UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

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

Commission File No. 1-8598

Belo Corp.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		75-0135890 (I.R.S. employer identification no.)
400 South Record Street Dallas, Texas (Address of principal executive offices)		75202-4841 (Zip code)

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

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

None

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

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 þ No o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

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

Class		Outstanding at July 31, 2011
Common Stock, $1.67 par value		103,679,804*

*

Consisting of 93,415,137 shares of Series A Common Stock and 10,264,667 shares of Series B Common Stock.

 

 

BELO CORP.
FORM 10-Q
TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures about Market Risk			19
Item 4. Controls and Procedures			19
PART II OTHER INFORMATION
Item 1. Legal Proceedings			19
Item 1A. Risk Factors			20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			20
Item 3. Defaults Upon Senior Securities			20
Item 4. Removed and Reserved			20
Item 5. Other Information			20
Item 6. Exhibits			20
Signatures			26
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I.

Item 1.		Financial Statements

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

Belo Corp. and Subsidiaries

		Three months ended								Six months ended
		June 30,								June 30,
In thousands, except per share amounts (unaudited)		2011				2010				2011				2010
Net Operating Revenues		$	166,379			$	162,982			$	317,849			$	317,314
Operating Costs and Expenses
Station salaries, wages and employee benefits			54,525				51,911				108,361				103,135
Station programming and other operating costs			52,565				47,015				102,761				92,646
Corporate operating costs			6,692				7,855				12,991				17,464
Pension settlement charge and contribution reimbursements			—				(4,200	)			20,466				(8,272	)
Depreciation			7,707				8,770				15,631				18,013
Total operating costs and expenses			121,489				111,351				260,210				222,986
Earnings from operations			44,890				51,631				57,639				94,328
Other Income and (Expense)
Interest expense			(18,050	)			(19,815	)			(36,033	)			(39,703	)
Other income, net			649				375				829				108
Total other income and (expense)			(17,401	)			(19,440	)			(35,204	)			(39,595	)
Earnings before income taxes			27,489				32,191				22,435				54,733
Income taxes			9,402				12,666				8,662				21,666
Net earnings		$	18,087			$	19,525			$	13,773			$	33,067
Earnings Per Share
Basic		$	0.17			$	0.19			$	0.13			$	0.32
Diluted		$	0.17			$	0.19			$	0.13			$	0.31
Weighted Average Shares Outstanding
Basic			103,626				103,027				103,515				102,919
Diluted			104,022				103,456				103,917				103,342
Dividends declared per share		$	0.05			$	—			$	0.05			$	—

See accompanying Notes to Consolidated Condensed Financial Statements.

CONSOLIDATED CONDENSED BALANCE SHEETS

Belo Corp. and Subsidiaries

In thousands, except share and per share amounts		June 30,				December 31,
(unaudited)		2011				2010
Assets
Current assets:
Cash and temporary cash investments		$	16,061			$	8,309
Accounts receivable, net			141,271				144,992
Income tax receivable			32,692				37,921
Other current assets			21,022				19,574
Total current assets			211,046				210,796
Property, plant and equipment, net			149,638				164,439
Intangible assets, net			725,399				725,399
Goodwill			423,873				423,873
Other assets			63,795				65,883
Total assets		$	1,573,751			$	1,590,390
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	18,449			$	20,744
Accrued expenses			38,250				52,274
Short-term pension obligation			15,095				36,571
Accrued interest payable			10,578				10,405
Income taxes payable			5,182				13,701
Dividends payable			5,178				—
Deferred revenue			2,780				3,505
Total current liabilities			95,512				137,200
Long-term debt			886,553				897,111
Deferred income taxes			250,675				206,765
Pension obligation			56,939				155,510
Other liabilities			17,167				23,162
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 93,412,167 shares at June 30, 2011 and 92,916,960 shares at December 31, 2010			155,998				155,172
Series B: Issued 10,264,667 shares at June 30, 2011 and 10,272,679 shares at December 31, 2010			17,142				17,155
Additional paid-in capital			916,648				915,014
Accumulated deficit			(765,382	)			(773,976	)
Accumulated other comprehensive loss			(57,501	)			(142,723	)
Total shareholders’ equity			266,905				170,642
Total liabilities and shareholders’ equity		$	1,573,751			$	1,590,390

See accompanying Notes to Consolidated Condensed Financial Statements.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Belo Corp. and Subsidiaries

