|
||||||||||||||
Accounts receivable, net
|
(6,236 | ) | (1,868 | ) | 44,353 | |||||||||
Other current assets and other assets
|
831 | 610 | (654 | ) | ||||||||||
Accounts payable
|
387 | 1,352 | (11,768 | ) | ||||||||||
Accrued compensation and benefits
|
13,318 | (17,450 | ) | (10,060 | ) | |||||||||
Other accrued expenses
|
6,613 | (3,323 | ) | (6,820 | ) | |||||||||
Interest payable
|
(277 | ) | 2,543 | (4,889 | ) | |||||||||
Income taxes payable/receivable
|
(35,770 | ) | (5,384 | ) | 7,211 | |||||||||
Net cash provided by continuing operations
|
143,465 | 79,922 | 127,649 | |||||||||||
Net cash used for discontinued operations
|
| | (18,321 | ) | ||||||||||
Net cash provided by operations
|
143,465 | 79,922 | 109,328 | |||||||||||
Investments
|
||||||||||||||
Capital expenditures
|
(14,968 | ) | (9,189 | ) | (25,359 | ) | ||||||||
Other investments, net
|
6,820 | 3,040 | (68 | ) | ||||||||||
Net cash used for investments of continuing operations
|
(8,148 | ) | (6,149 | ) | (25,427 | ) | ||||||||
Net cash used for investments of discontinued operations
|
| | (304 | ) | ||||||||||
Net cash used for investments
|
(8,148 | ) | (6,149 | ) | (25,731 | ) | ||||||||
Financing
|
||||||||||||||
Net proceeds from revolving debt
|
49,700 | 119,853 | 669,745 | |||||||||||
Payments on revolving debt
|
(181,700 | ) | (423,800 | ) | (351,795 | ) | ||||||||
Net proceeds from issuance of senior notes
|
| 269,654 | | |||||||||||
Redemption of senior notes
|
| | (350,000 | ) | ||||||||||
Purchase of senior notes
|
| (25,260 | ) | (26,787 | ) | |||||||||
Dividends on common stock
|
| (15,375 | ) | (35,767 | ) | |||||||||
Net proceeds from exercise of stock options
|
99 | 118 | | |||||||||||
Purchase of treasury stock
|
| | (2,203 | ) | ||||||||||
Excess tax benefit from option exercises
|
93 | 67 | | |||||||||||
Net cash used for financing
|
(131,808 | ) | (74,743 | ) | (96,807 | ) | ||||||||
Net increase (decrease) in cash and temporary cash investments
|
3,509 | (970 | ) | (13,210 | ) | |||||||||
Cash and temporary cash investments at beginning of year,
including cash of discontinued operations
|
4,800 | 5,770 | 18,980 | |||||||||||
Cash and temporary cash investments at end of year
|
$ | 8,309 | $ | 4,800 | $ | 5,770 | ||||||||
Supplemental Disclosures (Note 17)
|
||||||||||||||
See accompanying
Notes to Consolidated Financial Statements.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
45
Table of Contents
Notes to
Consolidated Financial Statements
Note 1:
Summary of Significant Accounting Policies
A) | Business and Principles of Consolidation On February 8, 2008, the Company completed the spin-off of its former newspaper businesses and related assets into a separate public company in the form of a pro-rata, tax-free dividend to the Companys shareholders of 0.20 shares of A. H. Belo Corporation (A. H. Belo) Series A common stock for every share of Belo Series A common stock, and 0.20 shares of A. H. Belo Series B common stock for every share of Belo Series B common stock owned at the close of business on January 25, 2008. The newspaper businesses and related assets are presented as discontinued operations. See Note 3. The Companys 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 to be aggregated into one reporting segment. |
The consolidated financial statements include the accounts of
Belo and its wholly-owned subsidiaries after the elimination of
all significant intercompany accounts and transactions. Belo
accounts for its interests in partnerships using the equity
method of accounting, with Belos share of the results of
operations being reported in Other Income and Expense in the
accompanying consolidated statements of operations.
In November 2010, the Company received a consent letter from the
Internal Revenue Service related to a change in the method used
for federal income tax purposes for deducting certain intangible
assets acquired prior to 1993. See Note 14, Income Taxes,
for further discussion. In connection with the accounting
evaluation of this change in tax method, the Company identified
that the noncurrent deferred tax asset had not been established
related to certain intangible assets acquired in 1984. As a
result, after considering the guidance in ASC 250, the Company
recorded a prior period adjustment to increase December 31,
2007, beginning retained earnings in the accompanying
consolidated statements of shareholders equity by $11,031
with a corresponding offset to decrease noncurrent deferred tax
liabilities. No adjustments were made to Belos historical
consolidated statements of operations or cash flows. The Company
believes this prior period adjustment is qualitatively and
quantitatively immaterial to the respective balances adjusted.
In preparing the accompanying consolidated financial statements,
the Company has reviewed events that have occurred subsequent to
December 31, 2010, through the issuance of the financial
statements.
All dollar amounts are in thousands, except per share amounts,
unless otherwise indicated.
B) | Cash and Temporary Cash Investments 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 classified as available-for-sale and are carried at fair value. | |
C) | Accounts Receivable Accounts receivable are net of a valuation reserve that represents an estimate of amounts considered uncollectible. We estimated our allowance for doubtful accounts primarily using historical net write-offs of uncollectible accounts. Belo analyzed the ultimate collectibility of its accounts receivable after one year, using a regression analysis of the historical net write-offs to determine the amount of those accounts receivable that were ultimately not collected. The results of this analysis were then applied to the current accounts receivable to determine the allowance necessary. The overall reserve is then reviewed in the context of the actual portfolio at the time and appropriate adjustments are made, if necessary. Our policy is to write off accounts after all collection efforts have failed; generally, amounts past due by more than one year have been written off. Expense for such uncollectible amounts is included in station programming and other operating costs. The carrying amount of accounts receivable approximates fair value. The following table shows the expense for uncollectible accounts and accounts written off, net of recoveries, for the years ended December 31, 2010, 2009 and 2008: |
Expense for |
Accounts |
|||||||
Uncollectible |
Written |
|||||||
Accounts | Off | |||||||
2010
|
$ | 1,155 | $ | 2,096 | ||||
2009
|
2,706 | 3,301 | ||||||
2008
|
4,051 | 2,760 | ||||||
D) | Risk Concentration Financial instruments that potentially subject the Company to concentrations of credit risk are primarily accounts receivable. Concentrations of credit risk with respect to the receivables are limited due to the large number of customers in the Companys customer base and their dispersion across different industries and geographic areas. The Company maintains an allowance for losses based upon the expected collectibility of accounts receivable. |
PAGE
46 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
E) | Program Rights Program rights represent the right to air various forms of first-run and existing second-run programming. Program rights and the corresponding contractual obligations are recorded when the license period begins and the programs are available for use. Program rights are carried at the lower of unamortized cost or estimated net realizable value on a program-by-program basis. Program rights and the corresponding contractual obligations are classified as current or long-term based on estimated usage and payment terms, respectively. Costs of off-network syndicated programs, first-run programming and feature films are amortized on a straight-line basis over the future number of showings allowed in the contract. | |
F) | Property, Plant and Equipment Depreciation of property, plant and equipment, including assets recorded under capital leases, is provided on a straight-line basis over the estimated useful lives of the assets as follows: |
Estimated |
||||
Useful Lives | ||||
Buildings and improvements
|
5-30 years | |||
Broadcast equipment
|
5-15 years | |||
Other
|
3-10 years |
The Company reviews the carrying amount of property, plant and
equipment for impairment whenever events and circumstances
indicate that the carrying amount of an asset may not be
recoverable. Recoverability of property and equipment is
measured by comparison of the carrying amount to the future
undiscounted net cash flows the property and equipment is
expected to generate. No impairment was recorded in any of the
periods presented.
G) | Intangible Assets and Goodwill The Companys intangible assets and goodwill result from its significant business acquisitions, which occurred primarily prior to 2002. In connection with these acquisitions, the Company obtained appraisals of the significant assets purchased. The excess of the purchase price over the fair value of the assets acquired was recorded as goodwill. The only significant intangible assets that were identified in these appraisals that could be classified separately from goodwill were FCC licenses and network affiliation agreements. |
Goodwill and indefinite-lived intangible assets (FCC licenses)
are required to be tested at least annually for impairment or
between annual tests if an event occurs or circumstances change
that would, more likely than not, reduce the fair value of a
reporting unit below its carrying amount. The Companys
indefinite-lived intangible assets represent FCC licenses in
markets (as defined by Nielsen Media Researchs Designated
Market Area report) where the Companys stations operate.
Goodwill is evaluated by reporting unit, with each reporting
unit consisting of the television station(s) and cable news
operations within a market. The Company measures the fair value
of goodwill and indefinite-lived intangible assets annually as
of December 31.
Goodwill impairment is determined using a two-step process. The
first step is to identify if a potential impairment exists by
comparing the fair value of a reporting unit with its carrying
amount, including goodwill. If the fair value of a reporting
unit exceeds its carrying amount, goodwill of the reporting unit
is not considered to be impaired and the second step of the
impairment test is not necessary. If the carrying amount exceeds
the fair value, a second step is performed to calculate the
implied fair value of the goodwill of the reporting unit by
deducting the fair value of all of the individual assets and
liabilities of the reporting unit from the respective fair
values of the reporting unit as a whole. To the extent the
calculated implied fair value of the goodwill is less than the
recorded goodwill, an impairment charge is recorded for the
difference.
In assessing the fair value of the Companys goodwill and
indefinite-lived intangible assets, the Company must make
assumptions regarding future cash flow projections and other
factors to estimate the fair value of the reporting units and
intangible assets. Necessarily, estimates of fair value are
subjective in nature, involve uncertainties and matters of
significant judgment, and are made at a specific point in time.
Thus, changes in key assumptions from period to period could
significantly affect the estimates of fair value. The
Companys estimates of the fair value of its reporting
units and indefinite-lived intangible assets are primarily
determined using discounted projected cash flows. Significant
assumptions used in these estimates include projected revenues
and related growth rates over time and in perpetuity (for 2010,
perpetuity growth rates used ranged from 2.0% to 3.0%),
forecasted operating margins, estimated tax rates, capital
expenditures, and required working capital needs, and an
appropriate risk-adjusted weighted-average cost of capital (for
2010, the weighted-average cost of capital used was 9.75%).
Additionally, for the Companys FCC licenses, significant
assumptions include costs and time associated with
start-up,
initial capital investments, and forecasts related to overall
market performance over time.
Based upon the assessments performed as of December 31,
2010, after applying the first step of the goodwill impairment
tests, the estimated fair value of all of the Companys 15
reporting units exceeded their carrying amounts and the second
step tests to measure goodwill impairment were not necessary.
Additionally, based on its assessments performed as of
December 31, 2010, no impairments of FCC licenses were
identified. See Note 4.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
47
Table of Contents
Notes to
Consolidated Financial Statements
H) | Revenue Recognition Belos principal sources of revenue are the sale of airtime on its television stations and advertising space on the Companys Internet Web sites. Broadcast revenue is recorded, net of agency commissions, when commercials are aired. Advertising revenues for Internet Web sites are recorded, net of agency commissions, ratably over the period of time the advertisement is placed on Web sites. Retransmission revenues are recognized in the period earned. | |
I) | Advertising Expense The cost of advertising is expensed as incurred. Belo incurred $4,673, $2,992, and $10,336 in advertising and promotion costs during 2010, 2009 and 2008, respectively. | |
J) | Employee Benefits Belo is, in effect, self-insured for employee-related health care benefits. A third-party administrator is used to process all claims. Belos employee health insurance liabilities are based on the Companys historical claims experience and are developed from actuarial valuations. Belos reserves associated with the exposure to the self-insured liabilities are monitored by management for adequacy. However, actual amounts could vary significantly from such estimates. | |
K) | Share-Based Compensation The Company records compensation expense related to its stock options according to ASC 718. The Company records compensation expense related to its options using the fair value as of the date of grant as calculated using the Black-Scholes-Merton method. The Company records the compensation expense related to its restricted stock units (RSUs) using the fair value as of the date of grant, as adjusted, for a portion of the RSUs to reflect liabilities expected to be settled in cash. |
L) | Income Taxes Belo uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. |
M) | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
Note 2:
Recently Issued Accounting Standards
On January 1, 2010, the Company adopted the amendment to
ASC 820-10,
which expands fair value disclosure requirements. These
disclosures are effective for fiscal years beginning after
December 15, 2009. This amendment affects disclosure
requirements only and has no effect on the Companys
financial position or results of operations.
Note 3:
Discontinued Operations and Related Party Transactions
On February 8, 2008, the Company completed the spin-off of
its former newspaper businesses and related assets into A. H.
