-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IT0mkZRzOr5+B7QkZAg+kPzKCaqGqj5sVKK+Nqwg/yIonnH40+sRjvleqgXdW/5m 8/T47sIGyMCIbCwpL0INWg== 0000950134-01-002092.txt : 20010314 0000950134-01-002092.hdr.sgml : 20010314 ACCESSION NUMBER: 0000950134-01-002092 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010313 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELO CORP CENTRAL INDEX KEY: 0000356080 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 750135890 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08598 FILM NUMBER: 1567260 BUSINESS ADDRESS: STREET 1: 400 S RECORD ST STREET 2: COMMUNICATIONS CENTER CITY: DALLAS STATE: TX ZIP: 75202 BUSINESS PHONE: 2149776600 MAIL ADDRESS: STREET 1: P O BOX 655237 CITY: DALLAS STATE: TX ZIP: 75265 FORMER COMPANY: FORMER CONFORMED NAME: BELO A H CORP DATE OF NAME CHANGE: 19920703 10-K 1 d84902e10-k.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2000 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-8598 BELO CORP. (FORMERLY 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 Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- SERIES A COMMON STOCK, $1.67 PAR VALUE NEW YORK STOCK EXCHANGE PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: SERIES B COMMON STOCK, $1.67 PAR VALUE -------------------------------------- (Title of class)
Indicate by check mark whether the 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock held by nonaffiliates on February 28, 2001, based on the closing price for the registrant's Series A Common Stock on such date as reported on the New York Stock Exchange, was approximately $1,757,255,166.* Shares of Common Stock outstanding at February 28, 2001: 109,480,862 shares. (Consisting of 90,658,142 shares of Series A Common Stock and 18,822,720 shares of Series B Common Stock.) * For purposes of this calculation, the market value of a share of Series B Common Stock was assumed to be the same as the share of Series A Common Stock into which it is convertible. Documents incorporated by reference: Portions of the registrant's Proxy Statement relating to the Annual Meeting of Shareholders to be held May 9, 2001 are incorporated by reference into Part III (Items 10, 11, 12 and 13). Also incorporated by reference into Part II are certain items included in the Company's 2000 Annual Report to Shareholders (Items 5, 6, 7, 7A and 8). 2 BELO CORP. FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.......................................................................................... 1 Item 2. Properties........................................................................................ 9 Item 3. Legal Proceedings................................................................................. 10 Item 4. Submission of Matters to a Vote of Security Holders............................................... 10 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................. 10 Item 6. Selected Financial Data........................................................................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 11 Item 7A. Quantitative and Qualitative Disclosures about Market Risks....................................... 11 Item 8. Financial Statements and Supplementary Data ...................................................... 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............. 11 PART III Item 10. Directors and Executive Officers of the Registrant................................................ 11 Item 11. Executive Compensation............................................................................ 11 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... 11 Item 13. Certain Relationships and Related Transactions.................................................... 11 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .................................. 11 Signatures .................................................................................................. 16
3 PART I ITEM 1. BUSINESS Belo Corp. ("Belo" or the "Company") is one of the nation's largest media companies, with a diversified group of market-leading television broadcasting, newspaper publishing, cable news and interactive media operations. The Company operates news and information franchises in some of America's most dynamic markets and regions, including Texas, the Pacific Northwest, the Southwest, Rhode Island, and the mid-Atlantic region. Belo owns 17 television stations (six in the top 17 markets) reaching 13.7 percent of U.S. television households. In addition, Belo owns or operates six cable news channels and manages three television stations through local marketing agreements ("LMAs"). Belo publishes four daily newspapers including The Dallas Morning News, The Providence Journal and The Press-Enterprise in Riverside, California. Effective January 1, 2001, Belo officially changed its name from A. H. Belo Corporation to Belo Corp. The change was achieved through the merger of a newly organized Delaware subsidiary named Belo Corp. with A. H. Belo Corporation. Six of the Company's television stations are located in four major metropolitan areas which are among the fastest growing in the country: WFAA-TV (ABC) in Dallas/Fort Worth, KHOU-TV (CBS) in Houston, KING-TV (NBC) and KONG-TV (Independent or "IND") in Seattle/Tacoma and KTVK-TV (IND) and KASW-TV (Warner Brothers Network or "WB") in Phoenix. These stations are located in the top 17 television markets. Belo has nine stations in the top 30 markets, 14 stations in the top 50 markets, and network affiliations as follows: four ABC affiliates, five CBS affiliates, four NBC affiliates, two independent stations, one WB affiliate and one FOX affiliate. Twelve of the Company's 17 stations are ranked either number one or two in overall sign-on/sign-off audience delivery. Belo's television stations have been recognized with numerous local, state and national awards for outstanding news coverage. Since 1957, Belo's television stations have garnered 15 Alfred I. duPont-Columbia Awards, 11 George Foster Peabody Awards and 19 Edward R. Murrow Awards - the industry's most prestigious honors. Belo's Publishing Division is headed by The Dallas Morning News, which has the country's seventh-largest Sunday circulation and ninth-largest daily circulation, followed by The Providence Journal, the leading newspaper in terms of both advertising and circulation in Rhode Island and southeastern Massachusetts and The Press-Enterprise, a daily newspaper serving Riverside, California. Belo also owns the Denton Record-Chronicle in Denton, Texas and operates certain commercial printing businesses. The Dallas Morning News is one of the leading newspaper franchises in America. The Dallas Morning News' success is founded upon the highest standards of journalistic excellence, with an emphasis on comprehensive news, information and community service. The newspaper's reporting and photography initiatives have earned six Pulitzer Prizes since 1986. The Providence Journal also has a long history of journalistic excellence and service to its community. It is America's oldest major daily newspaper of general circulation and continuous publication. The Providence Journal has earned four Pulitzer Prizes since 1945. Belo Interactive, Inc. ("Belo Interactive"), Belo's Internet subsidiary, includes 35 Web sites, several interactive alliances and a broad range of Internet-based products and services. Belo's cable news operations include Northwest Cable News ("NWCN") and Texas Cable News ("TXCN"), which provide regional news coverage in a comprehensive 24-hour a day format, utilizing the news resources of the television stations and newspapers owned by the Company in the Pacific Northwest and Texas. The Company also operates four cable news channels in partnership with Cox Communications and others, which provide local market coverage in New Orleans, LA (NewsWatch on Channel 15), Phoenix, AZ (Arizona NewsChannel and iMas! Arizona) and Norfolk, VA (Local News on Cable). These cable news channels also utilize the news resources of the television stations owned by the Company in those markets. iMas! Arizona is the Southwest's first Spanish-language cable news, information and sports channel. The channel went on-air in September 2000 and provides in-depth coverage of local issues and stories in the community. In 2000, Belo announced the formation of news partnerships with Time Warner Cable that call for the creation of 24-hour news channels in Houston and San Antonio. The relationship combines the resources of Belo, Texas' oldest and largest media company, with those of Time Warner Cable, Texas' largest cable operator. 1 4 The Company believes the success of its media franchises is built upon providing local and regional news, information and community service of the highest caliber. These principles have attracted and built relationships with viewers, readers and advertisers and have guided Belo's success for 159 years. Note 14 to the Consolidated Financial Statements, which is included in Belo's Annual Report to Shareholders, contains information about the Company's industry segments for the years ended December 31, 2000, 1999 and 1998. TELEVISION BROADCASTING The Company's television broadcasting operations began in 1950 with the acquisition of WFAA-TV shortly after the station commenced operations. In 1984, the Company expanded its television operations with the purchase of stations in Houston, Sacramento, Hampton/Norfolk and Tulsa. In June 1994 and February 1995, the Company acquired stations in New Orleans and Seattle/Tacoma, respectively. The Providence Journal Company ("PJC") acquisition in February 1997 added nine television stations, including NBC-affiliated KING-TV in Seattle/Tacoma. In accordance with Federal Communications Commission ("FCC" or "Commission") regulations, which at that time prohibited ownership of two or more stations in a single market, Belo exchanged its United Paramount Network ("UPN") affiliate, KIRO-TV, in Seattle/Tacoma for CBS affiliate KMOV-TV in St. Louis in June 1997. In October 1997, Belo acquired CBS affiliate KENS-TV in San Antonio. In June 1999, Belo acquired KVUE-TV, the ABC affiliate in Austin in exchange for KXTV, the Company's ABC affiliate in Sacramento. KASA-TV (FOX) in Albuquerque and KHNL-TV (NBC) in Honolulu were sold in October 1999, and KTVK-TV (IND) in Phoenix was acquired in November 1999. On March 1, 2000, Belo acquired KONG-TV (IND) in Seattle/Tacoma and KASW-TV (WB) in Phoenix, which were previously operated by Belo under LMAs. At the end of December 2000, Belo sold KOTV (CBS) in Tulsa and in January 2001, Belo agreed to acquire KTTU-TV (UPN) in Tucson. The acquisition of KTTU-TV, currently managed by Belo under an LMA, is subject to FCC approval, which remains pending. 2 5 The following table sets forth information for each of the Company's stations (including stations with which it has an LMA) and their markets:
Number of Station Station Market Commercial Rank in Audience Rank Year Network Stations in Market Share in Market (1) Station Acquired Affiliation Channel Market(2) (3) Market(4) - ------------------------- ------ ------- -------- ----------- ------- ----------- ------- --------- Dallas/Fort Worth 7 WFAA-TV 1950 ABC 8 15 1 14 Houston 11 KHOU-TV 1984 CBS 11 16 2 13 Seattle/Tacoma 12 KING-TV 1997 NBC 5 14 1 15 Seattle/Tacoma 12 KONG-TV 2000 IND 16 14 6 2 Phoenix 17 KTVK-TV 1999 IND 3 12 1* 11 Phoenix 17 KASW-TV 2000 WB 61 12 6* 5 St. Louis 22 KMOV-TV 1997 CBS 4 8 2 15 Portland 23 KGW-TV 1997 NBC 8 8 1* 13 Charlotte 28 WCNC-TV 1997 NBC 36 8 3 9 San Antonio 37 KENS-TV 1997 CBS 5 10 1* 13 San Antonio [LMA] 37 KBEJ-TV -- UPN 2 10 6 2 Hampton/Norfolk 41 WVEC-TV 1984 ABC 13 7 3 11 New Orleans 42 WWL-TV 1994 CBS 4 8 1 21 Louisville 48 WHAS-TV 1997 ABC 11 9 1* 13 Austin 58 KVUE-TV 1999 ABC 24 6 1 16 Tucson 71 KMSB-TV 1997 FOX 11 9 4 7 Tucson [LMA] 71 KTTU-TV -- UPN 18 9 5* 2 Spokane 77 KREM-TV 1997 CBS 2 6 1* 15 Spokane [LMA] 77 KSKN-TV -- UPN/WB 22 6 5 2 Boise 123 KTVB-TV 1997 NBC 7 6 1 23
(1) Market rank is based on the relative size of the television market Designated Market Area ("DMA"), among the 210 generally recognized DMAs in the United States, based on November 2000 Nielsen estimates. (2) Represents the number of television stations (both VHF and UHF) broadcasting in the market, excluding public stations, low power broadcast stations and national cable channels. (3) Station rank is derived from the station's rating, which is based on November 2000 Nielsen estimates of the number of television households tuned to the Company's station for the Sunday-Saturday 7:00 a.m. to 1:00 a.m. period ("sign-on/sign-off") as a percentage of the number of television households in the market. (4) Station audience share is based on November 2000 Nielsen estimates of the number of television households tuned to the Company's station as a percentage of the number of television households with sets in use in the market for the sign-on/sign-off period. * Tied with one or more other stations in the market. Commercial television stations generally fall into one of three categories. The first category of stations includes those affiliated with one of the four major national networks (ABC, CBS, NBC and FOX). The second category is comprised of stations affiliated with newer national networks, such as UPN, WB and Paxson Communications Corporation ("PAX TV"). The third category includes independent stations that are not affiliated with any network and rely principally on local and syndicated programming. Affiliation with a television network can have a significant influence on the revenues of a television station because the audience ratings generated by a network's programming can affect the rates at which a station can sell advertising time. Generally, rates for national and local spot advertising sold by the Company are determined by each station, which receives all of the revenues, net of agency commissions, for that advertising. Rates are influenced by the demand for advertising time, the popularity of the station's programming and market size. The Company's network affiliation agreements generally provide the station with the exclusive right to broadcast in its local service area all programs transmitted by the network with which the station is affiliated. In return, the network has the right to sell most of the advertising time during such broadcasts. Stations generally receive a specified amount of network compensation for broadcasting network programming. To the extent that a station's preemptions of network programming exceed a designated amount, that compensation may be reduced. These payments are also subject to decreases by the network during the term of an affiliation agreement under other circumstances, with provisions for advance notice. The Company has network affiliation agreements in place with ABC, CBS, NBC, FOX and WB. Belo's three stations with which it has LMAs have affiliation agreements with UPN and one has a secondary affiliation with WB. 3 6 NEWSPAPER PUBLISHING The Company's principal newspaper, The Dallas Morning News, was established in 1885. The Company acquired The Providence Journal in February 1997 and The Press-Enterprise in July 1997. In June 1999, Belo acquired the Denton Record-Chronicle in Denton, Texas. The Company sold The Gleaner in Henderson, Kentucky, The Eagle in Bryan-College Station, Texas, and the Messenger-Inquirer in Owensboro, Kentucky, effective November 1, December 1 and December 31, 2000, respectively. The following table sets forth information concerning the Company's daily newspaper operations:
