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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-8598
A. H. BELO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-0135890
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
P. O. BOX 655237
DALLAS, TEXAS 75265-5237
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (214) 977-6606
Former name, former address and former fiscal year,
if changed since last report.
NONE
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JULY 31, 1998
----- ----------------------------
Common Stock, $1.67 par value *125,191,658
* Consisting of 106,533,503 shares of Series A Common Stock and
18,658,155 shares of Series B Common Stock.
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A. H. BELO CORPORATION
FORM 10-Q
TABLE OF CONTENTS
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PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................................... 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk..................... 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 11
Item 2. Changes in Securities and Use of Proceeds...................................... 11
Item 3. Defaults Upon Senior Securities................................................ 11
Item 4. Submission of Matters to a Vote of Security Holders............................ 11
Item 5. Other Information.............................................................. 11
Item 6. Exhibits and Reports on Form 8-K............................................... 12
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PART I.
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
A. H. Belo Corporation and Subsidiaries
Three months ended June 30, Six months ended June 30,
=============================================================================================================
In thousands, except per share amounts
(unaudited) 1998 1997 1998 1997
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<S> <C> <C> <C> <C>
NET OPERATING REVENUES
Broadcasting $ 163,142 $ 152,194 $ 299,850 $ 244,196
Newspaper publishing 200,578 171,358 390,748 308,537
Other 2,550 8,265 5,132 11,786
--------- ---------- ---------- ----------
Total net operating revenues 366,270 331,817 695,730 564,519
OPERATING COSTS AND EXPENSES
Salaries, wages and employee benefits 112,710 101,110 225,491 172,488
Other production, distribution and operating costs 87,467 86,170 170,663 147,478
Newsprint, ink and other supplies 43,250 37,355 85,078 66,586
Depreciation 21,551 19,506 42,969 33,862
Amortization 18,703 16,962 37,347 25,940
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Total operating costs and expenses 283,681 261,103 561,548 446,354
--------- ---------- ---------- ----------
Earnings from operations 82,589 70,714 134,182 118,165
OTHER INCOME AND EXPENSE
Interest expense (27,363) (22,874) (54,597) (36,321)
Other, net 850 2,354 2,122 3,603
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Total other income and expense (26,513) (20,520) (52,475) (32,718)
EARNINGS
Earnings before income taxes 56,076 50,194 81,707 85,447
Income taxes 26,253 23,881 38,249 41,507
--------- ---------- ---------- ----------
Net earnings $ 29,823 $ 26,313 $ 43,458 $ 43,940
========= ========== ========== ==========
NET EARNINGS PER SHARE
Basic $ .24 $ .21 $ .35 $ .41
Diluted $ .24 $ .21 $ .34 $ .41
AVERAGE SHARES OUTSTANDING
Basic 125,213 123,542 125,023 107,176
Diluted 126,874 124,714 126,822 108,322
CASH DIVIDENDS DECLARED PER SHARE $ .06 $ .055 $ .12 $ .11
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</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
A. H. Belo Corporation and Subsidiaries
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Dollars in thousands June 30, December 31,
(Current year unaudited) 1998 1997
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ASSETS
Current assets:
Cash and temporary cash investments $ 25,146 $ 11,852
Accounts receivable, net 215,902 220,297
Other current assets 46,293 44,847
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Total current assets 287,341 276,996
Property, plant and equipment, net 611,702 608,318
Intangible assets, net 2,580,447 2,626,953
Other assets 105,044 110,687
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Total assets $ 3,584,534 $ 3,622,954
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,319 $ 43,818
Accrued expenses 82,542 104,084
Other current liabilities 51,919 66,560
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Total current liabilities 167,780 214,462
Long-term debt 1,583,512 1,614,045
Deferred income taxes 429,989 435,695
Other liabilities 34,988 32,748
Shareholders' equity:
Preferred stock
Common stock, $1.67 par value. Authorized
450,000,000 shares:
Series A: Issued 106,619,306 shares at June 30, 1998
and 52,998,586 shares at December 31, 1997 178,054 88,508
Series B: Issued 18,721,406 shares at June 30, 1998
and 9,283,001 shares at December 31, 1997 31,265 15,503
Additional paid-in capital 924,600 1,015,345
Retained earnings 231,731 203,276
Accumulated other comprehensive income 3,154 4,144
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Total 1,368,804 1,326,776
Less cost of 10,000 shares of Series A treasury stock (230) ---
Less deferred compensation - restricted shares (309) (772)
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Total shareholders' equity 1,368,265 1,326,004
Total liabilities and shareholders' equity $ 3,584,534 $ 3,622,954
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See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
A. H. Belo Corporation and Subsidiaries
==============================================================================================================
Six months ended June 30,
In thousands
(unaudited) 1998 1997
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OPERATIONS
Net earnings $ 43,458 $ 43,940
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 80,316 59,802
Deferred income taxes (2,102) 19,020
Other, net 7,727 (3,793)
Net change in current assets and liabilities:
Accounts receivable 4,738 (21,039)
Other current assets (2,593) 377
Accounts payable (13,699) (5,433)
Accrued expenses (22,645) 1,361
Other current liabilities (10,598) (5,302)
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Net cash provided by operations 84,602 88,933
INVESTING
Acquisitions --- (711,773)
Capital expenditures (31,708) (30,773)
Other, net (4,440) (2,126)
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Net cash used for investing (36,148) (744,672)
FINANCING
Net payments on revolving debt (27,333) (758,346)
Payment of dividends on stock (15,003) (10,783)
Net proceeds from exercise of stock options 7,176 2,952
Borrowings for acquisitions --- 894,506
Refinancing of Providence Journal debt --- (200,000)
Net proceeds from fixed rate debt offering --- 743,657
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Net cash provided by (used for) financing (35,160) 671,986
Net increase in cash and temporary cash investments 13,294 16,247
Cash and temporary cash investments at beginning of period 11,852 13,829
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Cash and temporary cash investments at end of period $ 25,146 $ 30,076
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SUPPLEMENTAL DISCLOSURES
Interest paid, net of amounts capitalized $ 55,609 $ 33,593
Income taxes paid, net of refunds $ 52,576 $ 34,759
Value of stock issued for acquisition $ --- $ 870,399
KIRO/KMOV asset exchange $ --- $ 152,000
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See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. H. Belo Corporation and Subsidiaries
(1) The accompanying unaudited consolidated condensed financial statements
of A. H. Belo Corporation and subsidiaries (the "Company" or "Belo")
have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1997 has been
derived from the audited consolidated financial statements at that date
but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six-month periods
ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1997.
Certain amounts for the prior periods have been reclassified to conform
to the current year presentation.
(2) As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes reporting requirements for
comprehensive income and its components, but has no effect on the
Company's net earnings or total shareholders' equity. SFAS No. 130,
among other things, requires unrealized gains and losses related to
available-for-sale securities to be included in other comprehensive
income. Previously, these amounts were reported as adjustments to
retained earnings. Total comprehensive income for the three months
ended June 30, 1998 and 1997 was $28,177 and $28,343, respectively.
Year-to-date comprehensive income was $42,468 and $45,376 for 1998 and
1997, respectively.
(3) On June 5, 1998, Belo completed a two-for-one stock split in the form
of a dividend whereby one additional share of Series A or Series B
Common Stock was issued for each corresponding share of Series A or
Series B Common Stock held on May 22, 1998. A total of 62,653,941
shares (53,306,307 shares of Series A Common Stock and 9,347,634 shares
of Series B Common Stock) were issued. In connection with the stock
split, common stock was increased and additional paid in capital was
charged for the aggregate par value of the shares that were issued. All
per share data have been restated to retroactively reflect the stock
split.