Belo Corporation (A. H. Belo), which has its own management and
board of directors. The spin-off was accomplished by
transferring the subject assets and liabilities to A. H. Belo
and distributing a pro-rata, tax-free dividend to the
Companys shareholders of 0.20 shares of A. H. Belo
Series A common stock for every share of Belo Series A
common stock, and 0.20 shares of A. H. Belo Series B
common stock for every share of Belo Series B common stock
owned as of the close of business on January 25, 2008.
Except as noted below, the Company has no further ownership
interest in A. H. Belo or in any newspaper businesses or related
assets, and A. H. Belo has no ownership interest in the Company
or any television station businesses or related assets. Belo has
not recognized any revenues or costs generated by A. H. Belo
that would have been included in its financial results were it
not for the spin-off. Belos relationship with A. H. Belo
is governed by a separation and distribution agreement, a
services agreement, a tax matters agreement, employee matters
agreement, and certain other agreements between the two
companies or their respective subsidiaries as discussed below.
Belo and A. H. Belo also co-own certain downtown Dallas, Texas,
real estate through a limited liability company. Belo and A. H.
Belo also co-own other investments in third party businesses and
have some overlap in board members and shareholders. Although
the services related to these agreements generate continuing
cash flows between Belo and A. H. Belo, the amounts are not
significant to the ongoing operations of either company. In
addition, the agreements and other relationships do not provide
Belo with the ability to significantly influence the operating
or financial policies of A. H. Belo and, therefore, do not
constitute significant continuing involvement. Therefore, the
classification of historical information for the newspaper
businesses and related assets as discontinued operations is
appropriate.
PAGE
48 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
The historical operations of the newspaper businesses and
related assets are included in discontinued operations in the
Companys financial statements. Below is the summary
financial information of discontinued operations for the period
from January 1, 2008 through February 8, 2008, the
date of the spin-off:
Net revenues
|
$ | 64,869 | ||
Total operating costs and expenses
|
72,319 | |||
Loss from discontinued operations
|
(7,450 | ) | ||
Other income, net
|
101 | |||
Loss from discontinued operations before income taxes
|
(7,349 | ) | ||
Income tax benefit
|
(2,353 | ) | ||
Net loss from discontinued operations
|
$ | (4,996 | ) | |
There were no assets and liabilities of discontinued operations
as of December 31, 2010 or 2009.
As of February 8, 2008, the Company settled certain
intercompany indebtedness between and among Belo and
subsidiaries of Belo Holdings, Inc. Belo Holdings, Inc. is a
subsidiary of Belo. The Company settled accounts through
offsets, contributions of such indebtedness to the capital of
the debtor subsidiaries, distributions by creditor subsidiaries
and other non-cash transfers. As of the effective time of the
spin-off, the Company had contributed to the capital of
A. H. Belo and its subsidiaries the net intercompany
indebtedness owed to the Company by A. H. Belo and its
subsidiaries and A. H. Belo assumed the indebtedness owed by the
Company to the A. H. Belo subsidiaries. The spin-off of A. H.
Belo resulted in a distribution from retained earnings of
$463,432 in 2008 with an adjustment of $1,497 in January 2009 to
reflect final settlement related to certain fixed assets.
Additionally, Belo incurred $4,659 of expenses for the year
ended December 31, 2008, related to the spin-off.
In connection with the Companys spin-off of A. H. Belo,
the Company entered into a separation and distribution
agreement, a services agreement, a tax matters agreement, an
employee matters agreement, which allocates liabilities and
responsibilities regarding employee compensation and benefit
plans and related matters, and other agreements with A. H. Belo
or its subsidiaries. In the separation and distribution
agreement, effective as of the spin-off date, Belo and A. H.
Belo indemnify each other and certain related parties, from all
liabilities existing or arising from acts and events occurring,
or failing to occur (or alleged to have occurred or to have
failed to occur) regarding each others businesses, whether
occurring before, at or after the effective time of the
spin-off. See Note 16.
Under the services agreement, the Company and A. H. Belo (or
their respective subsidiaries) provide each other various
services
and/or
support. Payments made or other consideration provided in
connection with all continuing transactions between the Company
and A. H. Belo will be on an arms-length basis. For the years
ended December 31, 2010 and 2009, the Company charged
$1,470 and $1,482, respectively, for services to A. H. Belo. A.
H. Belo charged $4,332 and $16,249 for information technology
and Web-related services to the Company during the years ended
December 31, 2010 and 2009, respectively.
The tax matters agreement sets out each partys rights and
obligations with respect to deficiencies and refunds, if any, of
federal, state, local, or foreign taxes for periods before and
after the spin-off and related matters such as the filing of tax
returns and the conduct of IRS and other audits. Under this
agreement, the Company will be responsible for all income taxes
prior to the spin-off, except that A. H. Belo will be
responsible for its share of income taxes paid on a consolidated
basis for the period of January 1, 2008 through
February 8, 2008. A. H. Belo will also be responsible for
its income taxes incurred after the spin-off. In addition, even
though the spin-off otherwise qualifies for tax-free treatment
to shareholders, the Company (but not its shareholders)
recognized for tax purposes approximately $51,900 of previously
deferred intercompany gains in connection with the spin-off,
resulting in a federal income tax obligation of $17,954, and a
state tax of $802, both of which were provided for in 2008. If
such gains are adjusted in the future, then the Company and A.
H. Belo shall be responsible for paying the additional tax
associated with any increase in such gains in the ratio of
one-third and two-thirds, respectively. With respect to all
other taxes, the Company will be responsible for taxes
attributable to the television businesses and related assets,
and A. H. Belo will be responsible for taxes attributable to the
newspaper businesses and related assets. In addition, the
Company will indemnify A. H. Belo and A. H. Belo will indemnify
the Company, for all taxes and liabilities incurred as a result
of post-spin-off actions or omissions by the indemnifying party
that affect the tax consequences of the spin-off, subject to
certain exceptions.
In the third quarter 2009, the Company and A. H. Belo amended
the tax matters agreement to allow A. H. Belos tax loss
for the year ended December 31, 2008, to be carried back
against the Companys 2007 consolidated federal tax return.
After the tax matters agreement was amended, the Company amended
the previously filed 2007 tax return to generate an $11,978
federal income tax refund. The Company and A. H. Belo agreed
that the refund would be held by the Company on A. H.
Belos behalf and be applied towards A. H. Belos
future obligations to reimburse the Company for a portion of
its
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
49
Table of Contents
Notes to
Consolidated Financial Statements
contributions to the Company-sponsored pension plan. The refund
covered the 2010 pension contribution reimbursements due to the
Company from A. H. Belo. See Note 7. Further in the fourth
quarter 2010, the Company and A. H. Belo agreed to allow A. H.
Belos tax loss for the year ended December 31, 2009,
to be carried back against the Companys 2008 consolidated
federal tax return. The amended 2008 tax return is expected to
generate a $4,732 federal income tax refund that will be
allocated between the parties as determined in the agreement.
The employee matters agreement allocates liabilities and
responsibilities relating to employee compensation and benefits
plans and programs and other related matters in connection with
the spin-off, including, without limitation, the treatment of
outstanding Belo equity awards, certain outstanding annual and
long-term incentive awards, existing deferred compensation
obligations, and certain retirement and welfare benefit
obligations.
The Companys Dallas/Fort Worth television station,
WFAA-TV, and
The Dallas Morning News, owned by A. H. Belo, provide
media content, cross-promotion, and other services to the other
on a mutually agreed upon basis. That sharing is expected to
continue for the foreseeable future under the agreements
discussed above. In addition, the Company and A. H. Belo co-own
certain downtown Dallas, Texas, real estate through a limited
liability company formed in connection with the spin-off and
several investments in third-party businesses. The investment in
the limited liability company of $15,716 is recorded as an
equity method investment and is included in other assets. Other
investments, primarily in third party businesses, of $8,718 are
recorded as either equity or cost method investments and are
included in other assets. The amount of income from the limited
liability company and third party investments included in the
Companys net income are immaterial.
Note 4:
Goodwill and Intangible Assets
As of December 31, 2010 and 2009, the Company had $725,399
in FCC licenses which are indefinite-lived intangible assets not
subject to amortization. Based on its assessments performed as
of December 31, 2010, no impairments of FCC licenses were
identified.
Based on its interim assessments performed as of
September 30, 2009, the Company recorded a non-cash
impairment charge of $242,144 reflecting the reduction in the
fair value of the Companys FCC licenses in 10 of its
markets. Of this amount, $84,584 related to the Phoenix, Arizona
market, $52,727 related to the Seattle, Washington market,
$27,807 related to the Portland, Oregon market, $13,133 related
to the St. Louis, Missouri market, $14,383 related to the
Louisville, Kentucky market, $10,518 related to the Austin,
Texas market, $10,212 related to the San Antonio, Texas
market, $10,128 related to the Tucson, Arizona market, $9,597
related to the Spokane, Washington market, and $9,055 related to
the Boise, Idaho market. Based on its annual assessment
performed at December 31, 2009, no additional impairments
of FCC licenses were identified. Based on the results of its
annual impairment tests of FCC licenses as of December 31,
2008, the Company recorded a non-cash impairment charge of
$311,611 in the fourth quarter of 2008. Of the total charge,
$91,170 related to the San Antonio, Texas market, $76,435
related to the Seattle, Washington market, $53,221 related to
the Austin, Texas market, $28,758 related to the Louisville,
Kentucky market, $28,506 related to the St. Louis, Missouri
market, $14,305 related to the Portland, Oregon market, $11,139
related to the Spokane, Washington market and $8,077 related to
the Tucson, Arizona market.
The impairment charges related to FCC licenses in 2009 resulted
primarily from a decline in the fair value of the individual
businesses due to lower projected cash flows versus historical
estimates, particularly in the first few years of projection,
and an increase in prevailing average costs of capital from
2008. The impairment charges related to FCC licenses in 2008
resulted primarily from a decline in the fair value of the
individual businesses due to lower projected cash flows versus
historical estimates, particularly in the first few years of
projection. These projected cash flows reflected generally lower
expected growth due to the economic environment and related
advertising downturn.
As of December 31, 2010 and 2009, the Company had $423,873
in goodwill. Based on the Companys annual impairment tests
of goodwill as of December 31, 2010 and 2009, and its
interim assessment of goodwill at September 30, 2009, the
Company determined that no impairments of goodwill existed in
2010 and 2009. Based on the results of its annual impairment
tests of goodwill as of December 31, 2008, the Company
recorded non-cash impairment charges of $350,540 in the fourth
quarter of 2008. Of the total charge, $114,454 related to the
Seattle, Washington market, $85,019 related to the Phoenix,
Arizona market, $81,950 related to the Portland, Oregon market,
$54,669 related to the St. Louis, Missouri market, and
$14,449 related to the Spokane, Washington market.
The impairment charges related to goodwill in 2008 resulted
primarily from a decline in the estimated fair value of the
individual businesses, principally due to lower projected cash
flows, particularly in the first few years of the projection
versus historical estimates. These lower projected cash flows
reflected the economic and advertising downturn.
Fair value estimates are inherently sensitive, particularly with
respect to FCC licenses. In five of the Companys 15
markets, the estimated fair value of its FCC licenses is less
than 25 percent greater than their respective carrying
values, with the
PAGE
50 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
closest market having an excess of estimated fair value over
carrying value of 15 percent. A significant reduction in
the fair value of the FCC licenses in any of these five markets
could result in an impairment charge. The carrying value of the
FCC licenses in those five markets represents approximately
$483,112 of the Companys total $725,399 of FCC licenses at
December 31, 2010. Goodwill at the Companys reporting
units is somewhat less sensitive as, collectively, reporting
units with estimated fair values exceeding their carrying values
by more than 20% represent over 90% of the total investments in
goodwill as of December 31, 2010, and impairment charges
related to FCC licenses that are recorded in any period will
reduce the carrying values of those applicable reporting units
prior to the goodwill impairment evaluation. If some or all of
the aforementioned key estimates or assumptions change in the
future, the Company may be required to record additional
impairment charges related to its goodwill and indefinite-lived
intangible assets.
The fair value measurements for the Companys implied
goodwill and FCC licenses use significant unobservable
Level 3 inputs which reflect its own assumptions about the
inputs that market participants would use in measuring fair
value, including assumptions about risk. The key assumptions
used to determine fair value of the Companys reporting
units and FCC licenses are discussed in Note 1.