2000 1999 ------------------------------ ----------------------------- Daily Sunday Daily Sunday Newspaper Location Circulation(1) Circulation(1) Circulation(1) Circulation(1) --------- -------- -------------- -------------- -------------- -------------- The Dallas Morning News Dallas, TX 520,157 785,758 518,548 781,959 The Providence Journal Providence, RI 162,358 230,636 166,888 237,629 The Press-Enterprise Riverside, CA 166,935 174,636 165,043 171,813 Denton Record-Chronicle Denton, TX 15,835 19,443 15,967 18,808
(1) Average paid circulation for the six months ended September 30, 2000 and 1999, respectively, according to the Audit Bureau of Circulation's FAS-FAX report, except for The Providence Journal, for which 2000 circulation data is taken from the Audit Bureau of Circulation's FAS-FAX supplement; and except for the Denton Record-Chronicle, for which 2000 circulation data is taken from the Certified Audit of Circulations Report for the six-month period ended September 30, 2000 and 1999 circulation data is taken from the Certified Audit of Circulations Report for the twelve-month period ended December 31, 1999. The Company's three largest newspapers, The Dallas Morning News, The Providence Journal and The Press-Enterprise, provide coverage of local, state, national and international news. The Dallas Morning News is distributed throughout the Southwest, though its circulation is concentrated primarily in the 12 counties surrounding Dallas. The Providence Journal is the leading newspaper in Rhode Island and southeastern Massachusetts. The Press-Enterprise is distributed throughout Riverside County and the inland southern California area. The Company recently began distributing its first international publication in Mexico, The Dallas Morning News Express, utilizing news content from its other newspapers. The basic material used in publishing Belo's newspapers is newsprint. During 2000, Belo's publishing operations consumed approximately 269,000 metric tons of newsprint at an average cost of $520 per metric ton. Consumption of newsprint in the previous year was approximately 266,000 metric tons at an average cost per metric ton of $487. At present, newsprint is generally purchased from four suppliers. In addition, The Providence Journal and The Press-Enterprise purchased approximately 56 percent and 73 percent, respectively, of their newsprint from other suppliers under long-term contracts. These contracts provide for certain minimum purchases per year at rates commonly available throughout the region. Management believes its sources of newsprint, along with available alternate sources, are adequate for its current needs. COMPETITION The success of broadcasting operations depends on a number of factors, including the general strength of the economy, the ability to provide attractive programming, audience ratings, relative cost efficiency for advertisers in reaching audiences as compared to other advertising media, technical capabilities and governmental regulations and policies. Competition for advertising revenues at Belo's television stations, as well as its daily newspapers, Web sites and cable news stations, include other television stations and newspapers (including those owned and operated by Belo), direct broadcast satellite ("DBS"), radio stations, cable television systems, outdoor advertising, the Internet, magazines and direct mail advertising. The four major national television networks are represented in each television market in which Belo has a television station. Competition for advertising sales and local viewers within each market is intense, particularly among the network-affiliated television stations. The Dallas Morning News' primary newspaper competitor in certain areas of the Dallas/Fort Worth market is the Fort Worth Star-Telegram. The Providence Journal has five competing daily newspapers in the Rhode Island market and The Press-Enterprise has four daily newspaper competitors in the Riverside County market. 4 7 The entry of local telephone companies and other multichannel video programming distributors into the market for video programming services has also had an impact on competition in the television industry. Belo is unable to predict the effect that these or other technological and related regulatory changes will have on the television industry or on the future results of Belo's operations. FCC REGULATION GENERAL. Belo's television broadcast operations are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the "Act"). Among other things, the Act empowers the FCC to assign frequency bands; determine stations' operating frequencies, location and power; issue, renew, revoke and modify station licenses; regulate equipment used by stations; impose penalties for violation of the Act or of FCC regulations; impose fees for processing applications and other administrative functions; and adopt regulations to carry out the Act's provisions. The Act also prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without prior FCC approval. Under the Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with television stations. The Act would prohibit Belo's subsidiaries from continuing as broadcast licensees if record ownership or power to vote more than one-fourth of Belo's stock were to be held by aliens, foreign governments or their representatives, or by corporations formed under the laws of foreign countries. STATION LICENSES. Under the Act, as amended in the Telecommunications Act of 1996 (the "1996 Act"), the FCC grants television station licenses for terms of up to eight years. The 1996 Act also requires renewal of a television license if the FCC finds that: o The station has served the public interest, convenience, and necessity; o There have been no serious violations of either the Act or the FCC's rules and regulations by the licensee; and o There have been no other violations of either the Act or the FCC's rules and regulations by the licensee which, taken together, constitute a pattern of abuse. In making its determination, the FCC cannot consider whether the public interest would be better served by a party other than the renewal applicant. Under the 1996 Act, competing applications for the same frequency may be accepted only after the Commission has denied an incumbent's application for renewal of license. The current license expiration dates for each of Belo's television broadcast stations are as follows: WVEC-TV, October 1, 2004; WCNC-TV, December 1, 2004; WWL-TV, June 1, 2005; WHAS-TV, August 1, 2005; KMOV-TV, February 1, 2006; KENS-TV, August 1, 2006; KHOU-TV, August 1, 2006; KVUE-TV, August 1, 2006; WFAA-TV, August 1, 2006; KASW-TV, October 1, 2006; KMSB-TV, October 1, 2006; KTVB-TV, October 1, 2006; KTVK-TV, October 1, 2006; KING-TV, February 1, 2007; KONG-TV, February 1, 2007; KGW-TV, February 1, 2007; and KREM-TV, February 1, 2007. The current license expiration dates for each of the television broadcast stations with which the Company has an LMA are as follows: KBEJ-TV, August 1, 2006; KTTU-TV, October 1, 2006; and KSKN-TV, February 1, 2007. OWNERSHIP RULES. The Commission's ownership rules, as modified pursuant to the 1996 Act and in recently concluded FCC proceedings, limit the aggregate audience reach of television stations that may be under common ownership, operation and control, or in which a single person or entity may hold office or have more than a specified interest or percentage of voting power, to 35 percent of the total national audience. FCC rules also place certain limits on common ownership, operation and control of, or cognizable or "attributable" interests or voting power in: o Television stations serving the same area; o Television stations and radio stations serving the same area; o Television stations and daily newspapers serving the same area; and o Television stations and cable systems serving the same area. The FCC's ownership rules affect the number, type and location of newspaper, broadcast and cable television properties that Belo might acquire in the future. For example, under current FCC rules, Belo generally may not acquire any daily newspaper or cable television property in a market where it now owns or has an interest in a television station deemed attributable under FCC rules. Belo's ownership of The Dallas Morning News and WFAA- 5 8 TV, which are both located in the Dallas/Fort Worth DMA, predates the adoption of the FCC's rules regarding newspaper/broadcast cross-ownership and was "grandfathered" by the FCC. In August 1999, the FCC concluded long-standing proceedings to review and revise certain of its rules regulating television station ownership and the standards used to determine what types of interests are considered to be attributable under its rules. As modified in 1999, and in an order on reconsideration issued in January 2001, one of these rules, the so-called "duopoly" rule, permits a party to own two or more television stations that (1) are located in separate DMAs or (2) are located in the same DMA, but do not have overlapping Grade B service contours. In addition, a party may acquire a second television station in the same DMA where it already owns or has an interest in a television station, if (1) at least eight television "voices" (independently owned and operated stations whose Grade B signals overlap the Grade B contour of at least one of the stations in the proposed combination, excluding LMAs) will remain in the market following the acquisition of the new television station and (2) one of the two stations is not ranked among the top four stations in the market based on Nielsen audience share ratings. It is pursuant to this new rule that on March 1, 2000, Belo acquired KONG-TV and KASW-TV, which are located in the same DMA as Belo's stations KING-TV and KTVK-TV, respectively. This new rule also provides the basis for Belo's proposed acquisition of KTTU-TV in Tucson, which is located in the same DMA as Belo's KMSB-TV. In addition, the FCC's rules provide that future waivers of the duopoly restrictions will be available to permit acquisition of "failed" or "failing" stations or unbuilt stations, subject to certain conditions. In its August 1999 decision, as modified by the January 2001 reconsideration orders, the FCC relaxed its restrictions on the common ownership of television and radio stations. The new FCC rules generally permit the common ownership of up to two television and six radio stations, or one television and seven radio stations, provided at least 20 independent media "voices" would remain in the market. In addition, the FCC's new rules provide that future waivers of the television/radio ownership restrictions generally will be available to permit the acquisition of "failed" stations. The FCC's January 2001 reconsideration orders made several minor changes to the Commission's attribution rules. Under the FCC's attribution rules as they stand after the reconsideration orders, the following relationships and interests generally are attributable for purposes of the agency's broadcast ownership restrictions: o All officers and directors of a licensee and its direct or indirect parent(s); o Voting stock interests of at least five percent; o Stock interests of at least 20 percent, if the holder is a passive institutional investor (investment companies, banks, insurance companies); o Any equity interest in a limited partnership or limited liability company, unless properly "insulated" from management activities; and o Equity and/or debt interests which in the aggregate exceed 33 percent of a licensee's total assets, if the interest holder supplies more than 15 percent of the station's total weekly programming, or is a same-market broadcast company, cable operator or newspaper. Under the 1996 Act, the Commission must review all of its broadcasting ownership rules biennially to determine if they remain necessary in the public interest. In June 2000, the FCC completed its 1998 biennial review of its rules and decided to retain the 35 percent national television ownership limitation, the cable system/television station cross-ownership rule, and the limit on the number of radio stations a company may own in a given market. In addition, the FCC proposed to consider limited changes to the newspaper/broadcast cross-ownership rule, but has not yet initiated a proceeding on that issue. In January 2001, the FCC also completed its 2000 biennial review, making no additional relevant changes to its ownership rules. PROGRAMMING AND OPERATIONS. The FCC has significantly reduced its regulation of the programming and other operations of broadcast stations in recent years, including elimination of formal ascertainment requirements and guidelines concerning the amounts of certain types of programming and commercial matter that may be broadcast. There are, however, FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as network/affiliate relations, cable systems' carriage of syndicated and network