		Six months ended June 30,
In thousands (unaudited)		2011				2010
Operations
Net earnings		$	13,773			$	33,067
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation			15,631				18,013
Pension settlement charge			28,699				—
Pension contributions			(19,557	)			(13,787	)
Deferred income taxes			(1,540	)			13,458
Employee retirement expense			1,810				2,516
Share-based compensation			1,435				1,281
Other non-cash items			554				(6,238	)
Equity (income) loss from partnerships			(750	)			(191	)
Other, net			(844	)			(1,983	)
Net change in operating assets and liabilities:
Accounts receivable			3,109				2,984
Other current assets			(2,225	)			7,401
Accounts payable			(4,139	)			(6,481	)
Accrued expenses			(13,942	)			4,569
Accrued interest payable			174				395
Income taxes payable			(3,290	)			(7,546	)
Net cash provided by operations			18,898				47,458
Investments
Capital expenditures			(6,741	)			(6,467	)
Proceeds from disposition of real estate			5,919				—
Other investments, net			459				23
Net cash used for investments			(363	)			(6,444	)
Financing
Net proceeds from revolving debt			32,000				38,000
Payments on revolving debt			(43,000	)			(77,000	)
Net proceeds from exercise of stock options			103				33
Excess tax benefit from option exercises			114				36
Net cash used for financing			(10,783	)			(38,931	)
Net increase in cash and temporary cash investments			7,752				2,083
Cash and temporary cash investments at beginning of period			8,309				4,800
Cash and temporary cash investments at end of period		$	16,061			$	6,883

See accompanying Notes to Consolidated Condensed Financial Statements.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Belo Corp. and Subsidiaries
(in thousands, except per share amounts)

Business Organization, Consolidation and Significant Accounting Policies

(1)

The accompanying unaudited consolidated condensed financial statements of Belo Corp. and subsidiaries (the Company or Belo) have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

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

Related Party Transactions

(2)

Belo and A. H. Belo Corporation (A. H. Belo), who have two common directors, are considered related parties under accounting rules. The Company has no ownership interest in A. H. Belo or in any 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’s relationship with A. H. Belo is governed by certain agreements between the two companies or their respective subsidiaries. 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. Under the services agreement, the Company and A. H. Belo (or their respective subsidiaries) provide each other various services and/or support. Belo and A. H. Belo also co-own certain downtown Dallas, Texas real estate through a limited liability company. The investment in the limited liability company is recorded as an equity method investment and is included in other assets. Belo and A. H. Belo also co-own other investments in third party businesses which are recorded as either equity or cost method investments and are included in other assets. The amount of income from the limited liability company and third party investments included in the Company’s net income are immaterial. See Note 7 for disclosures related to the split of the pension plan by Belo and A. H. Belo.

Earning Per Share

(3)

The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010.

		Three months ended								Six months ended
		June 30,								June 30,
		2011				2010				2011				2010
Income (Numerator)
Net earnings		$	18,087			$	19,525			$	13,773			$	33,067
Less: Income to participating securities			(252	)			(303	)			(171	)			(522	)
Income available to common stockholders		$	17,835			$	19,222			$	13,602			$	32,545
Shares (Denominator)
Weighted average shares outstanding (basic)			103,626				103,027				103,515				102,919
Dilutive effect of employee stock options			396				429				402				423
Dilutive effect of restricted stock units (RSUs)			—				—				—				—
Adjusted weighted average shares outstanding			104,022				103,456				103,917				103,342
Earnings per share:
Basic		$	0.17			$	0.19			$	0.13			$	0.32
Diluted		$	0.17			$	0.19			$	0.13			$	0.31

For the three months ended June 30, 2011, the Company excluded common stock options for 8,801,360 shares and 612,644 restricted stock units (RSUs) because to include them would be anti-dilutive. For the six months ended June 30, 2011, the Company excluded options for 8,803,614 shares and 568,999 RSUs because to include them would be anti-dilutive. For the three months ended June 30, 2010, the Company excluded options for 10,605,692 shares and 354,081 RSUs because to include them would be anti-dilutive. For the six months ended June 30, 2010, the Company excluded options for 10,614,847 shares and 378,823 RSUs because to include them would be anti-dilutive.