A summary of the changes in the Companys recorded goodwill
is below:
2010 | 2009 | |||||||
Balance at January 1
|
$ | 423,873 | $ | 423,873 | ||||
Goodwill impairment
|
| | ||||||
Balance at December 31
|
$ | 423,873 | $ | 423,873 | ||||
Note 5:
Long-Term Incentive Plan
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 or 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. The Company believes that the
long-term incentive plan better aligns the interests of its
employees with those of its shareholders. Shares of common stock
reserved for future grants under the plan were 3,996,331,
5,417,083, and 5,345,908 at December 31, 2010, 2009 and
2008, respectively.
Under the long-term incentive plan, the compensation cost that
has been charged against income from continuing operations for
the years ended December 31, 2010, 2009 and 2008 was
$5,842, $4,983 and $3,411, respectively. Compensation cost
related to employees of A. H. Belo is reflected in discontinued
operations. See Note 3. The total income tax benefit for
continuing operations recognized in the consolidated statements
of operations for share-based compensation arrangements was
$2,153, $1,835 and $1,249 for the years ended December 31,
2010, 2009 and 2008, respectively.
Options
The non-qualified options granted to employees and outside
directors under Belos long-term incentive plan become
exercisable in cumulative installments over periods of one to
three years and expire after 10 years. The fair value of
each option award granted is estimated on the date of grant
using the Black-Scholes-Merton valuation model that uses the
assumptions noted in the following table. Volatility is
calculated using an analysis of historical volatility. The
Company believes that the historical volatility of the
Companys stock is the best method for estimating future
volatility. The expected lives of options are determined based
on the Companys historical share option exercise
experience using a rolling ten-year average. The Company
believes the historical experience method is the best estimate
of future exercise patterns currently available. The risk-free
interest rates are determined using the implied yield currently
available for zero-coupon U.S. government issues with a
remaining term equal to the expected life of the options. The
expected dividend yields are based on the approved annual
dividend rate in effect and current market price of the
underlying common stock at the time of grant.
2010 | 2009 | 2008 | ||||||||||||
Weighted average grant date fair value
|
$ | 4.78 | $ | 0.32 | $ | 1.00 | ||||||||
Weighted average assumptions used:
|
||||||||||||||
Expected volatility
|
84.1 | % | 58.4 | % | 40.5 | % | ||||||||
Expected lives
|
5 yrs | 5 yrs | 5 yrs | |||||||||||
Risk-free interest rates
|
2.62 | % | 3.07 | % | 3.03 | % | ||||||||
Expected dividend yields
|
| 0.40 | % | 10.82 | % | |||||||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
51
Table of Contents
Notes to
Consolidated Financial Statements
A summary of option activity under the long-term incentive plan
for the three years ended December 31, 2010, is included in
the following table:
2010 | 2009 | 2008 | ||||||||||||||||||||||||
Weighted |
Weighted |
Weighted |
||||||||||||||||||||||||
Average |
Average |
Average |
||||||||||||||||||||||||
Number of |
Exercise |
Number of |
Exercise |
Number of |
Exercise |
|||||||||||||||||||||
Options | Price | Options | Price | Options | Price | |||||||||||||||||||||
Outstanding at January 1
|
10,638,633 | $ | 15.69 | 12,897,273 | $ | 15.71 | 12,484,648 | $ | 16.84 | |||||||||||||||||
Granted
|
609,500 | $ | 7.09 | 76,705 | $ | 0.64 | 1,459,289 | $ | 5.59 | |||||||||||||||||
Exercised
|
(56,185 | ) | $ | 1.76 | (62,740 | ) | $ | 1.88 | | $ | | |||||||||||||||
Canceled
|
(1,626,300 | ) | $ | 14.07 | (2,272,605 | ) | $ | 15.65 | (1,046,664 | ) | $ | 15.17 | ||||||||||||||
Outstanding at December 31
|
9,565,648 | $ | 15.50 | 10,638,633 | $ | 15.69 | 12,897,273 | $ | 15.71 | |||||||||||||||||
Vested and exercisable at December 31
|
8,576,261 | $ | 16.58 | 9,808,387 | $ | 16.62 | 11,371,641 | $ | 17.02 | |||||||||||||||||
Weighted average remaining contractual term (in years)
|
3.8 | 4.8 | 4.4 | |||||||||||||||||||||||
Options granted under the long-term incentive plan are granted
where the exercise price equals the closing stock price on the
day of grant, therefore the options outstanding have no
intrinsic value until exercised. The total intrinsic value of
options exercised during the years ended December 31, 2010,
2009 and 2008 is as follows:
2010
|
$ | 280 | ||
2009
|
223 | |||
2008
|
| |||
The following table summarizes information (net of estimated
forfeitures) related to stock options outstanding at
December 31, 2010:
|
||||||||||||||||||||||||
Number of |
Weighted
Average |
Weighted
Average |
Number of |
Weighted
Average |
||||||||||||||||||||
Range of |
Options |
Remaining |
Exercise |
Options |
Exercise |
|||||||||||||||||||
Exercise Prices | Outstanding(a) | Life (years) | Price | Exercisable | Price | |||||||||||||||||||
$ | 16 | 814,493 | 8.0 | $ | 1.79 | 551,954 | $ | 1.83 | ||||||||||||||||
$ | 714 | 3,286,200 | 3.8 | $ | 12.61 | 2,548,686 | $ | 13.93 | ||||||||||||||||
$ | 1517 | 2,181,675 | 3.1 | $ | 17.18 | 2,181,675 | $ | 17.18 | ||||||||||||||||
$ | 1823 | 3,238,122 | 3.4 | $ | 20.89 | 3,238,122 | $ | 20.89 | ||||||||||||||||
$ | 123 | 9,520,490 | 3.8 | $ | 15.55 | 8,520,437 | $ | 16.62 | ||||||||||||||||
(a)
|
Comprised of Series B shares |
As of December 31, 2010, there was $1,326 of total
unrecognized compensation cost related to non-vested options
which is expected to be recognized over a weighted average
period of 1.21 years.
In connection with the spin-off of A. H. Belo on
February 8, 2008, holders of outstanding Belo options
received an adjusted Belo option for the same number of shares
of Belo common stock as held before but with a reduced exercise
price based on the closing price on February 8, 2008.
Holders also received one new A. H. Belo option for every five
Belo options held as of the spin-off date (the distribution
ratio) with an exercise price based on the closing share price
on February 8, 2008. As of December 31, 2010, Belo
employees held 6,395,425 Belo options and 885,342 A. H. Belo
options. As of December 31, 2009, Belo employees held
6,782,362 Belo options and 1,070,434 A. H. Belo options. As of
December 31, 2008, Belo employees held 8,270,427 Belo
options and 1,362,993 A. H. Belo options.
Restricted Stock
Units (RSUs)
Under the long-term incentive plan, the Companys Board of
Directors has awarded RSUs. The RSUs have service
and/or
performance conditions and vest over a period of one to three
years. Upon vesting, the RSUs will be redeemed with
60 percent in Belos Series A common stock and
40 percent in cash. A liability has been established for
the cash portion of the redemption. During the vesting period,
holders of service-based RSUs and RSUs with performance
conditions where the performance conditions have been met
participate in the Companys dividends, if declared, by
receiving payments for dividend equivalents. Such dividend
equivalents are recorded as components of the Companys
share-based compensation. The RSUs do not have voting rights.
PAGE
52 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
A summary of RSU activity under the long-term incentive plan for
the three years ended December 31, 2010, is summarized in
the following table.
2010 | 2009 | 2008 | ||||||||||||||||||||||
Weighted |
Weighted |
Weighted |
||||||||||||||||||||||
Number of |
Average |
Number of |
Average |
Number of |
Average |
|||||||||||||||||||
RSUs | Price | RSUs | Price | RSUs | Price | |||||||||||||||||||
Outstanding at January 1
|
1,894,851 | $ | 9.86 | 2,056,163 | $ | 13.43 | 1,948,860 | $ | 14.77 | |||||||||||||||
Granted
|
492,766 | $ | 7.20 | 460,723 | $ | 1.51 | 358,834 | $ | 7.45 | |||||||||||||||
Vested
|
(891,336 | ) | $ | 10.88 | (553,004 | ) | $ | 16.08 | (226,472 | ) | $ | 15.35 | ||||||||||||
Canceled
|
(62,913 | ) | $ | 12.04 | (69,031 | ) | $ | 10.43 | (25,059 | ) | $ | 15.17 | ||||||||||||
Outstanding at December 31
|
1,433,368 | $ | 8.23 | 1,894,851 | $ | 9.86 | 2,056,163 | $ | 13.43 | |||||||||||||||
Vested at December 31
|
| $ | | | $ | | | $ | |
The fair value of the RSUs granted is determined using the
closing trading price of the Companys shares on the grant
date. The weighted-average grant-date fair value of the RSUs
granted during the years ended December 31, 2010, 2009 and
2008, was $7.20, $1.51 and $7.45, respectively. During 2010,
891,336 of RSUs were converted into shares of stock and $2,447
in share-based liabilities were paid. During 2009, 553,004 of
RSUs were converted into shares of stock and $368 in share-based
liabilities were paid. During 2008, 226,472 of RSUs were
converted into shares of stock and $1,177 in share-based
liabilities were paid. As of December 31, 2010, there was
$1,779 of total unrecognized compensation cost related to
non-vested RSUs. The compensation cost is expected to be
recognized over a weighted-average period of 1.02 years.
In connection with the spin-off of A. H. Belo, holders of Belo
RSUs retained their existing RSUs and also received restricted
stock unit awards of A. H. Belo common stock. The number of A.
H. Belo restricted shares awarded to Belos RSU holders was
determined using the distribution ratio. Subsequent to the
spin-off, Belo and A. H. Belo recognize compensation cost
related to all unvested modified awards for those employees that
provide service to each respective entity. As of
December 31, 2010, Belo employees held 1,184,278 Belo RSUs
and 38,508 A. H. Belo RSUs. As of December 31, 2009, Belo
employees held 1,366,614 Belo RSUs and 117,697 A. H. Belo RSUs.
As of December 31, 2008, Belo employees held 1,272,650 Belo
RSUs and 184,886 A. H. Belo RSUs. In the first quarter 2011, the
remaining Belo RSUs held by A. H. Belo employees and the
remaining A. H. Belo RSUs held by Belo employees will be fully
vested and issued.
Note 6:
Defined Contribution Plans
Belo sponsors a defined contribution plan established effective
October 1, 1989. The defined contribution plan covers
substantially all employees of the Company. Participants may
elect to contribute a portion of their pretax compensation as
provided by the plan and Internal Revenue Service (IRS)
regulations. The maximum pretax contribution an employee can
make is 100% of his or her annual eligible compensation (less
required withholdings and deductions) up to statutory limits.
Prior to March 10, 2009, the Company made matching
contributions to its defined contribution plan, based on certain
percentages as defined in the plan. Effective March 10,
2009, these matching contributions were suspended. Additionally,
from April 1, 2007 through to December 31, 2008, Belo
contributed an amount equal to two percent of the compensation
paid to eligible employees, subject to limitations. Effective
January 1, 2009, this two percent contribution became
discretionary. Effective January 1, 2011, the Company
reinstated matching contributions to its defined contribution
plan at a rate of $0.35 per dollar contributed by a
participating employee up to 6% of eligible pay. Belos
contributions to its defined contribution plans totaled $2,093
and $9,641 in 2009 and 2008, respectively. There were no
matching contributions in 2010.
Effective as of February 8, 2008, the Company transferred
the vested and non-vested account balances of A. H. Belo
employees and former employees from the Companys defined
contribution plan to a defined contribution plan established and
sponsored by A. H. Belo. Effective with this transfer, A. H.
Belo assumed and became solely responsible for all liabilities
of the Companys defined contribution plan with respect to
A. H. Belos employees and former employees. Subsequent to
the transfer, A. H. Belo and its subsidiaries ceased to be
participating employers in the Companys defined
contribution plan.
In March 2007, Belo froze benefits under the Pension Plan. See
Note 7. As part of the curtailment of the Pension Plan, the
Company is providing transition benefits to affected employees,
including supplemental contributions to the Belo pension
transition supplement plans, which are defined contribution
plans, for a period of up to five years. As a result, during the
years ended December 31, 2010 and 2008, the Company accrued
supplemental pension transition contributions for these plans
totaling $3,148 and $3,844, respectively. The Company suspended
contributions to the pension transition supplement plans for
2009.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
53
Table of Contents
Notes to
Consolidated Financial Statements
Prior to February 8, 2008, A. H. Belo established A. H.
Belo pension transition supplement plans, which are defined
contribution plans. Concurrent with the date that the Company
made its contribution to the Companys pension transition
supplement defined contribution plans for the 2007 plan year,
the Company transferred the vested and non-vested account
balances of A. H. Belo employees and former employees to A. H.