television programming on distant stations, political advertising practices, obscene and indecent programming, accessibility of television programming to audience members who are visually or hearing disabled, application procedures and other areas affecting the business or operations of broadcast stations. The courts have refused to overturn the FCC's invalidation of most aspects of the Fairness Doctrine, which had required broadcasters to present contrasting views on controversial issues of public importance. In October 2000, the U.S. Court of Appeals for the D.C. Circuit 6 9 ordered the FCC to suspend application of the personal attack and political editorializing rules, which had their origins in the Fairness Doctrine and which required broadcasters to provide free response time to certain individuals or groups. The FCC may consider re-instituting fairness obligations at a later date. The Children's Television Act of 1990 limits the permissible amount of commercial matter in children's television programs and requires each television station to present educational and informational children's programming. The Commission subsequently adopted stricter children's programming requirements, including a requirement that television broadcasters provide a minimum of three hours of children's educational programming per week. In October 2000, the FCC extended indefinitely the requirement that broadcasters report on their children's programming activities on a quarterly basis, and the agency now is considering a requirement that broadcasters place their children's programming reports on their own Web sites. To date, the Commission has not resolved this issue. Broadcasters also are required to place "issues/programs lists" in their public inspection files to provide their communities with information on their level of "public interest" programming. In October 2000, the Commission commenced a proceeding seeking comment on whether it should adopt a standardized form for this purpose and whether it should require television broadcasters to post the new form, as well as all other documents in their public inspection files, either on station Web sites or the Web sites of state broadcasters associations. This proceeding remains pending before the FCC. In April 1998, the U.S. Court of Appeals for the D.C. Circuit concluded that the FCC's longstanding Equal Employment Opportunity ("EEO") regulations were unconstitutional. The FCC responded to the court's ruling in September 1998 by suspending certain reporting requirements and commencing a proceeding to consider new rules that would not be subject to the court's constitutional objections. In January 2000, the FCC adopted new EEO rules, which: o Required broadcast licensees to widely disseminate information about job openings to all segments of the community; o Gave broadcasters the choice of implementing two FCC-suggested supplemental recruitment measures or, alternatively, designing their own broad recruitment/outreach programs; and o Imposed significant reporting requirements concerning broadcasters' recruitment efforts. The Commission also reinstated its former requirement that broadcasters file annual employment reports with the FCC. In January 2001, however, the U.S. Court of Appeals for the D.C. Circuit struck down the FCC's new EEO rules. The Commission thereafter suspended the rules, except for the general obligation not to engage in employment discrimination based on race, color, religion, national origin or sex. The Commission has several procedural options which it may pursue in order to revive at least some part of its EEO rules, including filing a petition with the U.S. Supreme Court or opening a new proceeding. At this time, it is difficult to predict how long the suspension period may last and what actions the Commission may take in this area in the future. The FCC has adopted various regulations to implement certain provisions of the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), as amended by the 1996 Act, governing the relationship between broadcasters and cable operators. Among other matters, these regulations require cable systems to devote a specified portion of their channel capacity to the carriage of the signals of local television stations and permit TV stations to elect between having a right to mandatory carriage on local cable systems ("must-carry rights") or a right to restrict or prevent cable systems from carrying the station's signal without the station's permission ("retransmission consent"). The Act and FCC regulations also contain measures to facilitate competition among cable systems, telephone companies and other systems in the distribution of TV signals, video programming and other services. DIGITAL TELEVISION SERVICE. In April 1997, the FCC adopted rules for implementing digital television ("DTV") service in the United States. Implementation of DTV will improve the technical quality of television signals received by viewers and will give television broadcasters the flexibility to provide new services, including high-definition television or multiple programs of standard definition television and data transmission. 7 10 On April 3, 1997, a second channel on which to initially provide separate DTV programming or simulcast its analog programming was assigned to all broadcasters holding a license to operate a full-power television station or a construction permit for such a station. These second channels are assigned for an eight-year transition period scheduled to end in 2006. Stations were required to construct their DTV facilities and be on the air with a digital signal according to a schedule set by the FCC based on the type of station and the size of the market in which it is located. For example, all ABC, CBS, NBC and FOX network affiliates in the 10 largest markets were required to be on the air with a digital signal by May 1, 1999. Several stations in large markets voluntarily committed in writing to the FCC to build DTV facilities by November 1, 1998. The Company's stations in Dallas, Houston and Seattle met the accelerated schedule. Affiliates of the four major networks in the top 30 markets were required to begin transmitting digital signals by November 1999. Belo's stations in St. Louis, Portland and Charlotte each met this schedule. All other commercial broadcasters must follow suit by May 1, 2002. Belo's remaining stations expect to meet this schedule. At the end of the transition period, analog television transmissions will cease, and DTV channels will be reassigned to a smaller segment of the broadcasting spectrum. Some of the vacated spectrum has been allocated to public safety transmissions, while the remainder will be auctioned for use by other telecommunications services. In January 2001, the FCC issued a further order on DTV transition issues which sets a number of deadlines for commercial broadcasters. By December 31, 2003, commercial stations with both analog and digital channel assignments within the DTV core spectrum (channels 2-51) must elect the channel they will use for broadcasting after the transition is concluded. On December 31, 2004, commercial broadcasters not replicating their existing analog service areas will lose interference protection in those portions of their existing service areas not covered by their digital signal. On that same date, commercial broadcasters must also provide a stronger digital signal to their communities of license than was previously required. The FCC hopes to complete the full transition to DTV by 2006. Although the FCC has targeted December 31, 2006 as the date by which all television broadcasters must return their analog licenses, the Balanced Budget Act of 1997 allows broadcasters to keep both their analog and digital licenses until at least 85 percent of the television households in their respective markets can receive a digital signal. Local zoning laws and the lack of qualified tall-tower builders to construct the facilities needed for DTV operations, as well as other factors, including the pace of DTV receiver production and sales, may cause delays in this transition. The Commission will periodically review the progress of DTV and make adjustments to the 2006 target date, if necessary. In addition, the FCC commenced, but has not completed, a proceeding to consider setting strict time limits within which local zoning authorities must act on zoning petitions by local television stations. In January 2001, the FCC issued an order addressing the must-carry rights of digital television broadcasters. Although the Commission deferred making a decision as to whether broadcasters are entitled to simultaneous carriage of both their digital and analog signals during the transition to DTV, the Commission did determine the following: o Digital-only television stations may immediately assert carriage rights on local cable systems; o Television stations that return their analog spectrum and convert to digital operations are entitled to must-carry rights; and o A digital-only station asserting must-carry rights is entitled only to carriage of a single programming stream and other "program-related" content, regardless of the number of programs it broadcasts simultaneously on its digital spectrum. In December 1999, the FCC commenced a proceeding seeking comment on the public interest obligations of television broadcast licensees. Specifically, the Commission requested information in four general areas: 8 11 o The new flexibility and capabilities of digital television, such as multiple channel transmission; o Service to local communities, including information on public interest activities and disaster relief; o Enhancing access to the media by persons with disabilities and using DTV to encourage diversity in the digital era; and o Enhancing the quality of political discourse. In commencing the proceeding, the FCC did not propose specific new rules or policies, but stated that it was seeking to create a forum for public debate on how broadcasters can best serve the public interest during and after the transition to DTV. In addition, the FCC has commenced, but not completed, a proceeding specifically addressing the children's programming obligations of DTV broadcast licensees and how the current children's programming rules should apply to DTV. In this proceeding, the Commission is considering a number of measures that might increase licensees' current obligation to air at least three hours of educational programming per week. SATELLITE TRANSMISSION OF LOCAL TELEVISION SIGNALS. In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 ("SHVIA"), which established a copyright licensing system for limited distribution of television network programming to Direct Broadcast Satellite ("DBS") viewers and directed the FCC to initiate rulemaking proceedings to implement the new system. As part of those rulemakings, the FCC established a market-specific requirement for mandatory carriage of local television stations, similar to that applicable to cable systems, for those markets in which a satellite carrier chooses to provide any local signal, beginning January 1, 2002. Stations in affected markets are required to make must-carry elections by June of 2001. These provisions have been challenged in federal court. SHVIA also extended the current system of satellite distribution of distant network signals to unserved households (i.e., those that do not receive a Grade B signal from a local network affiliate). The foregoing does not purport to be a complete summary of all the provisions of the Act, other applicable statutes or the regulations and policies of the FCC thereunder. Proposals for additional or revised regulations and requirements are pending before and are considered by Congress and federal regulatory agencies from time to time. Belo cannot predict the effect of existing and proposed federal legislation, regulations and policies on its business. Also, various of the foregoing matters are now, or may become, the subject of court litigation, and Belo cannot predict the outcome of any such litigation or the impact on its business. EMPLOYEES As of December 31, 2000, the Company had approximately 7,245 full-time employees. Belo has approximately 1,000 employees who are represented by various employee unions. Approximately one-half of these employees are located in Providence, Rhode Island, with the remaining union employees working at various television stations. Belo believes its relations with its employees are satisfactory. ITEM 2. PROPERTIES At December 31, 2000, Belo owned broadcast operating facilities in the following U. S. cities: Dallas, Texas (WFAA); Houston, Texas (KHOU); Seattle, Washington (KING and KONG); Phoenix, Arizona (KTVK and KASW); Portland, Oregon (KGW); Charlotte, North Carolina (WCNC); San Antonio, Texas (KENS); New Orleans, Louisiana (WWL); Norfolk, Virginia (WVEC); Louisville, Kentucky (WHAS); Austin, Texas (KVUE); Tucson, Arizona (KMSB); Spokane, Washington (KREM); and Boise, Idaho (KTVB). The Company also leases broadcast facilities for the operations of KMOV in St. Louis, Missouri. Three of the Company's broadcast facilities use broadcast towers that are jointly owned with another television station in the same market (WFAA, KGW and KENS). The broadcast towers associated with the Company's other television stations are wholly-owned by the Company. The Company leases a facility in Washington, D.C. that is used by its broadcasting and publishing operations for the gathering and distribution of news from the nation's capital. This facility includes a broadcast studio as well as general office space. 