<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-25579
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 3, 1997)
$750,000,000
A. H. Belo Corporation
$250,000,000 6 7/8% SENIOR NOTES DUE 2002
$300,000,000 7 1/8% SENIOR NOTES DUE 2007
$200,000,000 7 3/4% SENIOR DEBENTURES DUE 2027
------------------------
Interest payable June 1 and December 1
------------------------
THE 2002 SENIOR NOTES, THE 2007 SENIOR NOTES AND THE 2027 SENIOR DEBENTURES
(COLLECTIVELY, THE "OFFERED SECURITIES") WILL MATURE ON JUNE 1, 2002, JUNE 1,
2007 AND JUNE 1, 2027, RESPECTIVELY. THE OFFERED SECURITIES WILL BE REDEEMABLE
IN WHOLE OR IN PART, AT THE OPTION OF A. H. BELO CORPORATION (THE "COMPANY") AT
ANY TIME, AT A REDEMPTION PRICE AS SET FORTH HEREIN UNDER "DESCRIPTION OF
OFFERED SECURITIES -- REDEMPTION." EACH SERIES OF OFFERED SECURITIES WILL BE
REPRESENTED BY ONE OR MORE REGISTERED GLOBAL SECURITIES REGISTERED IN THE NAME
OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR ITS NOMINEE. BENEFICIAL
INTERESTS IN THE REGISTERED GLOBAL SECURITIES WILL BE SHOWN ON, AND TRANSFERS
THEREOF WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY OR ITS
PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, OFFERED SECURITIES IN DEFINITIVE FORM
WILL NOT BE ISSUED. SEE "DESCRIPTION OF OFFERED SECURITIES -- BOOK ENTRY SYSTEM"
HEREIN AND "DESCRIPTION OF DEBT SECURITIES -- GLOBAL SECURITIES" IN THE
ACCOMPANYING PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE OF 2002 SENIOR NOTES 99.798% AND ACCRUED INTEREST
PRICE OF 2007 SENIOR NOTES 99.220% AND ACCRUED INTEREST
PRICE OF 2027 SENIOR DEBENTURES 99.950% AND ACCRUED INTEREST
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per 2002 Senior Note................................ 99.798% .600% 99.198%
Total.......................................... $249,495,000 $1,500,000 $247,995,000
Per 2007 Senior Note................................ 99.220% .650% 98.570%
Total.......................................... $297,660,000 $1,950,000 $295,710,000
Per 2027 Senior Debenture........................... 99.950% .875% 99.075%
Total.......................................... $199,900,000 $1,750,000 $198,150,000
</TABLE>
- ------------
(1) Plus accrued interest from June 1, 1997.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriters."
(3) Before deducting expenses payable by the Company estimated at $1,000,000.
------------------------
The Offered Securities are offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to approval of certain legal matters by
Gibson, Dunn & Crutcher LLP, counsel for the Underwriters. It is expected that
delivery of the Offered Securities will be made on or about June 13, 1997
through the book-entry facilities of the Depositary against payment therefor in
immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
June 10, 1997
<PAGE> 2
A.H. BELO CORPORATION LOGO
BROADCAST DIVISION
<TABLE>
<S> <C> <C> <C>
WFAA-TV (ABC) KMOV-TV (CBS) KASA-TV (FOX) KREM-TV (CBS)
Dallas-Fort Worth, TX St. Louis, MO Albuquerque-Santa Fe, NM KSKN-TV (Ind.)(1)
KHOU-TV (CBS) KGW-TV (NBC) WHAS-TV (ABC) Spokane, WA
Houston, TX Portland, OR Louisville, KY KMSB-TV (FOX)
KTTU-TV (UPN)(1)
KING-TV (NBC) WCNC-TV (NBC) KOTV (CBS) Tucson, AZ
KONG-TV (Ind.)(1) Charlotte, NC Tulsa, OK
Seattle-Tacoma, WA KTVB-TV (NBC)
WVEC-TV (ABC) KHNL-TV (NBC) Boise, ID
KXTV (ABC) Hampton-Norfolk, VA KFVE-TV (UPN)(1)
Sacramento-Stockton- Honolulu, HI
Modesto, CA WWL-TV (CBS)
New Orleans, LA
</TABLE>
MAP
<TABLE>
<S> <C> <C> <C>
PUBLISHING DIVISION CABLE/PRODUCTION/ELECTRONIC MEDIA
The Dallas Morning News Owensboro Messenger- Television Food Network dallasnews.com
Dallas, TX Inquirer New York, NY Dallas, TX
Owensboro, KY
Providence NorthWest Cable News projo.com
Journal-Bulletin Bryan-College Station Seattle, WA Providence, RI
Providence, RI Eagle
Bryan-College Station, TX Belo Productions, Inc.
The Press-Enterprise(2) Seattle, WA
Riverside, CA The Gleaner
Henderson, KY
</TABLE>
- ---------------
(1) Station operated under local marketing agreement; KONG is not yet
operational.
(2) 38.5% ownership interest
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, THE OFFERED SECURITIES IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
S-2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company................................................. S-4
Use of Proceeds............................................. S-6
Capitalization.............................................. S-6
Selected Consolidated Financial Data........................ S-7
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-9
Description of Offered Securities........................... S-15
Underwriters................................................ S-18
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Company................................................. 3
Ratio of Earnings to Fixed Charges.......................... 4
Use of Proceeds............................................. 4
Description of Debt Securities.............................. 4
Description of Warrants..................................... 12
Plan of Distribution........................................ 13
Legal Matters............................................... 14
Experts..................................................... 14
</TABLE>
---------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS.
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO
ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR ANY
SALE MADE HEREUNDER DOES NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE ON WHICH SUCH
INFORMATION IS GIVEN.
S-3
<PAGE> 4
THE COMPANY
A. H. Belo Corporation (the "Company") is one of the nation's largest media
companies with a diversified group of television broadcasting, newspaper
publishing, cable network and electronic media assets. The Company is the oldest
continuously operating business in the state of Texas with a history that dates
back to 1842 with the publication of the Daily News in Galveston, Texas.
On February 28, 1997, the Company completed its acquisition of The
Providence Journal Company ("Providence Journal") by issuing 25.4 million shares
of the Company's Series A Common Stock and paying $587 million to the
shareholders of Providence Journal. The Company also incurred approximately $100
million in employee and transaction costs and refinanced $200 million of
Providence Journal debt. The acquisition included Providence Journal's nine
network-affiliated television stations (five NBC affiliates, one ABC affiliate,
one CBS affiliate and two FOX affiliates); cable programming businesses
(Television Food Network, America's Health Network and NorthWest Cable News) and
the Providence Journal-Bulletin. In order to comply with FCC regulations
prohibiting dual ownership of television stations in a single market, the
Company exchanged KIRO, the Company's UPN affiliate in Seattle-Tacoma,
Washington, for CBS affiliate KMOV in St. Louis, Missouri, effective June 2,
1997. This exchange allowed the Company to maintain ownership of Providence
Journal's NBC affiliate in Seattle-Tacoma, KING. Also, on May 13, 1997, the
Company announced the sale of substantially all of its ownership interest in
America's Health Network ("AHN") to Columbia/HCA Healthcare Corporation. After
giving effect to such sale, the Company owns and operates 16 network-affiliated
television stations, five daily newspapers, two cable channels and Belo
Productions, Inc.
The Company's Broadcast Division includes 16 network-affiliated television
stations which reach 13.5 percent of U.S. television households. Network
affiliations are balanced among the ABC, CBS and NBC networks plus two FOX
stations. The stations are geographically diverse, with ownership weighted in
the Southwest and the Pacific Northwest. In the February 1997 Nielsen ratings,
13 of the Company's 16 television stations were ranked first or second in their
markets. Collectively, the Company's television stations have received eight
George Foster Peabody Awards, 15 DuPont-Columbia Awards and 12 Edward R. Murrow
Awards, in addition to other local and national awards. The Company also manages
four television stations through local marketing agreements ("LMAs").
The Company's Publishing Division is led by The Dallas Morning News, which
has the country's seventh largest Sunday and ninth largest daily circulation. In
1996, for the fourth consecutive year, The Dallas Morning News ran more full-run
advertising than any other newspaper in the United States. In recognition of its
journalistic excellence, The Dallas Morning News has received six Pulitzer
Prizes since 1986. The Company also owns the Providence Journal-Bulletin, the
largest daily newspaper in terms of both advertising and circulation in Rhode
Island and southeastern Massachusetts. The Providence Journal-Bulletin has
received four Pulitzer Prizes since 1944. The Company's other newspapers are the
Owensboro Messenger-Inquirer in Owensboro, Kentucky; the Bryan-College Station
Eagle in Bryan-College Station, Texas; and The Gleaner in Henderson, Kentucky.
The Company also owns a 38.5 percent interest in The Press-Enterprise in
Riverside, California.
The Company owns NorthWest Cable News, a regional 24-hour cable news
channel and holds a controlling interest in the Television Food Network
("TVFN"), a 24-hour cable channel distributed to more than 24 million U.S. cable
subscribers. In addition, through Belo Productions, Inc., the Company produces
original programming for network and cable distribution.
S-4
<PAGE> 5
The following table sets forth the Company's major media assets by segment:
BROADCASTING
<TABLE>
<CAPTION>
Station
Network Rank in
Market Market Rank(1) Station Affiliation Market(2)
------ -------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Dallas-Fort Worth.......................... 8 WFAA ABC 1
Houston.................................... 11 KHOU CBS 1*
Seattle-Tacoma............................. 12 KING NBC 1
Seattle-Tacoma(3).......................... 12 KONG IND -
Sacramento-Stockton-Modesto................ 20 KXTV ABC 2
St. Louis.................................. 21 KMOV CBS 2
Portland................................... 24 KGW NBC 1*
Charlotte.................................. 28 WCNC NBC 3*
Hampton-Norfolk............................ 40 WVEC ABC 1*
New Orleans................................ 41 WWL CBS 1
Albuquerque-Santa Fe....................... 48 KASA FOX 4
Louisville................................. 50 WHAS ABC 1*
Tulsa...................................... 58 KOTV CBS 1
Honolulu................................... 69 KHNL NBC 2*
Honolulu(3)................................ 69 KFVE UPN -
Spokane.................................... 73 KREM CBS 2*
Spokane(3)................................. 73 KSKN IND -
Tucson..................................... 78 KMSB FOX 4
Tucson(3).................................. 78 KTTU UPN -
Boise...................................... 127 KTVB NBC 1
</TABLE>
NEWSPAPER PUBLISHING
<TABLE>
<CAPTION>
Daily Sunday
Newspaper Location Circulation(4) Circulation(4)
--------- ---------------------------- -------------- --------------
<S> <C> <C> <C>
The Dallas Morning News......... Dallas, Texas 523,955 800,306
Providence Journal-Bulletin..... Providence, Rhode Island 168,368 243,643
The Press-Enterprise(5)......... Riverside, California 162,235 169,565
Owensboro Messenger-Inquirer.... Owensboro, Kentucky 31,748 34,370
Bryan-College Station Eagle..... Bryan-College Station, Texas 21,968 27,501
The Gleaner..................... Henderson, Kentucky 11,624 13,752
</TABLE>
OTHER
<TABLE>
<CAPTION>
BUSINESS DESCRIPTION
-------- -----------
<S> <C>
Belo Productions, Inc............ Produces television programming
Television Food Network(6)....... Cable network distributed to 24 million subscribers
NorthWest Cable News............. Cable news network distributed to 1.7 million homes
dallasnews.com................... Web site featuring daily content from The Dallas Morning News
projo.com........................ Web site featuring daily content from Providence Journal-Bulletin
</TABLE>
- ---------------
* Tied with one or more stations in the market.
(1) Market rank is based on the relative size of the television market or
Designated Market Area ("DMA") among the 211 generally recognized DMA's in
the United States, based on January 1997 Nielsen estimates.