In connection with the stock split, the Company increased the number of
authorized shares from 150 million to 450 million shares.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. H. Belo Corporation and Subsidiaries
(4) Net operating revenues, earnings from operations, and depreciation and
amortization by industry segment are shown below (in thousands):
<TABLE>
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Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
NET OPERATING REVENUES
Broadcasting $ 163,142 $ 152,194 $ 299,850 $ 244,196
Newspaper publishing 200,578 171,358 390,748 308,537
Other 2,550 8,265 5,132 11,786
--------- ---------- ---------- ----------
Total net operating revenues $ 366,270 $ 331,817 $ 695,730 $ 564,519
========= ========== ========== ==========
EARNINGS FROM OPERATIONS
Broadcasting $ 47,991 $ 44,849 $ 71,633 $ 61,718
Newspaper publishing 44,739 40,825 84,456 79,702
Other (1,459) (5,755) (3,087) (7,289)
Corporate expenses (8,682) (9,205) (18,820) (15,966)
--------- ---------- ---------- ----------
Total earnings from operations $ 82,589 $ 70,714 $ 134,182 $ 118,165
========= ========== ========== ==========
DEPRECIATION AND AMORTIZATION
Broadcasting $ 24,998 $ 23,223 $ 49,969 $ 37,778
Newspaper publishing 14,411 12,213 28,741 20,413
Other 261 703 529 976
Corporate 584 329 1,077 635
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Total depreciation and amortization $ 40,254 $ 36,468 $ 80,316 $ 59,802
========= ========== ========== ==========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS)
The Company owns 17 network-affiliated television stations that currently reach
14.2 percent of U.S. television households. In addition, the Company manages
four television stations through local marketing agreements ("LMA"). Belo also
publishes six daily newspapers. The following table sets forth the Company's
major media assets by segment as of June 30, 1998:
<TABLE>
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BROADCASTING
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NETWORK
MARKET MARKET RANK(a) STATION AFFILIATION STATUS ACQUIRED
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Dallas-Fort Worth 8 WFAA ABC Owned March 1950
Houston 11 KHOU CBS Owned February 1984
Seattle-Tacoma 12 KING NBC Owned February 1997
Seattle-Tacoma 12 KONG IND LMA February 1997
Sacramento 20 KXTV ABC Owned February 1984
St. Louis 21 KMOV CBS Owned June 1997
Portland 24 KGW NBC Owned February 1997
Charlotte 28 WCNC NBC Owned February 1997
San Antonio 38 KENS CBS Owned October 1997
Hampton-Norfolk 39 WVEC ABC Owned February 1984
New Orleans 41 WWL CBS Owned June 1994
Albuquerque 48 KASA FOX Owned February 1997
Louisville 50 WHAS ABC Owned February 1997
Tulsa 58 KOTV CBS Owned February 1984
Honolulu 71 KHNL NBC Owned February 1997
Honolulu 71 KFVE UPN LMA February 1997
Spokane 73 KREM CBS Owned February 1997
Spokane 73 KSKN UPN LMA February 1997
Tucson 78 KMSB FOX Owned February 1997
Tucson 78 KTTU UPN LMA February 1997
Boise 125 KTVB NBC Owned February 1997
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NEWSPAPER PUBLISHING
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DAILY SUNDAY
NEWSPAPER LOCATION ACQUIRED CIRCULATION(b) CIRCULATION(b)
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The Dallas Morning News Dallas, TX (c) 521,162 795,030
The Providence Journal Providence, RI February 1997 166,968 239,466
The Press-Enterprise Riverside, CA July 1997 166,708 173,187
Messenger-Inquirer Owensboro, KY January 1996 32,008 34,864
The Eagle Bryan-College Station, TX December 1995 23,033 27,929
The Gleaner Henderson, KY March 1997 11,460 13,487
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<TABLE>
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OTHER
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COMPANY DESCRIPTION
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Northwest Cable News Cable news network distributed to approximately 2 million homes
dallasnews.com Web site featuring daily content from The Dallas Morning News
projo.com Web site featuring daily content from The Providence Journal
Belo Productions, Inc. Produces television programming
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</TABLE>
(a) 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 May 1998 Nielsen estimates.
(b) Average paid circulation for the six months ended March 31, 1998, according
to the Audit Bureau of Circulation's FAS-FAX report.
(c) The first issue of The Dallas Morning News was published October 1, 1885.
Net earnings for the second quarter and year-to-date 1998 were $29,823 (24 cents
per share) and $43,458 (34 cents per share) compared to $26,313 (21 cents per
share) and $43,940 (41 cents per share) for the same periods in 1997. Results
for 1998 include the effect of 1997 acquisitions, including: The Providence
Journal Company ("PJC") on February 28, 1997, which included nine television
stations and a daily newspaper; The Gleaner (Henderson, KY) on March 31, 1997;
and The Press-Enterprise (Riverside, CA) on July 25, 1997. In addition to these
acquisitions, the Company exchanged KIRO-TV (Seattle, WA) for KMOV-TV (St.
Louis, MO) effective June 2, 1997 and acquired KENS-TV (San Antonio, TX) in an
exchange for Belo's interest in TVFN, a cable network, on October 15, 1997. Net
earnings and earnings per share for the six month period in 1998 were lower than
comparable 1997 results due to higher amortization and interest expense and a
greater number of average shares outstanding as a result of the acquisitions
described above.
To enhance comparability of the Company's segment results of operations for the
three and six months ended June 30, 1998 and 1997, certain information below is
presented on an "as adjusted" basis and reflects the transactions noted above as
though each had occurred at the beginning of 1997. The discussion that follows
compares segment operations on an adjusted basis only.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, AS ADJUSTED AS REPORTED
(IN THOUSANDS) 1998 1997 % CHANGE 1998 1997 % CHANGE
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<S> <C> <C> <C> <C> <C> <C>
Revenues
Broadcasting $ 163,142 $ 155,782 4.7% $ 163,142 $152,194 7.2%
Newspaper publishing 200,578 194,773 3.0% 200,578 171,358 17.1%
Other 2,550 2,440 4.5% 2,550 8,265 (69.1%)
Operating cash flow(1)
Broadcasting $ 72,989 $ 71,584 2.0% $ 72,989 $ 68,072 7.2%
Newspaper publishing 59,150 57,432 3.0% 59,150 53,038 11.5%
Other (1,198) (704) (70.2)% (1,198) (5,052) 76.3%
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</TABLE>
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<TABLE>
<CAPTION>
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SIX MONTHS ENDED JUNE 30, AS ADJUSTED AS REPORTED
(IN THOUSANDS) 1998 1997 % CHANGE 1998 1997 % CHANGE
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<S> <C> <C> <C> <C> <C> <C>
Revenues
Broadcasting $ 299,850 $ 280,693 6.8% $ 299,850 $ 244,196 22.8%
Newspaper publishing 390,748 376,948 3.7% 390,748 308,537 26.6%
Other 5,132 4,916 4.4% 5,132 11,786 (56.5%)
Operating cash flow(1)
Broadcasting $ 121,602 $ 114,711 6.0% $ 121,602 $ 99,496 22.2%
Newspaper publishing 113,197 112,160 0.9% 113,197 100,115 13.1%
Other (2,558) (1,395) (83.4)% (2,558) (6,313) 59.5%
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(1) Operating cash flow is defined as segment earnings from operations plus
depreciation and amortization. Operating cash flow is used in the
broadcasting and newspaper publishing industries to analyze and 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.
</TABLE>
Broadcasting
Broadcasting revenues for the second quarter of 1998 were $163,142, an increase
of 4.7 percent over second quarter 1997 revenues of $155,782. On a year-to-date
basis, revenues of $299,850 were up 6.8 percent over 1997 revenues of $280,693.
The majority of the revenue increase between the quarterly periods is due to
significant political advertising revenues. The majority of Belo's 17 television
stations reported an increase in political advertising revenue in the second
quarter of 1998, with the most significant increases noted in Dallas and Houston
(TX), Sacramento, CA and Louisville, KY. In addition to Congressional and
Gubernatorial races, issues advertising also contributed to the increase in
political revenues. Local advertising revenues were up 1.6 percent for the
quarter as automotive gains in Dallas, Houston and Portland were partially
offset by local declines in Seattle and Sacramento. National advertising
revenues increased slightly over last year. Higher revenues from Belo's LMA
stations in Seattle and Spokane and improved telecommunications and automotive
advertising in Portland were substantially offset by lower national revenues in
Dallas, due to lower telecommunications advertising and a shift in national
automotive advertising to local.