9 12 The Company owns and operates a newspaper printing facility and distribution center in Plano, Texas where eight high-speed offset presses are housed to print The Dallas Morning News. The eighth press, providing improved production capacity and greater flexibility, began operations in the fourth quarter of 2000. Certain other operations of The Dallas Morning News are housed in a Company-owned, four-story building in downtown Dallas. The Company also owns and operates a newspaper printing facility in Providence, Rhode Island, where three high-speed flexographic presses are housed to print The Providence Journal. The remainder of The Providence Journal's operations is housed in a Company-owned, five-story building in downtown Providence. The Company owns and operates a newspaper publishing facility, a commercial printing facility and various other properties in southern California. The newspaper publishing facility is located in downtown Riverside, California and is equipped with three high-speed offset presses to print The Press-Enterprise. Each of Belo's three large-market newspapers' facilities is equipped with computerized input and photocomposition equipment and other equipment that is used in the production of both news and advertising copy. The Company also owns a newspaper production facility in Denton, Texas. TXCN's operations are conducted from a fully-equipped digital television facility located in downtown Dallas. NWCN conducts its regional cable news operations from the KING facility. The Company's corporate operations, several departments of The Dallas Morning News and certain broadcast administrative functions have offices located in downtown Dallas in an office building owned by the Company. The operations of Belo Interactive are located at each of Belo's individual operating units and in leased office space in downtown Dallas. All of the foregoing operations have additional leasehold and other interests that are used in their respective activities. The Company believes its properties are in satisfactory condition and are well maintained, and that such properties are adequate for present operations. ITEM 3. LEGAL PROCEEDINGS There are legal proceedings pending against the Company, including a number of actions for alleged libel and slander. In the opinion of management, liabilities, if any, arising from these actions would not have a material adverse effect on the consolidated results of operations, liquidity or financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of shareholders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this Form 10-K. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under the heading "Market Data" and "Note 9: Common and Preferred Stock" contained in the 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information set forth under the heading "Selected Financial Data" contained in the 2000 Annual Report to Shareholders is incorporated herein by reference. 10 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The information set forth under the heading "Market Risks" contained in the 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth under the headings "Consolidated Statements of Earnings," "Consolidated Balance Sheets," "Consolidated Statements of Shareholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements," together with the "Report of Independent Auditors" contained in the 2000 Annual Report to Shareholders is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the headings "Election of Directors," "Executive Officers of the Company," and "Section 16(a) Beneficial Ownership Reporting Compliance" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 9, 2001, is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the heading "Executive Compensation and Other Matters" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 9, 2001, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the heading "Outstanding Capital Stock and Stock Ownership of Directors, Certain Executive Officers and Principal Shareholders" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 9, 2001, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the heading "Certain Transactions" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 9, 2001, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The financial statements referenced in Item 8 are incorporated herein by reference to the 2000 Annual Report to Shareholders, a portion of which is filed as Exhibit 13 to this Form 10-K. (2) The financial schedules required by Regulation S-X are either not applicable or are included in the information provided in the Notes to Consolidated Financial Statements, which are incorporated herein by reference to the 2000 Annual Report to Shareholders. 11 14 (3) 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 Company 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 Annual Report on Form 10-K dated March 15, 2000 (the "1999 Form 10-K")) 3.2 * Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (Exhibit 3.2 to the 1999 Form 10-K) 3.3 * Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 (Exhibit 3.3 to the 1999 Form 10-K) 3.4 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 (Exhibit 3.4 to the 1999 Form 10-K) 3.5 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 (Exhibit 3.5 to the 1999 Form 10-K) 3.6 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 13, 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 * Certificate of Ownership and Merger, dated December 20, 2000, but effective as of 11:59 p.m. on December 31, 2000 (Exhibit 99.2 to Belo's Current Report on Form 8-K filed with the Commission on December 29, 2000) 3.8 * Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (Exhibit 3.7 to the 1999 Form 10-K) 3.9 * Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (Exhibit 3.8 to the 1999 Form 10-K) 3.10 Amended and Restated Bylaws of the Company, effective December 31, 2000 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.10 above. 4.2 Specimen Form of Certificate representing shares of the Company's Series A Common Stock 4.3 Specimen Form of Certificate representing shares of the Company's Series B Common Stock 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 1999 Form 10-K)
12 15
EXHIBIT NUMBER DESCRIPTION ------- ----------- 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 Supplement No. 2 to Amended and Restated Rights Agreement between the Company and The First National Bank of Boston dated as of June 5, 1998 4.7 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 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)
13 16
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.2 Compensatory plans: ~(1) Belo Savings Plan: * (a) Belo Savings Plan Amended and Restated July 1, 2000 (Exhibit 10.2(1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000 (the "2nd Quarter 2000 Form 10-Q")) (b) First Amendment to the Belo Savings Plan effective December 31, 2000 ~(2) Belo 1986 Long-Term Incentive Plan: * (a) Belo Corp. 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 10.2(2)(c) to the 1999 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) * Belo 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) * (b) Amendment to 1995 Executive Compensation Plan, dated December 16, 1999 (Exhibit 10.3(3)(b) to the 1999 Form 10-K) ~(4) * Management Security Plan (Exhibit 10.3(1) to the 1996 Form 10-K) * (a) Amendment to Management Security Plan of Belo Corp. and Affiliated Companies (as Restated Effective January 1, 1982) (Exhibit 10.2(4)(a) to the 1999 Form 10-K) ~(5) * Belo Supplemental Executive Retirement Plan * (a) Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2000 (Exhibit 10.2(5)(a) to the 1999 Form 10-K) * (b) First Amendment to Belo Supplemental Executive Retirement Plan as Amended and Restated Effective January 1, 2000, dated July 27, 2000 (Exhibit 10.2(5) to the 2nd Quarter 2000 Form 10-Q) ~(6) * Belo 2000 Executive Compensation Plan (Exhibit 4.15 to Belo's Registration Statement on Form S-8 (No. 333-43056) filed with the Commission on August 4, 2000) ~(7) Retirement Agreement between the Company and Ward L. Huey, Jr., dated November 3, 2000 12 Ratio of Earnings to Fixed Charges 13 Portions of the 2000 Annual Report to Shareholders (Items 5, 6, 7, 7A and 8) 21 Subsidiaries of the Company
14 17
EXHIBIT NUMBER DESCRIPTION ------- ----------- 23 Consent of Ernst & Young LLP 24 Power of Attorney (set forth on the signature page(s) hereof)
(b) Reports on Form 8-K. During the last quarter covered by this report, a report on Form 8-K was filed on December 29, 2000, containing information under Item 5. "Other Events" and Item 7. "Financial Statements and Exhibits" concerning the change of the Company's name from A. H. Belo Corporation to Belo Corp. 15 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. BELO CORP. (formerly A. H. Belo Corporation) By: /s/ Robert W. Decherd -------------------------------- Robert W. Decherd Chairman of the Board, President & Chief Executive Officer Dated: March 13, 2001 POWER OF ATTORNEY The undersigned hereby constitute and appoint Robert W. Decherd, Michael J. McCarthy and Dunia A. Shive and each of them, our true and lawful attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated below any and all amendments to this report and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, and hereby ratify and confirm all that such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ Robert W. Decherd Chairman of the Board, President March 13, 2001 - ------------------------------------ & Chief Executive Officer Robert W. Decherd /s/ Burl Osborne Director, President/Publishing March 13, 2001 - ------------------------------------ Division and Publisher/ Burl Osborne The Dallas Morning News /s/ John W. Bassett, Jr. Director March 13, 2001 - ------------------------------------ John W. Bassett, Jr. /s/ Henry P. Becton, Jr. Director March 13, 2001 - ------------------------------------ Henry P. Becton, Jr. /s/ Judith L. Craven, M.D., M.P.H. Director March 13, 2001 - ------------------------------------ Judith L. Craven, M.D., M.P.H. /s/ Roger A. Enrico Director March 13, 2001 - ------------------------------------ Roger A. Enrico /s/ Stephen Hamblett Director March 13, 2001 - ------------------------------------ Stephen Hamblett /s/ Dealey D. Herndon Director March 13, 2001 - ------------------------------------ Dealey D. Herndon
16 19
SIGNATURE TITLE DATE --------- ----- ---- /s/ Laurence E. Hirsch Director March 13, 2001 - ------------------------------------ Laurence E. Hirsch /s/ Arturo Madrid, Ph.D. Director March 13, 2001 - ------------------------------------ Arturo Madrid, Ph.D. /s/ Hugh G. Robinson Director March 13, 2001 - ------------------------------------ Hugh G. Robinson /s/ William T. Solomon Director March 13, 2001 - ------------------------------------ William T. Solomon /s/ J. McDonald Williams Director March 13, 2001 - ------------------------------------ J. McDonald Williams /s/ Dunia A. Shive Executive Vice President/ March 13, 2001 - ------------------------------------ Chief Financial Officer Dunia A. Shive
17 20 EXHIBIT INDEX
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 Company 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 Annual Report on Form 10-K dated March 15, 2000 (the "1999 Form 10-K")) 3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (Exhibit 3.2 to the 1999 Form 10-K) 3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 (Exhibit 3.3 to the 1999 Form 10-K) 3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 (Exhibit 3.4 to the 1999 Form 10-K) 3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 (Exhibit 3.5 to the 1999 Form 10-K) 3.6 Certificate of Amendment of Certificate of Incorporation of the Company dated May 13, 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 Certificate of Ownership and Merger, dated December 20, 2000, but effective as of 11:59 p.m. on December 31, 2000 (Exhibit 99.2 to Belo's Current Report on Form 8-K filed with the Commission on December 29, 2000) 3.8 Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (Exhibit 3.7 to the 1999 Form 10-K) 3.9 Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (Exhibit 3.8 to the 1999 Form 10-K) 3.10 Amended and Restated Bylaws of the Company, effective December 31, 2000 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.10 above. 4.2 Specimen Form of Certificate representing shares of the Company's Series A Common Stock 4.3 Specimen Form of Certificate representing shares of the Company's Series B Common Stock 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 1999 Form 10-K)
21
EXHIBIT NUMBER DESCRIPTION ------- ----------- 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 Supplement No. 2 to Amended and Restated Rights Agreement between the Company and The First National Bank of Boston dated as of June 5, 1998 4.7 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 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)
22
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.2 Compensatory plans: ~(1) Belo Savings Plan: (a) Belo Savings Plan Amended and Restated July 1, 2000 (Exhibit 10.2(1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000 (the "2nd Quarter 2000 Form 10-Q")) (b) First Amendment to the Belo Savings Plan effective December 31, 2000 ~(2) Belo 1986 Long-Term Incentive Plan: (a) Belo Corp. 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 10.2(2)(c) to the 1999 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) Belo 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) (b) Amendment to 1995 Executive Compensation Plan, dated December 16, 1999 (Exhibit 10.3(3)(b) to the 1999 Form 10-K) ~(4) Management Security Plan (Exhibit 10.3(1) to the 1996 Form 10-K) (a) Amendment to Management Security Plan of Belo Corp. and Affiliated Companies (as Restated Effective January 1, 1982) (Exhibit 10.2(4)(a) to the 1999 Form 10-K) ~(5) Belo Supplemental Executive Retirement Plan (a) Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2000 (Exhibit 10.2(5)(a) to the 1999 Form 10-K) (b) First Amendment to Belo Supplemental Executive Retirement Plan as Amended and Restated Effective January 1, 2000, dated July 27, 2000 (Exhibit 10.2(5) to the 2nd Quarter 2000 Form 10-Q) ~(6) Belo 2000 Executive Compensation Plan (Exhibit 4.15 to Belo's Registration Statement on Form S-8 (No. 333-43056) filed with the Commission on August 4, 2000) ~(7) Retirement Agreement between the Company and Ward L. Huey, Jr., dated November 3, 2000
23
EXHIBIT NUMBER DESCRIPTION ------- ----------- 12 Ratio of Earnings to Fixed Charges 13 Portions of the 2000 Annual Report to Shareholders (Items 5, 6, 7, 7A and 8) 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 24 Power of Attorney (set forth on the signature page(s) hereof)
EX-3.10 2 d84902ex3-10.txt AMENDED/RESTATED BYLAWS 1 EXHIBIT 3.10 AMENDED AND RESTATED BYLAWS OF BELO CORP. (A Delaware Corporation) Effective December 31, 2000 2 INDEX TO BYLAWS OF BELO CORP.