(2) Station rank is derived from the station's rating which is based on February
1997 Nielsen estimates of the number of television households tuned to the
Company's station for the Sunday-Saturday, 7:00 a.m. to 1:00 a.m. period
("sign-on/sign-off") as a percentage of the number of television households
in the market.
(3) Operated under local marketing agreement. KONG holds a construction permit
from the FCC and is not yet operational.
(4) Average paid circulation for the six months ended March 31, 1997, according
to the unaudited Publisher's Statement of the Audit Bureau of Circulations,
an independent agency.
(5) The Company holds a 38.5% ownership interest.
(6) The Company is the managing general partner with a 55% ownership interest.
S-5
<PAGE> 6
The Company is incorporated in the State of Delaware. The executive offices
of the Company are located at 400 South Record Street in Dallas, Texas 75202.
Its telephone number is (214) 977-6606. Unless otherwise specified or the
context otherwise requires, references in this Prospectus Supplement to the
"Company" shall include the Company and its subsidiaries.
USE OF PROCEEDS
The Company expects to use the net proceeds from the sale of the Offered
Securities offered hereby (estimated to be $740,855,000) to repay outstanding
bank debt under its revolving credit agreements and short-term notes classified
as long-term debt. At March 31, 1997, such outstanding debt was $1.458 billion
and had a weighted average interest rate of approximately 6% for the quarter
ended March 31, 1997. The Company currently has in place two revolving credit
agreements -- a $1.5 billion five-year variable rate facility that terminates on
January 31, 2002 and a $500 million 364-day facility that terminates on January
30, 1998. The portion of the Company's outstanding debt that will be repaid from
the net proceeds of this offering was used to finance the cash portion of the
purchase price of Providence Journal and related transaction costs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1997, and as adjusted to give effect to the sale by the
Company of the Offered Securities offered hereby (as if such sale occurred on
such date). This capitalization table should be read in conjunction with the
Company's consolidated financial statements and notes thereto incorporated by
reference in this Prospectus Supplement.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Offered Securities........................................ $ -- $ 750,000
Bank debt................................................. 1,458,300 717,445
Other long-term debt, less current portion................ 25,657 25,657
---------- ----------
Total long-term debt(1)........................... 1,483,957 1,493,102
---------- ----------
Shareholders' equity:
Common Stock, $1.67 par value. Authorized 150,000,000
shares:
Series A: Issued 60,849,808 shares at March 31, 1997... 101,619 101,619
Series B: Issued 9,201,617 shares at March 31, 1997.... 15,367 15,367
Additional paid-in capital................................ 1,132,746 1,132,746
Retained earnings......................................... 314,954 314,954
---------- ----------
Total............................................. 1,564,686 1,564,686
Less cost of 8,321,700 shares of Series A treasury
stock.................................................. (306,146) (306,146)
Less deferred compensation -- restricted shares........... (1,595) (1,595)
---------- ----------
Total shareholders' equity........................ 1,256,945 1,256,945
---------- ----------
Total capitalization.............................. $2,740,902 $2,750,047
========== ==========
</TABLE>
- ---------------
(1) For the four quarters ended March 31, 1997, the Company's ratio of funded
debt to pro forma operating cash flow, as defined in the Company's bank
credit facilities, was 4.2. Pro forma operating cash flow was computed by
combining the Company's and Providence Journal's historical operating cash
flow and removing non-recurring items and losses from certain cable
operations. The ratio for the year ended December 31, 1996, excluding any
consideration of the Providence Journal acquisition, was 2.7. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
S-6
<PAGE> 7
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data of the Company for each
of the five years in the period ended December 31, 1996 have been derived from
the audited consolidated financial statements of the Company included in the
documents incorporated by reference in the accompanying Prospectus. The selected
historical consolidated financial data for the three months ended March 31, 1996
and 1997 is unaudited; however, in the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the consolidated financial position and results of operations for these periods
have been included. Operating results for the three months ended March 31, 1997
include one month of operations of Providence Journal, which was acquired on
February 28, 1997, and are not necessarily indicative of the results that may be
expected for the full year. The following data should be read in conjunction
with the Company's consolidated financial statements and related notes thereto
included in its Annual Report on Form 10-K for the year ended December 31, 1996,
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and its
Current Report on Form 8-K dated February 28, 1997, as amended, each of which is
incorporated by reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1992 1993 1994 1995 1996 1996(1) 1997(1)
-------- -------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Broadcasting revenues(2)................ $201,241 $209,083 $258,040 $ 322,642 $ 333,396 $ 70,607 $ 92,002
Newspaper publishing revenues(3)........ 314,701 335,651 369,366 409,099 487,242 115,871 137,179
Other................................... -- 101 719 3,602 3,670 766 3,521
-------- -------- -------- ---------- ---------- ---------- ----------
Net operating revenues................ $515,942 $544,835 $628,125 $ 735,343 $ 824,308 $ 187,244 $ 232,702
======== ======== ======== ========== ========== ========== ==========
Net earnings(4)......................... $ 37,170 $ 51,077 $ 68,867 $ 66,576 $ 87,505 $ 12,724 $ 17,627
======== ======== ======== ========== ========== ========== ==========
Per share amounts:
Net earnings per common and common
equivalent share.................... $ .95 $ 1.26 $ 1.70 $ 1.68 $ 2.11 $ .33 $ .38
Cash dividends declared............... $ .27 $ .28 $ .30 $ .315 $ .41 $ .08 $ .11
Other data:
Segment operating cash flow(5)
Broadcasting.......................... $ 75,921 $ 83,356 $106,396 $ 121,716 $ 122,837 $ 20,203 $ 31,424
Newspaper publishing.................. $ 59,221 $ 61,667 $ 87,284 $ 90,915 $ 128,118 $ 27,562 $ 47,077
Operating cash flow margins(6)
Broadcasting.......................... 37.7% 39.9% 41.2% 37.7% 36.8% 28.6% 34.2%
Newspaper publishing.................. 18.8% 18.4% 23.6% 22.2% 26.3% 23.8% 34.3%
-------- -------- -------- ---------- ---------- ---------- ----------
Ratio of earnings to fixed charges(7)... 3.30 4.92 7.23 4.43 5.96 3.35 3.51
-------- -------- -------- ---------- ---------- ---------- ----------
Total assets............................ $758,527 $796,156 $913,791 $1,154,022 $1,224,072 $1,167,798 $3,383,128
Long-term debt(8)....................... $302,151 $277,400 $330,400 $ 557,400 $ 631,857 $ 563,557 $1,483,957
-------- -------- -------- ---------- ---------- ---------- ----------
</TABLE>
- ---------------
(1) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for information comparing the segment results of operations
for the first quarters of 1996 and 1997 on an adjusted basis to reflect the
acquisition of Providence Journal as though it had occurred at the beginning
of the respective periods presented.
(2) The Company purchased KIRO in February 1995, WWL in June 1994 and the
Providence Journal television stations in February 1997. Effective June 2,
1997, the Company disposed of KIRO in an exchange transaction whereby it
acquired KMOV in St. Louis.
(3) The Company purchased the Bryan-College Station Eagle in December 1995, the
Owensboro Messenger-Inquirer in January 1996, and as a result of the
Providence Journal acquisition, the Providence Journal-Bulletin in February
1997.
(4) Net earnings for 1993 include an increase of $6,599 (16 cents per share)
representing the cumulative effect of adopting Statement of Financial
Accounting Standards No. 109. "Accounting for Income Taxes", effective
January 1, 1993.
(5) Operating cash flow is defined as segment earnings from operations plus
related depreciation and amortization. Operating cash flow is used in the
broadcasting and publishing industries to analyze and
(footnotes continued on next page)
S-7
<PAGE> 8
compare companies on the basis of operating performance, leverage and
liquidity. However, operating cash flow should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(6) Operating cash flow margin is defined as segment operating cash flow divided
by segment net operating revenues, expressed as a percentage.
(7) The ratios of earnings to fixed charges were computed by dividing earnings
by the fixed charges. For the purposes of computing such ratios, "earnings"
consist of earnings from continuing operations before cumulative effect of
accounting changes plus fixed charges (excluding capitalized interest), and
"fixed charges" consist of interest, whether expensed or capitalized, and
the portion of rental expenses estimated to represent an interest component.
(8) Long-term debt decreased in May 1996 after the application of net proceeds
of approximately $198,500 from the issuance of 5,750,000 shares of Series A
Common Stock. Long-term debt subsequently increased in the fourth quarter of
1996 when the Company borrowed $306,146 for the purchase of 8,321,700 shares
of treasury stock. In the first quarter of 1997, long-term debt increased as
a result of the Providence Journal acquisition.
(footnotes continued on next page)
S-8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Company is one of the nation's largest media companies with a
diversified group of television broadcasting, newspaper publishing, cable
network and electronic media assets. The Company's television broadcast
operations began in 1950 with the acquisition of WFAA in Dallas. In 1984, the
Company expanded its broadcast operations through the acquisition of four
television stations in Houston, Sacramento, Hampton-Norfolk and Tulsa. In June
1994 and February 1995, the Company acquired television stations in New Orleans
and Seattle, respectively. The Company's principal newspaper is The Dallas
Morning News. In December 1995, the Company purchased a daily newspaper in
Bryan-College Station, Texas. In the first quarter of 1996, the Company acquired
a daily newspaper in Owensboro, Kentucky and sold its interest in its
programming distribution partnership.
On February 28, 1997, the Company completed the acquisition of Providence
Journal and thereby added to its broadcast holdings nine network-affiliated
television stations and four televisions stations operated under local marketing
agreements. Through its acquisition of Providence Journal, the Company also
acquired the Providence Journal-Bulletin, the largest daily newspaper in terms
of both advertising and circulation in Rhode Island and southeastern
Massachusetts. Comparability of year-to-year results and financial condition are
affected by these recent acquisitions.
The Company depends on advertising as its principal source of revenues. As
a result, the Company's operations are sensitive to changes in the national
economy as well as changes in the regional economies where the Company operates.
The Company also derives revenues, to a much lesser extent, from the circulation
revenue of its newspaper operations and from compensation paid by the networks
to its television stations for broadcasting network programming.
All references herein to broadcasting operating cash flow or newspaper
publishing operating cash flow refer to segment earnings from operations plus
related depreciation and amortization. Operating cash flow as defined should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
CONSOLIDATED RESULTS OF OPERATIONS
Net earnings for the first quarter of 1997 were $17,627 or 38 cents per
share compared to $12,724 (33 cents per share) for the first quarter of 1996.
First quarter 1996 results included a gain of $3,895 (6 cents per share) on the
sale of Maxam Entertainment, the Company's programming distribution partnership,
to CBS. First quarter 1997 results include the operations of Providence Journal
beginning March 1, 1997 and are not necessarily indicative of the results that
may be expected for the full year. The acquisition of Providence Journal is
dilutive to the Company's earnings due primarily to the amortization of
intangibles and increased interest expense on borrowings incurred to complete
the transaction.
S-9
<PAGE> 10
To enhance comparability of the Company's segment results of operations for
the three months ended March 31, 1997 and 1996, certain information below is
presented on an "as adjusted" basis and reflects the acquisition of Providence
Journal as though it had occurred at the beginning of the respective periods
presented. The discussion of results of operations that follows compares segment
operations on an "as adjusted" basis only.
