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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1999
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.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT APRIL 30, 1999
----- -----------------------------
<S> <C>
Common Stock, $1.67 par value 118,030,997*
</TABLE>
* Consisting of 99,054,972 shares of Series A Common Stock and
18,976,025 shares of Series B Common Stock.
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A. H. BELO CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................................... 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............................... 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk..................... 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 10
Item 2. Changes in Securities.......................................................... 10
Item 3. Defaults Upon Senior Securities................................................ 10
Item 4. Submission of Matters to a Vote of Security Holders............................ 10
Item 5. Other Information.............................................................. 10
Item 6. Exhibits and Reports on Form 8-K............................................... 11
</TABLE>
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PART I.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months ended March 31,
- -------------------------------------------------------------------------------------------------
In thousands, except per share amounts (unaudited) 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
NET OPERATING REVENUES
Broadcasting $ 131,385 $ 132,885
Newspaper publishing 192,473 190,369
Other 2,762 2,383
--------- ---------
Total net operating revenues 326,620 325,637
OPERATING COSTS AND EXPENSES
Salaries, wages and employee benefits 115,761 112,781
Other production, distribution and operating costs 79,496 79,373
Newsprint, ink and other supplies 41,150 41,828
Depreciation 22,277 21,418
Amortization 18,695 18,644
--------- ---------
Total operating costs and expenses 277,379 274,044
--------- ---------
Earnings from operations 49,241 51,593
OTHER INCOME AND EXPENSE
Interest expense (26,570) (27,234)
Other, net 1,217 1,272
--------- ---------
Total other income and expense (25,353) (25,962)
EARNINGS
Earnings before income taxes 23,888 25,631
Income taxes 11,298 11,996
--------- ---------
Net earnings $ 12,590 $ 13,635
========= =========
NET EARNINGS PER SHARE
Basic $ .11 $ .11
Diluted $ .11 $ .11
AVERAGE SHARES OUTSTANDING
Basic 118,331 124,830
Diluted 119,016 126,768
DIVIDENDS PER SHARE $ .06 $ .06
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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CONSOLIDATED CONDENSED BALANCE SHEETS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
March 31, December 31,
Dollars in thousands (Current year unaudited) 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $ 19,760 $ 19,451
Accounts receivable, net 187,739 211,428
Other current assets 45,066 44,902
---------- ------------
Total current assets 252,565 275,781
Property, plant and equipment, net 631,841 626,753
Intangible assets, net 2,524,448 2,543,143
Other assets 90,676 93,412
---------- ------------
Total assets $3,499,530 $ 3,539,089
========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,645 $ 56,044
Accrued expenses 75,058 84,026
Other current liabilities 60,290 40,678
---------- ------------
Total current liabilities 168,993 180,748
Long-term debt 1,620,228 1,634,029
Deferred income taxes 438,887 439,240
Other liabilities 36,450 36,972
Shareholders' equity:
Preferred stock, $1.00 par value.
Authorized 5,000,000 shares; none issued.
Common stock, $1.67 par value. Authorized
450,000,000 shares
Series A: Issued 98,922,089 shares at March 31, 1999
and 100,028,891 shares at December 31, 1998 165,200 167,048
Series B: Issued 18,997,534 shares at March 31, 1999
and 18,896,263 shares at December 31, 1998 31,726 31,557
Additional paid-in capital 873,937 879,856
Retained earnings 164,109 169,639
---------- ------------
Total shareholders' equity 1,234,972 1,248,100
---------- ------------
Total liabilities and shareholders' equity $3,499,530 $ 3,539,089
========== ============
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</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
A. H. Belo Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months ended March 31,
- --------------------------------------------------------------------------------------------
In thousands (unaudited) 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net earnings $ 12,590 $ 13,635
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 40,972 40,062
Deferred income taxes 24 252
Non cash expenses 4,165 3,826
Other, net (1,266) (1,847)
Net change in current assets and liabilities:
Accounts receivable 24,849 27,942
Other current assets (573) (753)
Accounts payable (19,399) (10,616)
Accrued expenses (8,968) (24,066)
Other current liabilities 19,708 1,143
-------- --------
Net cash provided by operations 72,102 49,578
INVESTMENTS
Capital expenditures (26,529) (12,269)
Other, net (79) (4,604)
-------- --------
Net cash used for investments (26,608) (16,873)
FINANCING
Purchase of treasury shares (21,793) --
Net payments on debt (16,801) (20,939)
Payment of dividends on stock (7,103) (7,490)
Net proceeds from exercise of stock options 512 4,679
-------- --------
Net cash used for financing (45,185) (23,750)
Net increase in cash and temporary cash investments 309 8,955
Cash and temporary cash investments at beginning of period 19,451 11,852
-------- --------
Cash and temporary cash investments at end of period $ 19,760 $ 20,807
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid, net of amounts capitalized $ 17,884 $ 18,223
Income taxes paid, net of refunds $ (193) $ 20,750
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</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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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, 1998 has been
derived from the audited consolidated financial statements at that date
but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March
31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. 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, 1998.