Page ---- ARTICLE I - OFFICES .......................................................................1 Section 1. Registered Office......................................................1 Section 2. Other Offices..........................................................1 ARTICLE II - MEETINGS OF THE STOCKHOLDERS...................................................1 Section 1. Place of Meetings......................................................1 Section 2. Annual Meeting.........................................................1 Section 3. Special Meeting........................................................2 Section 4. Notice of Annual or Special Meeting....................................2 Section 5. Business at Special Meeting............................................2 Section 6. Quorum of Stockholders.................................................2 Section 7. Act of Stockholders' Meeting...........................................3 Section 8. Voting of Shares.......................................................3 Section 9. Proxies................................................................3 Section 10. Voting List............................................................4 Section 11. Order of Business......................................................4 Section 12. Notice of Stockholder Business.........................................5 Section 13. Notice of Stockholder Nominees.........................................6 ARTICLE III - BOARD OF DIRECTORS............................................................8 Section 1. Powers.................................................................8 Section 2. Number of Directors....................................................8 Section 3. Election and Term......................................................8 Section 4. Vacancies..............................................................9 Section 5. Resignation and Removal...............................................10 Section 6. Compensation of Directors.............................................10
-ii- 3 ARTICLE IV - MEETINGS OF THE BOARD.........................................................11 Section 1. Regular Meetings......................................................11 Section 2. Special Meetings......................................................11 Section 3. Business at Regular or Special Meeting................................11 Section 4. Quorum of Directors...................................................11 Section 5. Act of Directors' Meeting.............................................11 Section 6. Action by Written Consent Without a Meeting...........................11 ARTICLE V - COMMITTEES.....................................................................12 ARTICLE VI - NOTICES.......................................................................14 Section 1. Methods of Giving Notice..............................................14 Section 2. Waiver of Notice......................................................14 Section 3. Attendance as Waiver..................................................14 ARTICLE VII - ACTION WITHOUT A MEETING BY USE OF A CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT.....................................................15 ARTICLE VIII - OFFICERS....................................................................15 Section 1. Executive Officers....................................................15 Section 2. Election and Qualification............................................16 Section 3. Division Officers.....................................................16 Section 4. Other Officers and Agents.............................................17 Section 5. Salaries..............................................................17 Section 6. Term, Removal and Vacancies...........................................17 Section 7. Chairman of the Board.................................................17 Section 8. Chief Executive Officer...............................................18 Section 9. President.............................................................18 Section 10. Vice Presidents.......................................................18 Section 11. Secretary.............................................................19 Section 12. Assistant Secretaries.................................................19 Section 13. Treasurer.............................................................19 Section 14. Assistant Treasurers..................................................20 Section 15. Officers' Bond........................................................20
-iii- 4 ARTICLE IX - CERTIFICATES FOR SHARES.......................................................20 Section 1. Certificates Representing Shares......................................20 Section 2. Transfer of Shares....................................................21 Section 3. Lost, Stolen or Destroyed Certificate.................................22 Section 4. Closing of Stock Ledger and Fixing Record Date........................22 Section 5. Foreign Share Ownership...............................................23 Section 6. Registered Stockholders...............................................25 ARTICLE X - GENERAL PROVISIONS.............................................................25 Section 1. Dividends.............................................................25 Section 2. Reserves..............................................................26 Section 3. Checks................................................................26 Section 4. Fiscal Year...........................................................26 Section 5. Seal..................................................................26 ARTICLE XI - INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................26 Section 1. Actions, Suits, or Proceedings Other Than by or in the Right of the Corporation..................................26 Section 2. Actions or Suits by or in the Right of the Corporation................27 Section 3. Indemnification for Costs, Charges, and Expenses of Successful Party....................................................28 Section 4. Determination of Right to Indemnification.............................28 Section 5. Advance of Costs, Charges and Expenses................................29 Section 6. Procedure for Indemnification.........................................29 Section 7. Other Rights; Continuation of Right to Indemnification................30 Section 8. Extent of Indemnification.............................................31 Section 9. Insurance.............................................................32 Section 10. Savings Clause........................................................32 ARTICLE XII - AMENDMENTS...................................................................33
-iv- 5 AMENDED AND RESTATED BYLAWS OF BELO CORP. (A Delaware Corporation) ARTICLE I OFFICES Section 1. Registered Office. The registered office shall be located in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The corporation also may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or as the business of the corporation may require. ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other proper purpose, including any special meeting of stockholders regardless of by whom called, shall be held at such time and place, within or without the State of Delaware, as the Board of Directors may from time to time designate, as stated in the notice of such meeting or a duly executed waiver of notice thereof. Section 2. Annual Meeting. An annual meeting of the stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors or, in the absence of a resolution of the Board of Directors providing otherwise, at 10:00 a.m. on the second -1- 6 Wednesday in May in each year, unless such day is a legal holiday, in which case such meeting shall be held at the specified time on the first full business day thereafter which is not a legal holiday. At such meeting the stockholders entitled to vote thereat shall elect, by a plurality vote of the voting power of all of the shares entitled to vote thereon, the successors to the directors whose terms shall expire that year, and may transact such other business as properly may be brought before the meeting. Section 3. Special Meeting. Special meetings of the stockholders may be called by the Chief Executive Officer, the Board of Directors or the holders of not less than one-fifth of the voting power of all shares entitled to vote at the meeting. Section 4. Notice of Annual or Special Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board or the Secretary, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. Section 5. Business at Special Meeting. The business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice thereof. Section 6. Quorum of Stockholders. Unless otherwise provided in the Certificate of Incorporation, the holders of a majority of the voting power of all of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the stockholders, but in -2- 7 no event shall a quorum consist of the holders of less than one-third (1/3) of the shares entitled to vote and thus represented at such meeting. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. Act of Stockholders' Meeting. The vote of the holders of a majority of the voting power of all of the shares entitled to vote and represented in person or by proxy at a meeting at which a quorum is present shall be the act of the stockholders' meeting, unless the vote of a greater number is required by law or the Certificate of Incorporation. Section 8. Voting of Shares. Each outstanding share shall be entitled to the number of votes per share as provided in the Certificate of Incorporation and the Certificate of Designation, if any, which relates to such share, on each matter submitted to a vote at a meeting of the stockholders. At each election of directors, every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of votes allotted to the shares owned by him or her for as many persons as there are directors to be elected and for whose election he or she has the right to vote. Cumulative voting in the election of directors or otherwise is expressly prohibited by the Certificate of Incorporation. Section 9. Proxies. At any meeting of the stockholders, each stockholder having the right to vote shall be entitled to vote either in person or by proxy. Any such proxy or evidence thereof shall be delivered to the secretary of such meeting at or prior to the time designated by the chairman -3- 8 of the meeting or in the order of business for so delivering such proxies. No proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law. Unless required by statute or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting or by such stockholder's proxy, if there be such proxy. Section 10. Voting List. The officer or agent having charge of the stock ledger for shares of the corporation shall make, at least ten (10) days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and number of shares of each class or series of the corporation's stock registered in the name of each stockholder, which list, for a period of ten (10) days prior to such meeting, shall be open to the examination of any stockholder, for any purpose germane to the meeting, at any time during the usual business hours, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The corporation shall be entitled to rely upon the stock ledger as the only evidence as to who are the stockholders entitled to examine the stock ledger, the aforementioned list of stockholders or the books of the corporation, or to vote in person or by proxy at any such meeting of stockholders. Section 11. Order of Business. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his or her absence, by the Vice Chairman of the Board, if any, -4- 9 or in his or her absence, by the Chief Executive Officer, or in his or her absence, by the President or an Executive Vice President or a Senior Vice President, or in the absence of the foregoing persons, by a chairman designated by the Board of Directors. The Secretary shall act as secretary of the meeting, but in the Secretary's absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The order of business of each meeting of the stockholders of the corporation shall be determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts and things as are necessary or desirable for the conduct of the meeting, including, without limitation, the establishment of procedures for the dismissal of business not properly presented, the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the corporation, restrictions on entry to such meetings after the time prescribed for commencement thereof, opening and closing of the voting polls, and adjournment of such meetings. Section 12. Notice of Stockholder Business. At an annual meeting of the stockholders or, subject to Article II, Section 5 of these Bylaws, at a special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Chief Executive Officer or the Board of Directors or (b) by any stockholder of the corporation entitled to vote at such annual or special meeting who complies with the notice procedures set forth in this Section 12. For business to be properly brought before an annual or special meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that -5- 10 in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than thirty (30) days from such anniversary date, then notice by the stockholder to be timely must be delivered not later than the close of business on the later of the 60th day prior to the annual meeting or the 10th day following the day on which the date of the meeting is publicly announced. Such stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual or special meeting (a) a brief description of the business desired to be brought before the annual or special meeting and the reasons for conducting such business at the annual or special meeting; (b) the name and address, as they appear on the corporation's books, of such stockholder; (c) the class, series and number of shares of the corporation which are beneficially owned by such stockholder; and (d) any material interest of such stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting of the stockholders or, subject to Article II, Section 5 of these Bylaws, at a special meeting except in accordance with the procedures set forth in this Section 12. The chairman of an annual or special meeting shall, if the facts warrant, determine that business was not properly brought before the meeting and in accordance with the provisions of this Section 12, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 12, a stockholder seeking to have a proposal included in the corporation's proxy statement in addition shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended (including, but not limited to, Rule 14a-8 or its successor provision). Section 13. Notice of Stockholder Nominees. Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as directors. -6- 11 Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders (a) by or at the direction of the Chief Executive Officer or the Board of Directors or (b) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 13. Nominations by stockholders shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than thirty (30) days from such anniversary date, then notice by the stockholder to be timely must be delivered not later than the close of business on the later of the 60th day prior to the annual meeting or the 10th day following the day on which the date of the meeting is publicly announced. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in a proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation's books, of such stockholder and (ii) the class, series and number of shares of the corporation which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in a stockholder's notice -7- 12 of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in these Bylaws. The chairman of the meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall not be admitted. ARTICLE III BOARD OF DIRECTORS Section 1. Powers. The business and affairs of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute, the Certificate of Incorporation or by these Bylaws directed or required to be exercised and done by the stockholders. Section 2. Number of Directors. The number of directors of the corporation constituting the Board of Directors shall be not less than nine (9) nor more than eighteen (18), determined from time to time in accordance with these Bylaws by resolution of the Board of Directors or of the stockholders. Section 3. Election and Term. The directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three (3) classes, each consisting of approximately one-third (1/3) of the whole number of the Board of Directors, and each director of the corporation shall hold office until his or her successor is elected and qualified or until his or her death, resignation, or removal. Each class of directors shall be as nearly equal in number of directors as possible and shall be denominated in such manner as the Board of Directors may determine. The -8- 13 term of office of those of the first class will expire at the first annual meeting of stockholders after adoption of this Bylaw provision; of the second class one year thereafter; of the third class two years thereafter; and at each annual election held after such classification and election, the successors to the class of directors whose terms shall expire that year shall be elected to hold office for a term of three (3) years, so that the term of office for one class of directors shall expire in each year. Directors need not be residents of the State of Delaware or stockholders of the corporation. Notwithstanding the foregoing, no person shall be eligible to stand for election as director if he or she has attained the age of 65 years. Furthermore, effective with the 2001 Annual Meeting of Stockholders, the term of each director shall terminate at the first annual meeting of stockholders following the date on which such director attains the age of 65 years. Notwithstanding anything else in these Bylaws, the term of any director elected, reelected or named to the Board of Directors after the 1998 Annual Meeting of Stockholders who was an officer or other employee of the corporation (or of a subsidiary of or other entity controlled by the corporation) at the time he or she was last elected, reelected or named to serve as a director, other than any person who at such time was serving as Chief Executive Officer of the corporation, shall automatically terminate at the first annual meeting of stockholders following the date on which such director ceases to serve as an officer or other employee of the corporation (or of a subsidiary of or other entity controlled by the corporation). Section 4. Vacancies. Any vacancies occurring in the Board of Directors and any newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his -9- 14 or her predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of a majority of the directors, subject to the applicable provisions then in effect of the Delaware General Corporation Law pertaining thereto. A director elected to fill a newly created directorship shall hold office until his or her successor is elected and qualified or until his or her death, resignation, or removal. Section 5. Resignation and Removal. Any director may resign at any time upon giving written notice to the corporation. At any meeting of stockholders called expressly for the purpose of removing a director or directors, any director or the entire Board of Directors may be removed, but for cause only (removal of directors without cause being expressly prohibited), by a vote of the holders of a majority of the voting power of all of the shares then entitled to vote at an election of directors. Section 6. Compensation of Directors. As specifically prescribed from time to time by resolution of the Board of Directors, the directors of the corporation may be paid their expenses of attendance at each meeting of the Board and may be paid reasonable compensation for their services as directors. This provision shall not preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for their services in such capacities. -10- 15 ARTICLE IV MEETINGS OF THE BOARD Section 1. Regular Meetings. Regular meetings of the Board of Directors may be held with or without notice at such time and at such place either within or without the State of Delaware as from time to time shall be prescribed by resolution of the Board of Directors. Section 2. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer or the Secretary on the written request of two directors. Written notice of special meetings of the Board of Directors shall be given to each director at least three (3) days before the date of the meeting. Section 3. Business at Regular or Special Meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 4. Quorum of Directors. A majority of the Board of Directors shall constitute a quorum for the transaction of business, unless a greater number is required by law or the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement of the meeting, until a quorum shall be present. Section 5. Act of Directors' Meeting. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the vote of a greater number is required by law or the Certificate of Incorporation. Section 6. Action by Written Consent Without a Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or of any committee thereof under the -11- 16 applicable provisions of any statute, the Certificate of Incorporation or these Bylaws may be taken without a meeting if a consent in writing setting forth the action so taken is signed by all members of the Board of Directors or of the committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote of the Board of Directors or of the committee, as the case may be. ARTICLE V COMMITTEES The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, the Certificate of Incorporation or these Bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation (except as permitted by the Delaware General Corporation Law), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease, or exchange of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the stockholders a voluntary dissolution of the corporation or a revocation thereof, amending, altering, or repealing the Bylaws of the corporation or adopting new Bylaws for the corporation, filling vacancies in or removing members of the Board of Directors or any such committee, fixing the compensation of any member of such committee, or -12- 17 altering or repealing any resolution of the Board of Directors which by its terms provides that it shall not be so amendable or repealable. Unless such resolution, the Certificate of Incorporation or these Bylaws so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of shares of the corporation, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. Vacancies in the membership of any such committee shall be filled by resolution adopted by the majority of the full Board of Directors at a regular or special meeting of the Board. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him or her by law. Any executive committee designated by the Board of Directors shall consist of the Chief Executive Officer and such number (not less than two (2)) of other directors as the Board may from time to time determine by resolution adopted by the majority of the full Board of Directors, one of the members of which committee shall be designated the chairman thereof by the Board of Directors. The executive committee may make rules for the conduct of its business, not inconsistent with this Article V, as it shall from time to time deem necessary and shall keep regular minutes of its proceedings and report the same to the Board when required. A majority of the members of the executive committee shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting, the members present may adjourn the meeting until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the executive committee, except as otherwise specifically provided by statute, the Certificate of Incorporation or the Bylaws of the corporation. Any member of the executive committee may be -13- 18 removed by the Board of Directors by the affirmative vote of a majority of the full Board, whenever in its judgment the best interests of the corporation will be served thereby. ARTICLE VI NOTICES Section 1. Methods of Giving Notice. Whenever any notice is required to be given to any stockholder or director under the provisions of any statute, the Certificate of Incorporation or these Bylaws, it shall be given in writing and delivered personally or mailed to such stockholder or director at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time the same shall be deposited in the United States mail with sufficient postage thereon prepaid. Notice to directors may also be given by telegram, telex, telecopy or similar means of visual data transmission, and notice given by any of such means shall be deemed to be delivered when transmitted for delivery to the recipient. Section 2. Waiver of Notice. Whenever any notice is required to be given to any stockholder or director under the provisions of any statute, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed (either in advance or after the fact) by the person or persons entitled to said notice shall be deemed equivalent to the giving of such notice. Section 3. Attendance as Waiver. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. -14- 19 ARTICLE VII ACTION WITHOUT A MEETING BY USE OF A CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT Subject to the provisions required or permitted for notice of meetings, unless otherwise restricted by the Certificate of Incorporation or these Bylaws, stockholders, members of the Board of Directors or members of any committee designated by such Board may participate in and hold a meeting of such stockholders, Board or committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE VIII OFFICERS Section 1. Executive Officers. The officers of the corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (with such supplemental designation to indicate seniority or scope of duties as the Board of Directors may determine from time to time), a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors as provided in Section 2 of this Article; provided that any of such offices except President, Secretary and Treasurer may be allowed to become vacant by failure of the Board of Directors to fill the office. Any two or more offices may be held by the same person, except that the Chairman of the Board or the President and the Secretary shall not be the same person. -15- 20 Section 2. Election and Qualification. The Board of Directors shall annually choose (subject to the provisions of Section 1 of this Article) a Chairman of the Board, a Chief Executive Officer, a President, such Executive Vice Presidents and Senior Vice Presidents as the Board shall deem necessary, a Secretary, and a Treasurer, none of whom, except the Chairman of the Board, the Chief Executive Officer and the President need to be a member of the Board. Section 3. Division Officers. The Board of Directors may from time to time establish one or more divisions of the corporation and assign to such divisions responsibilities for such of the corporation's business, operations and affairs as the Board may designate. The Board of Directors may appoint or authorize an officer of the corporation to appoint in writing officers of a division. Unless elected or appointed an officer of the corporation by the Board of Directors or pursuant to authority granted by the Board, an officer of a division shall not as such be an officer of the corporation, except that he or she shall be an officer of the corporation for the purposes of executing and delivering documents on behalf of the corporation or for other specific purposes, if and to the extent that he or she may be authorized to do so by the Board of Directors. Unless otherwise provided in the writing appointing an officer of a division, such officer shall hold office until his or her successor is appointed and qualified. Any officer of a division may be removed with or without cause by the Board of Directors or by the officer, if any, of the corporation then authorized by the Board of Directors to appoint such officer of a division. The Board of Directors may prescribe or authorize an officer of the corporation or an officer of a division to prescribe in writing the duties and powers and authority of officers of divisions and may authorize an officer of the corporation or an officer of a division to determine the compensation for officers of divisions. -16- 21 Section 4. Other Officers and Agents. The Board of Directors may elect or appoint such Vice Presidents, other officers, assistant officers and agents as the Board may deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 5. Salaries. Subject to the provisions of Section 3 of this Article, the compensation of all officers and agents of the corporation shall be determined by the Board of Directors. Section 6. Term, Removal and Vacancies. Each officer of the corporation shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Any officer may resign at any time upon giving written notice to the corporation. Any officer or agent or member of the executive committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled (subject to the provisions of Sections 1 and 3 of this Article) by the Board of Directors. Section 7. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and duties as usually pertain to such office or as may be prescribed by the Board of Directors. -17- 22 Section 8. Chief Executive Officer. The Board of Directors may designate whether the Chairman of the Board or the President shall be the Chief Executive Officer of the corporation. The officer so designated as the Chief Executive Officer shall have general powers of oversight, supervision and management of the business and affairs of the corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He or she shall execute bonds, mortgages and other contracts requiring a seal under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chief Executive Officer shall have such other powers and duties as usually pertain to such office or as may be prescribed by the Board of Directors. If a Chief Executive Officer is not otherwise designated by the Board of Directors, the Chairman of the Board shall be the Chief Executive Officer of the corporation. Section 9. President. The President, in the absence or disability of the Chairman of the Board, shall perform the duties and exercise the powers of the Chairman of the Board. The President shall perform such other duties and exercise such other powers as usually pertain to such office or as may be delegated from time to time by the Board of Directors. Section 10. Vice Presidents. Unless otherwise determined by the Board of Directors, the Vice Presidents, in the order of their seniority as such seniority may from time to time be designated by the Board of Directors, shall perform the duties and exercise the powers of the President in the absence or disability of the President. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. -18- 23 Section 11. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders, and shall record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. He or she shall keep in safe custody the seal of the corporation, and, when authorized by the Board of Directors, affix the same to any instrument requiring it. When so affixed, such seal shall be attested by his or her signature or by the signature of the Treasurer or an Assistant Secretary. Section 12. Assistant Secretaries. Unless otherwise determined by the Board of Directors, the Assistant Secretaries, in the order of their seniority as such seniority may from time to time be designated by the Board of Directors, shall perform the duties and exercise the powers of the Secretary in the absence or disability of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 13. Treasurer. The Treasurer shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. -19- 24 Section 14. Assistant Treasurers. Unless otherwise determined by the Board of Directors, the Assistant Treasurers, in the order of their seniority as such seniority may from time to time be designated by the Board of Directors, shall perform the duties and exercise the powers of the Treasurer in the absence or disability of the Treasurer. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 15. Officers' Bond. If required by the Board of Directors, any officer so required shall give the corporation a bond (which shall be renewed as the Board may require) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the corporation, in case of his or her death, resignation, retirement or removal from office, of any and all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the corporation. ARTICLE IX CERTIFICATES FOR SHARES Section 1. Certificates Representing Shares. The corporation shall deliver certificates representing all shares to which stockholders are entitled. Such certificates shall be numbered and shall be entered in the books of the corporation as they are issued, and shall be signed by the Chairman of the Board, the President or a Vice President, and the Secretary or an Assistant Secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of the Chairman of the Board, the President or Vice President, Secretary or Assistant Secretary, upon a certificate may be facsimiles, if the certificate is countersigned by a transfer agent -20- 25 or registered by a registrar, either of which is other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer at the date of its issuance. If the corporation is authorized to issue shares of more than one class of stock or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholder upon request and without charge, a full statement of all of the powers, designations, preferences, and rights of the shares of each class authorized to be issued and the qualifications, limitations or restrictions thereof, and, if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Each certificate representing shares shall state upon the face thereof that the corporation is organized under the laws of the State of Delaware, the name of the person to whom issued, the number and the class and the designation of the series, if any, which such certificate represents and the par value of each share represented by such certificate or a statement that the shares are without par value. No certificate shall be issued for any share until the consideration therefor has been fully paid. Section 2. Transfer of Shares. Subject to the provisions of Section 5 of this Article IX and the provisions of Section 2 of Article Four of the Certificate of Incorporation, upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the -21- 26 duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. Section 3. Lost, Stolen or Destroyed Certificate. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Closing of Stock Ledger and Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide that the stock ledger shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the stock ledger shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such ledger shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock ledger, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty (60) days, and, in case of a meeting of stockholders, not less than ten -22- 27 (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock ledger is not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section 4, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of the stock ledger and the stated period of closing has expired. Section 5. Foreign Share Ownership. As used in these Bylaws, the word "Alien" shall include any individual not a citizen of the United States of America and any representative of any such individual; any corporation or other entity organized under the laws of any foreign government; any foreign government, its agencies or representatives; any partnership of which any partner is an alien, except for limited partners insulated in accordance with the rules and regulations of the Federal Communications Commission; any corporation or other entity controlled directly or indirectly by other than United States citizens; and any other entity or individual determined to be an alien under Section 310 of the Communications Act of 1934, as amended, or the rules and regulations of the Federal Communications Commission. At no time shall Aliens (i) own, directly or indirectly, more than one-fourth of the equity in the corporation, or in any other corporation directly or indirectly controlling the corporation, that is represented by the issued and outstanding capital stock of such corporation; or (ii) vote, directly -23- 28 or indirectly, more than one-fourth of the total voting rights in the corporation, or in any other corporation directly or indirectly controlling the corporation, that are represented by the issued and outstanding capital stock of such corporation. The percentage of voting rights and equity ownership of Aliens in the corporation's issued and outstanding capital stock shall be determined in accordance with the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission, taking into account direct and indirect equity interests and direct and indirect voting rights in the corporation as may be required. As used in these Bylaws, a "Noncompliance Status" means the existence of circumstances in which, but for the following provisions of this Section 5, Aliens would own or hold voting rights or interests in the corporation in excess of the thresholds set forth in this paragraph. In the event a Noncompliance Status shall arise, then, so long as the Noncompliance Status continues to exist, those stockholders causing or contributing to the Noncompliance Status shall have no voting, dividend, or other rights with respect to the shares of the corporation that they may hold, except the right to transfer such shares in such a manner that the Noncompliance Status will cease to exist. No transfers of shares of domestic record to Aliens shall be made if a Noncompliance Status exists or if such transfer would result in a Noncompliance Status. If the corporation shall determine that stock of domestic record in fact is held or voted, in whole or in part, by or for the account of an Alien, and that such interest, but for this Section 5, would give rise to a Noncompliance Status, the holder of such stock shall not be entitled to vote, to receive dividends, or to exercise any other normal stockholder rights, except the right to transfer such stock to a citizen of the United States of America. -24- 29 Alien voting and equity interests and rights in stock of the corporation and the citizenship of transferees of the corporation's stock shall be determined in conformity with regulations prescribed by or upon the approval of the Board of Directors, which shall not be less restrictive than the requirements imposed by the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission. The Board of Directors shall be authorized, at any time and from time to time, to adopt such other provisions as the directors may deem necessary or desirable to avoid violation of the provisions of Section 310 of the Communications Act of 1934 as now in effect or as it may hereafter from time to time be amended, and to carry out the provisions of this Section 5. Section 6. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE X GENERAL PROVISIONS Section 1. Dividends. The Board of Directors from time to time may declare, and the corporation may pay, dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of the Certificate of Incorporation and these Bylaws. -25- 30 Section 2. Reserves. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. Section 3. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors from time to time may designate. Section 4. Fiscal Year. The fiscal year of the corporation shall be the calendar year. Section 5. Seal. The corporate seal shall have inscribed thereon the name of the corporation and may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE XI INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 1. Actions, Suits, or Proceedings Other Than by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and -26- 31 amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 2. Actions or Suits by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person -27- 32 shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 3. Indemnification for Costs, Charges, and Expenses of Successful Party. Notwithstanding the other provisions of this Article XI, to the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith. Section 4. Determination of Right to Indemnification. Any indemnification under Sections 1 and 2 of this Article XI (unless ordered by a court) shall be paid by the corporation unless a determination is made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the vote of the holders of a majority of the voting power of all of the shares entitled to vote thereon, that indemnification of the director, officer, employee or agent is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. -28- 33 Section 5. Advance of Costs, Charges and Expenses. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding, unless such action, suit or proceeding was authorized against an officer or director of the corporation by a majority of the directors not named as defendants therein, in which case such costs, charges and expenses may be paid by the corporation in advance if authorized by a majority of the directors not named as defendants therein; provided further, however, that the payment of such costs, charges and expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in this Article XI. Such costs, charges and expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may, in the manner set forth above, and upon approval of such director, officer, employee or agent of the corporation, authorize the corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the corporation is a party to such action, suit or proceeding. Section 6. Procedure for Indemnification. Any indemnification under Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within sixty (60) days, upon the written request of the director, officer, employee -29- 34 or agent. The right to indemnification or advances as granted by this Article XI shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction, if the corporation denies such request, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article XI where the required undertaking, if any, has been received by the corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 7. Other Rights; Continuation of Right to Indemnification. The indemnification and advancement of costs, charges and expenses provided by this Article XI shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of costs, charges and expenses may be entitled under any law (common or statutory), other Bylaw provision, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her -30- 35 official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the corporation, and shall continue as to a person who has ceased to be a director, officer, employee or agent as to actions taken while he or she was such a director, officer, employee or agent, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the corporation and each director, officer, employee or agent of the corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer, employee or agent or the obligations of the corporation arising hereunder. Section 8. Extent of Indemnification. In addition to the specific indemnification provided for herein, the corporation shall indemnify each person who is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provisions in effect on the date hereof, or (ii) by the corporation's Certificate of Incorporation as in effect on the date hereof. Subject to the exceptions and conditions set forth in Article XI, Section 2 of these Bylaws, the corporation shall also advance expenses to any of the foregoing individuals to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other -31- 36 statutory provision in effect on the date hereof, or (ii) by the corporation's Certificate of Incorporation as in effect on the date hereof. Section 9. Insurance. Notwithstanding the foregoing, the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Article. Section 10. Savings Clause. If this Article XI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director, officer, employee and agent of the corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article XI that shall not have been invalidated and to the full extent permitted by applicable law. -32- 37 ARTICLE XII AMENDMENTS The initial Bylaws of the corporation shall be adopted by the Board of Directors. The power to alter, amend, or repeal the Bylaws or adopt new Bylaws, subject to repeal or change by action of the stockholders, is vested in the Board of Directors. Thus, these Bylaws may be altered, amended, or repealed or new Bylaws may be adopted by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board, subject to repeal or change at any regular or special meeting of stockholders at which a quorum is present or represented by the affirmative vote of not less than two-thirds of the voting power of all of the shares entitled to vote at such meeting, voting together as a single class, and present or represented thereat, provided notice of the proposed repeal or change is contained in the notice of such meeting of stockholders. -33- EX-4.2 3 d84902ex4-2.txt SPECIMEN FORM OF CERTIFICATE-SERIES A COMMON STOCK 1 EXHIBIT 4.2 COMMON COMMON SERIES A [ARTWORK] SERIES A PAR VALUE $1.67 EACH PAR VALUE $1.67 EACH NUMBER SHARES [DS ] [ ] INCORPORATED UNDER THE LAWS SEE REVERSE SIDE FOR OF THE STATE OF DELAWARE RIGHTS PLAN CERTIFICATION BELO CORP. THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 080555 10 5 CANTON, MASSACHUSETTS AND SEE REVERSE FOR CERTAIN DEFINITIONS NEW YORK, NEW YORK AND RESTRICTIONS THIS CERTIFIES THAT IS THE OWNER OF FULLY-PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF BELO CORP. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued under and shall be subject to all of the provisions of the Certificate of Incorporation and Bylaws of the Corporation and any amendments thereto, copies of which are on file with the Corporation and the Transfer Agent, to all of which the holder by acceptance hereof, assents. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: COUNTERSIGNED AND REGISTERED: [SEAL] /s/ ROBERT W. DECHERD CHAIRMAN OF THE BOARD FLEET NATIONAL BANK TRANSFER AGENT AND REGISTRAR /s/ BRENDA C. MADDOX ASSISTANT SECRETARY AUTHORIZED SIGNATURE
2 BELO CORP. The Corporation is authorized to issue three series of Common Stock (Series A, Series B, and Series C) and more than one series of preferred stock. Upon written request of the recordholder of this certificate to the Corporation at its principal place of business or registered office, a full statement of the powers, designations, preferences, and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of such preferences and/or rights will be furnished without charge. The Communications Act of 1934 imposes restrictions on the ownership of shares of the Corporation by aliens. Article IX, Section 5 of the Bylaws of the Corporation provides that (a) not more than one-fourth of the equity or voting power of the Corporation shall at any time be owned of record or voted by or for the account of aliens, and (b) if the stock records of the Corporation shall at any time disclose one-fourth alien ownership or voting power, no transfers of shares to aliens will be made and, if it shall thereafter be found that such shares are in fact held by or for the account of an alien, such shares will not be entitled to vote, to receive dividends, or to any other rights, except the right to transfer such shares to a United States citizen. For these purposes, "alien" shall include the following: any individual not a citizen of the United States of America and any representative of any such individual; any foreign government or representative thereof; any corporation or other entity organized under the laws of any foreign government; any corporation directly or indirectly controlled by other than a United States citizen; any partnership of which any partner is an alien, except for limited partnerships with alien partners who are insulated in accordance with the rules and regulations of the Federal Communications Commission from material involvement in the management or operation of the media-related activities of the partnership; and any other entity or individual determined to be an alien under Section 310 of the Communications Act of 1934, as amended, or the rules, regulations and policies of the Federal Communications Commission. In determining the number of shares that are owned or voted by or for the account of aliens, the Corporation shall include in the calculation indirect as well as direct interests of aliens in such shares, in accordance with the policies and procedures of the Federal Communications Commission. ---------- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of the certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian ___________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act of survivorship and not as ___________________________________ tenants in common (State) Additional abbreviations may also be used though not in the above list. ---------- For value received, __________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE [ ] _______________________________________________________________________________ PLEASE PRINT OR TYPE NAME AND ADDRESS OF ASSIGNEE, INCLUDING ZIP CODE _______________________________________________________________________________ ________________________________________________________________________ Shares of the Common Stock represented by the within certificate, and do hereby irrevocably constitute and appoint ___________________________________________, Attorney to transfer such stock on the books of the within-named Corporation with full power of substitution in the premises. Dated: __________________________________ Signature(s) Guaranteed: ________________________________________ ________________________________________ THE SIGNATURE(S) MUST BE GUARANTEED BY Signature(s) AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT ASSOCIATIONS AND CREDIT UNIONS WITH MUST CORRESPOND WITH THE NAME(S) AS WRITTEN MEMBERSHIP IN AN APPROVED SIGNATURE UPON THE FACE OF THE CERTIFICATE IN GUARANTEE MEDALLION PROGRAM), PURSUANT EVERY PARTICULAR, WITHOUT ALTERATION OR TO S.E.C. RULE 17Ad-15. ENLARGEMENT OR ANY CHANGE WHATEVER.
---------- This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between the Corporation and the Rights Agent, dated as of March 10, 1986, amended and restated as of February 28, 1996, as further amended or supplemented from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights beneficially owned by Acquiring Persons (as defined in the Rights Agreement) may become null and void. EX-4.3 4 d84902ex4-3.txt SPECIMEN FORM OF CERTIFICATE-SERIES B COMMON STOCK 1 EXHIBIT 4.3 NUMBER THE SHARES REPRESENTED HEREBY ARE SHARES [DB ] SUBJECT TO (i) RESTRICTIONS ON TRANSFER [ ] AND THE REGISTRATION OF TRANSFER, AND (ii) MANDATORY CONVERSION UPON THE OCCURRENCE OF CERTAIN EVENTS -- SEE REVERSE SIDE. BELO CORP. SERIES B COMMON INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP 080555 20 4 PAR VALUE $1.67 EACH THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MASSACHUSETTS SEE REVERSE FOR CERTAIN DEFINITIONS AND NEW YORK, NEW YORK AND RESTRICTIONS This Certifies that SEE REVERSE SIDE FOR RIGHTS PLAN CERTIFICATION is the owner of FULLY-PAID AND NONASSESSABLE SHARES OF SERIES B COMMON STOCK OF BELO CORP. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued under and shall be subject to all of the provisions of the Certificate of Incorporation and Bylaws of the Corporation and any amendments thereto, copies of which are on file with the Corporation and the Transfer Agent, to all of which the holder, by acceptance hereof, assents. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: COUNTERSIGNED AND REGISTERED: [SEAL] FLEET NATION BANK TRANSFER AGENT AND REGISTRAR /s/ ROBERT W. DECHERD /s/ BRENDA C. MADDOX CHAIRMAN OF THE BOARD ASSISTANT SECRETARY AUTHORIZED SIGNATURE SEE REVERSE SIDE FOR RESTRICTIONS ON THE RIGHTS, PRIVILEGES, AND PREFERENCES OF THESE SHARES AND HOLDERS THEREOF.
