<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-8598
A. H. BELO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-0135890
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
P. O. BOX 655237
DALLAS, TEXAS 75265-5237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (214) 977-6606
Former name, former address and former fiscal year, if changed since last
report.
NONE
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT 10/31/94
----- -----------------------
Common Stock, $1.67 par value 19,730,023*
---------------
* Consisting of 14,088,944 shares of Series A Common Stock and 5,641,079
shares of Series B Common Stock.
================================================================================
<PAGE> 2
A. H. BELO CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . . . . . . 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 9
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
PART I.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
===============================================================================================================
In thousands, except per share amounts
(unaudited) 1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET OPERATING REVENUES
Newspaper publishing $ 93,262 $ 83,309 $ 267,290 $ 246,830
Broadcasting 66,320 49,230 179,276 152,353
- ---------------------------------------------------------------------------------------------------------------
Total net operating revenues 159,582 132,539 446,566 399,183
- ---------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Salaries, wages and employee benefits 46,527 40,136 130,875 118,992
Newsprint, ink and other supplies 25,739 26,177 75,993 78,261
Other production, distribution and operating costs 42,271 37,715 118,548 109,513
Depreciation 8,762 6,027 23,925 17,968
Amortization 3,598 3,096 9,952 9,288
- ---------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 126,897 113,151 359,293 334,022
- ---------------------------------------------------------------------------------------------------------------
Earnings from operations 32,685 19,388 87,273 65,161
- ---------------------------------------------------------------------------------------------------------------
OTHER INCOME AND EXPENSE
Interest expense (4,827) (3,639) (11,130) (11,188)
Other, net (Note 7) (7,450) 432 (6,465) 763
- ---------------------------------------------------------------------------------------------------------------
EARNINGS
Earnings before income taxes and cumulative effect
of change in accounting 20,408 16,181 69,678 54,736
Income taxes 4,660 8,247 24,381 23,388
- ---------------------------------------------------------------------------------------------------------------
Net earnings before cumulative effect
of change in accounting 15,748 7,934 45,297 31,348
Cumulative effect of change in accounting for
income taxes (Note 3) - - - 6,599
- ---------------------------------------------------------------------------------------------------------------
Net earnings $ 15,748 $ 7,934 $ 45,297 $ 37,947
- ---------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Before cumulative effect of change in accounting $ .79 $ .39 $ 2.24 $ 1.56
Cumulative effect of change in accounting $ - $ - $ - $ .33
Net earnings $ .79 $ .39 $ 2.24 $ 1.89
- ---------------------------------------------------------------------------------------------------------------
Average shares outstanding 19,946 20,301 20,237 20,078
- ---------------------------------------------------------------------------------------------------------------
Cash dividends declared per share $ .30 $ .28 $ .60 $ .56
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
1
<PAGE> 4
CONSOLIDATED CONDENSED BALANCE SHEETS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
===============================================================================================================
In thousands SEPTEMBER 30, December 31,
(Current year unaudited) 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $ 8,254 $ 8,943
Accounts receivable, net 86,463 80,023
Other current assets 23,768 28,419
- ---------------------------------------------------------------------------------------------------------------
Total current assets 118,485 117,385
- ---------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land 19,516 15,065
Buildings 123,419 116,466
Newspaper publishing equipment 185,212 183,211
Broadcast equipment 113,251 93,276
Other 40,279 35,610
Advance payments on plant and equipment expenditures 23,384 8,679
- ---------------------------------------------------------------------------------------------------------------
Total property, plant and equipment 505,061 452,307
Less accumulated depreciation (204,798) (182,295)
- ---------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 300,263 270,012
- ---------------------------------------------------------------------------------------------------------------
Excess cost over values assigned to
tangible assets of purchased subsidiaries 405,859 333,880
Other intangibles, net 19,268 20,221
Other assets, at cost 50,589 54,658
- ---------------------------------------------------------------------------------------------------------------
Total assets $ 894,464 $ 796,156
===============================================================================================================