Year-to-date political revenues were up $6,222 compared to the same period last
year due mostly to statewide election campaigns in Texas, California and
Kentucky. Local advertising increased 6.6 percent for the six-month period due
to gains in automotive spending and broadcast of the Winter Olympics on the
Company's six CBS stations. National advertising revenues for the year-to-date
period were up slightly as significant gains in Sacramento, St. Louis and
Portland, were mostly offset by declines in Dallas, Norfolk and New Orleans.
Broadcasting operating cash flow margins for the second quarter of 1998 and 1997
were 44.7 percent and 46 percent, respectively. Margins for the year-to-date
periods were 40.6 percent for 1998 and 40.9 percent for 1997. Broadcasting
operating cash flow for the quarter was $72,989 in 1998 versus $71,584 in 1997,
an improvement of 2 percent. Year-to-date broadcasting operating cash flow was
$121,602 for 1998, or 6 percent better than the prior year. Second quarter cash
expenses for broadcasting increased 7.1 percent in 1998 versus 1997, while
year-to-date cash expenses were up 7.4 percent. These increases were due
primarily to higher salaries, wages and employee benefits of 7.3 percent for the
quarter and 7.6 percent year-to-date. Contributing to the increase in employee
costs were more employees, normal merit adjustments, overtime, and higher
benefit costs. Other production, distribution and operating costs in 1998 were
up 6.9 percent for the quarter and 7.3 percent year-to-date, due primarily to
higher programming expenses and costs related to covering the Olympics during
the first quarter.
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Newspaper Publishing
Newspaper publishing revenues for the second quarter of 1998 were $200,578
compared to second quarter 1997 revenues of $194,773. Publishing revenues for
the year-to-date 1998 and 1997 periods were $390,748 and $376,948, respectively.
Revenues for Belo's largest newspaper, The Dallas Morning News were up 2.9
percent for the quarter and 3.3 percent year-to-date. Classified advertising
revenues were up as a result of higher average rates for both the quarter and
year-to-date periods. Retail advertising revenues, which were flat for the first
three months of 1998, were down slightly for the second quarter and
year-to-date, due to lower volumes. Part of the volume decline was due to
certain customers switching to total market coverage (TMC) advertising. As a
result, other advertising revenues, which include TMC, were up for the second
quarter and six-month periods of 1998. General advertising revenues were down
for the quarter and year-to-date periods in 1998 due to lower volumes and
average rates. Circulation revenues were also down for the quarter due to Daily
and Sunday volume declines of 1.3 percent and 1.8 percent, respectively.
Year-to-date circulation volumes were down 1.3 percent and 1.4 percent for Daily
and Sunday.
Revenues for The Providence Journal were up 4.1 percent and 6.7 percent for the
three and six month periods of 1998 as compared to 1997. Retail advertising for
both periods was up significantly due to higher average rates and volume gains
in the electronics, telecommunications, finance and automotive categories.
Classified advertising revenues were also higher in 1998 due to higher rates and
volume gains in the employment category, offset by declines in real estate and
classified automotive advertising. General advertising revenues declined in 1998
due to lower automotive volumes. Circulation revenues were down slightly due to
volume declines of 1.7 percent (both Daily and Sunday) for the quarter and 1.5
percent (Daily) and 1.8 percent (Sunday) for the year-to-date period.
Riverside Press-Enterprise revenues improved 5 percent for the quarter and 4.7
percent year-to-date due to increases in nearly all advertising categories.
Revenue gains in classified advertising were the result of higher average rates,
partially offset by lower automotive and real estate volumes. General
advertising gains were volume driven, due to increases in the telecommunications
and automotive categories. Retail advertising gains in 1998 as compared to 1997
were due to higher average rates, despite volume declines, particularly in the
office supplies, department and discount stores, home improvement and furnishing
categories. Circulation revenue for the six month period was up slightly when
compared to the prior year due to volume increases of 1.5 percent Daily and .4
percent Sunday. Quarter-to-quarter circulation revenue was flat.
The newspaper publishing operating cash flow margin for each of the second
quarters of 1998 and 1997 was 29.5 percent. Year-to-date newspaper publishing
operating cash flow margins were 29 percent and 29.8 percent in 1998 and 1997,
respectively. Publishing operating cash flow of $59,150 for the quarter and
$113,197 year-to-date was 3 percent and .9 percent better, respectively, than
the same periods in 1997. Newsprint, ink and other supplies expense was up 4.6
percent for the quarter and 9.6 percent for the six-month period, due to a
higher average cost per metric ton compared with the same periods of 1997.
Salaries, wages and employee benefits, which comprise more than 40 percent of
publishing cash expenses, increased by only 2.4 percent and 3.6 percent for the
three and six month periods in 1998, respectively, as compared to the prior year
periods. Other production, distribution and operating costs increased 2.1
percent and 1.5 percent for the quarter and year-to-date periods of 1998, due
primarily to higher outside services and advertising and promotion costs,
partially offset by savings in distribution costs and lower bad debt expense.
Consolidated results
Depreciation and amortization expenses were higher for the three and six month
periods of 1998 versus 1997 due to the effect of the prior year acquisitions.
Higher borrowings, also as a result of 1997 acquisitions, resulted in higher
quarter and year-to-date interest expense in 1998 compared to 1997.
Additionally, approximately two-thirds of the Company's debt outstanding during
the three and six month periods ended June 30, 1998 was fixed-rate debt carrying
a weighted average effective interest rate of 7.3 percent. During the same
periods in 1997, all of
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the Company's debt was borrowed under a revolving credit facility with a
weighted average borrowing rate of approximately 6 percent.
The effective tax rate for both the quarter and year-to-date periods of 1998 was
46.8 percent, slightly lower than the rates for the three and six month periods
in 1997 of 47.6 percent and 48.6 percent, respectively.
Liquidity and Capital Resources
Net cash provided by operations is the Company's primary source of liquidity.
During the first six months of 1998, net cash provided by operations was
$84,602, compared to $88,933 for the same period in 1997. Increases in 1998 cash
earnings (defined as net earnings plus depreciation and amortization) and
receivable collections were more than offset by greater working capital
requirements for interest and bonuses in the current year and the timing of
payments of income taxes, including those resulting from acquisition-related
transactions. Net cash provided by operations was sufficient to fund capital
expenditures and common stock dividends.
At June 30, 1998, the Company had $1 billion in fixed-rate debt securities. The
weighted average effective interest rate for these debt instruments is 7.3
percent. The Company also has $500,000 available for issuance under a shelf
registration statement filed in April of 1997. Future issues of fixed-rate debt
may be used to refinance variable-rate debt in whole or in part or for other
corporate needs as determined by management.
At June 30, 1998, the Company had a $1 billion five-year variable-rate revolving
credit agreement with a syndicate of 27 banks under which borrowings were
$455,000. In addition, the Company had $105,800 of short-term unsecured notes
outstanding at June 30, 1998. These borrowings may be converted at the Company's
option to revolving debt. Accordingly, such borrowings are classified as
long-term in the Company's financial statements. The Company is required to
maintain certain ratios as of the end of each quarter, as defined in its
revolving credit agreement. As of June 30, 1998, the Company was in compliance
with all debt covenant requirements.
On June 25, 1998, the Company announced its intention to repurchase shares from
time to time under its existing share repurchase authorization. This repurchase
authority covered approximately 10.7 million shares at the time of the
announcement. It is anticipated that share repurchases will be made in the open
market and in privately negotiated transactions. As of June 30, 1998, 10,000
shares had been repurchased for an aggregate purchase price of $230. During
July, the Company repurchased an additional 180,000 shares of its stock for an
aggregate cost of approximately $4,308. These purchases were funded primarily
through borrowings under the Company's revolving credit facility.
Capital expenditures for the first six months of 1998 were $31,708, the majority
of which were for publishing and broadcast equipment purchases, including
expenditures for the conversion to digital television.
