<PAGE> 1
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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: MARCH 31, 1996
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 MAY 7, 1996
----- --------------------------
Common Stock, $1.67 par value 44,185,304*
______________________
* Consisting of 34,890,736 shares of Series A Common Stock and 9,294,568
shares of Series B Common Stock.
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A. H. BELO CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<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 . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE> 3
PART I.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months ended March 31,
===============================================================================
In thousands, except per share amounts
(unaudited) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET OPERATING REVENUES
Broadcasting $ 70,607 $ 69,689
Newspaper publishing 115,871 93,300
Other 766 50
- --------------------------------------------------------------------------------
Total net operating revenues 187,244 163,039
- --------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Salaries, wages and employee benefits 55,935 50,230
Other production, distribution and operating costs 49,694 43,640
Newsprint, ink and other supplies 39,133 29,238
Depreciation 11,635 10,314
Amortization 4,936 4,106
- --------------------------------------------------------------------------------
Total operating costs and expenses 161,333 137,528
- --------------------------------------------------------------------------------
Earnings from operations 25,911 25,511
- --------------------------------------------------------------------------------
OTHER INCOME AND EXPENSE
Interest expense (8,864) (6,616)
Other, net 4,341 290
- --------------------------------------------------------------------------------
Total other income and expense (4,523) (6,326)
- --------------------------------------------------------------------------------
EARNINGS
Earnings before income taxes 21,388 19,185
Income taxes 8,664 7,742
- --------------------------------------------------------------------------------
Net earnings $ 12,724 $ 11,443
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NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ .33 $ .28
- --------------------------------------------------------------------------------
Average shares outstanding 38,876 40,266
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Cash dividends declared per share $ .08 $ .075
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</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
1
<PAGE> 4
CONSOLIDATED CONDENSED BALANCE SHEETS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
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In thousands MARCH 31, December 31,
(Current year unaudited) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $ 14,544 $ 12,846
Accounts receivable, net 108,410 120,541
Other current assets 30,782 31,919
- --------------------------------------------------------------------------------
Total current assets 153,736 165,306
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Property, plant and equipment, at cost:
Land 26,958 26,708
Buildings 157,261 155,877
Broadcast equipment 160,246 159,909
Newspaper publishing equipment 213,461 210,362
Other 52,464 51,156
Advance payments on plant and equipment expenditures 12,126 6,479
- --------------------------------------------------------------------------------
Total property, plant and equipment 622,516 610,491
Less accumulated depreciation (260,119) (248,650)
- --------------------------------------------------------------------------------
Net property, plant and equipment 362,397 361,841
- --------------------------------------------------------------------------------
Intangible assets, net 596,697 571,060
Other assets, at cost 54,968 55,815
- --------------------------------------------------------------------------------
Total assets $1,167,798 $1,154,022
================================================================================
</TABLE>
2
<PAGE> 5
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
====================================================================================
In thousands, except share data MARCH 31, December 31,
(Current year unaudited) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 51,535 $ 65,039
Other current liabilities 22,852 16,629
- -------------------------------------------------------------------------------------
Total current liabilities 74,387 81,668
- -------------------------------------------------------------------------------------
Long-term debt 563,557 557,400
Deferred income taxes 116,985 114,729
Other liabilities 10,132 11,761
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 29,084,504 shares at March 31, 1996
and 28,961,753 shares at December 31, 1995 48,571 48,366
Series B: Issued 9,293,867 shares at March 31, 1996
and 9,280,179 shares at December 31, 1995 15,521 15,498
Additional paid-in capital 101,882 97,930
Retained earnings 239,863 230,203
- -------------------------------------------------------------------------------------
Total 405,837 391,997
Deferred compensation - restricted shares (3,100) (3,533)
- -------------------------------------------------------------------------------------
Total shareholders' equity 402,737 388,464
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Total liabilities and shareholders' equity $ 1,167,798 $1,154,022
=====================================================================================
</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>
====================================================================================
Three months ended March 31,