</TABLE>
2
<PAGE> 5
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
===============================================================================================================
In thousands, except share data SEPTEMBER 30, December 31,
(Current year unaudited) 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 49,185 $ 49,542
Other current liabilities 14,882 10,189
- ---------------------------------------------------------------------------------------------------------------
Total current liabilities 64,067 59,731
- ---------------------------------------------------------------------------------------------------------------
Long-term debt 358,400 277,400
Deferred income taxes 110,815 107,308
Other liabilities 6,074 5,618
Shareholders' equity:
Preferred stock, $1.00 par value. Authorized
5,000,000 shares; none issued
Common stock, $1.67 par value. Authorized
150,000,000 shares:
Series A: Issued 14,088,144 shares at September 30, 1994
and 14,467,182 shares at December 31, 1993 23,527 24,161
Series B: Issued 5,641,479 shares at September 30, 1994
and 5,743,099 shares at December 31, 1993 9,421 9,591
Additional paid-in capital 118,496 116,451
Retained earnings 207,393 201,246
- ---------------------------------------------------------------------------------------------------------------
Total 358,837 351,449
Deferred compensation - restricted shares (3,729) (5,350)
- ---------------------------------------------------------------------------------------------------------------
Total shareholders' equity 355,108 346,099
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $894,464 $ 796,156
===============================================================================================================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
3
<PAGE> 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine months
ended September 30,
===============================================================================================================
In thousands
(unaudited) 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net earnings $ 45,297 $ 37,947
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 33,877 27,256
Deferred income taxes 2,146 8,435
Non-cash adjustments and allowances 1,731 107
Cumulative effect of change in accounting - (6,599)
Other, net (1,351) 2,825
Net change in current assets and liabilities:
Accounts receivable (6,594) 1,757
Other current assets 5,457 (8,304)
Accounts payable and accrued expenses (1,171) (101)
Other current liabilities 8,720 3,351
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operations 88,112 66,674
- ---------------------------------------------------------------------------------------------------------------
INVESTMENTS
Acquisition of WWL-TV assets (110,038) -
Capital expenditures (24,760) (41,397)
Asset dispositions 948 2,287
- ---------------------------------------------------------------------------------------------------------------
Net cash used for investments (133,850) (39,110)
- ---------------------------------------------------------------------------------------------------------------
FINANCING
Repayment of long-term debt - (100,000)
Net proceeds from (payments on) revolving debt 81,000 70,000
Purchases of treasury stock (32,073) -
Payments of dividends on stock (9,021) (8,310)
Net proceeds from exercise of stock options 5,143 15,926
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing 45,049 (22,384)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (689) 5,180
- ---------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 8,943 2,683
- ---------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $ 8,254 $ 7,863
===============================================================================================================
SUPPLEMENTAL DISCLOSURES
Interest paid, net of amounts capitalized $ 10,155 $ 12,222
Income taxes paid $ 20,483 $ 10,541
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. H. Belo Corporation and Subsidiaries
(1) The unaudited consolidated condensed financial statements as of
September 30, 1994 and for the three and nine-month periods ended
September 30, 1994 and 1993 and related notes should be read in
conjunction with the audited consolidated financial statements and
related notes as of December 31, 1993.
(2) In the opinion of A. H. Belo Corporation (the "Company" or "Belo")
management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments necessary to present
fairly the Company's financial position as of September 30, 1994, and
its results of operations and cash flows for the indicated periods.
All such adjustments are of a normal recurring nature.
Certain amounts for the prior periods have been reclassified to
conform to the current year presentation.
(3) Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes" changing the method of accounting for
income taxes. As permitted under the new rules, prior years'
financial statements have not been restated to reflect the change.
The cumulative effect of adopting SFAS No. 109 as of January 1, 1993
was an increase to net earnings of $6,599,000 or 33 cents per share.
(4) On June 1, 1994, Belo acquired the assets of television station
WWL-TV, the CBS affiliate in New Orleans, Louisiana from Rampart
Operating Partnership for approximately $110,000,000 in cash.