During the first six months of 1998, the Company paid dividends of $15,003 or 12
cents per share on Series A and Series B common stock outstanding, compared to
$10,783 or 11 cents per share during the comparable 1997 period. The higher
dividends in 1998 were due to the higher dividend rate and a larger number of
shares outstanding as a result of the February 1997 PJC acquisition.
Furthermore, during the second quarter, the Company completed a two-for-one
stock split in the form of a dividend. All record holders of Series A and Series
B common stock as of May 22, 1998 received an equal number of Series A or Series
B shares on June 5, 1998. All information set forth in this report, including
earnings and dividends per share and average shares outstanding, has been
restated to retroactively reflect the stock split.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No disclosure required.
10
<PAGE> 13
PART II.
ITEM 1. LEGAL PROCEEDINGS
There are a number of legal proceedings pending against the Company, including
several actions for alleged libel. In the opinion of management, liabilities, if
any, arising from these actions would not have a material adverse effect on the
operations or financial position of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders was held on May 13, 1998. All nominees
standing for election as directors were elected. The following chart indicates
the number of votes cast with respect to each nominee for director:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Judith L. Craven, M.D., M.P.H. 123,305,780 415,295
Stephen Hamblett 119,258,060 4,463,015
Dealey D. Herndon 123,290,055 431,020
Ward L. Huey, Jr. 123,257,608 463,467
James M. Moroney, Jr. 123,267,601 453,474
Hugh G. Robinson 123,299,212 421,863
</TABLE>
In addition to the election of directors, the Company's shareholders approved an
additional proposal to amend the Company's Certificate of Incorporation to
increase the total number of authorized shares of Common Stock from 150 million
to 450 million. The following chart indicates the number of votes cast for and
against the second proposal as well as the number of abstentions and broker
non-votes:
<TABLE>
<CAPTION>
<S> <C>
For 110,176,981
Against 13,346,091
Abstain 198,003
Broker non-votes --
</TABLE>
ITEM 5. OTHER INFORMATION
Shareholder proposals to be presented at the 1999 Annual Meeting of
Shareholders, for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting, must be received by the Company at its principal
executive offices in Dallas, Texas, addressed to the Secretary of the Company,
not later than December 5, 1998. Such proposals, and any nomination of
candidates for election as directors, must comply with the bylaws of the Company
and the requirements of Regulation 14A of the Securities Exchange Act of 1934.
The Company intends to exercise discretionary voting authority granted under any
Proxy which is executed and returned to the Company on any matter that may
properly come before the 1999 Annual Meeting of Shareholders, unless written
notice of the matter is delivered to the Company at its principal executive
offices in Dallas, Texas, addressed to the Secretary of the Company, not later
than February 17, 1999, or such other date specified by the Company's bylaws.
11
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits marked with an asterisk (*) are incorporated by reference to
documents previously filed by the Company with the Securities and
Exchange Commission, as indicated. Exhibits marked with a tilde (~) are
management contracts or compensatory plan contracts or arrangements
filed pursuant to Item 601 (b)(10)(iii)(A) of Regulation S-K. All other
documents are filed with this report.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 * Amended and Restated Agreement and Plan of Merger, dated as of
September 26, 1996 (Appendix A of the Joint Proxy
Statement/Prospectus of Belo and Providence Journal included
in Belo's Registration Statement on Form S-4 (Registration No.
333-19337) filed with the Commission on January 8, 1997)
3.1 * Certificate of Incorporation of the Company (Exhibit 3.1 to
the Company's Amended Annual Report on Form 10-K/A dated April
8, 1996 (the "1995 Form 10-K/A"))
3.2 * Certificate of Correction to Certificate of Incorporation
dated May 13, 1987 (Exhibit 3.2 to the 1995 Form 10-K/A)
3.3 * Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company dated April 16, 1987 (Exhibit
3.3 to the 1995 Form 10-K/A)
3.4 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 4, 1988 (Exhibit 3.4 to the 1995 Form
10-K/A)
3.5 * Certificate of Amendment of Certificate of Incorporation of
the Company dated May 3, 1995 (Exhibit 3.5 to the Company's
Annual Report on Form 10-K dated February 28, 1996 (the "1995
Form 10-K"))
3.6 Certificate of Amendment of Certificate of Incorporation of
the Company dated May 15, 1998
3.7 * Amended Certificate of Designation of Series A Junior
Participating Preferred Stock of the Company dated May 4, 1988
(Exhibit 3.6 to the 1995 Form 10-K/A)
3.8 * Certificate of Designation of Series B Common Stock of the
Company dated May 4, 1988 (Exhibit 3.7 to the 1995 Form
10-K/A)
3.9 * Amended and Restated Bylaws of the Company, effective February
13, 1998 (Exhibit 3.8 to the Company's Annual Report on Form
10-K dated March 18, 1998 (the "1997 Form 10-K"))
4.1 Certain rights of the holders of the Company's Common Stock
are set forth in Exhibits 3.1-3.8 above
4.2 * Specimen Form of Certificate representing shares of the
Company's Series A Common Stock (Exhibit 4.2 to the 1997 Form
10-K)
4.3 * Specimen Form of Certificate representing shares of the
Company's Series B Common Stock (Exhibit 4.3 to the 1997 Form
10-K)
12
<PAGE> 15
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.4 * Amended and Restated Form of Rights Agreement as of February
28, 1996 between the Company and Chemical Mellon Shareholder
Services, L.L.C., a New York banking corporation (Exhibit 4.4
to the 1995 Form 10-K)
4.5 * Supplement No. 1 to Amended and Restated Rights Agreement
between the Company and The First National Bank of Boston
dated as of November 11, 1996 (Exhibit 4.5 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996)
4.6 Instruments defining rights of debt securities:
(1) * Indenture dated as of June 1, 1997 between the Company
and The Chase Manhattan Bank, as Trustee (Exhibit 4.6(1)
to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997 (the "2nd Quarter
1997 Form 10-Q"))
(2) * (a) $200 million 6-7/8% Senior Note due 2002 (Exhibit 4.6
(2)(a) to the 2nd Quarter 1997 Form 10-Q)
* (b) $50 million 6-7/8% Senior Note due 2002 (Exhibit 4.6
(2)(b) to the 2nd Quarter 1997 Form 10-Q)
(3) * (a) $200 million 7-1/8% Senior Note due 2007 (Exhibit 4.6
(3)(a) to the 2nd Quarter 1997 Form 10-Q)
* (b) $100 million 7-1/8% Senior Note due 2007 (Exhibit 4.6
(3)(b) to the 2nd Quarter 1997 Form 10-Q)
(4) * $200 million 7-3/4% Senior Debenture due 2027
(Exhibit 4.6 (4) to the 2nd Quarter 1997 Form 10-Q)
(5) * Officer's Certificate dated June 13, 1997 establishing
terms of debt securities pursuant to Section 3.1 of the
Indenture (Exhibit 4.6 (5) to the 2nd Quarter 1997
Form 10-Q)
(6) * (a) $200 million 7-1/4% Senior Debenture due 2027
(Exhibit 4.6 (6)(a) to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended
September 30, 1997 (the "3rd Quarter 1997 Form
10-Q"))
* (b) $50 million 7-1/4% Senior Debenture due 2027
(Exhibit 4.6 (6)(b) to the 3rd Quarter 1997
Form 10-Q)
(7) * Officer's Certificate dated September 26, 1997 establishing
terms of debt securities pursuant to Section 3.1 of the
Indenture (Exhibit 4.6 (7) to the 3rd Quarter 1997
Form 10-Q)
10.1 Contracts relating to television broadcasting:
(1) * Form of Agreement for Affiliation between WFAA-TV in
Dallas, Texas and ABC (Exhibit 10.1 (1) to the 1995 Form
10-K/A)
13
<PAGE> 16
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.2 Financing agreements:
(1)* Amended and Restated Credit Agreement (Five-year
$1,000,000,000 revolving credit and competitive advance
facility dated as of August 29, 1997 among the Company and
The Chase Manhattan Bank, as Administrative Agent and
Competitive Advance Facility Agent, Bank of America
National Trust and Savings Association and Bank of
Tokyo-Mitsubishi, Ltd. as Co-Syndication Agents, and
NationsBank as Documentation Agent)(Exhibit 10.2(1) to the
3rd Quarter 1997 Form 10-Q)
10.3 Compensatory plans:
~(1) The A. H. Belo Corporation Employee Savings and
Investment Plan:
* (a) The A. H. Belo Corporation Employee Savings and
Investment Plan Amended and Restated January 1, 1998
(Exhibit 10.3(1)(a) to the 1997 Form 10-K)
* (b) Restated Master Trust Agreement between the
Company and Fidelity Management Trust Company, as
restated and dated March 13, 1998 (Exhibit 10.3(1)(b)
to the 1997 Form 10-K)
~(2) The A. H. Belo Corporation 1986 Long-Term Incentive Plan:
* (a) The A. H. Belo Corporation 1986 Long-Term Incentive
Plan (Effective May 3, 1989, as amended by Amendments
1, 2, 3, 4, and 5) (Exhibit 10.3 (2) to the Company's
Annual Report on Form 10-K dated March 10, 1997 (the
"1996 Form 10-K"))
* (b) Amendment No. 6 to 1986 Long-Term Incentive Plan
(Exhibit 10.3 (2)(b) to the 1997 Form 10-K)
* (c) Amendment No. 7 to 1986 Long-Term Incentive Plan
(Exhibit 10.3(9) to the 1995 Form 10-K)
(d) Amendment No. 8 to 1986 Long-Term Incentive Plan
~(3)* A. H. Belo Corporation 1995 Executive Compensation Plan
as restated to incorporate amendments through December 4,
1997 (Exhibit 10.3 (3) to the 1997 Form 10-K)
(a) Amendment to 1995 Executive Compensation Plan
dated July 21, 1998
~(4)* Management Security Plan (Exhibit 10.3 (1) to the 1996
Form 10-K)
~(5) A. H. Belo Corporation Supplemental Executive
Retirement Plan:
* (a) A. H. Belo Corporation Supplemental Executive
Retirement Plan (Exhibit 10.3(27) to the Company's
Annual Report on Form 10-K dated March 18, 1994
(the "1993 Form 10-K"))
* (b) Trust Agreement dated February 28, 1994, between the
Company and Mellon Bank, N.A. (Exhibit 10.3(28) to
the 1993 Form 10-K)
10.4 Agreements with officers:
(1) Separation Agreement between A. H. Belo Corporation and
Michael D. Perry dated June 30, 1998
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
14
<PAGE> 17
(b) Reports on Form 8-K
During the quarter covered by this report, there were no reports on
Form 8-K filed.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. H. BELO CORPORATION
August 7, 1998 By: /s/ DUNIA A. SHIVE
-------------------------------
Dunia A. Shive
Senior Vice President and
Chief Financial Officer
16
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of September 26,
1996 (Appendix A of the Joint Proxy Statement/Prospectus of Belo and Providence
Journal included in Belo's Registration Statement on Form S-4 (Registration
No. 333-19337) filed with the Commission on January 8, 1997) N/A
3.1 Certificate of Incorporation of the Company (Exhibit 3.1 to the Company's Amended
Annual Report on Form 10-K/A dated April 8, 1996 (the "1995 Form 10-K/A")) N/A
3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (Exhibit
3.2 to the 1995 Form 10-K/A) N/A
3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the
Company dated April 16, 1987 (Exhibit 3.3 to the 1995 Form 10-K/A) N/A
3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated
May 4, 1988 (Exhibit 3.4 to the 1995 Form 10-K/A) N/A
3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated
May 3, 1995 (Exhibit 3.5 to the Company's Annual Report on Form 10-K
dated February 28, 1996 (the "1995 Form 10-K")) N/A
3.6 Certificate of Amendment of Certificate of Incorporation of the Company dated
May 15, 1998 ___
3.7 Amended Certificate of Designation of Series A Junior Participating Preferred
Stock of the Company dated May 4, 1988 (Exhibit 3.6 to the 1995 Form 10-K/A) N/A
3.8 Certificate of Designation of Series B Common Stock of the Company dated May 4,
1995 Form 10-K/A) N/A
3.9 Amended and Restated Bylaws of the Company, effective February 13, 1998 (Exhibit 3.8
to the Company's Annual Report on Form 10-K dated March 18, 1998 (the "1997
Form 10-K")) N/A
4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits
3.1-3.8 above. N/A
4.2 Specimen Form of Certificate representing shares of the Company's Series A Common
Stock (Exhibit 4.2 to the 1997 Form 10-K) N/A
4.3 Specimen Form of Certificate representing shares of the Company's Series B Common
Stock (Exhibit 4.3 to the 1997 Form 10-K) N/A
4.4 Amended and Restated Form of Rights Agreement as of February 28, 1996 between the
Company and Chemical Mellon Shareholder Services, L.L.C., a New York banking
corporation (Exhibit 4.4 to the 1995 Form 10-K) N/A
</TABLE>
E-1
<PAGE> 20
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- -------
<S> <C>
4.5 Supplement No. 1 to Amended and Restated Rights Agreement between the
Company and The First National Bank of Boston dated as of November 11, 1996
(Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996) N/A
4.6 Instruments defining rights of debt securities:
(1) Indenture dated as of June 1, 1997 between the Company and The
Chase Manhattan Bank, as Trustee (Exhibit 4.6(1) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1997 (the "2nd Quarter 1997 Form 10-Q")) N/A
(2) (a) $200 million 6-7/8% Senior Note due 2002 (Exhibit 4.6 (2)(a) to the
2nd Quarter 1997 Form 10-Q) N/A
(b) $50 million 6-7/8% Senior Note due 2002 (Exhibit 4.6 (2)(b) to the
2nd Quarter 1997 Form 10-Q) N/A
(3) (a) $200 million 7-1/8% Senior Note due 2007 (Exhibit 4.6 (3)(a) to the
2nd Quarter 1997 Form 10-Q) N/A
(b) $100 million 7-1/8% Senior Note due 2007 (Exhibit 4.6 (3)(b) to the
2nd Quarter 1997 Form 10-Q) N/A
(4) $200 million 7-3/4% Senior Debenture due 2027 (Exhibit 4.6 (4) to the
2nd Quarter 1997 Form 10-Q) N/A
(5) Officer's Certificate dated June 13, 1997 establishing terms of debt
securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6 (5)
to the 2nd Quarter 1997 Form 10-Q) N/A
(6) (a) $200 million 7-1/4% Senior Debenture due 2027 (Exhibit 4.6 (6)(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1997 (the "3rd Quarter 1997 Form 10-Q")) N/A
(b) $50 million 7-1/4% Senior Debenture due 2027 (Exhibit 4.6 (6)(b) to the
3rd Quarter 1997 Form 10-Q) N/A
(7) Officer's Certificate dated September 26, 1997 establishing terms of debt
securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6 (7) to the
3rd Quarter 1997 Form 10-Q) N/A
10.1 Contracts relating to television broadcasting:
(1) Form of Agreement for Affiliation between WFAA-TV in Dallas, Texas and ABC
(Exhibit 10.1 (1) to the 1995 Form 10-K/A) N/A
</TABLE>
E-2
<PAGE> 21
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
10.2 Financing agreements:
(1) Amended and Restated Credit Agreement (Five-year $1,000,000,000 revolving
credit and competitive advance facility dated as of August 29, 1997 among the
Company and The Chase Manhattan Bank, as Administrative Agent and
Competitive Advance Facility Agent, Bank of America National Trust and
Savings Association and Bank of Tokyo-Mitsubishi, Ltd. as Co-Syndication
Agents, and NationsBank as Documentation Agent) (Exhibit 10.2 (1) to the 3rd
Quarter 1997 Form 10-Q) N/A
10.3 Compensatory plans:
(1) The A. H. Belo Corporation Employee Savings and Investment Plan:
(a) The A. H. Belo Corporation Employee Savings and Investment Plan
Amended and Restated January 1, 1998 (Exhibit 10.3(1)(a) to the
1997 Form 10-K) N/A
(b) Restated Master Trust Agreement between the Company and Fidelity
Management Trust Company, as restated and dated March 13, 1998
(Exhibit 10.3(1)(b) to the 1997 Form 10-K) N/A
(2) The A. H. Belo Corporation 1986 Long-Term Incentive Plan:
(a) The A. H. Belo Corporation 1986 Long-Term Incentive Plan
(Effective May 3, 1989, as amended by Amendments 1, 2, 3, 4,
and 5)(Exhibit 10.3(2) to the Company's Annual Report on
Form 10-K dated March 10, 1997 (the "1996 Form 10-K")) N/A
(b) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit
10.3(2)(b) to the 1997 Form 10-K) N/A
(c) Amendment No. 7 to 1986 Long-Term Incentive Plan (Exhibit 10.3(9)
to the 1995 Form 10-K) N/A
(d) Amendment No. 8 to 1986 Long-Term Incentive Plan ___
(3) A. H. Belo Corporation 1995 Executive Compensation Plan as restated to
incorporate amendments through December 4, 1997 (Exhibit 10.3(3) to
the 1997 Form 10-K) N/A
(a) Amendment to 1995 Executive Compensation Plan dated
July 21, 1998 ___
(4) Management Security Plan (Exhibit 10.3 (1) to the 1996 Form 10-K) N/A
(5) A. H. Belo Corporation Supplemental Executive Retirement Plan:
(a) A. H. Belo Corporation Supplemental Executive Retirement Plan
(Exhibit 10.3(27) to the Company's Annual Report on Form 10-K
dated March 18, 1994 (the "1993 Form 10-K")) N/A
(b) Trust Agreement dated February 28, 1994, between the Company
and Mellon Bank, N.A. (Exhibit 10.3(28) to the 1993 Form 10-K) N/A
</TABLE>
E-3
<PAGE> 22
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
10.4 Agreements with officers:
(1) Separation Agreement between A. H. Belo Corporation and Michael D.