Belos pension transition supplement defined contribution
plans. Effective with this transfer, A. H. Belo assumed and
became solely responsible for all liabilities for plan benefits
of the Companys pension transition supplement defined
contribution plans with respect to A. H. Belos employees
and former employees. A. H. Belo reimbursed the Company for the
aggregate contribution made by the Company to its pension
transition supplement defined contribution plans for the 2007
plan year for the account of A. H. Belo employees and former
employees.
Belo also sponsored non-qualified defined contribution
retirement plans for certain employees. Expense recognized in
2008 for these plans was $23. In January 2008, the plans were
suspended and balances totaling $8,525 were transferred to the
participants prior to the spin-off of A. H. Belo. No expense was
recognized in 2009.
Note 7:
Defined Benefit Pension and Other Post Retirement
Plans
Some of the Companys employees participated in Belos
Pension Plan, which covered employees who elected to continue
participation in the plan when it was frozen to new participants
in 2000 (for employees other than members of the Providence
newspaper guild) and in 2004 (for members of the Providence
newspaper guild). The benefits are based on years of service and
the average of the employees five consecutive years of
highest annual compensation earned during the most recently
completed ten years of employment. Certain information regarding
Belos Pension Plan is included below.
Belo froze benefits under the Pension Plan effective
March 31, 2007. As part of the curtailment of the Pension
Plan, Belo and A. H. Belo provide transition benefits to
affected employees, including the granting of five years of
additional credited service under the Pension Plan and
supplemental contributions for a period of up to five years to a
defined contribution plan. See Note 6.
Subsequent to the February 2008 spin-off of A. H. Belo through
December 31, 2010, the Company retained sole sponsorship of
the Pension Plan for both companies. Through December 31,
2010, Belo administered benefits for the Belo and A. H. Belo
current and former employees who participate in the Pension Plan
in accordance with the terms of the Pension Plan, and Belo,
jointly with A. H. Belo, oversaw the Pension Plan investments.
The spin-off caused each A. H. Belo employee to have a
separation from service for purposes of commencing benefits
under the Pension Plan at or after age 55. As sponsor of
the Pension Plan, the Company was solely responsible for
satisfying the funding obligations with respect to the Pension
Plan and retained sole discretion to determine the amount and
timing of any contributions required to satisfy such funding
obligations. Belo also retained the right, in its sole
discretion, to terminate the Pension Plan. A. H. Belo was
required to reimburse the Company for approximately
60 percent of contributions the Company made to the Pension
Plan for the 2010 plan year contributions. Both companies agreed
that an A. H. Belo related tax refund would be held by the
Company on A. H. Belos behalf and applied towards A. H.
Belos future obligations to reimburse the Company for a
portion of its contributions to the Company-sponsored pension
plan. The refund covered the 2010 contribution reimbursements
due to the Company from A. H. Belo. During the year ended
December 31, 2010, the Company made Pension Plan
contributions of $14,287 and A. H. Belo reimbursed the Company
$8,572. Remaining funds held on behalf of A. H. Belo as of
December 31, 2010, are recorded as current assets and
liabilities in the consolidated balance sheet. See Note 3.
In October 2010, Belo and A. H. Belo agreed to split the Pension
Plan into separately-sponsored pension plans effective
January 1, 2011. Under the agreement, participant benefit
liabilities and assets pertaining to approximately 5,100 current
and former employees of A. H. Belo and its related newspaper
businesses were transferred to two new defined benefit pension
plans created, sponsored, and managed by or on behalf of A. H.
Belo, and the new A. H. Belo plans are solely responsible for
paying those participant benefits. The participant benefit
liabilities and assets pertaining to current and former
employees of Belo and its related television businesses continue
to be held by the Pension Plan sponsored by and managed by or on
behalf of Belo Corp.
Through December 31, 2010, the Company was the sole plan
sponsor for Belo and A. H. Belo current and former employees who
participate in the Pension Plan. As plan sponsor, the full
required disclosures prior to the pension split for the Pension
Plan are presented below under Disclosures as of
December 31, 2010 as Full Plan Sponsor. However, in
connection with the pension plan split as January 1, 2011,
the Company expects that between 56 percent and
58 percent of the net unfunded liability as of
December 31, 2010 will be transferred to the two new
defined benefit plans created, sponsored and managed by or on
behalf of A. H. Belo as described above. Accordingly, the
estimated effects of the pension split for Belo related to
certain pension plan disclosures for periods subsequent to
January 1, 2011, are also presented below under
Disclosures Subsequent to the Pension Plan Split.
PAGE
54 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
Disclosures as of
December 31, 2010 as Full Plan Sponsor
The reconciliation of the beginning and ending balances of the
projected benefit obligation and the fair value of plan assets
for the years ended December 31, 2010 and 2009, and the
accumulated benefit obligation at December 31, 2010 and
2009, are as follows:
2010 | 2009 | |||||||
Funded Status
|
||||||||
Projected Benefit Obligation
|
||||||||
As of January 1
|
$ | 541,581 | $ | 495,421 | ||||
Actuarial loss
|
22,982 | 36,753 | ||||||
Interest cost
|
32,829 | 32,909 | ||||||
Benefits paid
|
(25,295 | ) | (23,502 | ) | ||||
As of December 31
|
$ | 572,097 | $ | 541,581 | ||||
Fair Value of Plan Assets
|
||||||||
As of January 1
|
$ | 345,233 | $ | 302,880 | ||||
Actual return on plan assets
|
45,785 | 65,856 | ||||||
Employer contributions
|
14,287 | | ||||||
Benefits paid
|
(25,295 | ) | (23,502 | ) | ||||
As of December 31
|
380,010 | $ | 345,233 | |||||
Funded Status as of December 31
|
$ | (192,087 | ) | $ | (196,348 | ) | ||
Accumulated Benefit Obligation
|
$ | 572,097 | $ | 541,581 | ||||
Amounts recognized in the consolidated balance sheets as of
December 31, 2010 and 2009 consist of:
2010 | 2009 | |||||||
Current accrued pension liability
|
$ | 36,571 | $ | 14,277 | ||||
Non-current accrued pension liability
|
155,510 | 182,065 | ||||||
Accumulated other comprehensive loss
|
219,199 | 214,554 | ||||||
Amounts recognized in accumulated other comprehensive loss as of
December 31, 2010 and 2009, only include net actuarial
losses.
Belos pension costs and obligations are calculated using
various actuarial assumptions and methodologies as prescribed
under ASC 715. To assist in developing these assumptions
and methodologies, Belo uses the services of an independent
consulting firm. To determine the benefit obligations, the
assumptions the Company uses include, but are not limited to,
the selection of the discount rate. In determining the discount
rate assumption, the Company used a measurement date of
December 31, 2010, and constructed a portfolio of bonds to
match the benefit payment stream that is projected to be paid
from the Companys Pension Plan. The discount rate used to
determine benefit obligations for the Pension Plan as of
December 31, 2010 and 2009, was 5.89 percent and
6.18 percent, respectively.
To compute the Companys net periodic benefit cost in the
year ended December 31, 2010, the Company uses actuarial
assumptions which include a discount rate and an expected
long-term rate of return on plan assets. The discount rate
applied in this calculation is the rate used in computing the
benefit obligation as of the end of the preceding year. The
expected long-term rate of return on plan assets assumption is
based on the weighted average expected long-term returns for the
target allocation of plan assets as of the measurement date, the
end of the year, and was developed through analysis of
historical market returns, current market conditions and the
Pension Plan assets past experience. Although the Company
believes that the assumptions used are appropriate, differences
between assumed and actual experience may affect the
Companys operating results.
Weighted average assumptions used to determine net periodic
benefit cost for years ended December 31, 2010, 2009 and
2008 are as follows:
2010 | 2009 | 2008 | ||||||||||
Discount rate
|
6.18% | 6.88% | 6.85% | |||||||||
Expected long-term rate of return on assets
|
8.50% | 8.50% | 8.50% | |||||||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
55
Table of Contents
Notes to
Consolidated Financial Statements
The net periodic pension cost (credit) for the years ended
December 31, 2010, 2009 and 2008 includes the following
components:
2010 | 2009 | 2008 | ||||||||||
Interest cost on projected benefit obligation
|
$ | 32,829 | $ | 32,909 | $ | 32,603 | ||||||
Expected return on plan assets
|
(32,015 | ) | (34,653 | ) | (37,916 | ) | ||||||
Amortization of net loss
|
4,568 | 1,355 | | |||||||||
Net periodic pension cost (credit)
|
$ | 5,382 | $ | (389 | ) | $ | (5,313 | ) | ||||
As the Pension Plan is frozen, all participants are inactive.
Accordingly, the Company is amortizing gains or losses over the
average remaining life expectancy of inactive participants. The
estimated net actuarial loss for the Pension Plan that will be
amortized from accumulated other comprehensive income into net
periodic benefit cost in 2011 is $2,719.
The expected benefit payments, net of administrative expenses,
under the plan are as follows:
2011
|
$ | 28,939 | ||
2012
|
29,822 | |||
2013
|
31,105 | |||
2014
|
32,415 | |||
2015
|
33,557 | |||
Belos funding policy is to contribute annually to the
Pension Plan amounts sufficient to meet minimum funding
requirements as set forth in employee benefit and tax laws, but
not in excess of the maximum tax-deductible contribution. The
Company made contributions totaling $14,287 to the Pension Plan
in 2010, and A. H. Belo reimbursed the Company $8,572. The
Company made no contributions to the Pension Plan during 2009 or
2008. In 2011, if the Pension Plan had not been split, as the
sole sponsor of the Pension Plan, the Company would have been
required to make contributions totaling $36,571 and A. H. Belo
would have been required to reimburse the Company for
approximately 60 percent of this amount. As such, $36,571
is recorded as a current liability in the Companys
Consolidated Balance Sheet as of December 31, 2010. See
Disclosures subsequent to the Pension Plan Split
below for the actual expected contributions that will be
required immediately following the pension split related to
current and former Belo employees only. There was no ERISA
funding requirement in 2009. No plan assets are expected to be
returned to the Company during the year ending December 31,
2011.
The primary investment objective of the Pension Plan is to
ensure, over the long-term life of the plan, an adequate pool of
assets to support the benefit obligations to participants,
retirees and beneficiaries. A secondary objective of the plan is
to achieve a level of investment return consistent with a
prudent level of portfolio risk that will minimize the financial
effect of the Pension Plan on the Company.
The Pension Plan weighted-average target allocation and actual
asset allocations at December 31, 2010 and 2009 by asset
category are as follows:
Target |
Actual | |||||||||||
Asset category | Allocation | 2010 | 2009 | |||||||||
Domestic equity securities
|
60.0% | 0.0% | 55.9% | |||||||||
International equity securities
|
15.0% | 0.1% | 15.9% | |||||||||
Fixed income securities
|
25.0% | 0.0% | 27.5% | |||||||||
Cash
|
| 99.9% | 0.7% | |||||||||
Total
|
100.0% | 100.0% | 100.0% | |||||||||
Domestic and international equity securities include common
stock, commingled funds and partnership interests. Fixed income
securities include corporate obligations, U.S. government
and agency obligations, and commingled funds. In preparation for
the Pension Plan split effective January 1, 2011,
substantially all investments were liquidated to facilitate the
transfer of Pension Plan assets related to A. H. Belo current
and former employees to new A. H. Belo plans.
Pension Plan assets do not include any Belo common stock at
December 31, 2010 or 2009. The fair value of Plan assets is
included in Note 8.
The Pension Plan invests in various investment securities.
Investment securities are exposed to various risks such as
interest rate, market and credit risks. Due to the level of risk
associated with certain investment securities, it is at least
reasonably
PAGE
56 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
possible that changes in the values of investment securities
will occur in the near term, and that such changes could
materially affect the net assets available for benefits.
Belo also sponsors post-retirement benefit plans for certain
employees. Expense for these plans recognized in 2010, 2009 and
2008 was $76, $45, and $140, respectively.
Disclosures
subsequent to the Pension Plan Split
As discussed above, Belo and A. H. Belo agreed to split the
Pension Plan into separately-sponsored pension plans effective
January 1, 2011. Immediately following the split of the
Pension Plan, the Companys remaining unfunded liability is
estimated to be approximately $80,000 to $85,000, which is the
net unfunded pension liability for Belo current and former
employees who participate in the Pension Plan. The net unfunded
liability at December 31, 2010 was $192,087. The pension
split will also affect estimated pension expense, required
pension contributions and estimated benefit payments, as
subsequent to the pension split these amounts will solely relate
to Belo current and former employees for all plan years
beginning January 1, 2011 and thereafter.
For purposes of recording net periodic benefit cost for the year
ended December 31, 2011, the Company expects to use the
discount rate of 5.89 percent. The estimated net actuarial
loss for the Pension Plan that will be amortized from
accumulated other comprehensive income into net periodic benefit
cost in 2011 is $2,719.