The cost of the acquisition has been allocated on the basis of the
estimated fair market value of the assets acquired. This preliminary
allocation resulted in excess cost over values assigned to tangible
assets of purchased subsidiaries of approximately $80 million which is
being amortized over 40 years.
The pro forma financial results of operations below, which reflect
purchase price adjustments including an estimated fixed long-term
borrowing rate of 7 percent, assume the transaction was completed at
the beginning of each period presented (in thousands):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Nine months ended September 30, 1994 1993
-------------------------------------------------------------------------------------
<S> <C> <C>
Net operating revenues $ 459,848 $ 420,279
Net earnings before cumulative effect
of change in accounting $ 44,690 $ 29,163
Net earnings $ 44,690 $ 35,762
Net earnings per share before cumulative
effect of change in accounting $ 2.21 $ 1.45
Net earnings per share $ 2.21 $ 1.78
-------------------------------------------------------------------------------------
</TABLE>
The pro forma financial information is provided for informational
purposes only and is not necessarily representative of the operating
results that would have occurred had the acquisition been completed as
of the indicated dates, nor is it indicative of future operating
results.
(5) On August 5, 1994, the Company entered into a new credit facility for
borrowings up to $600,000,000. The commitment expires on August 5,
1999 with an extension to August 5, 2000 at the request of the Company
and consent of the participating banks. The agreement also provides
for a facility fee ranging from 1/8 to 1/4 percent on the total
commitment. Loans under the new agreement bear interest at a rate
based, at the option of the Company, on the bank's alternate base
rate, LIBOR or competitive bid. The rate obtained through competitive
bid is either a Eurodollar rate or a rate agreed to by the Company and
the bank.
5
<PAGE> 8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. H. Belo Corporation and Subsidiaries
The revolving credit agreement contains certain covenants, including
the maintenance of cash flow in relation to both the Company's
leverage and its fixed charges, and a limitation on repurchases of the
Company's stock.
As of September 30, 1994, the Company had $358,400,000 of outstanding
debt. Based on the terms of the credit facility, all of the Company's
borrowings at September 30, 1994, including $22,000,000 of various
short-term notes which the Company has the intent and ability to
refinance under the revolving credit facility, are classified as
long-term.
(6) During the nine months ended September 30, 1994, Belo repurchased
644,000 shares of treasury stock for an aggregate purchase price of
$32,073,000. All of these shares have been retired, resulting in a
$32,073,000 reduction in total shareholders' equity.
(7) In September 1994, Belo donated 58,835 shares of Stauffer
Communications, Inc. to The Dallas Morning News--WFAA Foundation. The
fair market value of the shares at the time of the transfer, as
determined by an outstanding tender offer from a third party, exceeded
the carrying value of the stock, resulting in a gain of $9,271,000,
which was offset by a charge for the charitable contribution of
$16,675,000. The transaction, net of a $5,837,000 income tax benefit,
resulted in a decrease in quarter and year-to-date net earnings of
$1,567,000 (8 cents per share).
Upon consummation of the tender offer for the shares, the Company
expects to sell the remaining 15,267 shares in Stauffer
Communications, Inc. during 1995 for an offsetting gain of 8 cents per
share.
(8) Net operating revenues, earnings from operations, and depreciation and
amortization by industry segment are shown below (in thousands):
<TABLE>
<CAPTION>
==========================================================================================================
Three months ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET OPERATING REVENUES
Newspaper publishing $ 93,262 $ 83,309 $ 267,290 $ 246,836
Broadcasting 66,319 49,314 179,276 152,590
Intersegment revenues 1 (84) - (243)
- ----------------------------------------------------------------------------------------------------------
$ 159,582 $ 132,539 $ 446,566 $ 399,183
==========================================================================================================
EARNINGS FROM OPERATIONS
Newspaper publishing $ 18,220 $ 10,887 $ 46,844 $ 35,057
Broadcasting 19,083 12,187 51,630 42,512
Corporate expenses (4,618) (3,686) (11,201) (12,408)
- ----------------------------------------------------------------------------------------------------------
$ 32,685 $ 19,388 $ 87,273 $ 65,161
==========================================================================================================
DEPRECIATION AND AMORTIZATION
Newspaper publishing $ 5,163 $ 4,116 $ 15,461 $ 12,178
Broadcasting 7,050 4,946 17,969 14,882
Other 147 61 447 196
- ----------------------------------------------------------------------------------------------------------
$ 12,360 $ 9,123 $ 33,877 $ 27,256
==========================================================================================================
</TABLE>
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's primary source of liquidity is cash provided by
operations, which was $88,112,000 for the nine months ended September 30, 1994.