Perry dated June 30, 1998 ___
12 Ratio of Earnings to Fixed Charges ___
27 Financial Data Schedule N/A
</TABLE>
E-4
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
A. H. BELO CORPORATION
A. H. Belo Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the corporation
held on February 13, 1998, resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of the corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of the corporation for consideration thereof. The proposed
amendment, in the form adopted by the Board of Directors of the corporation, is
as set forth in Appendix A to this Certificate.
SECOND: That at the next annual meeting of the stockholders of the
corporation thereafter duly convened and held, upon notice in accordance with
Section 222 of the General Corporation Law of the State of Delaware, the
necessary number of shares as required by statute and by the corporation's
Certificate of Incorporation were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the corporation has caused this Certificate to be
duly executed by its Chairman of the Board and attested to by its Secretary, and
caused its corporate seal to be affixed hereto as of the 13th day of May, 1998.
A. H. BELO CORPORATION
By: /s/ Robert W. Decherd
-----------------------------
Chairman of the Board
[Corporate Seal]
ATTEST: /s/ Michael J. McCarthy
---------------------------------
Secretary
<PAGE> 2
THE STATE OF TEXAS
COUNTY OF DALLAS
On the 13th day of May, 1998 before me personally appeared Robert W.
Decherd, the Chairman of the Board of A. H. Belo Corporation, to me known to be
the person described in and who executed the foregoing instrument, and
acknowledged that he executed the same in the capacity indicated, that it is the
act and deed of such corporation, and that the facts stated therein are true.
/s/ Janice L. Goldrick
---------------------------------
Notary Public
My Commission Expires:
7/10/99 Janice L. Goldrick
- --------------------- ---------------------------------
Print Name
<PAGE> 3
APPENDIX A
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF A. H. BELO CORPORATION
The first paragraph of Section 1 of Article Four shall be deleted and replaced
with the following:
The aggregate number of shares of stock that the corporation
shall have the authority to issue is four hundred fifty-five million
(455,000,000) shares, of which five million (5,000,000) shares shall be
Preferred Stock (the "Preferred Stock"), par value $1.00 per share, and
four hundred fifty million (450,000,000) shares shall be Common Stock
(the "Common Stock"), par value $1.67 per share.
<PAGE> 1
EXHIBIT 10.3(2)(d)
AMENDMENT NO. 8
TO
A. H. BELO CORPORATION
1986 LONG TERM INCENTIVE PLAN
A. H. Belo Corporation, a Delaware corporation, pursuant to action of
its Board of Directors, adopts the following amendment to the A. H. Belo
Corporation 1986 Long Term Incentive Plan (the "Plan"), with reference to the
following facts:
A. On May 13, 1998, the Board of Directors of the Company declared a
two-for-one stock split in the form of a dividend on the Company's Common Stock,
payable on June 5, 1998, to shareholders of record on May 22, 1998.
B. The Board of Directors has authorized the amendments set forth below
to provide for the effect of such stock dividend.
NOW, THEREFORE, the Plan is amended as follows:
1. Each reference in Paragraph 2 of the Plan to the number of shares
authorized for issuance under the Plan is amended to read "3,475,280 shares"
2. The foregoing amendment will be effective as of May 22, 1998.
Executed at Dallas, Texas, this 21st day of July, 1998.
Executed at Dallas, Texas, this 21st day of July, 1998.
A. H. BELO CORPORATION
By: /s/ MARIAN SPITZBERG
----------------------------------
Vice President, Deputy General
Counsel and Secretary
<PAGE> 1
EXHIBIT 10.3(3)(a)
AMENDMENT
TO
A. H. BELO CORPORATION
1995 EXECUTIVE COMPENSATION PLAN
A. H. Belo Corporation, a Delaware corporation, pursuant to action of
its Board of Directors adopts the following amendments to the A. H. Belo
Corporation 1995 Executive Compensation Plan (the "Plan"), with reference to the
following facts:
A. On May 13, 1998, the Board of Directors of the Company declared a
two-for-one stock split in the form of a dividend on the Company's Common Stock,
payable on June 5, 1998, to shareholders of record on May 22, 1998.
B. The Board of Directors has authorized the amendments set forth below
to provide for the effect of such stock dividend, which amendments take into
account shares of Common Stock of the Company (also adjusted for the effect of
the stock dividend) issued upon the exercise of stock options prior to the
record date of the dividend.
NOW, THEREFORE, the Plan is amended as follows:
1. The reference to "5,000,000 shares" that appears in the first
sentence of Paragraph 3 of the Plan ("Shares Available Under the Plan") is
amended to read "9,867,652 shares".
2. Paragraph 4(a) of the Plan, relating to limitations on awards under
the Plan, is amended in its entirety to read as follows:
(a) Of the aggregate of 9,867,652 shares reserved for issuance under
the Plan, no more than 2,400,000 shares of Common Stock will be issued
or transferred as Restricted Stock.
3. The reference to "5,000,000 shares" in Paragraph 4(b) of the Plan is
amended to read "9,867,652 shares", and the reference to "500,000 shares" in
Paragraph 4(c) of the Plan is amended to read "1,000,000 shares".
<PAGE> 2
4. The reference to "Paragraphs 3, 4 and 6" in Paragraph 12 of the Plan
("Adjustments") is amended to read "Paragraphs 3 and 4."
The foregoing amendments will be effective as of May 22, 1998.
Executed at Dallas, Texas, this 21st day of July, 1998.
A. H. BELO CORPORATION
By: /s/ Marian Spitzberg
------------------------------------------
Vice President, Deputy General
Counsel and Secretary
2
<PAGE> 1
EXHIBIT 10.4(1)
SEPARATION AGREEMENT
This SEPARATION AGREEMENT (the "Agreement") is entered into as of the
30th day of June, 1998, by and between A. H. BELO CORPORATION, a Delaware
corporation (the "Company"), and MICHAEL D. PERRY ("MDP").