Certain amounts for the prior period have been reclassified to conform
to the current year presentation, including a change in presentation of
revenue and expense with respect to certain barter programming
transactions.
(2) The Company had total comprehensive income for the three months ended
March 31, 1998 of $14,291. During 1998, Belo either sold or donated all
of its available-for-sale securities; therefore, total comprehensive
income for the three months ended March 31, 1999 is equivalent to net
earnings.
(3) Per share amounts and weighted average shares for the three months
ended March 31, 1998 have been restated to reflect a two-for-one stock
split in the form of a dividend, effective June 5, 1998.
(4) The following table sets forth the reconciliation between weighted
average shares used for calculating basic and diluted earnings per
share for the three months ended March 31, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Three months ended March 31, 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Weighted average shares for basic earnings per share 118,331 124,830
Effect of employee stock options 685 1,938
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Weighted average shares for diluted earnings per share 119,016 126,768
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</TABLE>
(5) The Company has announced plans to exchange its ABC affiliate in
Sacramento, California plus up to $55,000 in cash for the ABC affiliate
in Austin, Texas. The Company will report a non-cash gain on the
transaction. While the amount of the non-cash gain has not been
determined, it is expected to be significant. The Company anticipates
closing the transaction in the second quarter of 1999.
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(6) Net operating revenues, earnings from operations, depreciation and
amortization and operating cash flow by industry segment are shown
below (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Three months ended March 31, 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
NET OPERATING REVENUES
Broadcasting $ 131,385 $ 132,885
Newspaper publishing 192,473 190,369
Other 2,762 2,383
--------- ---------
Total net operating revenues $ 326,620 $ 325,637
========= =========
EARNINGS FROM OPERATIONS
Broadcasting $ 19,976 $ 23,642
Newspaper publishing 39,449 39,186
Other (1,718) (1,097)
Corporate expenses (8,466) (10,138)
--------- ---------
Total earnings from operations $ 49,241 $ 51,593
========= =========
DEPRECIATION AND AMORTIZATION
Broadcasting $ 25,789 $ 24,971
Newspaper publishing 13,685 14,342
Other 665 256
Corporate 833 493
--------- ---------
Total depreciation and amortization $ 40,972 $ 40,062
========= =========
OPERATING CASH FLOW
Broadcasting $ 45,765 $ 48,613
Newspaper publishing 53,134 53,528
Other (1,053) (841)
Corporate (7,633) (9,645)
--------- ---------
Total operating cash flow $ 90,213 $ 91,655
========= =========
- -----------------------------------------------------------------------------------
</TABLE>
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The Company is an owner and operator of 17 network-affiliated television
stations and publisher of six daily newspapers. The following table sets forth
Belo's major media assets by segment as of March 31, 1999:
<TABLE>
<CAPTION>
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BROADCASTING
- ------------------------------------------------------------------------------------------------------------------
MARKET NETWORK
MARKET RANK(a) STATION AFFILIATION STATUS ACQUIRED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dallas/Fort Worth 7 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(b) 20 KXTV ABC Owned February 1984
St. Louis 21 KMOV CBS Owned June 1997
Portland 23 KGW NBC Owned February 1997
Charlotte 28 WCNC NBC Owned February 1997
San Antonio 37 KENS CBS Owned October 1997
Hampton/Norfolk 40 WVEC ABC Owned February 1984
New Orleans 41 WWL CBS Owned June 1994
Louisville 48 WHAS ABC Owned February 1997
Albuquerque 49 KASA FOX Owned February 1997
Tulsa 59 KOTV CBS Owned February 1984
Honolulu 71 KHNL NBC Owned February 1997
Honolulu(c) 71 KFVE UPN/WB LMA February 1997
Spokane 72 KREM CBS Owned February 1997
Spokane(c) 72 KSKN UPN/WB LMA February 1997
Tucson 78 KMSB FOX Owned February 1997
Tucson 78 KTTU UPN LMA February 1997
Boise 125 KTVB NBC Owned February 1997
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NEWSPAPER PUBLISHING
- ----------------------------------------------------------------------------------------------------------------------
DAILY SUNDAY
NEWSPAPER LOCATION ACQUIRED CIRCULATION CIRCULATION
(e) (e)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Dallas Morning News ("TDMN") Dallas, TX (d) 513,544 775,493
The Providence Journal ("PJ") Providence, RI February 1997 164,626 237,786
The Press-Enterprise ("PE") Riverside, CA July 1997 166,418 172,798
Messenger-Inquirer Owensboro, KY January 1996 32,022 35,014
The Eagle Bryan-College Station, TX December 1995 23,994 28,839
The Gleaner Henderson, KY March 1997 11,152 13,167
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</TABLE>
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<TABLE>
<CAPTION>
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OTHER
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COMPANY DESCRIPTION
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<S> <C>
Northwest Cable News ("NWCN") Cable news network offering regional news distributed to
approximately 2 million homes in the Pacific Northwest
Texas Cable News ("TXCN") Cable news network offering regional news in Texas
- -----------------------------------------------------------------------------------------------
</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 February 1999 Nielsen estimates.