Also, subsequent to the pension split, the expected benefit
payments, net of administrative expenses, under the plan are
expected to be as follows:
2011
|
$ | 10,872 | ||
2012
|
11,415 | |||
2013
|
12,214 | |||
2014
|
12,970 | |||
2015
|
13,677 | |||
Subsequent to the pension split, the Company expects to make
pension contributions in 2011 related to Belo current and former
employees only totaling approximately $15,909.
For Belo, the pension split transaction will be treated as a
settlement under ASC 715. Under settlement accounting for
pensions, the split of the Companys Pension Plan is
expected to result in a significant reduction to Belos net
unfunded pension liability, with an associated reduction in
previously unrecognized actuarial pension losses recorded as
part of accumulated other comprehensive income. Additionally,
pension-related deferred tax assets will be reduced with an
associated offset to accumulated other comprehensive income and
pension related deferred tax liabilities will be reduced with an
associated decrease in tax expense.
Based upon information available to date as of December 31,
2010, Belo currently expects to report a non-cash charge
associated with the split of the Pension Plan in the first
quarter of 2011 in the range of $19,000 to $23,000 with an
associated tax benefit in the range of $5,000 to $7,000;
however, the actual amount of the non-cash charge and associated
tax benefit is subject to change and may be more or less than
these ranges.
The non-cash charge has two primary components: the settlement
gain referred to above related to the transfer to A. H. Belo of
its portion of the net unfunded pension liability and the
settlement loss referred to above related to the immediate
recognition, upon the transfer of the Plans assets and
liabilities, of previously unrecognized actuarial pension
losses. These unrecognized losses were previously recorded as
part of accumulated other comprehensive income.
Note 8: Fair
Value Measurements
The Company adopted
ASC 820-10
for its financial assets and liabilities effective
January 1, 2008, and its non-financial assets and
liabilities effective January 1, 2009. The standard
establishes a framework for measuring fair value, clarifies the
definition of fair value and expands disclosures about
fair-value measurements. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
(i.e. the exit price). That framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (level 1
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
57
Table of Contents
Notes to
Consolidated Financial Statements
measurements) and the lowest priority to unobservable inputs
(level 3 measurements). The three levels of the fair value
hierarchy are described below:
Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access. |
Level 2 | Inputs to the valuation methodology include: |
| Quoted prices for similar assets and liabilities in active markets; | |
| Quoted prices for identical or similar assets and liabilities in inactive markets; | |
| Inputs other than quoted prices that are observable for the assets or liability; and | |
| Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
If the asset or liability has a specific contractual term,
Level 2 input must be observable for substantially the full
term of the asset or liability.
Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The assets or liabilitys fair value measurement
level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value
measurement. Valuation techniques used need to maximize the use
of observable inputs and minimize the use of unobservable inputs.
Common stocks are valued at quoted market prices based on the
closing price reported on the active market on which the stock
is traded. Corporate and U.S. government and agency
obligations are valued at the last quoted bid price. Investments
in commingled funds are recorded at fair value as determined by
the sponsor of the respective funds based upon closing market
quotes of the underlying assets.
The methods described above may produce a fair value calculation
that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Plan believes its
valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement
at the reporting date.
The primary investment objective of the Plan is to ensure, over
the long-term life of the plan, an adequate pool of assets to
support the benefit obligations to participants, retirees and
beneficiaries. A secondary objective of the plan is to achieve a
level of investment return consistent with the prudent level of
portfolio risk that will minimize the financial effect of the
Pension Plan on the Company. The investments in the Plan largely
consist of low-cost, broad-market index funds to mitigate risks
of concentration within market sectors. Each of the funds is
diversified across a wide number of securities within its stated
asset class.
The following table sets forth by level, within the fair value
hierarchy, the Pension Plans investments at fair value as
of December 31, 2010. In preparation for the Pension Plan
split effective January 1, 2011, the Company converted the
Pension Plan assets to cash and cash equivalents to effect the
transfer.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash and cash
equivalents(a)
|
$ | 379,683 | $ | | $ | | $ | 379,683 | ||||||||
Other
|
| 327 | | 327 | ||||||||||||
Total assets at fair value
|
$ | 379,683 | $ | 327 | $ | | $ | 380,010 | ||||||||
(a) | Primarily consists of pooled funds and mutual funds |
At December 31, 2009, the Pension Plan assets included a
partnership joint venture, the fair value of which was
determined by unobservable inputs (level 3). The following
table reconciles the beginning and ending balances for the
Pension Plans level 3 assets, as of December 31,
2010:
Balance at December 31, 2009
|
16 | |||
Settlement
|
(16 | ) | ||
Balance at December 31, 2010
|
| |||
PAGE
58 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
The following table sets forth by level, within the fair value
hierarchy, the Plans assets at fair value as of
December 31, 2009:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Cash and cash
equivalents(a)
|
$ | 7,089 | $ | | $ | | $ | 7,089 | ||||||||
Common
stock(b)
|
63,368 | | | 63,368 | ||||||||||||
U. S. government and agency
obligations(c)
|
35,706 | | | 35,706 | ||||||||||||
Corporate
obligations(d)
|
43,738 | | | 43,738 | ||||||||||||
Asset-backed securities
|
| 7,295 | | 7,295 | ||||||||||||
Other fixed income
securities(e)
|
3,761 | | | 3,761 | ||||||||||||
Tradestreet Small Cap Fund
|
| 21,659 | | 21,659 | ||||||||||||
EB Stock Index
Fund(f)
|
| 77,906 | | 77,906 | ||||||||||||
Management U.S. Smart Index
Fund(f)
|
| 28,479 | | 28,479 | ||||||||||||
International Equity Commingled Pooled Fund
|
| 20,582 | | 20,582 | ||||||||||||
International Equity Trust Fund
|
| 34,338 | | 34,338 | ||||||||||||
Other
|
| 184 | 16 | 200 | ||||||||||||
Total assets at fair value
|
$ | 153,662 | $ | 190,443 | $ | 16 | $ | 344,121 | ||||||||
(a) | Primarily consists of pooled funds and mutual funds | |
(b) | Primarily domestic common stocks | |
(c) | U. S. government obligations include 75% U. S. agencies with the remainder in U. S. Treasuries. | |
(d) | Primarily domestic obligations. | |
(e) | Primarily domestic private placements. | |
(f) | S&P 500 index funds |
There were no changes in fair value and there was no activity
during the year ended December 31, 2009, related to the
Pension Plans Level 3 assets, representing a
partnership in a joint venture.
Note 9:
Comprehensive Income (Loss)
For each of the three years in the period ended
December 31, 2010, total comprehensive income (loss) was
comprised as follows:
2010 | 2009 | 2008 | ||||||||||
Net earnings (loss)
|
$ | 86,906 | $ | (109,061 | ) | $ | (459,166 | ) | ||||
Other comprehensive income (loss):
|
||||||||||||
Pension liability adjustments:
|
||||||||||||
Annual adjustment, net of tax benefit of ($1,690), ($1,426) and
($69,070) in 2010, 2009 and 2008, respectively
|
(3,138 | ) | (2,649 | ) | (128,273 | ) | ||||||
Other comprehensive income (loss)
|
(3,138 | ) | (2,649 | ) | (128,273 | ) | ||||||
Comprehensive income (loss)
|
$ | 83,768 | $ | (111,710 | ) | $ | (587,439 | ) | ||||
Note 10:
Long-Term Debt
Long-term debt consists of the following at December 31,
2010 and 2009:
2010 | 2009 | |||||||
63/4% Senior
Notes Due May 30, 2013
|
$ | 175,623 | $ | 175,499 | ||||
8% Senior Notes Due November 15, 2016
|
270,488 | 269,720 | ||||||
73/4% Senior
Debentures Due June 1, 2027
|
200,000 | 200,000 | ||||||
71/4% Senior
Debentures Due September 15, 2027
|
240,000 | 240,000 | ||||||
Fixed-rate debt
|
886,111 | 885,219 | ||||||
Revolving credit agreement, including short-term unsecured notes
|
11,000 | 143,000 | ||||||
Total
|
$ | 897,111 | $ | 1,028,219 | ||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
59
Table of Contents
Notes to
Consolidated Financial Statements
The Companys long-term debt maturities are as follows:
2011
|
$ | | ||
2012
|
11,000 | |||
2013
|
175,623 | |||
2014
|
| |||
2015 and thereafter
|
710,488 | |||
Total
|
$ | 897,111 | ||
The combined weighted average effective interest rate for these
debt instruments was 7.4 percent and 7.0 percent as of
December 31, 2010 and 2009, respectively. The weighted
average effective interest rate for the fixed rate debt was
7.5 percent for each of the years ended December 31,
2010 and 2009. At December 31, 2010 and 2009, the fair
value of Belos fixed-rate debt was estimated to be
$865,482 and $796,984, respectively, using quoted market prices
and yields obtained through independent pricing sources, taking
into consideration the underlying terms of the debt, such as the
coupon rate and term to maturity. The increase in the fair value
is related to improved company operating performance and overall
market conditions.
On August 12, 2010, the Company amended the Amended 2009
Credit Agreement to decrease the borrowing capacity under the
agreement from $460,750 to $205,000, earlier than previously
scheduled. In connection with the decrease in capacity, the
Company recorded a charge of $1,225 related to the write-off of
debt issuance costs. This charge is included in interest expense.
On November 16, 2009, the Company entered into an Amended
and Restated $460,750 Competitive Advance and Revolving Credit
Facility Agreement with JPMorgan Chase Bank, N.A.,
J.P. Morgan Securities Inc., Banc of America Securities
LLC, Bank of America, N.A. and other lenders, which matures upon
expiration of the agreement on December 31, 2012 (the
Amended 2009 Credit Agreement). The Amended 2009 Credit
Agreement amended and restated the Companys existing
Amended and Restated $550,000 Five-Year Competitive Advance and
Revolving Credit Facility Agreement (the 2009 Credit Agreement).
The amendment reduced the total amount of the Credit Agreement
to $460,750 through June 7, 2011, then to $205,000 through
the end of the agreement. Additionally, it modified certain
other terms and conditions. The facility may be used for working
capital and other general corporate purposes, including letters
of credit. The Amended 2009 Credit Agreement is guaranteed by
the 100%-owned subsidiaries of the Company. Revolving credit
borrowings under the Amended 2009 Credit Agreement bear interest
at a variable interest rate based on either LIBOR or a base
rate, in either case plus an applicable margin that varies
depending upon the Companys leverage ratio. Competitive
advance borrowings bear interest at a rate obtained from bids
selected in accordance with JPMorgan Chase Banks standard
competitive advance procedures. Commitment fees of up to
0.75 percent per year of the total unused commitment,
depending on the Companys leverage ratio, accrue and are
payable under the facility.
The Company is required to maintain certain leverage and
interest ratios specified in the 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. For the term of the agreement, the maximum
allowed leverage ratios, minimum required interest coverage
ratios and maximum allowed senior leverage ratios are as follows:
Minimum |
Maximum |
|||||||||||||
Maximum
Allowed |
Required
Interest |
Allowed Senior |
||||||||||||
From | To | Leverage Ratio | Coverage Ratio | Leverage Ratio | ||||||||||
December 31, 2010
|
March 30, 2012 | 7.25 | 1.50 | 1.50 | ||||||||||
March 31, 2012
|
June 29, 2012 | 7.00 | 1.50 | 1.50 | ||||||||||
June 30, 2012
|
September 29, 2012 | 6.75 | 1.75 | 1.50 | ||||||||||
September 30, 2012
|
Thereafter | 6.25 | 1.75 | 1.50 | ||||||||||
While Belo was well within these limits at December 31,
2010, the failure in the future to comply with the covenants in
the agreements governing the terms of our indebtedness could be
an event of default which, if not cured or waived, would permit
acceleration of all our indebtedness and payment obligations.
The Amended 2009 Credit Agreement contains additional covenants
that are usual and customary for credit facilities of this type,
including limits on dividends, bond repurchases, acquisitions
and investments. The Amended 2009 Credit Agreement does not
permit share repurchases. Under the covenant related to
dividends, the Company may declare its usual and customary
dividend if its leverage ratio is then below 4.75. At a leverage
ratio between 4.75 and 5.25, the Company may declare a dividend
not to exceed 50 percent of the usual and customary amount.
The Company may not declare a dividend if its leverage ratio
exceeds 5.25.
PAGE
60 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
At December 31, 2010, the Companys leverage ratio was
3.7, its interest coverage ratio was 3.2 and its senior leverage
ratio was 0.04. As of December 31, 2010, the balance
outstanding under the Amended 2009 Credit Agreement was $11,000,
the weighted average interest rate was 3.0 percent, and all
unused borrowings were available for borrowing. At
December 31, 2010, the Company was in compliance with all
debt covenant requirements.