This compares with $66,674,000 generated during the corresponding period in
1993. This improvement is mostly due to increased earnings before the
cumulative effect of an accounting change and changes in the components of
working capital. Cash from operations for the nine months of 1994 was
sufficient to fund capital expenditures and dividends on common stock. Excess
cash from operations was also used to repurchase 644,000 treasury shares for
$32,073,000. These shares were subsequently retired.
At September 30, 1994, the Company had access to $600,000,000 in
revolving credit under which it borrowed $110,000,000 on June 1, 1994 to
finance the purchase of certain of the assets of WWL-TV, the CBS television
affiliate in New Orleans, Louisiana. As of September 30, 1994, borrowings
under the revolving credit agreement were $330,000,000. From time to time,
short-term unsecured notes are also used as a source of financing. Based on
the Company's intent and ability to renew short-term notes through the
revolving credit facility, short-term borrowings are also classified as
long-term. At September 30, 1994, there were $22,000,000 in short-term notes
outstanding.
Belo's ratio of long-term debt to total capitalization at September
30, 1994 was 50.2 compared to a ratio of 44.5 at December 31, 1993. The change
during 1994 is due to additional borrowings to finance the acquisition of
WWL-TV as noted previously and the reduction in shareholders' equity due to the
repurchase and subsequent retirement of treasury shares, partially offset by
current year earnings.
Although the Company believes its current financial condition and
credit relationships will enable it to adequately fund its current obligations
and near-term growth strategy, the Company's board of directors has authorized
the Company to file a shelf registration statement that would allow the
Company, from time to time, to offer up to $200,000,000 of debt securities.
Proceeds from any such offering would be used to refinance existing
indebtedness, to repurchase common stock under the Company's stock repurchase
program and for general corporate purposes.
Capital expenditures for the nine months of 1994 were $24,760,000.
Current year capital expenditures include additional production equipment for
The Dallas Morning News and significant building projects at two of Belo's
broadcast stations. Capital expenditures are generally financed with cash from
operations, supplemented when necessary with bank borrowings.
Belo paid dividends of $9,021,000 or 45 cents per share on Series A
and Series B common stock outstanding during year-to-date 1994 compared to
$8,310,000 or 42 cents per share in the same period of 1993.
RESULTS OF OPERATIONS
Belo recorded net earnings of $15,748,000 (79 cents per share) and
$45,297,000 ($2.24 per share) for the quarter and year-to-date periods ended
September 30, 1994, respectively, both of which were improvements from the same
periods in 1993. Net earnings for the same periods last year were $7,934,000
(39 cents per share) for the quarter and $37,947,000 ($1.89 per share) for nine
months. Results for the quarter and nine months of 1994 include a one-time
charge to net earnings of $1,567,000 (8 cents per share) from the donation of
shares of Stauffer Communications, Inc. stock to The Dallas Morning News--WFAA
Foundation. The transaction included a $9,271,000 gain on the write-up of the
shares to fair market value, less a charge of $16,675,000 for the subsequent
donation of those shares to the Foundation, and the related income tax benefit
of $5,837,000. Upon consummation of an outstanding tender offer for the
shares, Belo expects to sell its remaining investment in Stauffer
Communications, Inc. during 1995 for an offsetting gain of 8 cents per share.