(b)The Company has entered into an agreement to exchange KXTV for the ABC
affiliate in Austin, Texas (market rank 60).
(c)The primary affiliation is with UPN. The WB network is currently a secondary
affiliation.
(d)The first issue of The Dallas Morning News was published October 1, 1885.
(e)Average paid circulation for the six months ended March 31, 1999, according
to the Audit Bureau of Circulation's FAS-FAX report, except for The Gleaner,
for which the most recent data available is as of September 30, 1998.
RESULTS OF OPERATIONS
Net earnings for the first quarter of 1999 were $12,590 (11 cents per share)
compared with $13,635 (11 cents per share) for the first quarter of 1998. First
quarter 1999 net earnings were lower than the comparable 1998 quarter due to
slightly higher revenues that were more than offset by higher operating costs,
primarily for salaries, wages and employee benefits.
Broadcasting
Broadcasting revenues for the first quarter of 1999 were $131,385, a decrease of
1.1 percent compared with first quarter 1998 revenues of $132,885. Advertising
revenues in 1998 were influenced by the broadcast of the Super Bowl on Belo's
five NBC television stations and the Winter Olympics on the Company's six CBS
television stations. Advertising revenues from the Olympics were approximately
$5,300 in the first quarter of 1998. The first quarter of 1998 also included
higher political advertising than the first quarter of 1999. Belo's first
quarter 1999 local advertising revenues increased 8 percent compared with last
year, with significant increases in the Dallas/Fort Worth, Seattle/Tacoma,
Sacramento and Portland markets. National advertising revenues declined 8.7
percent, with the largest declines in the Dallas/Fort Worth, Houston, St. Louis
and New Orleans markets.
Broadcasting operating cash flow margins for the first quarter of 1999 and 1998
were 34.8 percent and 36.6 percent, respectively. Broadcasting operating cash
flow of $45,765 was 5.9 percent lower than last year's first quarter operating
cash flow of $48,613. In addition to lower first quarter 1999 revenues, cash
expenses were 1.6 percent higher. Programming costs and outside services were
higher by 11.5 and 6.6 percent, respectively. These increases were largely
offset by savings in advertising and promotion costs, which were down nearly 16
percent, and employee costs, which were lower by .7 percent as a result of last
year's early retirement program and other employee reduction initiatives.
Newspaper Publishing
First quarter 1999 revenues for newspaper publishing were $192,473, or 1.1
percent higher than first quarter 1998 revenues of $190,369. First quarter 1999
revenues at The Dallas Morning News were approximately 1 percent lower than
last year due mostly to a decline in classified advertising. While
classified automotive and real estate advertising revenues improved, classified
employment revenues were down from the first quarter of
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1998, contributing to an overall classified advertising decrease of 6.8 percent.
Retail advertising revenues were up 1.2 percent as higher average rates were
partially offset by volume declines, primarily in department store linage.
General advertising revenues were 8.3 percent higher due to volume increases,
primarily in the automotive and travel categories. Other revenues improved due
to increased TMC and preprints volume. Circulation revenues for TDMN were lower
as a home delivery rate increase effective December 1, 1998 was offset by higher
contractor rates and slightly lower volumes.