- ------------------------------------------------------------------------------------
In thousands
(unaudited) 1996 1995
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<S> <C> <C>
OPERATIONS
Net earnings $ 12,724 $ 11,443
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 16,571 14,420
Deferred income taxes 2,803 1,952
Non-cash adjustments and allowances (203) (206)
Other, net (2,437) 544
Net change in current assets and liabilities:
Accounts receivable 11,025 5,246
Other current assets (54) (2,952)
Accounts payable and accrued expenses (11,403) (14,053)
Other current liabilities 5,321 2,045
- ------------------------------------------------------------------------------------
Net cash provided by operations 34,347 18,439
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INVESTING
Acquisitions (35,281) (163,303)
Capital expenditures (7,078) (8,838)
Sale of investment 3,750 -
Other, net (59) 39
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Net cash used for investing (38,668) (172,102)
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FINANCING
Borrowings for acquisitions 36,415 163,313
Net proceeds from (payments on) debt (29,708) 687
Payments to repurchase stock - (8,440)
Payments of dividends on stock (3,064) (2,986)
Net proceeds from exercise of stock options 2,376 1,868
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Net cash provided by financing 6,019 154,442
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Net increase in cash and temporary cash investments 1,698 779
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Cash and temporary cash investments at beginning of period 12,846 9,294
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Cash and temporary cash investments at end of period $ 14,544 $ 10,073
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SUPPLEMENTAL DISCLOSURES
Interest paid, net of amounts capitalized $ 8,872 $ 6,324
Income taxes paid, net of refunds $ 538 $ 5,176
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</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 accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
balance sheet at December 31, 1995 has been derived from the audited
consolidated financial statements at that date but does not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended
March 31, 1996 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996. 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, 1995.
Certain amounts for the prior periods have been reclassified to
conform to the current year presentation.
(2) On February 1, 1995, Belo acquired television station KIRO-TV in
Seattle, Washington. The purchase price was $162,500,000 in cash plus
transaction costs. The acquisition was accounted for as a purchase.
The cost of the acquisition has been allocated on the basis of the
estimated fair market value of the assets acquired. This allocation
resulted in intangible assets of $122,767,000, which are being
amortized on a straight line basis over 40 years.
On December 26, 1995, Belo completed the acquisition of the
Bryan-College Station Eagle, a daily newspaper serving Bryan-College
Station, Texas. The acquisition, which was financed with the
revolving credit facility, has been accounted for as a purchase. On
January 1, 1996, Belo acquired the Owensboro Messenger-Inquirer, a
daily newspaper serving Owensboro, Kentucky. Notes payable, due in
various installments over four years, were issued to complete the
transaction. The acquisition has been accounted for as a purchase.
(3) In May 1996, the Company completed a public offering of 5,750,000
shares of Series A Common Stock for net proceeds, after deducting
estimated expenses associated with the offering, of approximately
$198,565,000. The proceeds were used to pay down debt. If the
offering and subsequent debt reduction had occurred at January 1,
1996, net earnings per share for the three months ended March 31,
1996, would have been 32 cents per share.
(4) On February 2, 1996, the Company sold its interest in its programming
distribution partnership, Maxam Entertainment. A gain of $3,895,000
(6 cents per share) was recorded in connection with the sale.
5
<PAGE> 8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. H. Belo Corporation and Subsidiaries
(5) Earnings and dividends per share for the first quarter of 1995 have
been restated to reflect a two-for-one stock split in the form of a
stock dividend effected on June 9, 1995.
(6) Net operating revenues, earnings from operations, and depreciation and
amortization by industry segment are shown below (in thousands):
<TABLE>
<CAPTION>
================================================================================
Three months ended March 31,
1996 1995
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<S> <C> <C>
NET OPERATING REVENUES
Broadcasting $ 70,607 $ 69,689
Newspaper publishing 115,871 93,300
Other 766 50
- --------------------------------------------------------------------------------
$ 187,244 $163,039
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EARNINGS FROM OPERATIONS
Broadcasting $ 10,213 $ 15,234
Newspaper publishing 21,204 15,468
Other (1,001) (1,094)
Corporate expenses (4,505) (4,097)
- --------------------------------------------------------------------------------
$ 25,911 $ 25,511
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DEPRECIATION AND AMORTIZATION
Broadcasting $ 9,990 $ 8,858
Newspaper publishing 6,358 5,385
Other 31 6
Corporate 192 171
- --------------------------------------------------------------------------------
$ 16,571 $ 14,420
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</TABLE>
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net earnings for the first quarter of 1996 were $12,724,000 (33 cents per
share) compared to net earnings of $11,443,000 (28 cents per share) for 1995.