Long Term Debt

(4)

At June 30, 2011, Belo had $886,553 in fixed-rate debt securities as follows: $175,685 of 63/4% Senior Notes due 2013; $270,868 of 8% Senior Notes due 2016; $200,000 of 73/4% Senior Debentures due 2027; and $240,000 of 71/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.5%.

At June 30, 2011, Belo also had variable-rate debt capacity of $205,000 under a credit agreement (Amended 2009 Credit Agreement). As of June 30, 2011, the Company did not have an outstanding balance under the Amended 2009 Credit Agreement and all unused borrowings were available for borrowing. 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 total debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At June 30, 2011, the Company’s leverage ratio was 3.7, its interest coverage ratio was 3.3 and its senior leverage ratio was 0.0. At June 30, 2011, the Company was in compliance with all debt covenants.

At June 30, 2011, the fair value of Belo’s 63/4% Senior Notes due May 30, 2013, 8% Senior Notes due November 15, 2016, 73/4% Senior Debentures due June 1, 2027, and 71/4% Senior Debentures due September 15, 2027, was estimated to be $188,416, $301,813, $181,000, and $214,800, respectively. The fair value is estimated 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 (Level 1 inputs).

Schedule of Condensed Financial Statements

(5)

In November 2009, the Company issued Senior Notes that are fully and unconditionally guaranteed by each of the Company’s 100%-owned subsidiaries as of the date of issuance. Accordingly, the following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows of Belo as parent, the guarantor subsidiaries consisting of Belo’s current 100%-owned subsidiaries, and eliminations necessary to arrive at the Company’s information on a consolidated basis. These statements are presented in accordance with the disclosure requirements under Securities and Exchange Commission Regulation S-X, Rule 3-10.

Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2011
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Net Operating Revenues		$	—			$	166,379			$	—			$	166,379
Operating Costs and Expenses
Station salaries, wages and employee benefits			—				54,525				—				54,525
Station programming and other operating costs			—				52,565				—				52,565
Corporate operating costs			5,862				830				—				6,692
Pension settlement charge and contribution reimbursements			—				—				—				—
Depreciation			317				7,390				—				7,707
Total operating costs and expenses			6,179				115,310				—				121,489
Earnings (loss) from operations			(6,179	)			51,069				—				44,890
Other Income and (Expense)
Interest expense			(18,028	)			(22	)			—				(18,050	)
Intercompany interest			1,114				(1,114	)			—				—
Other income (expense), net			(26	)			675				—				649
Total other income and (expense)			(16,940	)			(461	)			—				(17,401	)
Earnings (loss) before income taxes			(23,119	)			50,608				—				27,489
Income tax benefit (expense)			20,016				(29,418	)			—				(9,402	)
Equity in earnings of subsidiaries			21,190				—				(21,190	)			—
Net earnings		$	18,087			$	21,190			$	(21,190	)		$	18,087

Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2010
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Net Operating Revenues		$	—			$	162,982			$	—			$	162,982
Operating Costs and Expenses
Station salaries, wages and employee benefits			—				51,911				—				51,911
Station programming and other operating costs			—				47,015				—				47,015
Corporate operating costs			6,700				1,155				—				7,855
Pension contribution reimbursement			(4,200	)			—				—				(4,200	)
Depreciation			460				8,310				—				8,770
Total operating costs and expenses			2,960				108,391				—				111,351
Earnings (loss) from operations			(2,960	)			54,591				—				51,631
Other Income and (Expense)
Interest expense			(19,785	)			(30	)			—				(19,815	)
Intercompany interest			1,703				(1,703	)			—				—
Other income (expense), net			(47	)			422				—				375
Total other income and (expense)			(18,129	)			(1,311	)			—				(19,440	)
Earnings (loss) before income taxes			(21,089	)			53,280				—				32,191
Income tax benefit (expense)			16,185				(28,851	)			—				(12,666	)
Equity in earnings of subsidiaries			24,429				—				(24,429	)			—
Net earnings		$	19,525			$	24,429			$	(24,429	)		$	19,525

Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2011
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Net Operating Revenues		$	—			$	317,849			$	—			$	317,849
Operating Costs and Expenses
Station salaries, wages and employee benefits			—				108,361				—				108,361
Station programming and other operating costs			—				102,761				—				102,761
Corporate operating costs			11,566				1,425				—				12,991
Pension settlement charges and contribution reimbursements			20,466				—				—				20,466
Depreciation			623				15,008				—				15,631
Total operating costs and expenses			32,655				227,555				—				260,210
Earnings (loss) from operations			(32,655	)			90,294				—				57,639
Other Income and (Expense)
Interest expense			(35,986	)			(47	)			—				(36,033	)
Intercompany interest			2,798				(2,798	)			—				—
Other income (expense), net			(65	)			894				—				829
Total other income and (expense)			(33,253	)			(1,951	)			—				(35,204	)
Earnings (loss) before income taxes			(65,908	)			88,343				—				22,435
Income tax benefit (expense)			26,526				(35,188	)			—				(8,662	)
Equity in earnings of subsidiaries			53,155				—				(53,155	)			—
Net earnings		$	13,773			$	53,155			$	(53,155	)		$	13,773

Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2010
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Net Operating Revenues		$	—			$	317,314			$	—			$	317,314
Operating Costs and Expenses
Station salaries, wages and employee benefits			—				103,135				—				103,135
Station programming and other operating costs			—				92,646				—				92,646
Corporate operating costs			15,484				1,980				—				17,464
Pension contribution reimbursement			(8,272	)			—				—				(8,272	)
Depreciation			1,071				16,942				—				18,013
Total operating costs and expenses			8,283				214,703				—				222,986
Earnings (loss) from operations			(8,283	)			102,611				—				94,328
Other Income and (Expense) Interest expense			(39,640	)			(63	)			—				(39,703	)
Intercompany interest			3,406				(3,406	)			—				—
Other income (expense), net			(214	)			322				—				108
Total other income and (expense)			(36,448	)			(3,147	)			—				(39,595	)
Earnings (loss) before income taxes			(44,731	)			99,464				—				54,733
Income tax benefit (expense)			26,305				(47,971	)			—				(21,666	)
Equity in earnings of subsidiaries			51,493				—				(51,493	)			—
Net earnings		$	33,067			$	51,493			$	(51,493	)		$	33,067

Condensed Consolidating Balance Sheet
As of June 30, 2011
(in thousands)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and temporary cash investments		$	14,601			$	1,460			$	—			$	16,061
Accounts receivable, net			104				141,167				—				141,271
Income tax receivable			32,692				—				—				32,692
Other current assets			6,235				14,787				—				21,022
Total current assets			53,632				157,414				—				211,046
Property, plant and equipment, net			3,455				146,183				—				149,638
Intangible assets, net			—				725,399				—				725,399
Goodwill, net			—				423,873				—				423,873
Deferred income taxes			32,587				—				(32,587	)			—
Intercompany receivable			165,304				—				(165,304	)			—
Investment in subsidiaries			979,936				—				(979,936	)			—
Other assets			40,206				23,589				—				63,795
Total assets		$	1,275,120			$	1,476,458			$	(1,177,827	)		$	1,573,751
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	9,748			$	8,701			$	—			$	18,449
Accrued expenses			11,930				26,320				—				38,250
Short-term pension obligation			15,095				—				—				15,095
Accrued interest payable			10,578				—				—				10,578
Income taxes payable			5,182				—				—				5,182
Dividends payable			5,178				—				—				5,178
Deferred revenue			—				2,780				—				2,780
Total current liabilities			57,711				37,801				—				95,512
Long-term debt			886,553				—				—				886,553
Deferred income taxes			—				283,262				(32,587	)			250,675
Pension obligation			56,939				—				—				56,939
Intercompany payable			—				165,304				(165,304	)			—
Other liabilities			7,012				10,155				—				17,167
Total shareholders’ equity			266,905				979,936				(979,936	)			266,905
Total liabilities and shareholders’ equity		$	1,275,120			$	1,476,458				(1,177,827	)		$	1,573,751

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
Other current assets			6,443				13,131				—				19,574
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 expenses			23,810				28,464				—				52,274
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

Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2011
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Total
Operations
Net cash provided by (used for) operations		$	(31,426	)		$	50,324			$	18,898
Investments
Capital expenditures			(1,476	)			(5,265	)			(6,741	)
Proceeds from disposition of real estate			—				5,919				5,919
Other investments, net			(159	)			618				459
Net cash provided by (used for) investments			(1,635	)			1,272				(363	)
Financing
Net proceeds from revolving debt			32,000				—				32,000
Payments on revolving debt			(43,000	)			—				(43,000	)
Net proceeds from exercise of stock options			103				—				103
Excess tax benefit from option exercises			114				—				114
Intercompany activity			53,155				(53,155	)			—
Net cash provided by (used for) financing activities			42,372				(53,155	)			(10,783	)
Net increase (decrease) in cash and temporary cash investments			9,311				(1,559	)			7,752
Cash and temporary cash investments at beginning of period			5,290				3,019				8,309
Cash and temporary cash investments at end of period		$	14,601			$	1,460			$	16,061

Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2010
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Total
Operations
Net cash provided by (used for) operations		$	(77,043	)		$	124,501			$	47,458
Investments
Capital expenditures			(474	)			(5,993	)			(6,467	)
Other, net			—				23				23
Net cash used for investments			(474	)			(5,970	)			(6,444	)
Financing
Net proceeds from revolving debt			38,000				—				38,000
Payments on revolving debt			(77,000	)			—				(77,000	)
Net proceeds from exercise of stock options			33				—				33
Excess tax benefit from option exercises			36				—				36
Intercompany activity			118,149				(118,149	)			—
Net cash provided by (used for) financing activities			79,218				(118,149	)			(38,931	)
Net increase in cash and temporary cash investments			1,701				382				2,083
Cash and temporary cash investments at beginning of period			3,646				1,154				4,800
Cash and temporary cash investments at end of period		$	5,347			$	1,536			$	6,883

Long-Term Incentive Plan

(6)

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

Share-based compensation cost for awards to Belo’s employees and non-employee directors was $1,291 and $3,722, for the three and six months ended June 30, 2011. Share-based compensation cost for awards to Belo’s employees and non-employee directors was $667 and $3,599 for the three and six months ended June 30, 2010.

Defined Benefit Pension and Other Post Retirement Plans

(7)

In February 2008, the Company spun-off its newspaper businesses and related assets to a separate company, A. H. Belo. Subsequent to the spin-off, Belo retained sponsorship of The G. B. Dealey Retirement Pension Plan (Pension Plan). As the sole plan sponsor for the Pension Plan, Belo continued to administer benefits for Belo and A. H. Belo current and former employees. In October 2010, Belo and A. H. Belo agreed to split the Pension Plan into separately-sponsored pension plans effective January 1, 2011. Under the agreement, participant benefit liabilities and assets allocable to approximately 5,100 current and former employees of A. H. Belo and its related newspaper businesses were transferred to two new defined benefit pension plans created, sponsored, and managed by or on behalf of A. H. Belo. Effective January 1, 2011, the new A. H. Belo plans were solely responsible for paying participant benefits for the current and former employees of A. H. Belo, and the Company is no longer responsible for those liabilities. The participant benefit liabilities and assets pertaining to current and former employees of Belo, and its related television businesses, continue to be held by the Pension Plan sponsored by and managed by or on behalf of Belo. As of June 30, 2011, the remaining unfunded liability pertaining to Belo’s current and former employees was $72,034.

For Belo, the January 1, 2011, pension split transaction was treated as a settlement under ASC 715. Under settlement accounting for pensions, the split of the Company’s Pension Plan results in the transfer of $238,833 in Pension Plan assets, all of which have been transferred to A.H. Belo, and $339,799 in Pension Plan liabilities to the plans sponsored by A. H. Belo. This resulted in a reduction in the net unfunded liability of $100,966, which was recorded as a non-cash settlement gain, and recognition of actuarial losses of $129,665 previously recognized in accumulated other comprehensive loss, which was recorded as a non-cash settlement charge. This settlement gain and charge resulted in a net non-cash settlement charge of $28,699. This charge was partially offset by a final net pension contribution reimbursement of $8,233 received from A. H. Belo as discussed below. The combined result of all pension split transactions was a net charge before taxes of $20,466. Additionally, the Company’s 2011 effective tax rate reflects the effect of deferred tax adjustments of $7,143 in pension settlement items.

Belo’s funding policy is to contribute annually to the Pension Plan amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws, but not in excess of the maximum tax-deductible contribution. For the six months ended June 30, 2011, the Company made contributions totaling $19,557 to the Pension Plan related to the 2010 and 2011 plan years and A. H. Belo reimbursed the Company $8,233 related to contributions for the 2010 plan year. A. H. Belo has no further obligation to reimburse the Company for any contributions after the 2010 plan year. During the second half of 2011, the Company expects to make contributions of approximately $7,600 to the Pension Plan for the 2011 plan year. These expected contributions are for the benefit of Belo’s current and former employees. No plan assets are expected to be returned to the Company during the year ending December 31, 2011. For the three and six months ended June 30, 2010, the Company made contributions totaling $7,000 and $13,787 to the Pension Plan related to the 2010 plan year and A. H. Belo reimbursed the Company $4,200 and $8,272, respectively.