Revenues for The Providence Journal were up 5.6 percent in the first quarter of
1999 compared to the same period in 1998. Retail advertising revenues improved
9.2 percent due to higher average rates while the 9.4 percent increase in
general advertising revenue was due to volume gains. Classified advertising
revenues were up 2.6 percent due mainly to rate increases. Total revenue for The
Press-Enterprise in Riverside, California, improved 5.5 percent over last year
with increases in all advertising categories.
Newspaper publishing operating cash flow margins during the first quarters of
1999 and 1998 were 27.6 percent and 28.1 percent, respectively. Publishing
operating cash flow of $53,134 was .7 percent lower than last year's first
quarter operating cash flow of $53,528. The 1.1 percent improvement in revenues
was offset by a 1.8 percent increase in cash expenses, primarily due to higher
employee costs, offset somewhat by lower newsprint expense. The average cost per
metric ton of newsprint was almost 5 percent lower in the first quarter of 1999
as compared to the first quarter of 1998. Increases in distribution and outside
services expenses were largely offset by savings in communications and supplies
expenses.
Consolidated results
Depreciation and amortization expenses were higher for the first quarter of 1999
compared with 1998 due to prior year capital expenditures. Interest expense for
the first quarter of 1999 was lower than in 1998 due to lower weighted average
interest rates.
The effective tax rate for the first three months of 1999 was 47.3 percent,
compared with 46.8 percent for the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations, bank borrowings and term debt are the Company's
primary sources of liquidity. During the first quarter of 1999, net cash
provided by operations was $72,102, compared with $49,578 for the same period in
1998. Working capital requirements for taxes, interest and bonus payments were
lower in 1999 than in 1998, contributing to the increase in cash provided by
operations. Net cash provided by operations was sufficient to fund capital
expenditures, share repurchases and common stock dividends. Total debt decreased
$16,801 from December 31, 1998 to March 31, 1999.
At March 31, 1999, the Company had $1 billion in fixed-rate debt securities as
follows: $250,000 of 6 7/8% Senior Notes due 2002; $300,000 of 7 1/8% Senior
Notes due 2007; $200,000 of 7 3/4% Senior Debentures due 2027; and $250,000 of 7
1/4% Senior Debentures due 2027. The weighted average effective interest rate
for the fixed-rate 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 issuances 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 March 31, 1999, the Company had a $1 billion variable-rate revolving credit
agreement with a syndicate of 26 banks under which borrowings were $530,000.
Borrowings under the agreement mature upon expiration of the agreement on August
29, 2002, with one year extensions possible through August 29, 2004, at the
request of the Company and with the consent of the participating banks. In
addition, the Company had $67,800 of short-term unsecured notes outstanding at
March 31, 1999. 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.
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The Company is required to maintain certain ratios as of the end of each
quarter, as defined in its revolving credit agreement. As of March 31, 1999, the
Company was in compliance with all debt covenant requirements.
The Company paid first quarter 1999 dividends of $7,103 or 6 cents per share on
Series A and Series B common stock outstanding, compared with $7,490 or 6 cents
per share in the first quarter of 1998. The lower dividends in 1999 were due to
the repurchase of 6,727,400 treasury shares during 1998. In addition, during the
three months ended March 31, 1999, 1,187,300 shares were repurchased for an
aggregate cost of $21,793.
First quarter 1999 capital expenditures were $26,529. Approximately $16,000 of
this amount represents the first installment payment of a new press at TDMN. The
remaining expenditures were for broadcast equipment purchases, including those
for the conversion to digital television, and other publishing equipment
purchases.
The Company has announced plans to exchange its ABC affiliate in Sacramento,
California plus up to $55,000 in cash for the ABC affiliate in Austin, Texas.
The Company expects to finance the payment using borrowings under its revolving
credit agreement.
Year 2000
The Company has performed an enterprise-wide evaluation to assess the ability of
its information technology ("IT") and non-IT systems to function properly and
execute transactions relating to the year 2000. The program includes the
following phases: (1) project identification, (2) estimation of costs and target
end dates, (3) system remediation or replacement, (4) testing, (5) integration,
and (6) vendor compliance assessment. The Company has substantially completed
the first two phases of the program. Active management of projects in all other
phases is ongoing. All phases of the program are expected to be completed by
December 31, 1999 or sooner.
The Company is in the process of replacing systems in the Publishing Division,
including certain systems related to advertising, circulation and editorial
applications. Remediation and replacement of other systems in both the
Publishing and Broadcast divisions are also underway. The Company expects to
remediate or replace the affected systems in a timely manner.