<TABLE>
<CAPTION>
AS ADJUSTED AS REPORTED
------------------- -------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- -------------------
1997 1996 % CHANGE 1997 1996 % CHANGE
-------- -------- -------- -------- -------- --------
(UNAUDITED; DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues
Broadcasting.......................... $120,423 $113,989 5.6% $ 92,002 $ 70,607 30.3%
Newspaper Publishing.................. 156,769 145,996 7.4% 137,179 115,871 18.4%
Other................................. 7,575 5,399 40.3% 3,521 766 --
Operating cash flow
Broadcasting.......................... $ 38,606 $ 32,588 18.5% $ 31,424 $ 20,203 55.5%
Newspaper publishing.................. 50,468 30,312 66.5% 47,077 27,562 70.8%
Other................................. (4,714) (5,196) 9.3% (1,261) (970) (30.0)%
</TABLE>
Broadcasting
Broadcasting revenues for first quarter 1997 were $120,423, an increase of
$6,434 or 5.6 percent over first quarter 1996 revenues of $113,989. Local
revenues were up 4.7 percent with the largest improvements noted in Dallas,
Seattle and Portland. These three markets posted a combined local revenue
improvement of nearly 10 percent. The higher local revenues are attributable to
strong ratings in both the November 1996 and February 1997 Nielsen ratings
periods. National revenues were also much stronger in 1997 versus 1996,
increasing 10.2 percent. All but three of the Company's television stations
posted higher national revenues. Telecommunications and automotive advertising
contributed to the strength in the national revenue category. National revenues
at KING, the Company's NBC affiliate in Seattle, also benefited as advertisers
looked to this established leader while other stations in the market prepare to
change network affiliations later this year. Overall, political advertising was
26.5 percent lower in 1997 than in 1996 due to the lack of any major elections;
however, both Texas stations had higher 1997 political advertising revenues due
to aggressive issues advertising by the telecommunication and public utility
industries.
Operating cash flow margins for the first quarter of 1997 and 1996 were
32.1 percent and 28.6 percent, respectively. Broadcasting operating cash flow of
$38,606 improved 18.5 percent over last year's first quarter broadcasting
operating cash flow of $32,588. While net operating revenues increased as noted
above, total cash expenses were relatively flat when compared to last year.
Compensation and benefits were up just 2.1 percent over last year due to changes
in employee headcount and merit increases from year to year. Outside services
and other operating costs also increased slightly over last year. However,
advertising and promotion expense was lower in 1997 than in 1996, which included
a significant advertising campaign in connection with the Honolulu station's
change in network affiliation. Programming expense was also lower in 1997 due to
lower costs for both barter and purchased programming.
Newspaper Publishing
First quarter 1997 revenues for newspaper publishing were $156,769, an
improvement of $10,773 or 7.4 percent over 1996 revenues of $145,996. Revenues
at The Dallas Morning News rose 8.3 percent while the Providence
Journal-Bulletin revenues improved 3.7 percent. At The Dallas Morning News,
classified advertising was up 10.9 percent due to higher average rates, offset
somewhat by lower linage. Although classified employment linage improved nearly
7 percent, decreases in automotive and real estate linage more than offset this
volume gain. General advertising volume at The Dallas Morning News was up
substantially, primarily in the technology category, which contributed to a 14.1
percent general advertising revenue increase.
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<PAGE> 11
Retail advertising revenue was up 3.1 percent due to higher rates. Circulation
revenues were flat compared to last year's first quarter as daily volumes
declined .9 percent and Sunday circulation declined .2 percent.
Advertising revenues at the Providence Journal-Bulletin were up 5.3 percent
over last year, primarily in classified and general. Across-the-board rate
increases effective January 1, 1997, Providence Journal-Bulletin's first rate
increases since October 1, 1995, produced the higher revenues. Despite these
rate increases, volume in all full-run run-of-press ("ROP") categories improved
over first quarter 1996 results. Classified revenues were especially strong,
improving 19 percent over last year with increases in automotive, employment and
education, and real estate. General advertising improvement came from the
automotive, professional services and travel and entertainment categories.
Circulation revenues were up 1.1 percent over last year, due to a price increase
last year for Sunday single-copy and home delivery and a January 1997 increase
in the daily home delivery price. Circulation volumes for daily and Sunday were
down 1.5 percent and 3.8 percent, respectively.
Newspaper publishing operating cash flow margins for the first quarter of
1997 and 1996 were 32.2 percent and 20.8 percent, respectively. Newspaper
publishing operating cash flow improved dramatically in the first quarter of
1997 versus first quarter 1996 due to a combination of higher revenues and lower
cash expenses. The most significant savings came in lower newsprint prices. The
Dallas Morning News' newsprint expense was one-third less than the first quarter
of last year and all other newspaper operations experienced similar decreases.
Salaries, wages and employee benefits were up only 2.4 percent over last year.
While employee expenses at The Dallas Morning News increased 6 percent over the
first quarter of last year, an April 1996 restructuring at Providence
Journal-Bulletin reduced its overall employee costs by 5.5 percent. All other
operating expenses for the newspaper publishing group were up 11.4 percent.
Distribution expenses at The Dallas Morning News were higher due to an increase
in its total market coverage ("TMC") advertising program. The Dallas Morning
News also had higher bad debt expense and costs associated with contractor
recognition programs.
Other
Other revenues, primarily in cable programming and electronic media,
increased 40.3 percent to $7,575 for the first quarter of 1997 due mostly to
higher revenues at TVFN, in which the Company has a controlling partnership
interest. Operating cash flow for this segment, while negative for the first
quarters of 1997 and 1996, has improved in the current period, due to improving
margins at Northwest Cable News. On May 13, 1997, the Company announced the
pending sale of substantially all of its ownership interest in AHN, which it
acquired in connection with the Providence Journal acquisition. Accordingly, the
results of operations and financial position of AHN are not included herein.
Consolidated Results
Depreciation and amortization expenses were higher in first quarter 1997
versus 1996 because of the Providence Journal acquisition. Amortization of
intangibles associated with Providence Journal for first quarter 1997 was
approximately $4 million while incremental depreciation expense for Providence
Journal was $2.6 million.
Higher interest expense resulted from the higher debt levels associated
with the Providence Journal acquisition and fourth quarter 1996 treasury stock
repurchases. Weighted average interest rates for the first quarter of 1997 were
relatively unchanged from last year.
The effective tax rate for the first quarter of 1997 was 50 percent versus
a first quarter 1996 effective rate of 40.5 percent. The increase in the
effective rate is due to non-deductible goodwill amortization associated with
the Providence Journal acquisition.
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YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
The following discussion is based upon the Company's reported financial
results for the years ended December 31, 1996 and 1995. Such results have not
been adjusted to take into account the Company's acquisition of Providence
Journal.
CONSOLIDATED RESULTS OF OPERATIONS
The Company recorded 1996 net earnings of $87,505 or $2.11 per share,
compared to $66,576 or $1.68 per share in 1995. Results for 1996 include a gain
of $3,895 (6 cents per share) on the sale of the Company's interest in its
programming distribution partnership while 1995 results include a $2,406 (4
cents per share) gain on the sale of the Company's investment in Stauffer
Communications, Inc. ("Stauffer") stock. Results for 1995 also include a
non-recurring charge for early retirement costs of $1,254 (2 cents per share).
These non-recurring items in 1996 and 1995 are included in other, net. Excluding
the non-recurring items, adjusted earnings per share are $2.05 for 1996 compared
to $1.66 in 1995.
Interest expense in 1996 was $27,643 compared to $29,987 in 1995. The
decrease in interest expense was primarily due to lower average rates, which
were approximately 5.7 percent for 1996 compared to 6.3 percent in 1995. Average
debt outstanding for the year was slightly lower than in 1995. The Company used
the proceeds from its May 1996 equity offering to retire approximately $198,500
in revolving debt. However, borrowing increased substantially during the fourth
quarter in 1996 as the Company purchased 8,321,700 shares of treasury stock for
an aggregate purchase price of $306,146.
Broadcasting
Broadcasting revenues in 1996 were $333,396, an increase of 3.3 percent
over 1995 revenues of $322,642. Results for 1995 included only 11 months of
revenue for the Seattle station, which was purchased on February 1, 1995. On a
same-station basis, 1996 revenues increased 2.5 percent over 1995.
The increase in 1996 broadcast revenues over the prior year is primarily
due to political advertising associated with the presidential election, senate
races in Texas and California and issues advertising. Local advertising revenues
also improved due primarily to a contract between the Seattle Mariners and UPN
affiliate KIRO. Both local and national revenues were up at WWL in New Orleans,
as advertisers favored this long-established market leader when other stations
in the New Orleans market switched network affiliations in the first part of
1996. These increases in revenues were offset by declining national advertising.
Stiff competition from NBC's prime time lineup and Olympics programming, as well
as weak national sales in Dallas and Houston, combined for decreased national
revenues of 2.7 percent.
Broadcasting operating cash flow for 1996 was $122,837, up slightly from
1995 broadcasting operating cash flow of $121,716. Operating cash flow margins
were 36.8 percent in 1996 and 37.7 percent in 1995. Excluding the effect of KIRO
in January of 1996, earnings from operations and margins improved only slightly.
Salaries, wages and employee benefits increased 7.1 percent (5.5 percent on a
same-station basis) due primarily to more employees, merit increases, and
overtime associated with election coverage. Programming expense in 1996 was also
up significantly, due to the Seattle Mariners contract and more syndicated
programming at KIRO. Programming costs also increased slightly at other stations
for certain syndicated programming. These increases were partially offset by the
elimination of a weekly news show in Dallas and the cancellation of the Oakland
A's contract in Sacramento.
Newspaper Publishing
In 1996, newspaper publishing revenues represented 59.1 percent of total
revenues, compared to 55.6 percent in 1995. The increased contribution to total
revenues over last year is partly due to the acquisitions of the Bryan-College
Station Eagle in December 1995 and the Owensboro Messenger-Inquirer in January
1996. In addition, the Company's principal newspaper, The Dallas Morning News,
had a revenue increase of nearly 13 percent over 1995. Advertising revenues
account for approximately 87 percent of publishing revenues, while circulation
revenues represent approximately 11 percent. Other publishing revenues,
primarily commercial printing, contribute the remainder.
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Newspaper advertising volume for The Dallas Morning News is measured in
column inches. Volume for the last two years was as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1996 1995
------ ------
(IN THOUSANDS OF
INCHES)
<S> <C> <C>
Full-run ROP inches(1):
Classified........................................ 2,057 2,125
Retail............................................ 1,435 1,429
General........................................... 296 254
----- -----
Total.......................................... 3,788 3,808
===== =====
</TABLE>
- ---------------
(1) Full-run ROP inches refers to the number of column inches of display and
classified advertising that is printed and distributed in all editions of
the newspaper. During the periods indicated above, The Dallas Morning News
ran more full-run ROP advertising than any other newspaper in the United
States.
Revenues from newspaper publishing in 1996 were $487,242, an increase of
19.1 percent over 1995 revenues of $409,099. Excluding the effect of the
recently acquired newspapers, revenues increased 12.4 percent. The full year
effect of two advertising rate increases in 1995, combined with additional rate
increases in January 1996, contributed the majority of the year over year
revenue improvement at The Dallas Morning News. The rate increases were
implemented in response to escalating newsprint prices throughout 1995 and in
the first quarter of 1996. Classified advertising linage fell 3.2 percent as a
result of the rate increases, which were higher in classified than in other
advertising categories. Retail advertising volume was relatively unchanged over
last year, with additional grocery store ads offsetting declines in department
store advertising. General advertising linage improved 16.5 percent despite the
higher rates, with significant gains in the technology and automotive
categories. The Dallas Morning News' preprint, TMC and other advertising
revenues increased 7.8 percent, primarily due to more TMC participation.
Circulation revenues were up nearly 10 percent over last year due to an October
1995 increase in the daily single-copy rate from $.25 to $.50 and a February
1996 increase in the home delivery rate. Circulation volume declined slightly
from 534,197 in 1995 to 513,099 in 1996 for daily and from 800,147 in 1995 to
785,934 in 1996 for Sunday delivery due primarily to these rate increases.