In November 2009, Belo issued $275,000 of 8% Senior Notes
due November 15, 2016, at a discount of approximately
$5,346. Interest on these 8% Senior Notes is due
semi-annually on May 15 and November 15 of each year. The Senior
Notes are guaranteed by the 100%-owned subsidiaries of the
Company. The Company may redeem the 8% Senior Notes at its
option at any time in whole or from time to time in part at a
redemption price calculated in accordance with the indenture
under which the notes were issued. The net proceeds were used to
repay debt previously outstanding under Belos revolving
credit facility. The $5,346 discount associated with the
issuance of these 8% Senior Notes is being amortized over
the term of the 8% Senior Notes using the effective
interest rate method. As of December 31, 2010, the
unamortized discount was $4,512.
In 2009, the Company purchased $40,500 of its outstanding
63/4% Senior
Notes due May 30, 2013, for a total cost of $25,260 and a
net gain of $14,905. These purchases were funded with borrowings
under the credit facility.
On February 26, 2009, the Company entered into an Amended
and Restated $550,000 Five-Year Competitive Advance and
Revolving Credit Facility Agreement with JPMorgan Chase Bank,
N.A., J.P. Morgan Securities Inc., Banc of America
Securities LLC, Bank of America, N.A. and other lenders. The
2009 Credit Agreement amended and restated the Companys
then existing Amended and Restated $600,000 Five-Year
Competitive Advance and Revolving Credit Facility Agreement (the
2008 Credit Agreement). The amendment reduced the total amount
of the Credit Agreement and modified certain other terms and
conditions. The facility was available for working capital and
other general corporate purposes, including letters of credit.
The 2009 Credit Agreement was guaranteed by the material
subsidiaries of the Company. Revolving credit borrowings under
the 2009 Credit Agreement bore interest at a variable interest
rate based on either LIBOR or a base rate, in either case plus
an applicable margin that varied depending upon the
Companys leverage ratio. Competitive advance borrowings
bore interest at a rate obtained from bids selected in
accordance with JPMorgan Chase Banks standard competitive
advance procedures. Commitment fees of up to 0.5 percent
per year of the total unused commitment, depending on the
Companys leverage ratio, accrued and were payable under
the facility. This 2009 Credit Agreement was amended and
restated in November 2009, as discussed above.
In 2008, the Company redeemed its 8% Senior Notes due
November 1, 2008, with borrowings under the credit
facility. Additionally in 2008, the Company repurchased $33,575
of its outstanding
63/4% Senior
Notes due May 30, 2013, and $10,000 of its outstanding
71/4% Senior
Debentures due September 15, 2027, for a total cost of
$26,787 and a net gain of $16,407. These repurchases were funded
with borrowings under the credit facility.
During 2010, 2009 and 2008, cash paid for interest, net of
amounts capitalized, was $71,993, $58,414 and $85,077,
respectively. At December 31, 2010, Belo had outstanding
letters of credit of $10,032 issued in the ordinary course of
business.
Note 11:
Supplemental Guarantor Information
In November 2009, the Company issued Senior Notes that are fully
and unconditionally guaranteed by each of the Companys
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 consolidated statements of cash flows of Belo
as parent, the guarantor subsidiaries consisting of Belos
current 100%-owned subsidiaries, non-guarantor subsidiaries
consisting of subsidiaries no longer owned by Belo, and
eliminations necessary to arrive at the Companys
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.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
61
Table of Contents
Notes to
Consolidated Financial Statements
Condensed
Consolidating Statement of Operations
For the Year
Ended December 31, 2010
(in
thousands)
Guarantor |
||||||||||||||||
Parent | Subsidiaries | Eliminations | Total | |||||||||||||
Net Operating Revenues
|
$ | | $ | 687,395 | $ | | $ | 687,395 | ||||||||
Operating Costs and Expenses
|
||||||||||||||||
Station salaries, wages and employee benefits
|
| 209,945 | | 209,945 | ||||||||||||
Station programming and other operating costs
|
| 199,304 | | 199,304 | ||||||||||||
Corporate operating costs
|
32,676 | 3,811 | | 36,487 | ||||||||||||
Pension contribution reimbursements
|
(8,572 | ) | | | (8,572 | ) | ||||||||||
Depreciation
|
1,766 | 32,927 | | 34,693 | ||||||||||||
Total operating costs and expenses
|
25,870 | 445,987 | | 471,857 | ||||||||||||
Earnings (loss) from operations
|
(25,870 | ) | 241,408 | | 215,538 | |||||||||||
Other Income and Expense
|
||||||||||||||||
Interest expense
|
(77,778 | ) | (117 | ) | | (77,895 | ) | |||||||||
Intercompany interest
|
6,850 | (6,850 | ) | | | |||||||||||
Other income (expense), net
|
1,080 | 297 | | 1,377 | ||||||||||||
Total other income and expense
|
(69,848 | ) | (6,670 | ) | | (76,518 | ) | |||||||||
Earnings (loss) before income taxes
|
(95,718 | ) | 234,738 | | 139,020 | |||||||||||
Income tax (expense) benefit
|
38,449 | (90,563 | ) | | (52,114 | ) | ||||||||||
Equity in earnings (loss) of subsidiaries
|
144,175 | | (144,175 | ) | | |||||||||||
Net earnings
|
$ | 86,906 | $ | 144,175 | $ | (144,175 | ) | $ | 86,906 | |||||||
Condensed
Consolidating Statement of Operations
For the Year
Ended December 31, 2009
(in
thousands)
Guarantor |
||||||||||||||||
Parent | Subsidiaries | Eliminations | Total | |||||||||||||
Net Operating Revenues
|
$ | | $ | 590,267 | $ | | $ | 590,267 | ||||||||
Operating Costs and Expenses
|
||||||||||||||||
Station salaries, wages and employee benefits
|
| 191,003 | | 191,003 | ||||||||||||
Station programming and other operating costs
|
| 200,215 | | 200,215 | ||||||||||||
Corporate operating costs
|
25,687 | 4,215 | | 29,902 | ||||||||||||
Depreciation
|
3,300 | 38,355 | | 41,655 | ||||||||||||
Impairment charge
|
| 242,144 | | 242,144 | ||||||||||||
Total operating costs and expenses 28,987
|
28,987 | 675,932 | | 704,919 | ||||||||||||
Loss from operations
|
(28,987 | ) | (85,665 | ) | | (114,652 | ) | |||||||||
Other Income and Expense
|
||||||||||||||||
Interest expense
|
(63,774 | ) | (146 | ) | | (63,920 | ) | |||||||||
Intercompany interest
|
6,850 | (6,850 | ) | | | |||||||||||
Other income (expense), net
|
12,665 | (224 | ) | | 12,441 | |||||||||||
Total other income and expense
|
(44,259 | ) | (7,220 | ) | | (51,479 | ) | |||||||||
Loss before income taxes
|
(73,246 | ) | (92,885 | ) | | (166,131 | ) | |||||||||
Income tax benefit
|
27,515 | 29,555 | | 57,070 | ||||||||||||
Equity in earnings (loss) of subsidiaries
|
(63,330 | ) | | 63,330 | | |||||||||||
Net earnings (loss)
|
$ | (109,061 | ) | $ | (63,330 | ) | $ | 63,330 | $ | (109,061 | ) | |||||
PAGE
62 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
Condensed
Consolidating Statement of Operations
For the Year
Ended December 31, 2008
(in
thousands)
Non |
||||||||||||||||||||
Guarantor |
Guarantor |
|||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
Net Operating Revenues
|
$ | | $ | 733,470 | $ | | $ | | $ | 733,470 | ||||||||||
Operating Costs and Expenses
|
||||||||||||||||||||
Station salaries, wages and employee benefits
|
| 231,256 | | | 231,256 | |||||||||||||||
Station programming and other operating costs
|
| 218,241 | | | 218,241 | |||||||||||||||
Corporate operating costs
|
27,759 | 4,476 | | | 32,235 | |||||||||||||||
Spin-off related costs
|
4,659 | | | | 4,659 | |||||||||||||||
Depreciation
|
4,133 | 38,760 | | | 42,893 | |||||||||||||||
Impairment charge
|
| 662,151 | | | 662,151 | |||||||||||||||
Total operating costs and expenses
|
36,551 | 1,154,884 | | | 1,191,435 | |||||||||||||||
Loss from operations
|
(36,551 | ) | (421,414 | ) | | | (457,965 | ) | ||||||||||||
Other Income and Expense
|
||||||||||||||||||||
Interest expense
|
(82,917 | ) | (176 | ) | | | (83,093 | ) | ||||||||||||
Intercompany interest
|
14,479 | (14,479 | ) | | | | ||||||||||||||
Other income (expense), net
|
20,171 | (325 | ) | | | 19,846 | ||||||||||||||
Total other income and expense
|
(48,267 | ) | (14,980 | ) | | | (63,247 | ) | ||||||||||||
Loss from continuing operations before income taxes
|
(84,818 | ) | (436,394 | ) | | | (521,212 | ) | ||||||||||||
Income tax benefit
|
12,773 | 54,269 | | | 67,042 | |||||||||||||||
Equity in earnings (loss) of subsidiaries
|
(387,121 | ) | | | 387,121 | | ||||||||||||||
Net earnings (loss) from continuing operations
|
(459,166 | ) | (382,125 | ) | | 387,121 | (454,170 | ) | ||||||||||||
Loss from discontinued operations, net of tax
|
| | (4,996 | ) | | (4,996 | ) | |||||||||||||
Net earnings (loss)
|
$ | (459,166 | ) | $ | (382,125 | ) | $ | (4,996 | ) | $ | 387,121 | $ | (459,166 | ) | ||||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
63
Table of Contents
Notes to
Consolidated Financial Statements
Condensed
Consolidating Balance Sheet
As of
December 31, 2010
(in
thousands)
Guarantor |
||||||||||||||||
Parent | Subsidiaries | Eliminations | Total | |||||||||||||
Assets
|
||||||||||||||||
Current assets:
|
||||||||||||||||
Cash and temporary cash investments
|
$ | 5,290 | $ | 3,019 | $ | | $ | 8,309 | ||||||||
Accounts receivable, net
|
190 | 144,802 | | 144,992 | ||||||||||||
Income tax receivable
|
37,921 | | | 37,921 | ||||||||||||
Deferred income taxes
|
44 | 1,869 | | 1,913 | ||||||||||||
Short-term broadcast rights
|
| 7,408 | | 7,408 | ||||||||||||
Prepaid and other current assets
|
6,399 | 3,854 | | 10,253 | ||||||||||||
Total current assets
|
49,844 | 160,952 | 210,796 | |||||||||||||
Property, plant and equipment, net
|
3,877 | 160,562 | | 164,439 | ||||||||||||
Intangible assets, net
|
| 725,399 | | 725,399 | ||||||||||||
Goodwill, net
|
| 423,873 | | 423,873 | ||||||||||||
Deferred income taxes
|
70,736 | | (70,736 | ) | | |||||||||||
Intercompany receivable
|
238,189 | | (238,189 | ) | | |||||||||||
Investment in subsidiaries
|
926,781 | | (926,781 | ) | | |||||||||||
Other assets
|
38,422 | 27,461 | | 65,883 | ||||||||||||
Total assets
|
$ | 1,327,849 | $ | 1,498,247 | $ | (1,235,706 | ) | $ | 1,590,390 | |||||||
Liabilities and Shareholders Equity
|
||||||||||||||||
Current liabilities:
|
||||||||||||||||
Accounts payable
|
$ | 9,884 | $ | 10,860 | $ | | $ | 20,744 | ||||||||
Accrued compensation and benefits
|
12,357 | 14,203 | | 26,560 | ||||||||||||
Short-term film obligations
|
| 7,928 | | 7,928 | ||||||||||||
Other accrued expenses
|
11,453 | 6,333 | | 17,786 | ||||||||||||
Short-term pension obligation
|
36,571 | | | 36,571 | ||||||||||||
Income taxes payable
|
13,701 | | | 13,701 | ||||||||||||
Deferred revenue
|
| 3,505 | | 3,505 | ||||||||||||
Accrued interest payable
|
10,405 | | | 10,405 | ||||||||||||
Total current liabilities
|
94,371 | 42,829 | 137,200 | |||||||||||||
Long-term debt
|
897,111 | | | 897,111 | ||||||||||||
Deferred income taxes
|
| 277,501 | (70,736 | ) | 206,765 | |||||||||||