The Company's program includes testing of systems that have been corrected,
upgraded or replaced and testing of applications and equipment identified as
compliant. Once a system has been fully tested, it is integrated into the
production environment. While testing provides assurance that individual
applications will properly perform required functions in 2000, it is not
possible to completely simulate the effect of Year 2000 requirements.
The vendor compliance assessment phase includes contacting significant
third-party vendors in an effort to determine the state of their Year 2000
readiness. As are all businesses, Belo is dependent upon certain vendors and
suppliers whose delivery of product or service is material to the production and
distribution of the Company's products. Material vendors include, but are not
limited to, utilities providers, telecommunications, news and content providers,
television network and programming suppliers, and newsprint suppliers. The
Company has initiated formal communications with its significant vendors and is
monitoring responses and implementing additional follow-up measures as
necessary. However, there can be no assurances that IT and non-IT systems of
third parties that the Company may rely upon will be Year 2000 compliant in a
timely manner, and therefore the Company could be adversely affected by failure
of a significant third party to become Year 2000 compliant.
The Company believes the Year 2000 issues associated with its IT and non-IT
systems will be mitigated by the implementation of previously planned system
replacements. Costs associated with these system replacements have been included
in the Company's capital plans and have been funded primarily with cash provided
by operations. The Company has expensed $3,100 in connection with its Year 2000
program through March 31, 1999, including $2,800 expensed in 1997 and $300 in
1998, and does not expect remaining Year 2000 expenses to be significant.
The business risks to the Company for failure to achieve Year 2000 compliance
vary, and depend upon the system and the business unit affected. While the
Company believes its Year 2000 projects will be completed on a timely basis,
failure to successfully complete significant portions of its Year 2000 program
or failure by significant third
9
<PAGE> 12
parties to be Year 2000 compliant could have a material adverse effect on
various phases of the Company's newspaper and broadcasting operations, and
therefore, on its operating results and financial condition.
Although the Company has not adopted a formal contingency plan, it is currently
reviewing existing contingency plans and assessing alternatives at the
individual project level in the event Year 2000 issues arise.
Forward-Looking Statements
Statements in this Form 10-Q concerning the Company's future financings and the
Year 2000, as well as any other statements concerning the Company's business
outlook or future economic performance, anticipated profitability, revenues,
expenses, cash flows or other financial and non-financial items that are not
historical facts, are "forward-looking statements" as the term is defined under
applicable Federal Securities Laws. Forward-looking statements are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from those statements.
Such risks, uncertainties and factors include, but are not limited to, changes
in capital market conditions and prospects, continuing internal and external
Year 2000-related developments, and other factors such as changes in advertising
demand, interest rates and newsprint prices; technological changes; development
of Internet commerce; industry cycles; changes in pricing or other actions by
competitors and suppliers; regulatory changes; the effects of Company
acquisitions and dispositions; and general economic conditions, as well as other
risks detailed in the Company's filings with the Securities and Exchange
Commission ("SEC"), including the Annual Report on Form 10-K and in the
Company's periodic press releases.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No disclosure required.
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
results of operations, liquidity or financial position of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
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 (Exhibit 3.6 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1998 (the "2nd Quarter 1998 Form 10-Q"))
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 September
18, 1998 (Exhibit 3.9 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1998)
4.1 Certain rights of the holders of the Company's Common Stock are
set forth in Exhibits 3.1-3.9 above
4.2 * Specimen Form of Certificate representing shares of the
Company's Series A Common Stock (Exhibit 4.2 to the Company's
Annual Report on Form 10-K dated March 18, 1998 (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)
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)
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<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)
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)
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)
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