Newspaper publishing operating cash flow for 1996 was $128,118 compared to
$90,915 in 1995, an increase of 40.9 percent. Excluding the effect of the
newspaper acquisitions, operating cash flow increased 32.1 percent. The
operating cash flow margin in 1996 of 26.3 percent (26.1 percent without the new
newspapers) improved over the 1995 operating cash flow margin of 22.2 percent
due to a combination of factors. While revenues increased 19.1 percent, expenses
increased only 13.3 percent. Other production, distribution and operating
expenses at The Dallas Morning News were up the most compared to last year, due
to higher TMC distribution expenses, transportation costs, advertising and
promotion and outside services associated with election coverage, research and
temporary help. Salaries, wages and employee benefits were also higher than last
year due to more employees and higher performance bonuses. Newsprint, ink and
other supplies expense was up 6.5 percent (3.6 percent excluding the new
newspapers) over last year due to higher cost per ton, offset somewhat by lower
consumption due to decreased circulation. There have been significant
fluctuations in newsprint prices in recent years. Prices began increasing in mid
1994 from a low of $375 per ton to a high of nearly $675 per ton in February
1996 before declining to approximately $460 per ton in December 1996. Future
price changes, and thus overall newsprint costs, cannot be predicted with
certainly. However, for 1997, the Company expects overall newsprint costs per
ton to be lower than in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations and bank borrowings are the Company's
primary sources of liquidity. Long-term debt outstanding increased $852.1
million from December 31, 1996 to March 31, 1997 due to the
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<PAGE> 14
purchase of Providence Journal. Specifically, the Company paid $587 million in
cash to shareholders of Providence Journal and approximately $85 million in
employee and transaction costs, and refinanced $200 million of Providence
Journal's debt under its existing credit facility. An additional $15 million in
merger related costs are expected to be paid during the remainder of 1997. Also,
in connection with the Providence Journal acquisition, the Company issued
25,394,564 shares of Series A Common Stock resulting in an increase in equity of
$870.4 million.
During 1996, total debt outstanding increased $74.5 million from December
31, 1995. Total debt was reduced in May 1996 by approximately $198.5 million due
to the application of the net proceeds from an equity offering of 5,750,000
shares of Series A Common Stock. Total long-term debt then increased in the
fourth quarter of 1996 when the Company borrowed $306.1 million to purchase
8,321,700 shares of treasury stock. These shares were purchased under a Board
action in September 1996, which increased the Company's stock repurchase
authorization by 10,000,000 shares. Treasury shares may or may not be used to
facilitate future transactions with third parties and will be held in treasury
until such a determination has been made. At March 31, 1997, the Company has
remaining Board authority for the purchase of approximately 5,337,000 treasury
shares.
During the first quarter of 1997, net cash provided by operations was $57.2
million, compared to $34.3 million for the same period in 1996. The increase was
due primarily to higher earnings and changes in working capital. During 1996,
net cash provided by operations was $164.4 million, compared to $96.6 million in
1995. This increase was also due primarily to higher net earnings and changes in
working capital. The most significant working capital change was a reduction in
newsprint inventory balances at the end of 1996. The decrease was due to fewer
newsprint tons on hand and a lower cost per ton at the end of 1996 versus 1995.
The timing of accounts receivable collections and income tax payments also
contributed to the increase in 1996 net cash provided by operations. Net cash
provided by operations was sufficient to fund capital expenditures and common
stock dividends.
At March 31, 1997, the Company had a $1.5 billion five-year revolving
credit agreement and a $500 million 364-day revolving credit agreement.
Borrowings under these agreements at March 31, 1997 were $1,387 million. 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 these short-term notes
through the long-term revolving credit agreement, short-term borrowing is
classified as long-term. The Company had short-term unsecured notes of $71.3
million outstanding at March 31, 1997.
As defined in the credit agreements, the Company is required to maintain
certain ratios as of the end of each quarter. For the four quarters ended March
31, 1997, the Company's ratio of funded debt to pro forma operating cash flow,
which is not to exceed 5.0, was 4.2 compared to 2.7 for the year ended December
31, 1996. The Company's interest coverage ratio for the four quarters ended
March 31, 1997 was 4.4 versus 8.4 for the year ended December 31, 1996, compared
to a minimum coverage requirement of 2.5 times.
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 during the first quarter of 1997 were
approximately 6 percent compared to 6.1 percent for the same period in 1996.
On April 21, 1997, the Company filed a shelf registration statement on Form
S-3 with the Securities and Exchange Commission covering the issuance from time
to time of up to $1.5 billion in debt securities, including the Offered
Securities described in this Prospectus Supplement. With this financing option,
combined with the existing revolving credit facilities discussed above, the
Company believes its current financial condition and credit relationships are
adequate to fund both its current obligations as well as near-term growth.
The Company paid first quarter 1997 dividends of $4 million or 11 cents per
share on Series A and Series B Common Stock compared to $3.1 million or 8 cents
per share in first quarter 1996. The Company paid dividends of $16.4 million or
41 cents per share on Series A and Series B Common Stock outstanding during 1996
compared to $12.3 million or 31.5 cents per share during 1995. The Company
expects its
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<PAGE> 15
aggregate dividend payment to be higher in the remainder of 1997 due to the
additional shares issued in the Providence Journal acquisition.
Capital expenditures in 1996 were $49.8 million. Capital projects included
additional production equipment and major building renovations at The Dallas
Morning News, a building and studio remodeling project at the Company's Dallas
television station, leasehold improvements and furniture and equipment purchases
for the Company's new consolidated Washington D.C. news bureau and the expansion
of corporate offices. The Company also completed a new studio control room in
Seattle, purchased broadcast equipment for each of the television stations and
invested in new production equipment for its two new publishing subsidiaries.
Capital expenditures for first quarter 1997 were $15.5 million. Total capital
expenditures in 1997, including projects at Providence Journal subsidiaries, are
expected to be between $80 million and $90 million. The Company expects to
finance future capital expenditures using cash generated from operations and,
when necessary, borrowings under the revolving credit facilities.
DESCRIPTION OF OFFERED SECURITIES
The following description of the particular terms of the Offered Securities
offered hereby supplements and, to the extent inconsistent therewith, replaces
the description of the general terms and provisions of the Offered Securities
set forth in the accompanying Prospectus under the caption "Description of Debt
Securities," to which description reference is hereby made. The following
summary is qualified in its entirety by reference to the Indenture referred to
in the accompanying Prospectus.
GENERAL
The 2002 Senior Notes, the 2007 Senior Notes and the 2027 Senior Debentures
offered hereby each constitute a series of debt securities under the Indenture,
limited to $250 million aggregate principal amount, with respect to the 2002
Senior Note series; $300 million aggregate principal amount, with respect to the
2007 Senior Note series; and $200 million aggregate principal amount, with
respect to the 2027 Senior Debentures series. The 2002 Senior Notes will mature
on June 1, 2002, the 2007 Senior Notes will mature on June 1, 2007 and the 2027
Senior Debentures will mature on June 1, 2027.
The 2002 Senior Notes, the 2007 Senior Notes and the 2027 Senior Debentures
will bear interest from June 1, 1997 at the rate shown in their title, payable
semi-annually (to holders of record at the close of business on May 15 or
November 15 immediately preceding the interest payment date) on June 1 and
December 1 of each year beginning December 1, 1997. Upon issuance, each series
of the Offered Securities will be represented by one or more registered Global
Securities that will be deposited with, or on behalf of, the Depositary and will
be registered in the name of the Depositary or its nominee. For so long as the
Offered Securities are registered in the name of the Depositary, or its nominee,
the principal and interest due on the Offered Securities will be payable by the
Company or its agent to the Depositary for payment to its participants for
subsequent disbursement to the beneficial owners. See "Book-Entry System" below
and "Description of Debt Securities -- Global Securities" in the accompanying
Prospectus.
The Offered Securities will be unsubordinated and unsecured obligations of
the Company ranking pari passu with all existing and future unsubordinated and
unsecured obligations of the Company. Claims of Holders of Offered Securities
will be effectively subordinated to the claims of holders of the debt and other
liabilities of the Company's subsidiaries with respect to the assets of such
subsidiaries. In addition, claims of Holders of Offered Securities will be
effectively subordinated to the claims of holders of secured debt of the Company
and its subsidiaries with respect to the collateral securing such claims. As of
March 31, 1997, the Company's subsidiaries had $25.7 million of Indebtedness, as
defined in the Indenture, and the Company and its subsidiaries had $16.1 million
of secured Indebtedness.
The defeasance and covenant defeasance provisions of the Indenture
described under the caption "Description of Debt Securities -- Defeasance and
Covenant Defeasance" in the accompanying Prospectus will apply to the Offered
Securities.
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<PAGE> 16
REDEMPTION
The 2002 Senior Notes, the 2007 Senior Notes and the 2027 Senior Debentures
will be redeemable as a whole or in part, at the option of the Company at any
time, at a redemption price equal to the greater of (i) 100% of their principal
amount or (ii) the sum of the present values of the remaining scheduled payments
of principal and interest thereon discounted to the date of redemption on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Yield plus 10 (ten) basis points for the 2002 Senior Notes, 15
(fifteen) basis points for the 2007 Senior Notes and 20 (twenty) basis points
for the 2027 Senior Debentures, plus in the case of each of clause (i) and (ii)
accrued interest to the date of redemption.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the applicable Offered Security that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the 2002 Senior Notes, the 2007 Senior Notes or the 2027
Senior Debentures, as the case may be. "Independent Investment Banker" means
Morgan Stanley & Co. Incorporated or, if such firm is unwilling or unable to
select the Comparable Treasury Issue, an independent investment banking
institution of national standing appointed by the Trustee.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the five Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average as determined by the Trustee of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by the Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption
date.
"Reference Treasury Dealer" means (i) Morgan Stanley & Co. Incorporated,
Bear, Stearns & Co. Inc., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Brothers Inc and their respective successors,
provided however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company shall substitute therefor another Primary Treasury Dealer and (ii) any
other Primary Treasury Dealer selected by the Trustee after consultation with
the Company.
Holders of 2002 Senior Notes, 2007 Senior Notes or 2027 Senior Debentures
to be redeemed will receive notice thereof by first-class mail at least 30 and
not more than 60 days prior to the date fixed for redemption.
BOOK-ENTRY SYSTEM
The 2002 Senior Notes, the 2007 Senior Notes, and the 2027 Senior
Debentures will be represented by one or more Global Securities registered in
the name of Cede & Co., the partnership nominee of The Depository Trust Company,
the Depositary. The Depositary is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of
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<PAGE> 17
the Exchange Act. The Depositary holds securities that its participants (the
"Direct Participants") deposit with the Depositary. The Depositary also
facilities the settlement among Direct Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Direct Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by The New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either directly
or indirectly (the "Indirect Participants," and together with the Direct
Participants, the "Participants"). The rules applicable to the Depositary and
its Participants are on file with the U.S. Securities and Exchange Commission.
Purchases of the Offered Securities within the Depositary's system must be
made by or through Direct Participants, which will receive a credit for the
Offered Securities on the Depositary's records. The ownership interest of each
actual purchaser of each Offered Security (a "Beneficial Owner") is in turn to
be recorded on the Direct and Indirect Participants' respective records.
Beneficial Owners will not receive written confirmation from the Depositary of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interest in the Offered Securities are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interest in Offered
Securities except in the event that use of the book-entry system for the Offered
Securities is discontinued.
To facilitate subsequent transfers, all Offered Securities deposited by
Direct Participants with the Depositary will be registered in the name of Cede &
Co. The deposit of the Offered Securities with the Depositary and their
registration in the name of Cede & Co. effect no change in beneficial ownership.
The Depositary has no knowledge of the actual Beneficial Owners of the Offered
Securities; the Depositary's records reflect only the identify of the Direct
Participants to whose accounts such Offered Securities are credited, which may
or may not be the Beneficial Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Offered Securities of an issue are being redeemed, the Depositary's practice is
to determine by lot the amount of the interest of each Direct Participant in
such series to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Offered Securities. Under its usual procedures, the Depositary mails an
omnibus proxy (an "Omnibus Proxy") to the Participants as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Offered Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Principal, redemption premium, if any, and interest payments on the Offered
Securities will be made to the Depositary. The Depositary's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
for the accounts of customers in bearer form or registered in "street-name," and
will be the responsibility of such Participant and not of the Depositary, the
underwriters, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
redemption
S-17
<PAGE> 18
premium, if any, and interest to the Depositary is the responsibility of the
Company or the respective trustees. Disbursement of such payments to Direct
Participants is the responsibility of the Depositary, and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants. Registered Global Securities will settle in immediately available
funds in the secondary trading market. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading activity
in the Offered Securities.