Net periodic pension cost includes the following components for the three and six months ended June 30, 2011, subsequent to the Pension Plan split, and for the three and six months ended June 30, 2010, prior to the Pension Plan split when the Company was the sole plan sponsor:

		Three months ended								Six months ended
		June 30,								June 30,
		2011				2010				2011				2010
Interest cost on projected benefit obligation		$	3,415			$	8,163			$	6,830			$	16,326
Expected return on assets			(3,018	)			(7,945	)			(6,037	)			(15,890	)
Amortization of net loss			680				1,099				1,360				2,198
Net periodic pension cost before settlement charge			1,077				1,317				2,153				2,634
Settlement charge			—				—				28,699				—
Net periodic pension cost		$	1,077			$	1,317			$	30,852			$	2,634

Income Taxes

(8)

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the 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. In July 2011, the Company received satisfactory resolution of a pending tax matter which

will result in a reduction in tax expense of approximately $2,400 in the third quarter of 2011. The full year 2011 effective tax rate is now expected to be approximately 36 percent.

Commitment and Contingencies

(9)

In addition to the proceeding described below, 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.

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

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

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

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

Overview

Belo Corp. (Belo or the Company), a Delaware corporation, began as a Texas newspaper company in 1842 and today is one of the nation’s 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 owns two local and two regional cable news channels and holds an ownership interest in one other cable news channel.

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

The following table sets forth the Company’s major media assets as of June 30, 2011:

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

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

The Company has network affiliation agreements with ABC, CBS, NBC, FOX and CW. The Company’s network affiliation agreements generally provide the station with the exclusive right to broadcast over the air in its local service area all programs transmitted by the network with which the station is affiliated. In return, the network has the right to sell most of the advertising time during such broadcasts. In the past, some of the Company’s 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 principal source of the Company’s revenue is from the sale of local, regional and national advertising. In even numbered years, the Company’s revenue also includes significant revenue from political advertising. Additional discussion regarding the Company’s results of operations for the three and six months ended June 30, 2011, as compared to the three and six months ended June 30, 2010, is provided below.

Results of Operations
(Dollars in thousands)

		Three months ended June 30,												Six months ended June 30,
		Percentage												Percentage
		2011				Change				2010				2011				Change				2010
Net operating revenues		$	166,379				2.1	%		$	162,982			$	317,849				0.2	%		$	317,314
Pension settlement charge and contribution reimbursements			—			NM					(4,200	)			20,466			NM					(8,272	)
Other operating costs and expenses			121,489				5.1	%			115,551				239,744				3.7	%			231,258
Total operating costs and expenses			121,489				9.1	%			111,351				260,210				16.7	%			222,986
Earnings from operations			44,890				(13.1	%)			51,631				57,639				(38.9	%)			94,328
Other income (expense)			(17,401	)			(10.5	%)			(19,440	)			(35,204	)			(11.1	%)			(39,595	)
Earnings from operations before income taxes			27,489				(14.6	%)			32,191				22,435				(59.0	%)			54,733
Income tax expense			(9,402	)			(25.8	%)			(12,666	)			(8,662	)			(60.0	%)			(21,666	)
Net earnings		$	18,087				(7.4	%)		$	19,525			$	13,773				(58.3	%)		$	33,067

NM is not meaningful

Net Operating Revenues

		Three months ended June 30,												Six months ended June 30,
		Percentage												Percentage
		2011				Change				2010				2011				Change				2010
Spot advertising revenue		$	137,039				1.4	%		$	135,199			$	259,820				(1.4	%)		$	263,403
Other			29,340				5.6	%			27,783				58,029				7.6	%			53,911
Net operating revenues		$	166,379				2.1	%		$	162,982			$	317,849				0.2	%		$	317,314

Spot advertising revenue increased $1,840, or 1.4 percent, in the three months ended June 30, 2011, as compared to the three months ended June 30, 2010. This increase is primarily due to increases in the healthcare, retail and telecommunications categories, partially offset by a decrease in the automotive category and a $1,356 decrease in political advertising revenue. Political revenues are generally higher in even-numbered years than in odd-numbered years due to elections for various state and national offices. Other revenue increased primarily due to a 22.6 percent increase in retransmission revenue and a 17.6 percent increase in Internet revenue, partially offset by a decline in network compensation.