W I T N E S S E T H:
WHEREAS, MDP desires to separate from employment by the Company; and
WHEREAS, MDP's intimate knowledge of the business and affairs of the
Company is of material value to the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties do hereby agree as follows:
Section 1. Resignation of MDP. On June 30, 1998 ("Resignation Date"),
MDP shall resign as the Company's Senior Corporate Vice President/Chief
Financial Officer and from all other positions held by him in the Company and
its subsidiaries and affiliates.
Section 2. Events Upon Resignation. MDP's resignation shall result in
the receipt of additional compensation (to which he would not otherwise be
entitled) and the treatment of his Company benefits as follows:
(a) Bonus. MDP shall be eligible for any pro rata 1998 year-end bonus
as determined pursuant to the Company's 1995 Executive Compensation Plan
("ECP").
(b) Restricted Shares. As part of his compensation arrangements with
the Company, MDP received 8,612 shares of Common Stock of the Company as
restricted
<PAGE> 2
shares. As of the date of this Agreement, these restricted shares are
subject to performance-oriented or time-lapse restrictions and risks of
forfeiture provided for in the agreement pursuant to which such shares were
awarded. The Compensation Committee of the Board of Directors of the Company
(the "Committee") has taken all action necessary, subject to the terms of this
Agreement, to cause the performance-oriented or time-lapse restrictions and
risks of forfeiture to lapse upon the date of this Agreement with respect to all
of such restricted shares.
(c) Stock Options. As of the date of this Agreement, MDP has (i)
121,000 outstanding and exercisable stock options, and (ii) 149,600 outstanding
and unvested stock options. The Committee has taken all action necessary to
authorize the acceleration and vesting of all of the unvested stock options
except for 62,858 options granted on December 18, 1996. After the Resignation
Date, the 62,858 unvested options shall terminate. With respect to those stock
options vested and exercisable as of the Resignation Date, the stock options
granted from 1992 through 1994 shall terminate on June 30, 1999, and the stock
options granted from 1995 through 1997 shall terminate on June 30, 2000.
(d) G. B. Dealey Pension Plan. MDP shall participate in the G. B.
Dealey Retirement Pension Plan as an employee of the Company through the
Resignation Date but not thereafter except as provided under the terms of such
Plan.
(e) Employee Savings and Investment Plan ("401(k) Plan"). MDP shall
participate in the 401(k) Plan as an employee of the Company through the
Resignation Date but not thereafter except as provided under the terms of such
Plan.
2
<PAGE> 3
(f) Management Security Plan. MDP shall be entitled to whatever
benefits shall accrue to him from time to time by virtue of his participation in
the Management Security Plan through the Resignation Date.
(g) Supplemental Executive Retirement Plan (SERP). MDP shall receive
the $174,275 balance in his SERP account on August 1, 1998.
(h) Medical/Dental Coverage. On the Resignation Date, MDP (as an
employee) and his dependents cease to be covered under the Company's medical and
dental and other employee benefit plans. Commencing July 1, 1998, MDP and his
dependents will be eligible for, and the Company shall pay the cost of,
continuation coverage under the Company's group health plans pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). At the
conclusion of the eighteen month COBRA continuation period applicable to MDP, if
he is then living and is not covered by another employer-sponsored group health
plan, the Company shall make a lump sum payment to MDP in an amount equal to
$5,000 on the date that the COBRA continuation period ends. All obligations of
the Company under this Section 2(i) shall terminate if MDP becomes covered by
another employer-sponsored group health plan.
(i) Life Insurance. MDP's Company-sponsored life insurance shall
terminate as of June 30, 1998.
(j) Computer and Related Equipment. MDP shall be entitled to retain the
computer, installed software, and related electronic equipment previously
provided him by the Company.
(k) Outplacement Service. MDP shall be entitled to Company-paid
executive-level outplacement services at a company of his choice.
3
<PAGE> 4
(l) Accrued Vacation. MDP shall receive a cash payment for his four
weeks of accrued but unused vacation.
Section 3. Periodic Separation Payments. For the period from July 1,
1998 through December 31, 2000 (the "Separation Period"), MDP shall receive from
the Company monthly payments, payable on the fifteenth of each month, as
follows: (1) for the first six months, he shall receive $29,850 per month; (2)
beginning with the January 1999 payment, he shall receive $14,925 per month
through December 2000. During the Separation Period, it is understood and agreed
that MDP shall have no continuing relationship with the Company, as employee,
consultant, agent or contractor, with the Company other than MDP's recipient
rights to the payments and other benefits provided for herein.
Section 4. Post-Closing Covenants. In consideration of the promises and
payments made or to be made by the Company pursuant to the Agreement, and in
order to aid in the protection of the confidential and proprietary information
and goodwill of the Company, MDP agrees as follows:
A. Confidentiality. MDP agrees that he shall not, during the term
of any part of this Agreement or at any time thereafter, use or disclose to any
third party other than as required by court order or law or as necessary for the
proper performance of his duties hereunder, any of the trade secrets,
confidential dealings or other confidential or proprietary information
concerning the business, finances, transactions or affairs of the Company,
including its subsidiaries and affiliates. MDP hereby certifies that he has
returned or will promptly return all files, records or information of any sort
with respect
4
<PAGE> 5
to such trade secrets, confidential dealings or other confidential or
proprietary information concerning the Company, including its subsidiaries and
affiliates.
B. No Solicitation. MDP agrees that prior to December 31, 2000,
he shall not, directly or indirectly for his own account or for the benefit of
any other party (i) solicit, induce, entice any employee or contractor of the
Company or its subsidiaries or affiliates to terminate his/her employment or
contract with the Company or such subsidiary or affiliate or (ii) solicit,
induce, entice any customer of the Company or its subsidiaries or affiliates to
establish a business relationship with a competitor of the Company or any of its
subsidiaries or affiliates.
C. Acknowledgment. MDP acknowledges that, in his employment with
the Company, he acquired confidential and proprietary information of a highly
sensitive nature, and that the protection of this information is critical to the
Company. MDP further acknowledges that the covenants contained in this Section 4
will not unreasonably limit his ability to earn a living.
Section 5. Non-Exclusive Remedies. MDP recognizes and acknowledges that
the Company would suffer irreparable harm and substantial loss if MDP violated
any of the terms and provisions of Sections 4. Accordingly and because of the
fact that the actual damages which might be sustained by the Company as a result
of any breach of the foregoing Sections 4 would be difficult, if not impossible,
to ascertain, MDP agrees, at the election of the Company and in addition to, and
not in lieu of, the Company's right to seek all other remedies and damages which
the Company may have at law or in equity for such breach, that the Company shall
be entitled to injunctive relief restraining MDP from violating such terms and
provisions of this Agreement. It is the express intention of the
5
<PAGE> 6
parties to this Agreement to comply with all laws which may be applicable to
this Agreement. Should any restriction contained in Section 4 hereof be found to
exceed in duration or scope the restriction permitted by law, it is expressly
agreed that this Agreement may be reformed or modified by the final judgment of
a court of competent jurisdiction to reflect a lawful duration or scope.
Additionally, in the event that MDP breaches any of the terms and
provisions contained in this Agreement, including Sections 4, the Company shall
have the right to cease making any further payments or providing any other
benefits or consideration pursuant to Sections 2 and 3.
Section 6. Publicity/Press Release. The Company and MDP have agreed on
the wording of the proposed press release attached to this Agreement (the "Press
Release"). The Company and MDP mutually agree that each shall refrain from
making any public statement that is materially inconsistent with the Press
Release or from making any negative or derogatory remarks about the other party.
Section 7. Release.