The Depositary may discontinue providing its services as securities
depository with respect to the Offered Securities at any time by giving
reasonable notice to the Company. Under such circumstances and in the event that
a successor securities depository is not obtained, Offered Securities
certificates are required to be printed and delivered. In addition, the Company
may decide to discontinue use of the system of book-entry transfers through the
Depositary (or a successor securities depository). In that event, Offered
Securities certificates will be printed and delivered.
The Company will not have any responsibility or obligation to Participants
or the persons for whom they act as nominees with respect to the accuracy of the
records of the Depositary, its nominee or any Direct or Indirect Participant
with respect to any ownership interest in the Offered Securities, or with
respect to payments to or providing of notice for the Direct Participants, the
Indirect Participants or the Beneficial Owners.
The information contained herein under the caption "Description of Offered
Securities -- Book-Entry System" concerning the Depositary and the Depositary's
book-entry system has been obtained from the Depositary. Neither the Company,
the Trustee nor the underwriters, dealers or agents take responsibility for the
accuracy or completeness thereof.
THE TRUSTEE
The Offered Securities will be issued under an Indenture entered into by
and between the Company and The Chase Manhattan Bank, as Trustee (the
"Trustee"). The Trustee and an affiliate of the Trustee serve as agents and
lenders under the Company's credit agreements.
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amount of the Offered Securities set forth opposite their
respective names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF 2002 OF 2007 OF 2027
NAME SENIOR NOTES SENIOR NOTES SENIOR DEBENTURES
---- ---------------- ---------------- -----------------
<S> <C> <C> <C>
Morgan Stanley & Co. Incorporated...... $ 50,000,000 $ 60,000,000 $ 40,000,000
Bear, Stearns & Co. Inc. .............. 50,000,000 60,000,000 40,000,000
Goldman, Sachs & Co. .................. 50,000,000 60,000,000 40,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............. 50,000,000 60,000,000 40,000,000
Salomon Brothers Inc................... 50,000,000 60,000,000 40,000,000
------------ ------------ ------------
Total..................... $250,000,000 $300,000,000 $200,000,000
============ ============ ============
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to pay for and accept delivery of the Offered Securities is subject
to the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Offered Securities if any are taken.
S-18
<PAGE> 19
The Underwriters initially propose to offer part of the Offered Securities
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
to exceed .375% of the principal amount in the case of the 2002 Senior Notes,
.400% of the principal amount in the case of the 2007 Senior Notes, and .500% of
the principal amount in the case of the 2027 Senior Debentures. Any Underwriter
may allow, and any such dealers may reallow, a concession to certain other
dealers not to exceed .250% of the principal amount in the case of the 2002
Senior Notes, .250% of the principal amount in the case of the 2007 Senior
Notes, and .250% of the principal amount in the case of the 2027 Senior
Debentures. After the initial offering of the Offered Securities, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company does not intend to apply for listing of any of the Offered
Securities on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the Offered
Securities, as permitted by applicable laws and regulations. The Underwriters
are not obligated, however, to make a market in the Offered Securities and any
such market-making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Offered Securities.
In order to facilitate the offering of the Offered Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Offered Securities. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Offered Securities for their own account. In addition, to cover overallotments
or to stabilize the price of the Offered Securities, the Underwriters may bid
for, and purchase, the Offered Securities in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an underwriter
or a dealer for distributing the Offered Securities in the offering, if the
syndicate repurchases previously distributed Offered Securities in transactions
to cover syndicate short positions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the
Offered Securities above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Thomas B. Walker, Jr., a director of the Company, is a limited partner of
The Goldman Sachs Group, L.P., which is a general partner of and owns a 99%
interest in Goldman, Sachs & Co.
From time to time, certain of the Underwriters or their affiliates engage
in transactions with and perform services for the Company and its affiliates in
the ordinary course of business.
S-19
<PAGE> 20
PROSPECTUS
$1,500,000,000
[A H BELO LOGO]
DEBT SECURITIES
AND
WARRANTS TO PURCHASE
DEBT SECURITIES
---------------------
A. H. Belo Corporation (the "Company") intends to issue from time to time
in one or more series its unsecured debt securities ("Debt Securities") and
warrants ("Warrants") to purchase Debt Securities (the Debt Securities and the
Warrants being herein collectively called the "Securities") with an aggregate
initial public offering price or purchase price of up to $1,500,000,000, or the
equivalent thereof if any of the Securities are denominated in a foreign
currency or composite currency such as the European Currency Unit ("ECU"). The
Debt Securities of each series and the Warrants will be offered on terms to be
determined at the time of sale. See "Description of Debt Securities" and
"Description of Warrants." The Debt Securities and Warrants may be sold for
United States dollars, foreign currencies or composite currencies such as the
ECU, and the principal of, premium, if any, and any interest on the Debt
Securities may be payable in United States dollars, foreign currencies or
composite currencies such as the ECU. The specific designation, aggregate
principal amount, the currency or composite currency in which the principal,
premium, if any, and any interest are payable, the rate (or method of
calculation) and the time and place of payment of any interest, authorized
denominations, maturity, offering price, any redemption terms and any other
specific terms of the Debt Securities in respect of which this Prospectus is
being delivered are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"). With regard to the Warrants, if any, in respect of
which this Prospectus is being delivered, the Prospectus Supplement sets forth a
description of the Debt Securities for which the Warrants are exercisable and
the offering price, if any, exercise price, duration and any other specific
terms of the Warrants.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The Securities may be sold by the Company directly to purchasers, through
agents designated from time to time, or to or through underwriters or dealers.
If underwriters or agents are involved in the offering of Securities, the names
of the underwriters or agents will be set forth in the Prospectus Supplement. If
an underwriter, agent or dealer is involved in the offering of any Securities,
the underwriter's discount, agent's commission or dealer's purchase price will
be set forth in, or may be calculated from the information set forth in, the
Prospectus Supplement, and the net proceeds to the Company from such offering
will be the public offering price of the Securities less such discount, in the
case of an offering through an underwriter, or the purchase price of the
Securities less such commission, in the case of an offering through an agent,
and less, in each case, the other expenses of the Company associated with the
issuance and distribution of the Securities. See "Plan of Distribution."
---------------------
Prior to issuance there will have been no market for the Debt Securities,
and there can be no assurance that a secondary market for any such Debt
Securities will develop. This Prospectus may not be used to consummate sales of
any Debt Securities unless accompanied by the Prospectus Supplement.
---------------------
The date of this Prospectus is June 3, 1997.
<PAGE> 21
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional
Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, New York, New
York 10048. Copies of such materials can be obtained upon written request from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such materials may
also be inspected and copied at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005, on which exchange one or more
of the Company's securities are listed. Copies of reports, proxy statements and
other information electronically filed with the Commission by the Company may be
inspected by accessing the Commission's World Wide Web site at
http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or such other
document. A copy of the Registration Statement and the exhibits and schedules
thereto may be examined without charge at the Commission's principal offices at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and copies of such
materials can be obtained from the Public Reference Section of the Commission at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-8598) pursuant to the Exchange Act are incorporated herein by reference: (i)
Annual Report on Form 10-K for the year ended December 31, 1996, (ii) Current
Report on Form 8-K dated February 28, 1997, as amended by Form 8-K/A filed May
2, 1997, (iii) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 and (iv) all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Securities.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents which are incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to the Public Affairs Department, A. H. Belo Corporation, P.O. Box
655237, Dallas, Texas 75265-5237, telephone: (214) 977-6606.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.
2
<PAGE> 22
THE COMPANY
A. H. Belo Corporation's history dates back to 1842 with the publication of
the Daily News in Galveston, Texas. Today, the Company is the oldest
continuously operating business in the state of Texas and one of the nation's
largest media companies with a diversified group of television broadcasting,
newspaper publishing, cable network and electronic media assets.
The Company's Broadcast Division includes 16 network-affiliated television
stations with an audience reach of 13.5 percent of U.S. television households.
The stations are geographically diverse, with ownership weighted in the
Southwest and the Pacific Northwest. Network affiliations are almost entirely
balanced among the ABC, CBS and NBC networks, and include two FOX stations. The
Company also manages four additional television stations through local marketing
agreements and holds controlling interests in two television cable networks: the
Television Food Network and America's Health Network. In addition, through its
subsidiary Belo Productions, Inc., the Company produces original programming for
network and cable distribution.
The Company's Publishing Division is led by The Dallas Morning News, which
has the country's seventh largest Sunday and ninth largest daily circulation. In
1996, The Dallas Morning News ranked first in full run advertising for the
fourth consecutive year. The Company also owns the Providence Journal-Bulletin
in Providence, Rhode Island; the Owensboro Messenger-Inquirer in Owensboro,
Kentucky; the Bryan-College Station Eagle in Bryan-College Station, Texas; the
Arlington Morning News in Arlington, Texas; and The Gleaner in Henderson,
Kentucky. Both The Dallas Morning News and the Providence Journal-Bulletin have
been recognized for their journalistic excellence with numerous local and
national awards including six Pulitzer Prizes at The Dallas Morning News and
four at the Providence Journal-Bulletin.
The following table sets forth information for each of the Company's
television stations and their markets:
<TABLE>
<CAPTION>
MARKET TELEVISION YEAR NETWORK
MARKET RANK(1) STATION ACQUIRED AFFILIATION
------ ------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Dallas-Fort Worth................................... 8 WFAA 1950 ABC
Houston............................................. 11 KHOU 1984 CBS
Seattle-Tacoma(2)................................... 12 KING 1997 NBC
Sacramento.......................................... 20 KXTV 1984 ABC
St. Louis(2)........................................ 21 KMOV 1997 CBS
Portland............................................ 24 KGW 1997 NBC
Charlotte........................................... 28 WCNC 1997 NBC
Hampton-Norfolk..................................... 40 WVEC 1984 ABC
New Orleans......................................... 41 WWL 1994 CBS
Albuquerque......................................... 48 KASA 1997 FOX
Louisville.......................................... 50 WHAS 1997 ABC
Tulsa............................................... 58 KOTV 1984 CBS
Honolulu............................................ 69 KHNL 1997 NBC
Spokane............................................. 73 KREM 1997 CBS
Tucson.............................................. 78 KMSB 1997 FOX
Boise............................................... 127 KTVB 1997 NBC
</TABLE>
- ---------------
(1) Market rank is based on the relative size of the television market or
Designated Market Area ("DMA") among the 211 generally recognized DMAs in
the United States, based on January 1997 Nielsen estimates.
(2) Prior to June 2, 1997, the Company also owned KIRO-TV in Seattle, Washington
which it acquired in 1995. On February 20, 1997, the Company announced an
agreement among multiple parties whereby, through an exchange of assets, it
agreed to exchange KIRO for CBS affiliate KMOV-TV in St. Louis, Missouri.
The exchange was closed effective June 2, 1997.
The Company is incorporated in the State of Delaware. The executive offices
of the Company are located at 400 South Record Street in Dallas, Texas 75202.
Its telephone number is (214) 977-6606. Unless otherwise specified or the
context otherwise requires, references in this Prospectus to the "Company" shall
include the Company and its subsidiaries.
3
<PAGE> 23
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company. The ratios were derived from the audited consolidated financial
statements of the Company for the years ended December 31, 1992, 1993, 1994,
1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.............. 3.30 4.92 7.23 4.43 5.96
</TABLE>
For purposes of computing the foregoing ratios: (i) Earnings consist of
income from continuing operations before cumulative effects of accounting
changes plus income tax expense plus Fixed Charges (excluding capitalized
interest); and (ii) Fixed Charges consist of interest, whether expensed or
capitalized, and the portion of rental expenses estimated to represent an
interest component.