Spot advertising revenue decreased $3,583, or 1.4 percent, in the six months ended June 30, 2011, as compared to the six months ended June 30, 2010. This decrease is primarily due to a $7,244 decrease in political advertising revenue. Political revenues are generally higher in even-numbered years than in odd-numbered years due to elections for various state and national offices. The decrease in political advertising revenues was partially offset by an increase in combined local and national spot revenues of $3,661, or 1.4 percent, versus the prior year. Increases in the healthcare, retail, telecommunications and consumer services categories were partially offset by decreases in the financial services, grocery and automotive categories. Other revenue increased due to a 23.7 percent increase in retransmission revenue and a 18.7 percent increase in Internet revenue, partially offset by a decline in network compensation.

Operating Costs and Expenses

Station salaries, wages and employee benefits increased $2,614, or 5.0 percent, in the three months ended June 30, 2011, compared to the three months ended June 30, 2010, primarily due to increases in salary expense of $1,319, partial reinstatement of the Company’s employer match for the Belo Savings Plan (401(k) plan) of $612 and higher pension expense of $538. Station programming and other operating costs increased $5,550, or 11.8 percent, in the three months ended June 30, 2011, compared to the three months ended June 30, 2010, primarily due to a non-cash expense reduction in 2010 of $3,125, relating to a 2005 Federal Communications Commission (FCC) decision that 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. Two Belo markets converted to this digital equipment in the second quarter of 2010. Additionally, technology costs increased $1,170, programming expense increased $783 and advertising and promotion expenses increased $426.

Station salaries, wages and employee benefits increased $5,226, or 5.1 percent, in the six months ended June 30, 2011, compared to the six months ended June 30, 2010, primarily due to increases in salary expense of $2,466, partial reinstatement of the Company’s employer match for the Belo Savings Plan (401(k) plan) of $1,279 and higher pension expense of $1,075. Station programming and other operating costs decreased $10,115, or 10.9 percent, primarily related to the non-cash expense reduction in 2010 of $7,019, relating to the 2005 FCC decision discussed above. Six Belo markets converted to this digital equipment in the first half of 2010. Additionally, technology costs increased $2,064, programming expense increased $1,379 and advertising and promotion expense increased $684.

Corporate operating costs decreased $1,163, or 14.8 percent, in the three months ended June 30, 2011, compared to the three months ended June 30, 2010, primarily related to a decrease in pension expense of $778 related to the pension split, a decrease in technology costs of $452 and a decrease in accrued bonus expense of $418. Corporate operating costs decreased $4,473, or 25.6 percent, in the six months ended June 30, 2011, compared to the six months ended June 30, 2010, primarily related to a decrease in technology costs of $1,557, a decrease in pension expense of $1,556 related to the pension split and a decrease in accrued bonus expense of $1,265.

In October 2010, Belo and A. H. Belo agreed to split the Pension Plan into separately-sponsored pension plans effective January 1, 2011. Under the agreement, participant benefit liabilities and assets allocable to approximately 5,100 current and former employees of A. H. Belo and its related newspaper businesses were transferred to two new defined benefit pension plans created, sponsored, and managed by or on behalf of A. H. Belo. Effective January 1, 2011, the new A. H. Belo plans were solely responsible for paying participant benefits for the current and former employees of A. H. Belo, and the Company is no longer responsible for those liabilities. The participant benefit liabilities and assets pertaining to current and former employees of Belo, and its related television businesses, continue to be held by the Pension Plan sponsored by and managed by or on behalf of Belo.

For Belo, the January 1, 2011, pension split transaction was treated as a settlement under ASC 715. Under settlement accounting for pensions, the split of the Company’s Pension Plan results in the transfer of $238,833 in Pension Plan assets, all of which have been transferred to A. H. Belo, and $339,799 in Pension Plan liabilities to the plans sponsored by A. H. Belo. This resulted in a reduction in the net unfunded liability of $100,966, which was recorded as a non-cash settlement gain, and recognition of $129,665 in actuarial losses previously recognized in accumulated other comprehensive loss, which was recorded as a non-cash settlement charge. This settlement gain and charge resulted in a net non-cash settlement charge of $28,699. This charge was partially offset by a final net pension contribution reimbursement of $8,233 received from A. H. Belo as discussed in “Liquidity and Capital Resources” below. The combined result of all pension split settlement transactions in 2011 was a net charge before taxes of $20,466.