It is the Company's intention that The Dallas Morning News--WFAA Foundation
will fund most of the future corporate charitable cash contributions that have
heretofore been funded directly by Belo. Results for the nine months of 1993
include
7
<PAGE> 10
an increase in net earnings of $6,599,000 (33 cents per share) representing the
cumulative effect of adopting Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," partially offset by an
adjustment to accommodate the one percent increase in the federal income tax
rate in August 1993, which resulted in a net earnings decrease of $2,249,000
(11 cents per share) as deferred tax accounts were again adjusted to reflect
the new tax rate. Excluding the nonrecurring charge in 1994 and the effects of
SFAS No. 109 in 1993, comparable earnings for the third quarter of 1994 and
1993 would have been 87 cents and 50 cents, respectively, while comparable
year-to-date earnings would have been $2.32 per share for the 1994 period
versus $1.67 for the 1993 period.
Earnings for the nine-month period in 1994 include the first quarter
reversal of certain music license fee accruals of $631,000 (2 cents per share).
Results for the three and nine-month periods ended September 30, 1994 include
three and four months' operations of WWL-TV, respectively, which was
consolidated beginning June 1, 1994. Net earnings (after financing costs and
taxes) for the three and nine-month periods were slightly higher due to
WWL-TV's results.
Revenues for the quarter and nine-month periods ended September 30,
1994 were $159,582,000 and $446,566,000. Revenues for the same periods in 1993
were $132,539,000 and $399,183,000, resulting in year-to-year improvement of
20.4 percent and 11.9 percent, respectively. Publishing revenues for the
quarter of $93,262,000 improved 11.9 percent over 1993 third quarter revenues
of $83,309,000 while year-to-date revenues of $267,290,000 were 8.3 percent
better than the $246,830,000 recognized during year-to-date 1993. While full
run ROP retail advertising volumes were down during the third quarter, the
declines were offset by increases in full run preprints, resulting in a slight
increase in retail revenues for 1994 versus 1993. General and classified
advertising revenues have improved during the three and nine-month periods of
1994, primarily in the automotive and employment categories, due to both higher
volumes and increased rates. Circulation revenues were down slightly on a
year-to-date basis due to contractor rate adjustments that were implemented in
the first quarter. These declines were subsequently offset by daily
subscription and Sunday single copy rate increases during the second and third
quarters. Accordingly, circulation revenues improved for the three month
period ending September 30, 1994 compared to the same period in 1993, even
though circulation volumes remained flat on a daily basis and were slightly
lower for Sundays.
Excluding WWL-TV revenues for the three and nine-month periods ended
September 30, 1994, broadcast revenues improved 17 percent and 10.1 percent,
respectively. Total broadcast revenues of $66,320,000 for the quarter and
$179,276,000 for nine months were 34.7 percent and 17.7 percent better than
revenues of $49,230,000 and $152,353,000 in the corresponding 1993 periods.
Locally generated revenues in Dallas were 48.1% better than in third quarter
1993 while the Virginia and Tulsa stations each posted third quarter local
revenues that exceeded 1993 third quarter revenues by more than 15 percent.
Favorable national advertising sales trends in all markets contributed to
higher 1994 revenues. Political advertising also had a significant effect on
third quarter broadcast revenues, contributing $2,468,000 of the total third
quarter improvement. Recently renegotiated network affiliation agreements for
certain of the Company's television stations also resulted in third quarter
network revenue increases. Network compensation will be higher in future
periods as a result of these new agreements. Year-to-date revenues were also
up significantly from 1993, primarily due to locally generated advertising.
Additionally, national revenues for the nine months ended September 30, 1994
were boosted by broadcast of the Winter Olympics by Belo's CBS affiliates.
Operating expenses for the three and nine months of 1994 of
$126,897,000 and $359,293,000 increased 12.1 percent and 7.6 percent,
respectively, from 1993 to 1994. Salaries, wages and employee benefits
increased 15.9 percent and 10 percent, respectively, (10.4 percent and 7.5
percent, excluding WWL-TV) due to additional employees, salary increases and
higher benefit costs, particularly pension and 401(k) matching contributions.