USE OF PROCEEDS
The Company expects to add substantially all of the net proceeds from the
sale of the Securities to its funds to be used for general corporate purposes,
including repayment of long-term and short-term debt, capital expenditures,
working capital, securities repurchase programs and the financing of
acquisitions. Funds not required immediately may be invested in short-term
marketable securities.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be issued under an Indenture, as supplemented from
time to time in accordance with its terms (the "Indenture"), to be entered into
between the Company and a trustee to be appointed (the "Trustee"). The following
brief summary of the Indenture and the Debt Securities is subject to the
detailed provisions of the Indenture, a copy of which is an exhibit to the
Registration Statement. Wherever references are made to particular provisions of
the Indenture, such provisions are incorporated by reference as a part of the
statements made herein and such statements are qualified in their entirety by
such reference. Certain defined terms in the Indenture are capitalized herein.
Italicized references appearing in parenthesis are to section numbers of the
Indenture. As used in this "Description of the Debt Securities," the "Company"
refers to A. H. Belo Corporation and does not include its subsidiaries.
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder. It provides that Debt Securities may be issued from time to
time in series. The Debt Securities will be unsecured obligations of the Company
and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company. Reference is made to the Prospectus Supplement for
a description of the following terms of the Debt Securities in respect of which
this Prospectus is being delivered: (i) the title of such Debt Securities; (ii)
the limit, if any, upon the aggregate principal amount of such Debt Securities;
(iii) the dates on which or periods during which such Debt Securities may be
issued and the date or dates on which the principal of (and premium, if any, on)
such Debt Securities will be payable; (iv) the rate or rates, if any, or the
method of determination thereof, at which such Debt Securities will bear
interest, if any; the date or dates from which such interest will accrue; the
dates on which such interest will be payable; and the regular record dates for
the interest payable on such interest payment dates; (v) the obligation, if any,
of the Company to redeem, repay or purchase such Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of a holder and the
periods within which or the dates on which, the prices at which and the terms
and conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (vi) the periods
within which or the dates on which, the prices, if any, at which and the terms
and conditions upon which such Debt Securities may be redeemed, in whole or in
part, at the option of the Company; (vii) if other than denominations of $1,000
and any integral multiple thereof, the denominations in which such Debt
Securities will be issuable; (viii) whether such Debt Securities are to be
issued at less than the principal amount thereof and the amount of discount with
which such Debt Securities will be issued; (ix) provisions, if any, for the
defeasance of such Debt Securities; (x) if other than United
4
<PAGE> 24
States dollars, the currency or composite currency in which such Debt Securities
are to be denominated, or in which payment of the principal of (and premium, if
any) and interest on such Debt Securities will be made and the circumstances, if
any, when such currency of payment may be changed; (xi) if the principal of (and
premium, if any) or interest on such Debt Securities are to be payable, at the
election of the Company or a holder, in a currency or composite currency other
than that in which such Debt Securities are denominated or stated to be payable,
the periods within which, and the terms and conditions upon which, such election
may be made and the time and the manner of determining the exchange rate between
the currency or composite currency in which such Debt Securities are denominated
or stated to be payable and the currency in which such Debt Securities are to be
paid pursuant to such election; (xii) if the amount of payments of principal of
(and premium, if any) or interest on the Debt Securities may be determined with
reference to an index including, but not limited to an index based on a currency
or currencies other than that in which such Debt Securities are stated to be
payable, the manner in which such amounts shall be determined; (xiii) whether
such Debt Securities will be issued in the form of one or more Global Securities
and, if so, the identity of the depository for such Global Securities; (xiv) any
additions to or changes in the Events of Default or covenants relating solely to
such Debt Securities or any Events of Default or covenants generally applicable
to Debt Securities which are not to apply to the particular series of Debt
Securities in respect of which the Prospectus Supplement is being delivered;
(xv) if the Company will pay additional amounts on any of the Debt Securities of
any series to any Holder who is a United States Alien, in respect of any tax or
assessment withheld, under what circumstances and with what procedures the
Company will pay such amounts; (xvi) any terms applicable to original issue
discount, if any, including the rate or rates at which such original issue
discount, if any, shall accrue; and (xvii) any other terms of such Debt
Securities not inconsistent with the provisions of the Indenture. (Section 3.1)
Unless otherwise indicated in the Prospectus Supplement, the Indenture does not
afford the holder of any series of Debt Securities the right to tender such Debt
Securities to the Company for repurchase, or provide for any increase in the
rate or rates of interest per annum at which such Debt Securities will bear
interest, in the event the Company should become involved in a highly leveraged
transaction.
The Debt Securities may be issued under the Indenture bearing no interest
or interest at a rate below the prevailing market rate at the time of issuance,
to be offered and sold at a discount below their stated principal amount.
Federal income tax consequences and other special considerations applicable to
any such discounted Debt Securities or to other Debt Securities offered and sold
at par which are treated as having been issued at a discount for federal income
tax purposes will be described in the Prospectus Supplement relating thereto.
A substantial portion of the assets of the Company is held by subsidiaries.
The Company's right and the rights of its creditors, including the holders of
Debt Securities, to participate in the assets of any subsidiary upon its
liquidation or recapitalization would be subject to the prior claims of such
subsidiary's creditors, except to the extent that the Company may itself be a
creditor with recognized claims against such subsidiary. There is no restriction
in the Indenture against subsidiaries of the Company incurring unsecured
indebtedness.
Unless otherwise described in the Prospectus Supplement, the Debt
Securities will be issued only in fully registered form without coupons, in
denominations of $1,000 and multiples of $1,000, and will be payable only in
United States dollars. (Section 3.2) In addition, all or a portion of the Debt
Securities of any series may be issued as permanent registered Global Securities
which will be exchangeable for definitive Debt Securities only under certain
conditions. (Section 2.3) The Prospectus Supplement indicates the denominations
to be issued, the procedures for payment of interest and principal thereon, and
other matters. No service charge will be made for any registration of transfer
or exchange of the Debt Securities, but the Company may, in certain instances,
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Section 3.5)
The Company shall deliver Debt Securities of any series, duly executed by
the Company, to the Trustee for authentication, together with an order for the
authentication and delivery of such Debt Securities. The Trustee, in accordance
with such order, shall authenticate and deliver such Debt Securities. No Debt
Securities of any series shall be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose unless there appears thereon a
certificate of authentication substantially in the form provided for in the
Indenture and manually executed by the Trustee or an authenticating agent duly
appointed by the Trustee. Such certificate shall be conclusive evidence, and the
only evidence, that such Debt Securities have been duly authenticated and
delivered under, and are entitled to the benefits of, the Indenture. (Section
3.3)
5
<PAGE> 25
GLOBAL SECURITIES
The Debt Securities of a particular series may be issued in the form of one
or more Global Securities which will be deposited with a depository (the
"Depositary"), or its nominee, each of which will be identified in the
Prospectus Supplement relating to such series. Unless and until exchanged, in
whole or in part, for Debt Securities in definitive registered form, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to a nominee of such Depositary, by a nominee of such Depositary
to such Depositary or another nominee of such Depositary or by such Depositary
or any such nominee to a successor of such Depositary or a nominee of such
successor. (Section 2.3) The specific terms of the depository arrangement with
respect to any portion of a particular series of Debt Securities to be
represented by a Global Security will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will apply to all depository arrangements.
Upon the issuance of a Global Security, the Depositary therefor or its
nominee will credit, on its book entry and registration system, the respective
principal amounts of the Debt Securities represented by such Global Security to
the accounts of such persons having accounts with such Depositary
("participants") as shall be designated by the underwriters or agents
participating in the distribution of such Debt Securities or by the Company if
such Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold beneficial interests through participants. Ownership of
beneficial interests in a Global Security will be shown on, and the transfer of
such ownership will be effected only through, records maintained by the
Depositary therefor or its nominee (with respect to beneficial interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). The laws of some
states require certain purchasers of securities to take physical delivery
thereof in definitive form. Such depository arrangements and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner thereof, such Depositary or such nominee, as the case may be,
will be considered the sole owner or holder of the Debt Securities represented
by such Global Security for all purposes under the Indenture. Except as provided
below, owners of beneficial interests in a Global Security will not be entitled
to have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture for any other
purpose.
Principal, premium, if any, and interest payments on a Global Security
registered in the name of a Depositary or its nominee will be made to such
Depositary or nominee, as the case may be, as the registered owner of such
Global Security. None of the Company, the Trustee or any paying agent for Debt
Securities of the series represented by such Global Security will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary for a Global Security or its
nominee, upon receipt of any payment of principal, premium or interest, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such Global
Security as shown on the records of such Depositary or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
such Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the
responsibility of such participants.
If the Depositary for a Global Security representing Debt Securities of a
particular series is at any time unwilling or unable to continue as Depositary
and a successor Depositary is not appointed by the Company within 90 days, the
Company will issue Debt Securities of such series in definitive form in exchange
for such Global Security. In addition, the Company may at any time and in its
sole discretion determine not to have the Debt Securities of a particular series
represented by one or more Global Securities and, in such event, will issue Debt
Securities of such series in definitive form in exchange for all of the Global
Securities representing Debt Securities of such series.