(a) MDP, in consideration of the payments to be made by the Company
hereunder and the provision of the other benefits herein, hereby irrevocably and
unconditionally releases and forever discharges the Company, its subsidiaries
and affiliates and its and their past and present officers, trustees, directors,
agents, employees, representatives, successors and assigns, and the Company, in
consideration of the premises and promises made by MDP, hereby irrevocably and
unconditionally releases and forever discharges MDP and his heirs, agents,
personal representatives, estate,
6
<PAGE> 7
successors and assigns from any and all suits, actions, charges, causes of
action, rights, damages, debts, demands, claims or liabilities of any kind
whatsoever, known or unknown (collectively referred to herein as "Claims"),
which a released party has or may have against another released party, for any
alleged acts, practices or events occurring prior to the date of this Agreement,
or any alleged continuing effects of such acts, practices or events, or any
other factors or conditions relating to or arising out of MDP's employment with
the Company, as well as the separation of his employment with the Company;
Claims arising under federal, state, or local laws prohibiting employment
discrimination such as, without limitation, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act of l967 (for all Claims arising
through the date you sign this Agreement), the Americans with Disabilities Act,
the Equal Pay Act, the Texas Commission on Human Rights Act, and the Family and
Medical Leave Act; Claims for breach of contract, excluding breach of this
Agreement by the Company, quasi-contract, or wrongful or constructive discharge;
Claims for personal injury, harm, or damages (whether intentional or
unintentional), including but not limited to, libel, slander, assault, battery,
invasion of privacy, negligent or intentional infliction of emotional distress,
or interference with business opportunity or with contracts; Claims arising out
of any legal restrictions on the Company's right to terminate its employees;
Claims arising under the Employee Retirement Income Security Act; or Claims for
salary, vacation pay, sick pay, bonus, severance pay, future pay, compensation
of any kind, retirement, health insurance, long-term disability, AD&D, life
insurance, or any other employee benefit; provided, however, that no release or
discharge is hereby made with respect to (i) the rights and obligations of the
Company and MDP under this
7
<PAGE> 8
Agreement, or (ii) any Claims known or unknown arising out of or related to
fraud, dishonesty, gross negligence or willful misconduct of MDP. MDP also
specifically releases the released parties from any claims for attorneys' fees,
costs and expenses incurred in connection with this Agreement or any matter
herein released. As used herein, the term "released party" or "released parties"
means the Company and its subsidiaries and affiliates and its and their past and
present officers, trustees, directors, agents, employees, representatives,
successors and assigns, jointly and severally, and MDP and his heirs, agents,
personal representatives, estate, successors and assigns. On the Resignation
Date, MDP and the Company shall each execute and deliver to the other a release
substantially in the form attached hereto.
(b) In order to comply with the Older Workers' Benefit Protection Act,
it is necessary that the Company advise MDP that he should consult with an
attorney prior to executing this Agreement and that the offer evidenced by this
Agreement be extended for a period of twenty-one days during which MDP may
consider whether to accept or reject the offer. As part of this Agreement, MDP
is asked to specifically waive any and all rights and claims arising under the
ADEA. By his execution below, MDP acknowledges that (i) he has carefully read
this Agreement, understands its terms and their legal effect, and has had the
opportunity to have it reviewed by an attorney; (ii) MDP or his attorney has
made such investigation of the facts pertaining to this Agreement (including the
release) as may be necessary; and (iii) MDP understands that he has the right
within seven days after his signing this Agreement to revoke his execution of
this Agreement to the extent, and only to the extent, that this Agreement waives
or releases any and all
8
<PAGE> 9
rights and claims under the ADEA. If MDP so revokes his
execution of this Agreement, the Agreement shall nevertheless remain in effect
for all other purposes.
(c) Notwithstanding Sections 7(a) and (b) above, MDP shall be entitled
to the same rights to and benefits of indemnification and directors and officers
insurance coverage as and to the extent provided current directors and officers,
and this Agreement shall not release or discharge any of such rights or
benefits.
Section 8. Arbitration Agreement. The parties hereto do not intend any
provision of this Agreement to modify their existing April 27, 1994 Arbitration
Agreement.
Section 9. Miscellaneous. This Agreement represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto. This Agreement shall be construed in accordance with and
governed by the laws of the State of Texas applicable to agreements made and to
be performed entirely within such state. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
Other than for existing agreements with Rebecca Perry relating to portions of
the benefits described above, MDP shall not encumber or dispose of the right to
receive any payment or benefit under this Agreement, such rights hereunder being
expressly agreed to be non-assignable and non-transferable, and in the event of
any attempted assignments or transfer, the Company shall have no further
liability hereunder. No waiver, alteration or modification of any of the
provisions of this Agreement shall be valid unless the same shall be in writing
and signed by the parties hereto.
9
<PAGE> 10
Section 11. Taxes/Securities. MDP acknowledges and agrees that the
Company is obligated to, and will, deduct and withhold from certain amounts
payable by the Company to MDP pursuant to this Agreement for taxes and other
amounts required by law on account of the compensation and other benefits
described in this Agreement. MDP also acknowledges that he will comply with all
provisions of the federal securities laws, to the extent still applicable, in
trading of the Company's securities referenced herein.
Section 12. Further Assurances. From time to time after the execution
of this Agreement, each of the Company and MDP will execute and deliver such
other documents and take such other actions as the other party to this Agreement
reasonably may request in order to effect the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
A. H. BELO CORPORATION
By: /s/ ROBERT W. DECHERD
-----------------------------------
Chairman of the Board,
President and Chief
Executive Officer
/s/ MICHAEL D. PERRY
-----------------------------------
MICHAEL D. PERRY
10
<PAGE> 1
A. H. BELO CORPORATION Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1994 1995 1996 1997
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings before income taxes
and the cumulative effect
of accounting changes $ 75,578 $ 107,897 $ 111,014 $ 144,040 $ 154,122
Add: Total fixed charges 18,792 17,294 32,089 29,009 94,069
Less: Interest capitalized 1,961 138 957 255 510
--------- --------- --------- ---------- ---------
Adjusted earnings $ 92,409 $ 125,053 $ 142,146 $ 172,794 $ 247,681
========= ========= ========= ========== =========
Fixed Charges:
Interest $ 16,976 $ 16,250 $ 30,944 $ 27,898 $ 91,288
Portion of rental expense
representative of the
interest factor (1) 1,816 1,044 1,145 1,111 2,781
--------- --------- --------- ---------- ---------
Total fixed charges $ 18,792 $ 17,294 $ 32,089 $ 29,009 $ 94,069
========= ========= ========= ========== =========
Ratio of Earnings to Fixed Charges 4.92 x 7.23 x 4.43 x 5.96 x 2.63 x
========= ========= ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1998
--------- ----------
<S> <C> <C>
Earnings:
Earnings before income taxes
and the cumulative effect
of accounting changes $ 85,447 $ 81,707
Add: Total fixed charges 37,931 56,210
Less: Interest capitalized 232 237
--------- ----------
Adjusted earnings $ 123,146 $ 137,680
========= ==========
Fixed Charges:
Interest $ 36,553 $ 54,834
Portion of rental expense
representative of the
interest factor (1) 1,378 1,376
--------- ----------
Total fixed charges $ 37,931 $ 56,210
========= ==========
Ratio of Earnings to Fixed Charges 3.25 x 2.45 x
========= ==========
</TABLE>
- --------------
(1) For purposes of calculating fixed charges, an interest factor of one third
was applied to total rent expense for the period indicated.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 25,146
<SECURITIES> 0
<RECEIVABLES> 223,872
<ALLOWANCES> (7,970)
<INVENTORY> 22,200
<CURRENT-ASSETS> 287,341
<PP&E> 1,013,335
<DEPRECIATION> (401,633)
<TOTAL-ASSETS> 3,584,534
<CURRENT-LIABILITIES> 167,780
<BONDS> 1,583,512
0
0
<COMMON> 209,319
<OTHER-SE> 1,158,946
<TOTAL-LIABILITY-AND-EQUITY> 3,584,534
<SALES> 0
<TOTAL-REVENUES> 695,730
<CGS> 0
<TOTAL-COSTS> 481,232
<OTHER-EXPENSES> 80,316
<LOSS-PROVISION> 2,936
<INTEREST-EXPENSE> (54,597)
<INCOME-PRETAX> 81,707
<INCOME-TAX> 38,249
<INCOME-CONTINUING> 43,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,458
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.34
</TABLE>