Pension obligation
|
155,510 | | | 155,510 | ||||||||||||
Intercompany payable
|
| 238,189 | (238,189 | ) | | |||||||||||
Other liabilities
|
10,215 | 12,947 | | 23,162 | ||||||||||||
Total shareholders equity
|
170,642 | 926,781 | (926,781 | ) | 170,642 | |||||||||||
Total liabilities and shareholders equity
|
$ | 1,327,849 | $ | 1,498,247 | $ | (1,235,706 | ) | $ | 1,590,390 | |||||||
PAGE
64 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
Condensed
Consolidating Balance Sheet
As of
December 31, 2009
(in
thousands)
Guarantor |
||||||||||||||||
Parent | Subsidiaries | Eliminations | Total | |||||||||||||
Assets
|
||||||||||||||||
Current assets:
|
||||||||||||||||
Cash and temporary cash investments
|
$ | 3,646 | $ | 1,154 | $ | | $ | 4,800 | ||||||||
Accounts receivable, net
|
361 | 139,550 | | 139,911 | ||||||||||||
Deferred income taxes
|
| 8,072 | | 8,072 | ||||||||||||
Short-term broadcast rights
|
| 8,132 | | 8,132 | ||||||||||||
Prepaid and other current assets
|
11,193 | 4,016 | | 15,209 | ||||||||||||
Total current assets
|
15,200 | 160,924 | 176,124 | |||||||||||||
Property, plant and equipment, net
|
4,655 | 172,820 | | 177,475 | ||||||||||||
Intangible assets, net
|
| 725,399 | | 725,399 | ||||||||||||
Goodwill, net
|
| 423,873 | | 423,873 | ||||||||||||
Deferred income taxes
|
77,210 | | (77,210 | ) | | |||||||||||
Intercompany receivable
|
442,306 | | (442,306 | ) | | |||||||||||
Investment in subsidiaries
|
782,606 | | (782,606 | ) | | |||||||||||
Other assets
|
51,594 | 29,996 | | 81,590 | ||||||||||||
Total assets
|
$ | 1,373,571 | $ | 1,513,012 | $ | (1,302,122 | ) | $ | 1,584,461 | |||||||
Liabilities and Shareholders Equity
|
||||||||||||||||
Current liabilities:
|
||||||||||||||||
Accounts payable
|
$ | 10,882 | $ | 9,854 | $ | | $ | 20,736 | ||||||||
Accrued compensation and benefits
|
5,427 | 7,815 | | 13,242 | ||||||||||||
Short-term film obligations
|
| 11,036 | | 11,036 | ||||||||||||
Other accrued expenses
|
11,754 | 5,890 | 17,644 | |||||||||||||
Short-term pension obligation
|
14,277 | | | 14,277 | ||||||||||||
Income taxes payable
|
12,052 | | | 12,052 | ||||||||||||
Deferred revenue
|
| 4,228 | | 4,228 | ||||||||||||
Accrued interest payable
|
10,682 | | | 10,682 | ||||||||||||
Total current liabilities
|
65,074 | 38,823 | 103,897 | |||||||||||||
Long-term debt
|
1,028,219 | | | 1,028,219 | ||||||||||||
Deferred income taxes
|
| 236,067 | (77,210 | ) | 158,857 | |||||||||||
Pension obligation
|
182,065 | | | 182,065 | ||||||||||||
Intercompany payable
|
| 442,306 | (442,306 | ) | | |||||||||||
Other liabilities
|
15,351 | 13,210 | | 28,561 | ||||||||||||
Total shareholders equity
|
82,862 | 782,606 | (782,606 | ) | 82,862 | |||||||||||
Total liabilities and shareholders equity
|
$ | 1,373,571 | $ | 1,513,012 | (1,302,122 | ) | $ | 1,584,461 | ||||||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
65
Table of Contents
Notes to
Consolidated Financial Statements
Condensed
Consolidating Statement of Cash Flows
For the Year
Ended December 31, 2010
(in
thousands)
Guarantor |
||||||||||||
Parent | Subsidiaries | Total | ||||||||||
Operations
|
||||||||||||
Net cash provided by (used for) operations
|
$ | (12,561 | ) | $ | 156,026 | $ | 143,465 | |||||
Investments
|
||||||||||||
Capital expenditures
|
(1,686 | ) | (13,282 | ) | (14,968 | ) | ||||||
Other investments, net
|
3,524 | 3,296 | 6,820 | |||||||||
Net cash provided by (used for) investments
|
1,838 | (9,986 | ) | (8,148 | ) | |||||||
Financing
|
||||||||||||
Net proceeds from revolving debt
|
49,700 | | 49,700 | |||||||||
Payments on revolving debt
|
(181,700 | ) | | (181,700 | ) | |||||||
Net proceeds from exercise of stock options
|
99 | | 99 | |||||||||
Excess tax benefit from option exercises
|
93 | | 93 | |||||||||
Intercompany activity
|
144,175 | (144,175 | ) | | ||||||||
Net cash provided by (used for) financing
|
12,367 | (144,175 | ) | (131,808 | ) | |||||||
Net increase in cash and temporary cash investments
|
1,644 | 1,865 | 3,509 | |||||||||
Cash and temporary cash investments at beginning of period
|
3,646 | 1,154 | 4,800 | |||||||||
Cash and temporary cash investments at end of period
|
$ | 5,290 | $ | 3,019 | $ | 8,309 | ||||||
Condensed
Consolidating Statement of Cash Flows
For the Year
Ended December 31, 2009
(in
thousands)
Guarantor |
||||||||||||
Parent | Subsidiaries | Total | ||||||||||
Operations
|
||||||||||||
Net cash provided by operations
|
$ | 9,169 | $ | 70,753 | $ | 79,922 | ||||||
Investments
|
||||||||||||
Capital expenditures
|
(1,072 | ) | (8,117 | ) | (9,189 | ) | ||||||
Other investments, net
|
874 | 2,166 | 3,040 | |||||||||
Net cash used for investments
|
(198 | ) | (5,951 | ) | (6,149 | ) | ||||||
Financing
|
||||||||||||
Net proceeds from revolving debt
|
119,853 | | 119,853 | |||||||||
Payments on revolving debt
|
(423,800 | ) | | (423,800 | ) | |||||||
Net proceeds from issuance of senior notes
|
269,654 | | 269,654 | |||||||||
Purchase of senior notes
|
(25,260 | ) | | (25,260 | ) | |||||||
Payment of dividends on common stock
|
(15,375 | ) | | (15,375 | ) | |||||||
Net proceeds from exercise of stock options
|
118 | | 118 | |||||||||
Excess tax benefit from option exercises
|
67 | | 67 | |||||||||
Intercompany activity
|
64,826 | (64,826 | ) | | ||||||||
Net cash provided by (used for) financing
|
(9,917 | ) | (64,826 | ) | (74,743 | ) | ||||||
Net increase (decrease) in cash and temporary cash investments
|
(946 | ) | (24 | ) | (970 | ) | ||||||
Cash and temporary cash investments at beginning of period
|
4,592 | 1,178 | 5,770 | |||||||||
Cash and temporary cash investments at end of period
|
$ | 3,646 | $ | 1,154 | $ | 4,800 | ||||||
PAGE
66 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
Condensed
Consolidating Statement of Cash Flows
For the Year
Ended December 31, 2008
(in
thousands)
Non |
||||||||||||||||
Guarantor |
Guarantor |
|||||||||||||||
Parent | Subsidiaries | Subsidiaries | Total | |||||||||||||
Operations
|
||||||||||||||||
Net cash provided by (used for) continuing operations
|
$ | (103,092 | ) | $ | 230,741 | $ | | $ | 127,649 | |||||||
Net cash used for discontinued operations
|
| | (18,321 | ) | (18,321 | ) | ||||||||||
Net cash provided by (used for) operations
|
(103,092 | ) | 230,741 | (18,321 | ) | 109,328 | ||||||||||
Investments
|
||||||||||||||||
Capital expenditures
|
(8,390 | ) | (16,969 | ) | | (25,359 | ) | |||||||||
Other investments, net
|
1,330 | (1,398 | ) | | (68 | ) | ||||||||||
Net cash used for investments of continuing operations
|
(7,060 | ) | (18,367 | ) | | (25,427 | ) | |||||||||
Net cash used for investments of discontinued operations
|
| | (304 | ) | (304 | ) | ||||||||||
Net cash used for investments
|
(7,060 | ) | (18,367 | ) | (304 | ) | (25,731 | ) | ||||||||
Financing
|
||||||||||||||||
Net proceeds from revolving debt
|
669,745 | | | 669,745 | ||||||||||||
Payments on revolving debt
|
(351,795 | ) | | | (351,795 | ) | ||||||||||
Redemption of senior notes
|
(350,000 | ) | | | (350,000 | ) | ||||||||||
Purchase of senior notes
|
(26,787 | ) | | | (26,787 | ) | ||||||||||
Payment of dividends on common stock
|
(35,767 | ) | | | (35,767 | ) | ||||||||||
Purchase of treasury stock
|
(2,203 | ) | | | (2,203 | ) | ||||||||||
Intercompany activity
|
201,168 | (212,003 | ) | 10,835 | | |||||||||||
Net cash provided by (used for) financing
|
104,361 | (212,003 | ) | 10,835 | (96,807 | ) | ||||||||||
Net increase (decrease) in cash and temporary cash investments
|
(5,791 | ) | 371 | (7,790 | ) | (13,210 | ) | |||||||||
Cash and temporary cash investments at beginning of period
|
10,383 | 807 | 7,790 | 18,980 | ||||||||||||
Cash and temporary cash investments at end of period
|
$ | 4,592 | $ | 1,178 | $ | | $ | 5,770 | ||||||||
Note 12:
Common and Preferred Stock
The total number of authorized shares of common stock is
450,000,000 shares. The Company has two series of common
stock outstanding, Series A and Series B, each with a
par value of $1.67 per share. The Series A and
Series B shares are identical except as noted herein.
Series B shares are entitled to 10 votes per share on all
matters submitted to a vote of shareholders, while the
Series A shares are entitled to one vote per share.
Series B shares are convertible at any time on a
one-for-one
basis into Series A shares but Series A shares are not
convertible into Series B shares. Shares of Belos
Series A common stock are traded on the New York Stock
Exchange (NYSE symbol: BLC). There is no established public
trading market for shares of Series B common stock.
Transferability of the Series B shares is limited to family
members and affiliated entities of the holder. Upon any other
type of transfer, the Series B shares automatically convert
into Series A shares.
The Company has a stock repurchase program pursuant to
authorization from Belos Board of Directors on
December 9, 2005. There is no expiration date for this
repurchase program. The remaining authorization for the
repurchase of shares as of December 31, 2010, under this
authority was 13,030,716 shares. The Amended 2009 Credit
Agreement, which became effective November 16, 2009, does
not permit share repurchases. There were no share repurchases in
2010 or 2009. For the year ended December 31, 2008,
191,000 shares were repurchased at an aggregate cost of
$2,203.
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
67
Table of Contents
Notes to
Consolidated Financial Statements
Note 13:
Earnings Per Share
The following table sets forth the reconciliation between
weighted average shares used for calculating basic and diluted
earnings per share for the three years in the period ended
December 31, 2010 (in thousands, except per share amounts):
2010 | 2009 | 2008 | ||||||||||
Income (loss) (Numerator)
|
||||||||||||
Net earnings (loss)
|
$ | 86,906 | $ | (109,061 | ) | $ | (459,166 | ) | ||||
Less: Income to participating securities
|
(1,303 | ) | (79 | ) | (344 | ) | ||||||
Income (loss) available to common stockholders
|
85,603 | (109,140 | ) | (459,510 | ) | |||||||
Effect of dilutive securities
|
5 | | | |||||||||
Income available to common stockholders plus assumed conversions
|
$ | 85,608 | $ | (109,140 | ) | $ | (459,510 | ) | ||||
Shares (Denominator)
|
||||||||||||
Weighted average shares outstanding (basic)
|
103,026 | 102,491 | 102,219 | |||||||||
Dilutive effect of employee stock options
|
411 | | | |||||||||
Dilutive effect of restricted stock units (RSU)
|
| | | |||||||||
Adjusted weighted average shares outstanding
|
103,437 | 102,491 | 102,219 | |||||||||
Earnings (loss) per share:
|
||||||||||||
Basic
|
$ | 0.83 | $ | (1.06 | ) | $ | (4.50 | ) | ||||
Diluted
|
$ | 0.83 | $ | (1.06 | ) | $ | (4.50 | ) | ||||
Potential dilutive common shares were antidilutive as a result
of the Companys net loss from continuing operations for
the years ended December 31, 2009 and 2008. As a result,
basic weighted average shares were used in the calculations of
basic net earnings per share and diluted earnings per share.