6
<PAGE> 26
CERTAIN COVENANTS OF THE COMPANY
Limitation on Indebtedness Secured by a Mortgage. The Indenture provides
that neither the Company nor any Restricted Subsidiary will create, assume,
guarantee or suffer to exist any Indebtedness secured by any mortgage, pledge,
lien, security interest, conditional sale or other title retention agreement or
other similar encumbrance ("Mortgage") on any assets of the Company or a
Restricted Subsidiary unless the Company secures or causes such Restricted
Subsidiary to secure the Debt Securities equally and ratably with, or prior to,
such secured Indebtedness. This restriction will not apply to Indebtedness
secured by (i) Mortgages on the property of any corporation which Mortgages
existed at the time such corporation became a Restricted Subsidiary; (ii)
Mortgages in favor of the Company or a Restricted Subsidiary; (iii) Mortgages on
property of the Company or a Restricted Subsidiary in favor of the United States
of America or any state or political subdivision thereof, or in favor of any
other country or any political subdivision thereof, to secure payment pursuant
to any contract or statute or to secure any indebtedness incurred for the
purpose of financing all or part of the purchase price or the cost of
construction or improvement of the property subject to such Mortgages; (iv)
Mortgages on any property subsequently acquired by the Company or any Restricted
Subsidiary, contemporaneously with such acquisition or within 120 days
thereafter, to secure or provide for the payment of any part of the purchase
price, construction or improvement of such property, or Mortgages assumed by the
Company or any Restricted Subsidiary upon any property subsequently acquired by
the Company or any Restricted Subsidiary which were existing at the time of such
acquisition, provided that the amount of any Indebtedness secured by any such
Mortgage created or assumed does not exceed the cost to the Company or
Restricted Subsidiary, as the case may be, of the property covered by such
Mortgage; (v) Mortgages existing at the date of issuance of the first series of
Debt Securities under the Indenture; (vi) Mortgages representing the extension,
renewal or refunding of any Mortgage referred to in the foregoing clauses (i)
through (v), inclusive; and (vii) any other Mortgage, other than Mortgages
referred to in the foregoing clauses (i) through (vi), inclusive, so long as the
aggregate of all Indebtedness secured by Mortgages pursuant to this clause (vii)
and the aggregate Value of the Sale and Lease-Back Transactions in existence at
that time (not including those in connection with which the Company has
voluntarily retired funded Indebtedness as provided in the Indenture) does not
exceed 15% of Consolidated Net Tangible Assets. (Section 10.7)
Limitation on Sale and Lease-Back Transactions. The Indenture provides that
neither the Company nor any Restricted Subsidiary will enter into any Sale and
Lease-Back Transaction with respect to any Principal Property unless either (i)
the Company or such Restricted Subsidiary would be entitled, pursuant to the
foregoing covenant relating to "Limitation on Indebtedness Secured by a
Mortgage," to create, assume, guarantee or suffer Indebtedness in a principal
amount equal to or exceeding the Value of such Sale and Lease-Back Transaction
secured by a Mortgage on the property to be leased without equally and ratably
securing the Debt Securities or (ii) the Company or such Restricted Subsidiary,
within four months after the effective date of such transaction, applies an
amount equal to the greater of (x) the net proceeds of the sale of the property
subject to the Sale and Lease-Back Transaction and (y) the Value of such Sale
and Lease-Back Transaction, to the voluntary retirement of the Debt Securities
or other unsubordinated funded Indebtedness of the Company or such Restricted
Subsidiary. (Section 10.8)
Certain Definitions. "Consolidated Net Tangible Assets" is defined in the
Indenture to mean total consolidated assets of the Company and its Restricted
Subsidiaries, less (i) current liabilities of the Company and its Restricted
Subsidiaries, and (ii) the net book amount of all intangible assets of the
Company and its Restricted Subsidiaries. (Section 10.7)
"Consolidated Subsidiary" is defined in the Indenture to mean a Subsidiary
the accounts of which are consolidated with those of the Company for public
financial reporting purposes. (Section 1.1)
"Indebtedness" is defined in the Indenture to mean (i) long-term
liabilities representing borrowed money or purchase money obligations as shown
on the liability side of a balance sheet (other than liabilities evidenced by
obligations under leases and contracts payable for broadcast rights), (ii)
indebtedness secured by any Mortgage existing on property owned subject to such
Mortgage, whether or not such secured indebtedness has been assumed and (iii)
contingent obligations in respect of, or to purchase or otherwise acquire, any
such indebtedness of others described in the foregoing clauses (i) or (ii)
above, including guarantees and
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endorsements (other than for purposes of collection in the ordinary course of
business of any such indebtedness). (Section 10.7)
"Principal Property" is defined in the Indenture to mean any manufacturing
or printing plant, distribution center, warehouse, office building, television
station or transmission facility owned by the Company or any Restricted
Subsidiary or any other property or right owned by or granted to the Company or
any Restricted Subsidiary and used or held for use in the newspaper or
television business conducted by the Company or any Restricted Subsidiary,
except for any such property or right which, in the opinion of the Board of
Directors of the Company as set forth in a Board Resolution adopted in good
faith, is not material to the total business conducted by the Company and its
Restricted Subsidiaries considered as one enterprise. (Section 1.1)
"Restricted Subsidiary" is defined in the Indenture to mean each Subsidiary
of the Company as of the date of the Indenture and each Subsidiary thereafter
created or acquired, unless expressly excluded by resolution of the Board of
Directors of the Company before, or within 120 days following, such creation or
acquisition. (Section 10.7)
"Sale and Lease-Back Transaction" is defined in the Indenture as the
leasing by the Company or a Subsidiary for a period of more than three years of
any Principal Property which has been sold or is to be sold or transferred by
the Company or any such Subsidiary to any party (other than the Company or a
Subsidiary). (Section 10.8)
"Subsidiary" is defined in the Indenture to mean a corporation more than
50% of the outstanding voting stock of which is owned, directly or indirectly,
by the Company or by one or more other Subsidiaries or by the Company and one or
more other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency. (Section 1.1)
"Value" is defined in the Indenture to mean, with respect to any particular
Sale and Lease-Back Transaction, as of any particular time, the amount equal to
the greater of (i) the net proceeds of the sale or transfer of the property
leased pursuant to such Sale and Lease-Back Transaction or (ii) the fair value
in the opinion of the Board of Directors of the Company of such property at the
time of the Company's entering into such Sale and Lease-Back Transaction,
subject to adjustment at any particular time for the length of the remaining
initial lease term. (Section 10.8)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company may not consolidate with or merge
into any other corporation, or convey, transfer or lease its properties and
assets substantially as an entirety to any other party, unless, among other
things, (i) the corporation formed by such consolidation or into which the
Company is merged or the party which acquires by conveyance or transfer, or
which leases the properties and assets of the Company substantially as an
entirety, is organized and existing under the laws of the United States, any
State thereof or the District of Columbia and expressly assumes the Company's
obligations on the Debt Securities and under the Indenture by means of an
indenture supplemental to the Indenture; and (ii) immediately after giving
effect to such transaction no Event of Default, and no event which, after notice
or lapse of time, or both, would become an Event of Default, shall have occurred
and be continuing. (Section 8.1)
EVENTS OF DEFAULT, WAIVER AND NOTICE
With respect to the Debt Securities of any series, an Event of Default is
defined in the Indenture as being (i) default for 30 days in payment of any
interest upon the Debt Securities of such series; (ii) default in payment of the
principal of or premium, if any, on the Debt Securities of such series when due
either at maturity or upon acceleration, redemption or otherwise; (iii) default
by the Company in the performance of any other of the covenants or warranties in
the Indenture for the benefit of such series applicable to the Company which
shall not have been remedied for a period of 60 days after Notice of Default;
(iv) the failure to pay when due any indebtedness for money borrowed (including
indebtedness under Debt Securities other than that series) with a principal
amount then outstanding in excess of $20,000,000 under any mortgage, indenture
or instrument under which any such indebtedness is issued or secured (including
the Indenture), or any other default which results in the acceleration of
maturity of such indebtedness, unless such indebtedness
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or acceleration shall have been discharged or annulled within 10 days after due
notice by the Trustee or by Holders of at least 10% in principal amount of the
Outstanding Debt Securities of that series; and (v) certain events of
bankruptcy, insolvency or reorganization of the Company or any Significant
Subsidiary. (Section 5.1) Within 90 days after the occurrence of any default
under the Indenture with respect to Debt Securities of any series, the Trustee
is required to notify the Holders of Debt Securities of any default unless, in
the case of any default other than a default in the payment of principal of or
premium, if any, or interest on any Debt Securities, a trust committee of the
Board of Directors or Responsible Officers of the Trustee in good faith
considers it in the interest of the Holders of Debt Securities not to do so.
(Section 6.2)
"Significant Subsidiary" is defined in the Indenture to mean any Subsidiary
(i) which, as of the close of the fiscal year of the Company immediately
preceding the date of determination, contributed more than 10% of the
consolidated net operating revenues of the Company and its Consolidated
Subsidiaries for such year or (ii) the total assets of which as of the close of
such immediately preceding fiscal year exceeded 10% of the Consolidated Net
Tangible Assets of the Company and its Consolidated Subsidiaries. (Section 5.1)
The Indenture provides that if an Event of Default, other than an Event of
Default as described in clause (v) in the above paragraph with respect to Debt
Securities of any series shall have occurred and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the Debt
Securities of that series then outstanding may declare the entire principal and
accrued interest of all Debt Securities of such series (or, if any of the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Debt Securities as may be specified by the terms
thereof) to be due and payable immediately. If an Event of Default described in
clause (v) in the above paragraph with respect to any series of Debt Securities
Outstanding under the Indenture occurs, the principal amount (or, if any of the
Debt Securities of that series are Original Issue Discount Securities, such
portion of the principal amount of such Debt Securities as may be specified by
the terms thereof) shall automatically, and without any declaration or other
action on the part of the Trustee or any Holder, become immediately due and
payable. Any time after acceleration with respect to the Debt Securities of any
series has been made, but before a judgment or decree for the payment of money
based on such acceleration has been obtained by the Trustee, the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series,
may, under certain circumstances, rescind and annul such acceleration. The
Holders of a majority in principal amount of the Outstanding Debt Securities of
any series may waive any past defaults under the Indenture with respect to the
Debt Securities of such series, except defaults in payment of principal of or
premium, if any (other than by a declaration of acceleration), or interest on
the Debt Securities or provisions of such series that may not be modified or
amended without the consent of the Holders of all Outstanding Debt Securities of
such series. (Sections 5.2 and 5.13)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of its covenants and agreements under the
Indenture. (Section 10.9)
Subject to certain conditions set forth in the Indenture, the Holders of a
majority in principal amount of the then Outstanding Debt Securities of any
series with respect to which an Event of Default has occurred shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the Indenture in respect of such series.
No Holder of any Debt Securities shall have any right to cause the Trustee to
institute any proceedings, judicial or otherwise, with respect to the Indenture
or any remedy thereunder unless, among other things, the Holder or Holders of
Debt Securities shall have offered to the Trustee reasonable indemnity against
costs, expenses and liabilities relating to such proceedings. (Sections 5.12 and
5.7)
The Indenture provides that, in determining whether the Holders of the
requisite aggregate principal amount of the Outstanding Debt Securities have
given, made or taken any request, demand, authorization, direction, notice,
consent, waiver or other action thereunder as of any date, (a) the principal
amount of an Original Issue Discount Security which shall be deemed to be
Outstanding shall be the amount of the principal thereof which would be due and
payable as of such date upon acceleration of the Maturity thereof to such date,
(b) if, as of such date, the principal amount payable at the Stated Maturity of
a Debt Security is not determinable, the principal amount of such Debt Security
which shall be deemed to be Outstanding shall be the amount as established in or
pursuant to a Board Resolution and set forth, or determined in the manner
provided, in an Officers' Certificate, or established in one or more
supplemental indentures, prior to the
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issuance of such Debt Securities, (c) the principal amount of a Debt Security
denominated in one or more foreign currencies or currency units which shall be
deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of
such date in the manner as described in clause (b) above, of the principal
amount of such Debt Security (or, in the case of a Debt Security described in
clause (a) or (b) above, of the amount determined as provided in such clause),
and (d) Debt Securities owned by the Company or any other obligor upon the Debt
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, only Debt
Securities which the Trustee knows to be so owned shall be so disregarded. Debt
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debt Securities and that the
pledgee is not the Company or any other obligor upon the Debt Securities or any
Affiliate of the Company or of such other obligor. (Section 1.1)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may, without the
consent of the Holders, modify or amend the Indenture in order to (i) evidence
the succession of another corporation to the Company and the assumption by any
such successor corporation of the covenants of the Company in the Indenture and
in the Debt Securities; (ii) add to the covenants, agreements and obligations of
the Company for the benefit of the Holders of all or any series of Debt
Securities; (iii) add any additional Events of Default to the Indenture; (iv)
add to or change any of the provisions of the Indenture necessary to permit the
issuance of Debt Securities in bearer form, registrable as to principal, and
with or without interest coupons; (v) add to, change or eliminate any of the
provisions of the Indenture, in respect of one or more series of Debt
Securities, provided that any such addition, change or elimination may not apply
to any Debt Security of any series created prior to such addition, change or
elimination; (vi) establish the form or terms of Debt Securities of any series
as permitted under the Indenture; (vii) evidence and provide for the acceptance
of appointment under the Indenture by a successor Trustee with respect to the
Debt Securities of one or more series; or (viii) cure any ambiguity, or correct
or supplement any provision of the Indenture which may be inconsistent with any
other provision of the Indenture, provided such action does not adversely affect
the interest of the Holders of Debt Securities of any series.