Net earnings for 1996 included a gain of $3,895,000 (6 cents per share) on the
sale of the Company's interest in its programming distribution partnership.
Total operating revenues of $187,244,000 were 14.8 percent higher than first
quarter 1995 revenues of $163,039,000. Broadcast revenues of $70,607,000 were
1.3 percent higher than first quarter 1995 revenues of $69,689,000. First
quarter 1996 includes revenues from KIRO-TV in Seattle for three months while
1995 includes only two months of KIRO revenue. On a comparable basis, 1996
revenues for the broadcast division were down 2.7 percent. The decrease was
due to lower advertising revenues at the Company's two largest stations,
WFAA-TV in Dallas and KHOU-TV in Houston and to a lesser extent at KOTV in
Tulsa. These stations experienced declines in nearly all advertising
categories, but particularly in automotive advertising. WFAA, an ABC
affiliate, also had lower 1996 revenues due to the Super Bowl being on NBC in
1996 and on ABC in 1995. These declines were partially offset by strong
political advertising revenues at KXTV in Sacramento and an increase in network
compensation at KXTV, which changed its affiliation from CBS to ABC in March of
1995. WWL-TV in New Orleans had year-to-year revenue increases in both local
and national advertising due to affiliation changes in the market, which
resulted in WWL-TV's late newscast being one of only two broadcast in the
market during much of the first quarter.
Newspaper publishing revenues of $115,871,000 were 24.2 percent higher than
last year's revenues of $93,300,000. The increase is due in part to the
acquisition of the Bryan-College Station Eagle in December 1995 and the
Owensboro Messenger-Inquirer in January 1996. Excluding these acquisitions,
newspaper publishing revenues increased 17.5 percent over last year.
Advertising revenues at The Dallas Morning News, the Company's principal
newspaper, increased 18.5 percent. Classified revenues were up due to rate
increases in 1995 and early 1996, offset somewhat by a slight decline in
volume, mostly in automotive and real estate advertising. Retail and general
advertising revenues were up due to both rate and volume increases. The grand
opening of a Nordstrom department store in Dallas contributed to the
advertising volume increase in first quarter 1996. Circulation revenues were
up at The Dallas Morning News by nearly 10 percent due to rate increases in the
fourth quarter of 1995 and the first quarter of 1996. Circulation volume was
down from last year both daily (2.5 percent) and Sunday (1.9 percent).
Operating expenses during the first quarter of 1996 were $161,333,000, or 17.3
percent higher than in the same period of 1995. Adjusting for the two
newspaper acquisitions and excluding one month of KIRO-TV results in 1996,
comparable operating expenses were up 10.8 percent. Newsprint, ink and other
supplies expense increased nearly 34 percent (30.2 percent excluding
acquisitions) due principally to higher newsprint prices. Newsprint prices
escalated throughout 1995, but beginning in the second quarter of 1996, prices
are expected to decline. However, year-to-year comparisons of newsprint, ink
and other supplies expense may continue to be unfavorable through the second
quarter of 1996. Wage increases and the acquisitions contributed to the
increase in salaries, wages and employee benefits. Other production,
distribution and operating costs were higher due to the acquisitions, increases
in programming costs at KIRO-TV, higher advertising and promotion expenses at
The Dallas Morning News and expenses associated with election coverage.
Depreciation and amortization expenses in 1996 were higher because of recent
acquisitions.
First quarter 1996 interest expense of $8,864,000 was higher than interest
expense in the first quarter of 1995 due to increased debt levels, offset
somewhat by lower average rates. Average debt increased substantially in first
quarter 1996 over first quarter 1995 due to the acquisitions noted previously
and 1995 treasury share purchases. In May 1996, the Company completed a public
offering of 5,750,000 shares of Series A Common Stock. The net proceeds of
approximately $198,565,000 were used to pay down debt. See further discussion
in "Liquidity and Capital Resources".
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations is the Company's primary source of liquidity.
During the first quarter of 1996, net cash provided by operations was
$34,347,000, compared to $18,439,000 for the first quarter of 1995. The
increase was primarily due to changes in working capital. Collections of
accounts receivable increased due to the KIRO acquisition, and first quarter
1996 payments for bonuses and taxes were lower than in 1995. Cash from
operations was more than sufficient to fund capital expenditures and the
payment of dividends.