For the year ended December 31, 2010, the Company excluded
9,174 options and 337 RSUs because to include them would be
antidilutive. For the year ended December 31, 2009, the
Company excluded 10,638 options and 1,895 RSUs due to the net
loss from continuing operations. For the year ended
December 31, 2008, the Company excluded 12,897 options and
2,056 RSUs due to the net loss from continuing operations.
Note 14:
Income Taxes
Income tax expense (benefit) for the years ended
December 31, 2010, 2009 and 2008 consists of the following:
2010 | 2009 | 2008 | ||||||||||
Current:
|
||||||||||||
Federal
|
$ | (5,562 | ) | $ | 5,700 | $ | 42,800 | |||||
State
|
1,920 | 849 | 3,064 | |||||||||
Total current
|
(3,642 | ) | 6,549 | 45,864 | ||||||||
Deferred
|
||||||||||||
Federal
|
52,369 | (62,824 | ) | (106,991 | ) | |||||||
State
|
3,387 | (795 | ) | (5,915 | ) | |||||||
Total deferred
|
55,756 | (63,619 | ) | (112,906 | ) | |||||||
Total income tax expense (benefit)
|
$ | 52,114 | $ | (57,070 | ) | $ | (67,042 | ) | ||||
Income tax expense (benefit) for the years ended
December 31, 2010, 2009 and 2008 differs from amounts
computed by applying the applicable U.S. federal income tax
rate as follows:
2010 | 2009 | 2008 | ||||||||||
Computed expected income tax expense (benefit)
|
$ | 48,657 | $ | (58,146 | ) | $ | (182,424 | ) | ||||
State income tax expense (benefit)
|
3,478 | 65 | (1,849 | ) | ||||||||
Spin-off related tax charge
|
| | 18,235 | |||||||||
Goodwill impairment
|
| | 97,166 | |||||||||
Other
|
(21 | ) | 1,011 | 1,830 | ||||||||
Total income tax expense (benefit)
|
$ | 52,114 | $ | (57,070 | ) | $ | (67,042 | ) | ||||
Effective income tax rate
|
37.5% | 34.4% | 12.9% | |||||||||
PAGE
68 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
Significant components of Belos deferred tax liabilities
and assets as of December 31, 2010 and 2009, are as follows:
2010 | 2009 | |||||||
Deferred tax liabilities:
|
||||||||
Excess tax amortization
|
$ | 268,007 | $ | 221,134 | ||||
Excess tax depreciation
|
13,683 | 13,078 | ||||||
Expenses deductible for tax purposes in a year different from
the year accrued
|
24,014 | 15,178 | ||||||
Other
|
| | ||||||
Total deferred tax liabilities
|
305,704 | 249,390 | ||||||
Deferred tax assets:
|
||||||||
Deferred compensation and benefits
|
11,334 | 12,524 | ||||||
State taxes
|
5,946 | 5,104 | ||||||
Accrued pension liability
|
76,851 | 75,161 | ||||||
Expenses deductible for tax purposes in a year different from
the year accrued
|
3,280 | 3,575 | ||||||
Other
|
3,441 | 2,241 | ||||||
Total deferred tax assets
|
100,852 | 98,605 | ||||||
Net deferred tax liability
|
$ | 204,852 | $ | 150,785 | ||||
In 2007, Belo applied for a change in accounting method with the
Internal Revenue Service (IRS) related to the deduction of
amortization expense associated with certain intangibles. In
November of 2010, the Company received a consent letter from the
IRS approving the change in accounting method and subsequently
filed an amendment to its 2007 federal tax return. Pending final
review by the IRS and related authorities, the amended return is
expected to result in a tax refund of approximately $30,000 for
the Company.
On January 1, 2007, the Company adopted
ASC 740-10.
ASC 740-10
clarifies the accounting and disclosure requirements for
uncertainty in tax positions as defined by the standard. In
connection with the adoption of the standard, the Company
analyzed its filing positions in all significant jurisdictions
where it is required to file income tax returns for the open tax
years in such jurisdictions. The Company has identified as major
tax jurisdictions, as defined, its federal income tax return and
its state income tax returns in five states. The Companys
federal income tax returns for the years subsequent to
December 31, 2005, remain subject to examination. The
Companys income tax returns in major state income tax
jurisdictions remain subject to examination for various periods
subsequent to December 31, 2005.
The table below summarizes the change in reserve for uncertain
tax positions, excluding related accrued interest and penalties.
2010 | 2009 | |||||||
Balance at January 1
|
$ | 2,948 | $ | 2,343 | ||||
Increases in tax positions for prior years
|
1,300 | 605 | ||||||
Balance at end of year
|
$ | 4,248 | $ | 2,948 | ||||
The entire reserve for uncertain tax positions of $4,248 and
$2,948 as of December 31, 2010 and 2009, respectively,
would affect the Companys effective tax rate if and when
recognized in future years. The Company recognizes interest and
penalty charges related to the reserve for uncertain tax
positions as interest expense. For the years ended
December 31, 2010 and 2009, the Company recognized interest
and penalties of $86 and $210, respectively. As of
December 31, 2010 and 2009, the Company has recorded
liabilities for accrued interest and penalties of $296 and $297,
respectively.
Note 15: Commitments
The Company has entered into commitments for broadcast rights
that are not currently available for broadcast and are therefore
not recorded in the financial statements. In addition, the
Company has contractual obligations for capital
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
69
Table of Contents
Notes to
Consolidated Financial Statements
expenditures that primarily relate to television broadcast
equipment. The table below summarizes the following specified
commitments of the Company as of December 31, 2010:
Nature of Commitment | Total | 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | |||||||||||||||||||||
Broadcast rights and programming
|
$ | 131,007 | $ | 56,591 | $ | 31,475 | $ | 25,205 | $ | 16,086 | $ | 1,650 | $ | | ||||||||||||||
Capital expenditures and licenses
|
110 | 110 | | | | | | |||||||||||||||||||||
Non-cancelable operating leases
|
12,467 | 2,408 | 2,223 | 1,588 | 1,316 | 1,026 | 3,906 | |||||||||||||||||||||
Total
|
$ | 143,584 | $ | 59,109 | $ | 33,698 | $ | 26,793 | $ | 17,402 | $ | 2,676 | $ | 3,906 | ||||||||||||||
Total lease expense for property and equipment was $5,320,
$6,295 and $8,268 in 2010, 2009 and 2008, respectively.
Note 16:
Contingent Liabilities
Under the terms of the separation and distribution agreement
between the Company and A. H. Belo, A. H. Belo has agreed to
indemnify the Company for any liability arising out of the
lawsuits described in the following two paragraphs.
On October 24, 2006, 18 former employees of The Dallas
Morning News filed a lawsuit against The Dallas Morning
News, the Company, and others in the United States District
Court for the Northern District of Texas. The plaintiffs
lawsuit mainly consists of claims of unlawful discrimination and
alleged ERISA violations. In June 2007, the court issued a
memorandum order granting in part and denying in part
defendants motion to dismiss. In August 2007 and March
2009, the Court dismissed certain additional claims. A summary
judgment motion seeking dismissal of all remaining claims
against all defendants is pending. A trial date is tentatively
set for September 2011. The Company believes the lawsuit is
without merit and is vigorously defending against it.
On April 13, 2009, four former independent contractor
newspaper carriers of The Press-Enterprise, on behalf of
themselves and other similarly situated individuals, filed a
purported
class-action
lawsuit against A. H. Belo, Belo, Press Enterprise Company, and
as yet unidentified defendants in the Superior Court of the
State of California, County of Riverside. The complaint alleges
that the defendants violated California laws by allegedly
improperly categorizing the plaintiffs and the purported class
members as independent contractors rather than employees, and in
doing so, allegedly failed to pay minimum, hourly and overtime
wages to the purported class members and allegedly failed to
comply with other laws and regulations applicable to an
employer-employee relationship. Plaintiffs and purported class
members sought minimum wages, unpaid regular and overtime wages,
unpaid rest break and meal period compensation, reimbursement of
expenses and losses incurred by them in discharging their
duties, payment of minimum wage to all employees who failed to
receive minimum wage for all hours worked in each payroll
period, penalties, injunctive and other equitable relief, and
reasonable attorneys fees and costs. On May 5, 2010,
A. H. Belo and the other parties to the lawsuit reached a
preliminary agreement to settle the lawsuit. The Court granted
final approval on February 25, 2011. No payment was
required of the Company.
In addition to the proceedings disclosed above, a number of
other legal proceedings are pending against the Company,
including several actions for alleged libel
and/or
defamation. In the opinion of management, liabilities, if any,
arising from these other legal proceedings would not have a
material adverse effect on the consolidated results of
operations, liquidity or financial position of the Company.
Note 17: Supplemental
Cash Flow Information
Supplemental cash flow information for each of the three years
in the period ended December 31, 2010 is as follows:
2010 | 2009 | 2008 | ||||||||||
Supplemental cash flow information:
|
||||||||||||
Interest paid, net of amounts capitalized
|
$ | 71,993 | $ | 58,414 | $ | 85,077 | ||||||
Income taxes paid, net of refunds
|
$ | 26,061 | $ | 11,262 | $ | 37,331 | ||||||
PAGE
70 Belo
Corp. 2010 Annual Report on Form 10-K
Table of Contents
Notes to
Consolidated Financial Statements
Note 18: Quarterly
Results of Operations (unaudited)
Following is a summary of the unaudited quarterly results of
operations for the years ended December 31, 2010 and 2009.
Certain previously reported information has been reclassified to
conform to the current year presentation.
2010 | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | ||||||||||||||
Net operating revenues
|
$ | 154,332 | $ | 162,982 | $ | 163,853 | $ | 206,228 | ||||||||||
Operating costs and expenses
|
||||||||||||||||||
Station salaries, wages and employee benefits
|
51,224 | 51,911 | 53,273 | 53,537 | ||||||||||||||
Station programming and other operating costs
|
45,631 | 47,015 | 51,573 | 55,085 | ||||||||||||||
Corporate operating costs
|
9,609 | 7,855 | 8,738 | 10,285 | ||||||||||||||
Pension contribution reimbursements
|
(4,072 | ) | (4,200 | ) | (300 | ) | | |||||||||||
Depreciation
|
9,243 | 8,770 | 8,449 | 8,231 | ||||||||||||||
Total operating costs and expenses
|
111,635 | 111,351 | 121,733 | 127,138 | ||||||||||||||
Other income (expense), net
|
(267 | ) | 375 | 21 | 1,248 | |||||||||||||
Interest expense
|
(19,888 | ) | (19,815 | ) | (20,037 | ) | (18,155 | ) | ||||||||||
Income taxes
|
(9,000 | ) | (12,666 | ) | (8,159 | ) | (22,289 | ) | ||||||||||
Net earnings
|
$ | 13,542 | $ | 19,525 | $ | 13,945 | $ | 39,894 | ||||||||||
Basic earnings per share:
|
$ | 0.13 | $ | 0.19 | $ | 0.13 | $ | 0.38 | ||||||||||
Diluted earnings per share:
|
$ | 0.13 | $ | 0.19 | $ | 0.13 | $ | 0.38 | ||||||||||
2009
|
||||||||||||||||||
Net operating revenues
|
$ | 133,536 | $ | 144,770 | $ | 140,617 | $ | 171,344 | ||||||||||
Operating costs and expenses
|
||||||||||||||||||
Station salaries, wages and employee benefits
|
52,673 | 45,536 | 47,002 | 45,792 | ||||||||||||||
Station programming and other operating costs
|
48,364 | 49,219 | 49,973 | 52,659 | ||||||||||||||
Corporate operating costs
|
8,950 | 5,199 | 7,742 | 8,011 | ||||||||||||||
Depreciation
|
10,792 | 9,967 | 11,520 | 9,376 | ||||||||||||||
Impairment charge
|
| | 242,144 | | ||||||||||||||
Total operating costs and expenses
|
120,779 | 109,921 | 358,381 | 115,838 | ||||||||||||||
Other income (expense), net
|
16,369 | (2,805 | ) | (657 | ) | (466 | ) | |||||||||||
Interest expense
|
(14,580 | ) | (15,332 | ) | (15,654 | ) | (18,354 | ) | ||||||||||
Income taxes
|
(5,635 | ) | (6,417 | ) | 83,554 | (14,432 | ) | |||||||||||
Net earnings (loss)
|
$ | 8,911 | $ | 10,295 | $ | (150,521 | ) | $ | 22,254 | |||||||||
Basic earnings (loss) per share:
|
.09 | .10 | (1.47 | ) | $ | .21 | ||||||||||||
Diluted earnings (loss) per share:
|
.09 | .10 | (1.47 | ) | $ | .21 | ||||||||||||
Belo
Corp. 2010 Annual Report on Form 10-K PAGE
71