With respect to the Debt Securities of any series, modification or
amendment of the Indenture may be made by the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the Debt
Securities of such series, except that no such modification or amendment may,
without the consent of the Holders of all then Outstanding Debt Securities of
such series (i) change the due date of the principal of, or any installment of
principal of or interest on, any Debt Securities of such series; (ii) reduce the
principal amount of, or any installment of principal or interest or rate of
interest on, or any premium payable on redemption of any Debt Securities of such
series; (iii) reduce the principal amount of any Debt Securities of such series
payable upon acceleration of the maturity thereof; (iv) change the place or the
currency of payment of principal of, or any premium or interest on, any Debt
Securities of such series; (v) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Securities of such
series on or after the due date thereof (or, in the case of redemption, on or
after the redemption date thereof); (vi) reduce the percentage in principal
amount of Debt Securities of such series then outstanding, the consent of whose
holders is required for modification or amendment of the Indenture or for waiver
of compliance with certain provisions of the Indenture or for waiver of certain
defaults; or (vii) modify certain provisions of the Indenture regarding the
amendment or modification of, or waiver with respect to, any provision of the
Indenture or the Debt Securities. (Section 9.2)
DISCHARGE OF THE INDENTURE
The Indenture, with respect to the Debt Securities of any series (if all
series issued under the Indenture are not to be affected), shall upon the
written request or order of the Company cease to be of further effect (except as
to any surviving rights of registration of transfer or exchange of Debt
Securities therein expressly provided for), when (i) either (A) all Debt
Securities theretofore authenticated and delivered (other than (1) Debt
Securities which have been destroyed, lost or stolen and which have been
replaced or paid and (2) Debt
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Securities for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (B) all such Debt Securities not theretofore delivered to the
Trustee for cancellation (1) have become due and payable, (2) will become due
and payable at their stated maturity within one year or (3) if the Debt
Securities of such series are denominated and payable only in United States
dollars and such Debt Securities are to be called for redemption within one
year, and the Company in the case of (1), (2) or (3) above, has deposited or
caused to be deposited with the Trustee an amount in United States dollars
sufficient to pay and discharge the entire indebtedness on such Debt Securities
not theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case of Debt
Securities which have become due and payable) or to the stated maturity or any
redemption date, as the case may be; (ii) the Company has paid or caused to be
paid all other sums payable under the Indenture by the Company; and (iii) the
Company has delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for in the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with. (Section 4.1)
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise specified in the Prospectus Supplement, the following
provisions relating to defeasance and discharge of indebtedness, or relating to
defeasance of certain covenants in the Indenture, will apply to the Debt
Securities of any series, or to any specified part of a series. (Section 13.1)
Defeasance and Discharge. The Indenture provides that the Company will be
discharged from all its obligations with respect to such Debt Securities (except
for certain obligations to exchange or register the transfer of Debt Securities,
to replace stolen, lost or mutilated Debt Securities, to maintain paying
agencies and to hold moneys for payment in trust) upon the deposit in trust for
the benefit of the Holders of such Debt Securities of money or U.S. Government
Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay any installment of principal of and any premium and interest
on and any mandatory sinking fund payments in respect of such Debt Securities on
the respective Stated Maturities in accordance with the terms of the Indenture
and such Debt Securities. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Company has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or there has been a change
in tax law, in either case to the effect that Holders of such Debt Securities
will not recognize gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred. (Sections
13.1 and 13.2)
Defeasance of Certain Covenants. The Indenture provides that the Company
may omit to comply with certain restrictive covenants described under the
captions "Certain Covenants of the Company -- Limitation on Indebtedness Secured
by a Mortgage" and "Certain Covenants of the Company -- Limitation on Sale and
Leaseback Transactions" above and any that may be described in the Prospectus
Supplement, and that such omission will be deemed not to be or result in an
Event of Default, in each case with respect to such Debt Securities. In order to
do so, the Company will be required to deposit, in trust for the benefit of the
Holders of such Debt Securities, money or U.S. Government Obligations, or both,
which through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
any installment of the principal of and any premium and interest on and any
mandatory sinking fund payments in respect of such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indenture and
such Debt Securities. The Company will also be required, among other things, to
deliver to the Trustee an Opinion of Counsel to the effect that Holders of such
Debt Securities will not recognize gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit and defeasance had not
occurred. In the event the Company exercises this option with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S. Government
Obligations so deposited in trust will be sufficient to pay amounts due on such
Debt Securities at the time of their respective Stated Maturities but may not be
sufficient to pay amounts due on such Debt Securities upon
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any acceleration resulting from such Event of Default. In such case, the Company
will remain liable for such payments. (Sections 13.1 and 13.2)
THE TRUSTEE
Prior to the offering of any Debt Securities, a trustee will be appointed
by the Company to serve as Trustee under the Indenture. The Trustee may be a
depository for funds of and perform other services for and transact other
banking business with the Company in the normal course of business.
The Trustee may serve as a trustee under other indentures entered into by
the Company. Upon the occurrence of an Event of Default under the Indenture or
an event which, after notice or lapse of time or both, would become such an
Event of Default, or upon the occurrence of a default under any such other
indenture, the Trustee may be deemed to have a conflicting interest with respect
to the Debt Securities for purposes of the Trust Indenture Act and, unless the
Trustee is able to eliminate any such conflicting interest, the Trustee may be
required to resign as Trustee under the Indenture. In that event, the Company
would be required to appoint a successor Trustee for the Indenture.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 1.12)
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth certain
general terms and provisions of the Warrants to which any Prospectus Supplement
may relate. The particular terms of the Warrants offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply to
the Warrants so offered will be described in the Prospectus Supplement relating
to such Warrants.
GENERAL
Warrants may be offered together with any series of Debt Securities offered
by a Prospectus Supplement and if so offered will be attached to such Debt
Securities and will entitle the holder thereof to purchase additional Debt
Securities having the same terms and interest rate as the offered Debt
Securities. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent (the "Warrant Agent"), all as described
in the Prospectus Supplement relating to such series of Warrants. The Warrant
Agent will act solely as the agent of the Company under the applicable Warrant
Agreement and in connection with the certificates for the Warrants (the "Warrant
Certificates") of such series, and will not assume any obligation or
relationship of agency or trust for or with any holders of such Warrant
Certificates or beneficial owners of Warrants. A copy of the form of Warrant
Agreement, including the form of Warrant Certificates, is filed as an exhibit to
this Registration Statement. The following summary of certain provisions of the
forms of Warrant Agreement and Warrant Certificates does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Warrant Agreement and the Warrant Certificates.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of such
Warrants, including, where applicable: (i) the offering price; (ii) the currency
or currencies in which such Warrants are being offered; (iii) the designation,
aggregate principal amount, currency or currencies, denominations and other
terms of the series of Debt Securities purchasable upon exercise of such
Warrants; (iv) the designation and terms of the series of Debt Securities with
which such Warrants are being offered and the number of such Warrants being
offered with each such Debt Security; (v) the date on and after which such
Warrants and the related series of Debt Securities will be transferable
separately; (vi) the principal amount of the Debt Securities purchasable upon
exercise of each such Warrant and the price at which and currency or currencies
in which such principal amount of Debt Securities may be purchased upon such
exercise; (vii) the date on which the right to exercise such Warrants shall
commence (the "Exercise Date") and the date on which such right shall expire
(the "Expiration Date"); (viii) a discussion of the material United States
Federal income tax considerations applicable to the
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exercise of the Warrants; (ix) whether the Warrants represented by the Warrant
Certificates will be issued in registered or bearer form, and, if registered,
where they may be transferred and registered; (x) call provisions of such
Warrants, if any; and (xi) any other terms of such Warrants not inconsistent
with the applicable Warrant Agreement.
Warrants of any series will be exchangeable into Warrants of the same
series representing in the aggregate the number of Warrants surrendered for
exchange. Warrant Certificates may be presented for exchange or transfer at the
corporate trust office of the Warrant Agent for such series of Warrants (or any
other office indicated in the Prospectus Supplement relating to such series of
Warrants). Prior to the exercise of their Warrants, holders of Warrants will not
have any of the rights of holders of the series of Debt Securities purchasable
upon such exercise, including the right to receive payments of principal of,
premium, if any, or interest, if any, on the Debt Securities purchasable upon
such exercise, or to enforce any of the covenants in the Indenture.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase such principal
amount of the related series of Debt Securities at such exercise price as shall
in each case be set forth in, or be calculable as set forth in, the Prospectus
Supplement relating to such Warrant. Warrants of a series may be exercised at
the corporate trust office of the Warrant Agent for such series (or any other
office indicated in the Prospectus Supplement relating to such series) at any
time on or after the Exercise Date and prior to 5:00 P.M., New York, New York
time (unless otherwise indicated in the related Prospectus Supplement), on the
Expiration Date set forth in the Prospectus Supplement relating to such series
of Warrants. After the close of business on the Expiration Date relating to such
series of Warrants, unexercised Warrants of such series will be void.
Warrants of a series may be exercised by delivery to the appropriate
Warrant Agent of payment, as provided in the Prospectus Supplement relating to
such series of Warrants, of the consideration required to purchase the principal
amount of the series of Debt Securities purchasable upon such exercise, together
with certain information as set forth on or incorporated in the Warrant
Certificate evidencing such Warrants. Such Warrants will be deemed to have been
exercised upon receipt of the exercise price, subject to the receipt of the
Warrant Certificate evidencing such Warrants within five business days. Upon
receipt of such payment and such Warrant Certificate, properly completed and
duly executed, at the corporate trust office of the appropriate Warrant Agent
(or any other office indicated in the Prospectus Supplement relating to such
series of Warrants), the Company will, as soon as practicable, issue and deliver
the principal amount of the series of Debt Securities purchasable upon such
exercise. If fewer than all of the Warrants represented by a Warrant Certificate
are exercised, a new Warrant Certificate will be issued and delivered for the
remaining amounts of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) to or through
underwriters or dealers, (ii) through agents or (iii) directly to one or more
purchasers. With respect to each series of Securities being offered hereby, the
terms of the offering of the Securities of such series, including the name or
names of any underwriters, dealers or agents, the purchase price of such
Securities and the proceeds to the Company from such sale, any underwriting
discounts, selling commissions and other items constituting underwriters',
dealers' or agents' compensation, any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers or agents, and
any securities exchanges on which the Securities of such series may be listed,
will be set forth in, or may be calculated from the information set forth in,
the Prospectus Supplement. Only underwriters so named in the Prospectus
Supplement will be deemed to be underwriters in connection with the Securities
offered thereby.
If underwriters are used to sell any of the Securities, the Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. Unless otherwise set forth in the Prospectus Supplement, the
obligations of the underwriters to purchase Securities will be subject to
certain conditions precedent and the underwriters
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will be obligated to purchase all the Securities offered by the Prospectus
Supplement if any of such Securities are purchased. In connection with the sale
of Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Securities for whom they may act as
agent. Underwriters may sell Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions (which may be changed from time to
time) from the purchasers for whom they may act as agent. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Securities may also be sold directly by the Company or through agents
(which may also act as principals) designated by the Company from time to time.
Any agent involved in the offer or sale of the Securities in respect of which
this Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth in, or may be calculated from the
information set forth in, the Prospectus Supplement. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment. In the case of sales made directly by
the Company, no commission will be payable.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Securities from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date specified in the
Prospectus Supplement. Such contracts will be subject to the conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commissions payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for the Company or its affiliates in the ordinary
course of business.
The Securities may or may not be listed on a national securities exchange
or a foreign securities exchange. The Securities will be a new issue of
securities with no established trading market. In the event that the Securities
of any series are not listed on a national securities exchange, certain
broker-dealers may make a market in the Securities of such series, but will not
be obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given that any broker-dealer will make a market in
the Securities or as to the liquidity of the trading market for the Securities.
The Prospectus Supplement with respect to the Securities of any series will
state, if known, whether or not any broker-dealer intends to make a market in
such Securities. If no such determination has been made, the Prospectus
Supplement will so state.
Certain of the underwriters, dealers and/or agents and their associates may
be customers of, engage in transactions with and perform services for the
Company, including its subsidiaries, in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Securities will be passed upon for
the Company by Locke Purnell Rain Harrell (A Professional Corporation)("Locke
Purnell"), Dallas, Texas. Attorneys employed by Locke Purnell from time to time
own shares of Common Stock in the Company. Certain legal matters relating to the
Securities will be passed upon for any underwriters, dealers or agents by
Gibson, Dunn & Crutcher LLP, New York, New York. Gibson, Dunn & Crutcher LLP
provides legal services to the Company from time to time.
EXPERTS
The Consolidated Financial Statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the year ended December 31, 1996 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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