On January 1, 1996, the Company acquired the Owensboro Messenger-Inquirer, a
daily newspaper serving Owensboro, Kentucky. Notes payable, due in various
installments over four years, were issued in connection with the transaction.
The acquisition was accounted for as a purchase.
The Company is a party to an $800,000,000 variable rate revolving credit
agreement with a syndicate of 14 banks. At March 31, 1996, borrowings under
the agreement were $395,000,000. The agreement expires on July 28, 2000 with
an extension to July 28, 2001 at the request of the Company and with the
consent of the participating banks. The agreement contains certain covenants,
including the maintenance of cash flow in relation to both the Company's
leverage and its fixed charges as well as a limitation on repurchases of the
Company's stock. 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 classified as long-term. At March 31, 1996, $152,500,000 in short-term
notes were outstanding. Total debt outstanding increased $6,707,000 from
December 31, 1995. The increase was due to borrowings for the Owensboro
acquisition, partially offset by cash received from other sources, including
operations and stock option exercises.
Because substantially all of the Company's outstanding debt is currently at
floating interest rates, the Company is subject to interest rate volatility.
Weighted average interest rates for the first quarter of 1996 were
approximately 5.8 percent.
At March 31, 1996, the Company's ratio of total debt to total capitalization
was 58.3 percent, relatively unchanged as compared to a ratio of 58.9 percent
at the end of 1995. In May 1996, the Company completed a public offering of
5,750,000 shares of Series A Common Stock for net proceeds of approximately
$198,565,000. The proceeds from the offering were used to repay existing debt
to provide liquidity for general corporate purposes, including possible future
acquisitions. Assuming the transaction were complete at March 31, 1996, the
Company's ratio of total debt to total capitalization would have been 37.8
percent.
Capital expenditures for the first quarter were $7,078,000. Capital projects
for the period included building renovations and the purchase of property and
equipment. The Company expects to finance future capital expenditures using
net cash generated from operations and, when necessary, borrowings under the
revolving credit agreement.
The Company paid dividends of $3,064,000 or 8 cents per share on Series A and
Series B Common Stock outstanding during the first quarter of 1996 compared to
$2,986,000 (7.5 cents per share) during the first quarter of 1995. The Company
declared a quarterly dividend of 11 cents per share payable in the second
quarter of 1996.
<PAGE> 11
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 would not have a material
adverse effect on the operations or financial position of the Company.
ITEM 2. CHANGES IN SECURITIES
On February 28, 1996, the Company's Board of Directors authorized the
amendment and restatement of the Company's preferred share purchase rights
plan, which was originally adopted in 1986 and was scheduled to expire in March
1996. The amended and restated rights plan (the "Plan"), which will expire in
2006, changes the initial exercise price of the rights, and adds provisions
which offer protection against certain stock accumulations by allowing the
existing holders of rights, upon certain events, to purchase shares of Company
stock at a substantial discount. The Plan was further amended to permit the
exchange of rights for shares of the Company's common stock, upon the
occurrence of certain triggering events.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter covered by this report, there were no reports on
Form 8-K filed.
<PAGE> 12
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
May 15, 1996 By: /s/ Michael D. Perry
-----------------------------
Michael D. Perry
Senior Vice President and
Chief Financial Officer
10
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQ.
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
27 Financial Data Schedule n/a
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS DATED AS OF MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 14,544
<SECURITIES> 0
<RECEIVABLES> 112,370
<ALLOWANCES> (3,960)
<INVENTORY> 18,463
<CURRENT-ASSETS> 153,736
<PP&E> 622,516
<DEPRECIATION> (260,119)
<TOTAL-ASSETS> 1,167,798
<CURRENT-LIABILITIES> 74,387
<BONDS> 563,557
<COMMON> 64,092
0
0
<OTHER-SE> 338,645
<TOTAL-LIABILITY-AND-EQUITY> 1,167,798
<SALES> 0
<TOTAL-REVENUES> 187,244
<CGS> 0
<TOTAL-COSTS> 144,762
<OTHER-EXPENSES> 16,571
<LOSS-PROVISION> 1,640
<INTEREST-EXPENSE> 8,864
<INCOME-PRETAX> 21,388
<INCOME-TAX> 8,664
<INCOME-CONTINUING> 12,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,724
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