Other Income and (Expense)

Interest expense decreased $1,765 and $3,670 in the three and six months ended June 30, 2011, respectively, due primarily to decreased interest costs associated with lower variable rate debt balances in the three and six months ended June 30, 2011 versus the same periods in 2010. In addition, commitment fees and amortization of financing costs associated with the variable rate debt declined due to the Company’s election to reduce commitments under the credit agreement in August 2010.

Income taxes decreased $3,264, for the three months ended June 30, 2011, compared with the three months ended June 30, 2010, primarily due to lower pretax earnings and the settlement of certain tax matters in the second quarter of 2011. Income taxes decreased $13,004, for the six months ended June 30, 2011, compared with the six months ended June 30, 2010, primarily due to the $7,143 tax benefit related to deferred tax adjustments for the pension settlement charge and lower pretax earnings.

Station Adjusted EBITDA

		Three months ended June 30,												Six months ended June 30,
		Percentage												Percentage
		2011				Change				2010				2011				Change				2010
Station Adjusted EBITDA		$	59,289				(7.4	%)			64,056				106,727				(12.2	%)			121,533
Corporate operating costs and expenses			(6,692	)			(14.8	%)			(7,855	)			(12,991	)			(25.6	%)			(17,464	)
Depreciation			(7,707	)			(12.1	%)			(8,770	)			(15,631	)			(13.2	%)			(18,013	)
Pension settlement charge and contribution reimbursements			—			NM					4,200				(20,466	)		NM					8,272
Earnings from operations		$	44,890				(13.1	%)		$	51,631			$	57,639				(38.9	%)		$	94,328

NM is not meaningful

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

For the three months ended June 30, 2011, Station Adjusted EBITDA decreased $4,767, or 7.4 percent, compared with the three months ended June 30, 2010. For the six months ended June 30, 2011, Station Adjusted EBITDA decreased $14,806, or 12.2 percent, compared with the six months ended June 30, 2010. These decreases were due to the decrease in political, Olympics and Super Bowl revenue and an increase in operating costs and expenses as discussed above.

Liquidity and Capital Resources

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

Operating Cash Flows

Net cash provided by operations was $18,898 in the six months ended June 30, 2011, compared with $47,458 in the six months ended June 30, 2010. The 2011 operating cash flows were primarily provided by net earnings adjusted for non-cash and pension-related items, pension contributions and routine changes in working capital. The 2010 operating cash flows were primarily provided by net earnings adjusted for non-cash items, pension contributions and routine changes in working capital. The decrease in net cash provided by operations is primarily due to higher pension contributions and payments in the first quarter of 2011 for bonuses accrued in 2010.

The Company made $19,557 in contributions to its Pension Plan for the 2010 and 2011 plan years during the six months ended June 30, 2011, and expects to make contributions of approximately $7,600 to its Pension Plan during the second half of 2011 related to the 2011 plan year. As previously discussed, A. H. Belo was obligated to reimburse the Company for its portion of any contributions the Company made to the Pension Plan related to the 2010 plan year. Such reimbursements totaled $8,233 and $8,272 during the six months ended June 30, 2011 and 2010, respectively.

Investing Cash Flows

Net cash flows used for investing activities were $363 in the six months ended June 30, 2011, compared to $6,444 in the six months ended June 30, 2010. The 2011 investing cash flows were primarily used for capital expenditures, mostly offset by proceeds from the sale of certain real estate. The 2010 investing cash flows were primarily used for capital expenditures.

Property Transaction

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

Capital Expenditures

Total capital expenditures were $6,741 in the first six months of 2011 compared with $6,467 in the first six months of 2010.

Financing Cash Flows

Net cash flows used for financing activities were $10,783 in the six months ended June 30, 2011 compared with $38,931 in the six months ended June 30, 2010. The financing activity cash flows consisted primarily of borrowings and repayments under the Company’s revolving credit facility.

Long-Term Debt

At June 30, 2011, Belo had $886,553 in fixed-rate debt securities as follows: $175,685 of 6³/4% Senior Notes due 2013; $270,868 of 8% Senior Notes due 2016; $200,000 of 7³/4% Senior Debentures due 2027; and $240,000 of 7¹/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.5%.