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) First Amendment to A. H. Belo Corporation Employee Savings and Investment Plan
(Exhibit 10.3(1)(b) to the Company's Annual Report on Form 10-K dated March 17,
1999 (the "1998 Form 10-K"))
* (c) Second Amendment to A. H. Belo Corporation Employee Savings and Investment
plan (Exhibit 10.3(1)(c) to the 1998 Form 10-K)
* (d) 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 (Exhibit 10.3(2)(d) to the 2nd
Quarter 1998 Form 10-Q)
~(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 (Exhibit 10.3(3)(a)
to the 2nd Quarter 1998 Form 10-Q)
~(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)
</TABLE>
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter covered by this report, there were no reports on
Form 8-K filed.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. H. BELO CORPORATION
May 7, 1999 By: /s/ Dunia A. Shive
-------------------------------
Dunia A. Shive
Senior Vice President/
Chief Financial Officer
14
<PAGE> 17
E-3
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT Page
NUMBER DESCRIPTION Number
- ------- ----------- ----------
<S> <C> <C>
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 (Exhibit 3.6 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1998 (the "2nd Quarter 1998
Form 10-Q")) N/A
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 September 18, 1998
(Exhibit 3.9 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998) N/A
4.1 Certain rights of the holders of the Company's Common Stock are set forth
in Exhibits 3.1-3.9 above. N/A
4.2 Specimen Form of Certificate representing shares of the Company's Series A
Common Stock (Exhibit 4.2 to the Company's Annual Report on Form 10-K
dated March 18, 1998 (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
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
</TABLE>
E-1
<PAGE> 18
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT Page
NUMBER DESCRIPTION Number
- ------- ----------- ----------
<S> <C> <C>
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
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
</TABLE>
E-2
<PAGE> 19
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT Page
NUMBER DESCRIPTION Number
- ------- ----------- ----------
<S> <C> <C>
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) First Amendment to A. H. Belo Corporation Employee Savings and
Investment Plan (Exhibit 10.3(1)(b) to the Company's Annual Report
on Form 10-K dated March 17, 1999 (the "1998 Form 10-K")) N/A
(c) Second Amendment to A. H. Belo Corporation Employee Savings and
Investment Plan (Exhibit 10.3(1)(c) to the 1998 Form
10-K) N/A (d) 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 (Exhibit 10.3(2)(d)
to the 2nd Quarter 1998 Form 10-Q) N/A
(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
(Exhibit 10.3(3)(a) to the 2nd Quarter 1998 Form 10-Q) N/A
(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
12 Ratio of Earnings to Fixed Charges ___
27 Financial Data Schedule N/A
</TABLE>
E-3
<PAGE> 1
Exhibit 12
A. H. BELO CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings before income taxes
and the cumulative effect
of accounting charges $ 107,897 $ 111,014 $ 144,040 $ 154,122 $ 130,460
Add: Total fixed charges 17,294 32,089 29,009 94,069 112,082
Less: Interest capitalized 138 957 255 510 1,680
--------- --------- --------- --------- ---------
Adjusted earnings $ 125,053 $ 142,146 $ 172,794 $ 247,681 $ 240,862
========= ========= ========= ========= =========
Fixed Charges:
Interest $ 16,250 $ 30,944 $ 27,898 $ 91,288 $ 109,318
Portion of rental expense
representative of the
interest factor (1) 1,044 1,145 1,111 2,781 2,764
--------- --------- --------- --------- ---------
Total fixed charges $ 17,294 $ 32,089 $ 29,009 $ 94,069 $ 112,082
========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges 7.23 x 4.43 x 5.96 x 2.63 x 2.15 x
========= ========= ========= ========= =========
<CAPTION>
Three months ended
March 31,
---------------------------
1998 1999
---- ----
<S> <C> <C>
Earnings:
Earnings before income taxes
and the cumulative effect
of accounting charges $ 25,631 $ 23,888
Add: Total fixed charges 28,025 27,959
Less: Interest capitalized 129 755
--------- ---------
Adjusted earnings $ 53,527 $ 51,092
========= =========
Fixed Charges:
Interest $ 27,363 $ 27,325
Portion of rental expense
representative of the
interest factor (1) 662 634
--------- ---------
Total fixed charges $ 28,025 $ 27,959
========= =========
Ratio of Earnings to Fixed Charges 1.91 x 1.83 x
========= =========
</TABLE>
- ---------------------------------------
(1) For the 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 19,760
<SECURITIES> 0
<RECEIVABLES> 194,402
<ALLOWANCES> (6,663)
<INVENTORY> 19,858
<CURRENT-ASSETS> 252,565
<PP&E> 1,086,304
<DEPRECIATION> (454,463)
<TOTAL-ASSETS> 3,499,530
<CURRENT-LIABILITIES> 168,993
<BONDS> 1,620,228
196,926
0
<COMMON> 0
<OTHER-SE> 1,038,046
<TOTAL-LIABILITY-AND-EQUITY> 3,499,530
<SALES> 0
<TOTAL-REVENUES> 326,620
<CGS> 0
<TOTAL-COSTS> 236,407
<OTHER-EXPENSES> 40,972
<LOSS-PROVISION> 1,546
<INTEREST-EXPENSE> 26,570
<INCOME-PRETAX> 23,888
<INCOME-TAX> 11,298
<INCOME-CONTINUING> 12,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,590
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