Increased programming expenses for locally produced series and syndicated
programs represent a significant portion of the overall increase in other
production, distribution and operating costs, which was higher by 12.1 percent
and 8.3 percent for the three and nine-month periods, respectively (4.9 percent
and 5.1 percent, excluding WWL-TV). Higher distribution and outside
solicitation costs also contributed to the increase. These increases were
offset somewhat by the first quarter reversal of certain music license fee
accruals of $631,000 and savings in rental of property and equipment. Favorable
newsprint prices in 1994 and slightly lower tonnage resulted in lower quarter
and year-to-date 1994 expense for newsprint, ink and other supplies. However,
recent and proposed newsprint price increases are expected to offset much of
the year-to-date 1994 savings by year end.
8
<PAGE> 11
Furthermore, although the effect on net earnings cannot be predicted at this
time, the Company expects newsprint prices to continue to increase during 1995.
Depreciation expense increased in 1994 primarily due to the addition of WWL-TV
assets in June 1994 and completion of the North Plant production facility
expansion in the third quarter of 1993.
Interest expense of $4,827,000 for the third quarter of 1994 was
significantly higher than the $3,639,000 in the third quarter 1993, due to
borrowings of $110,000,000 on June 1, 1994 for the purchase of WWL-TV.
Interest expense for the nine months ended September 30, 1994 was relatively
flat compared to 1993 despite higher 1994 borrowings. This is because of the
replacement of $100,000,000 of 8 5/8% notes with proceeds from the revolving
credit agreement in December 1993.
The effective tax rate for the three-month period ended September 30,
1994 of 22.8 percent compares to an effective rate of 51 percent during the
same period of 1993. The third quarter 1994 rate reflects the tax benefit
associated with the Stauffer Communications, Inc. transaction discussed
previously. In the third quarter of 1993, the effective rate included an
adjustment of $2,249,000 to deferred taxes for the change in the federal income
tax rate to 35 percent. Effective tax rates excluding these adjustment were
38.7 percent in 1994 and 37.1 percent in 1993.
OTHER MATTERS
On September 13, 1994, Belo announced an agreement in principle to
purchase television station KIRO-TV in Seattle, Washington, for $160,000,000
cash. Belo intends to borrow funds from its revolving credit agreement to
complete the purchase. The transaction, which is subject to the signing of a
definitive agreement, as well as customary closing conditions, including
approval by appropriate government agencies, will be accounted for as a
purchase.
PART II.
ITEM 1. LEGAL PROCEEDINGS
There are a number of legal proceedings pending against the Company,
including several actions for alleged libel. In the opinion of management,
liabilities, if any, arising from these actions are either covered by insurance
or would not have a material adverse effect on the operations or financial
position of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
9
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Ex. 27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter covered by this report, there was a report on Form
8-K filed on September 19, 1994, containing information under Item 5 concerning
an agreement in principle to purchase the assets of television station KIRO-TV
in Seattle, Washington.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. H. BELO CORPORATION
November 7, 1994 By: /S/ Michael D. Perry
Michael D. Perry
Senior Vice President and
Chief Financial Officer
10
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 8,254
<SECURITIES> 0
<RECEIVABLES> 90,311
<ALLOWANCES> (3,848)
<INVENTORY> 10,955
<CURRENT-ASSETS> 118,485
<PP&E> 505,061
<DEPRECIATION> (204,798)
<TOTAL-ASSETS> 894,464
<CURRENT-LIABILITIES> 64,067
<BONDS> 358,400
<COMMON> 32,948
0
0
<OTHER-SE> 322,160
<TOTAL-LIABILITY-AND-EQUITY> 894,464
<SALES> 0
<TOTAL-REVENUES> 446,566
<CGS> 0
<TOTAL-COSTS> 325,416
<OTHER-EXPENSES> 33,877
<LOSS-PROVISION> 3,080
<INTEREST-EXPENSE> 11,130
<INCOME-PRETAX> 69,678
<INCOME-TAX> 24,381
<INCOME-CONTINUING> 45,297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,297
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.24
</TABLE>