2 BELO CORP. The Corporation is authorized to issue three series of Common Stock (Series A, Series B, and Series C) and more than one series of preferred stock. Upon written request of the recordholder of this certificate to the Corporation at its principal place of business or registered office, a full statement of the powers, designations, preferences, and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of such preferences and/or rights will be furnished without charge. The holders of Series B Stock are entitled to ten (10) votes per share, voting as a single class with the holders of all outstanding shares of Series A Stock and outstanding shares, if any, of Series C Stock. Shares of Series B Stock are subject to significant restrictions on transfer and registration of transfer and to mandatory conversion upon the occurrence of certain events. In general, Series B Stock can be transferred only to "Permitted Transferees" (as defined in Article Four of the Corporation's Certificate of Incorporation). As a condition to transfer of Series B Stock the Corporation requires affidavits or other proof acceptable to the Corporation and its transfer agent that the transferee is a Permitted Transferee. Series B Stock presented for transfer shall be presumed to be presented for conversion and delivery of Series A Stock to a person who is not a Permitted Transferee unless accompanied by such evidence to the contrary when delivered to the Corporation or its transfer agent. Shares of Series B Stock are freely convertible into shares of Series A Stock. The holder of such shares may exercise the conversion privilege at any time by surrendering the certificate(s) representing Series B Stock to the Corporation or its transfer agent and completing and signing the written notice of election to convert such shares into Series A Stock set forth at the bottom of this certificate. All statements herein are qualified in their entirety by reference to the provisions of Article Four of the Corporation's Certificate of Incorporation and the Certificate of Designation by which the Series B Stock was created, both of which are incorporated herein by this reference. The Communications Act of 1934 imposes restrictions on the ownership of shares of the Corporation by aliens. Article IX, Section 5 of the Bylaws of the Corporation provides that (a) not more than one-fourth of the equity or voting power of the Corporation shall at any time be owned of record or voted by or for the account of aliens, and (b) if the stock records of the Corporation shall at any time disclose one-fourth alien ownership or voting power, no transfers of shares to aliens will be made and, if it shall thereafter be found that such shares are in fact held by or for the account of an alien, such shares will not be entitled to vote, to receive dividends, or to any other rights, except the right to transfer such shares to a United States citizen. For these purposes, "alien" shall include the following: any individual not a citizen of the United States of America and any representative of any such individual; any foreign government or representative thereof; any corporation or other entity organized under the laws of any foreign government; any corporation directly or indirectly controlled by other than a United States citizen; any partnership of which any partner is an alien, except for limited partnerships with alien partners who are insulated in accordance with the rules and regulations of the Federal Communications Commission from material involvement in the management or operation of the media-related activities of the partnership; and any other entity or individual determined to be an alien under Section 310 of the Communications Act of 1934, as amended, or the rules, regulations and policies of the Federal Communications Commission. In determining the number of shares that are owned or voted by or for the account of aliens, the Corporation shall include in the calculation indirect as well as direct interests of aliens in such shares, in accordance with the policies and procedures of the Federal Communications Commission. ---------- ABBREVIATIONS The following abbreviations, when used in the inscription on the face of the certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian ___________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act of survivorship and not as ___________________________________ tenants in common (State) Additional abbreviations may also be used though not in the above list. ---------- For value received, __________________ hereby sell, assign, and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE [ ] _______________________________________________________________________________ PLEASE PRINT OR TYPE NAME AND ADDRESS OF ASSIGNEE, INCLUDING ZIP CODE _______________________________________________________________________________ ________________________________________________________________________ Shares of the Common Stock represented by the within certificate, and do hereby irrevocably constitute and appoint ____________________________________________ Attorney to transfer such stock on the books of the within-named Corporation with full power of substitution in the premises. Dated: __________________________________ Signature(s) guaranteed: ________________________________________ ________________________________________ THE SIGNATURE(S) MUST BE GUARANTEED BY Signature(s): AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT ASSOCIATIONS AND CREDIT UNIONS WITH MUST CORRESPOND WITH THE NAME(S) AS WRITTEN MEMBERSHIP IN AN APPROVED SIGNATURE UPON THE FACE OF THE CERTIFICATE IN GUARANTEE MEDALLION PROGRAM), PURSUANT EVERY PARTICULAR, WITHOUT ALTERATION OR TO S.E.C. RULE 17Ad-15. ENLARGEMENT OR ANY CHANGE WHATEVER.
---------- UNLESS THE FOLLOWING CERTIFICATE OF PERMITTED TRANSFEREE IS COMPLETED AT TIME OF REQUEST FOR TRANSFER, SHARES OF SERIES A STOCK (RATHER THAN SERIES B STOCK) WILL BE ISSUED AUTOMATICALLY ON A SHARE-FOR-SHARE BASIS UPON TRANSFER PURSUANT TO THE FOREGOING ASSIGNMENT CERTIFICATE OF PERMITTED TRANSFEREE The undersigned hereby certifies that the undersigned, the assignee of _____________ shares of Series B Stock represented by the within certificate, is _________________________________________________________________________ (State relationship to assignor) of the assignor and as such is a Permitted Transferee (as defined in Article Four of the Corporation's Certificate of Incorporation). The undersigned hereby requests that such shares of Series B Stock be transferred to and registered in the name of the undersigned. The undersigned hereby acknowledges that such shares of Series B Stock may not be transferred into "street" or nominee name or to any person who is not a Permitted Transferee and that any such shares subsequently transferred to "street" or nominee name or to a person who is not such a Permitted Transferee will be deemed to have been converted automatically into shares of Series A Stock in accordance with Article Four of the Corporation's Certificate of Incorporation. ________________________________________ ________________________________________ Address Print Name ________________________________________ ________________________________________ City, State, Zip Code Signature Dated __________________________________
NOTICE OF ELECTION TO CONVERT SHARES OF SERIES B STOCK INTO SHARES OF SERIES A STOCK The undersigned hereby converts ______________________________ shares of Series B Stock represented by this certificate into a like number of shares of Series A Stock to be registered in the name of the undersigned (any balance of shares not converted hereby will be returned to the undersigned as shares of Series B Stock). Dated _________________________________ ________________________________________ Signature This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between the Corporation and the Rights Agent, dated as of March 10, 1986, amended and restated as of February 28, 1996, as further amended or supplemented from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights beneficially owned by Acquiring Persons (as defined in the Rights Agreement) may become null and void.
EX-4.6 5 d84902ex4-6.txt SUPPLEMENT NO. 2 TO AMENDED/RESTATED RIGHTS AGRMNT 1 EXHIBIT 4.6 SUPPLEMENT NO. 2 TO AMENDED AND RESTATED RIGHTS AGREEMENT This Supplement No. 2 to the Amended and Restated Rights Agreement (the "Rights Agreement") dated as of March 10, 1986, as amended and restated as of February 28, 1996, as amended by Supplement No. 1 dated as of November 11, 1996, between A. H. Belo Corporation, a Delaware corporation (the "Company"), and Chemical Mellon Shareholder Services, L.L.C ("Chemical Mellon"), is made and entered into by and between the Company and The First National Bank of Boston ("Bank of Boston"), as successor to Chemical Mellon as Rights Agent. RECITALS WHEREAS, the Board of Directors of Belo has declared a two-for-one stock split in the form of a stock dividend on all outstanding shares of its Common Stock, pursuant to which, on or about June 5, 1998 it will distribute one share of its Series A Common Stock for each share of Series A Common Stock held as of May 22, 1998 and one share of its Series B Common Stock for each of Series B Common Stock held as of May 22, 1998 (the "Distribution"); and WHEREAS, in connection with the Distribution, Belo and Bank of Boston desire to amend the Rights Agreement pursuant to Section 27 of the Rights Agreement; NOW THEREFORE, the parties hereto agree to amend the Rights Agreement as follows: "Pursuant to the provisions of Section 11(n), as a result of the Distribution (i) each Right shall entitle the holder thereof to purchase one two-hundredth of a Preferred Share, rather than one one-hundredth, at an exercise price of $75 per one two-hundredth of a Preferred Share, and (ii) the redemption price of $.01 per Right set forth in Section 23 is hereby adjusted to $.005 per Right." 2 IN WITNESS WHEREOF, the parties hereto have caused this Supplement No. 2 to be duly executed and attested effective as of the 5th day of June, 1998. A. H. BELO CORPORATION ATTEST: /s/ MICHAEL J. MCCARTHY By: /s/ MARIAN SPITZBERG - -------------------------- ------------------------------ Name: Michael J. McCarthy Name: Marian Spitzberg --------------------- ----------------------------- Title: Secretary Title: Vice President -------------------- ---------------------------- BANK BOSTON, N.A. ATTEST /s/ ANGELA DRAY By: /s/ TYLER HAYNES - ------------------------- ------------------------------ Name: Angela Dray Name: Tyler Haynes -------------------- ----------------------------- Title: Account Manager Title: Director, Client Services ------------------ --------------------------- 2 EX-10.2.1(B) 6 d84902ex10-2_1b.txt FIRST AMENDMENT TO BELO SAVINGS PLAN 1 EXHIBIT 10.2(1)(b) FIRST AMENDMENT TO THE BELO SAVINGS PLAN (AS AMENDED AND RESTATED EFFECTIVE JULY 1, 2000) A. H. Belo Corporation, a Delaware corporation, pursuant to authorization by the Compensation Committee of the Board of Directors, adopts the following amendments to the Belo Savings Plan (the "Plan"), effective as of December 31, 2000, except as otherwise indicated. 1. Section 1.6 of the Plan is amended in its entirety to read as follows: 1.6 "Company" means Belo Corp., a Delaware corporation (formerly A. H. Belo Corporation). 2. The second paragraph of Section 1.31 of the Plan ("Year of Service") is amended in its entirety, effective as of July 1, 2000, to read as follows: Notwithstanding the foregoing, if an Employee is classified as a part-time Employee in accordance with standard personnel practices of his Participating Employer, the term `Year of Service' means, solely for purposes of satisfying the eligibility requirements of Section 2.1, the completion of 1,000 Hours of Service during the 12 consecutive months beginning on the date the Employee first performs an Hour of Service, or during the 12 consecutive months beginning on any anniversary of such date. 3. Section 2.1 of the Plan is amended in its entirety to read as follows: 2.1 Eligibility to Participate (a) Deferral Contributions. Each Employee who is not a Participant as of December 31, 2000, will become a Participant and may authorize Deferral Contributions to the Plan as of the first payroll period beginning on or after the latest of (i) January 1, 2001, (ii) the date on which the Employee first completes an Hour of Service and (iii) the date on which he has attained age 21, or as soon as administratively practicable thereafter, if he is then employed by a Participating Employer. An Employee who becomes a Participant pursuant to this Section 2.1(a) will not be eligible for Participating Employer matching contributions or profit sharing contributions until he satisfies the eligibility requirements of Section 2.1(b). (b) Matching and Profit Sharing Contributions. Each Employee who is not a Participant as of December 31, 2000, will become a Participant with respect to Participating Employer matching contributions and profit sharing contributions as of the first payroll period beginning on or after the date he has both attained age 21 and 2 completed a Year of Service, or as soon as administratively practicable thereafter, if he is then employed by a Participating Employer. 4. Section 2.3 of the Plan is amended in its entirety to read as follows: 2.3 Reemployment Provisions. If an Employee terminates employment before satisfying the eligibility requirements set forth in Section 2.1(b) with respect to Participating Employer matching contributions and profit sharing contributions, and is reemployed by a Controlled Group Member before incurring a number of consecutive One Year Breaks in Service at least equal to the greater of five or his aggregate Years of Service, he will become a Participant with respect to such matching and profit sharing contributions on the later of the date initially determined under Section 2.1(b) or the date he is credited with one or more Hours of Service by a Participating Employer after reemployment; but if he is reemployed by a Controlled Group Member after incurring a number of consecutive One Year Breaks in Service at least equal to the greater of five or his aggregate Years of Service, he will be treated as a new Employee for purposes of Section 2.1(b) and his Hours of Service completed before his reemployment will be disregarded in determining when he will become a Participant with respect to such contributions. 5. Section 3.1(b) of the Plan is amended in its entirety to read as follows: (b) Modification and Suspension of Deferral Contributions. A Participant may increase or decrease the amount of his Deferral Contributions and may suspend his Deferral Contributions at any time during the Plan Year. A Participant who suspends his Deferral Contributions may again authorize Deferral Contributions to the Plan and such authorization will be effective as soon as administratively practicable. If a Participant receives a distribution on account of hardship pursuant to Section 6.3, such Participant's Deferral Contributions will automatically be suspended for a 12-month period following the date on which such Participant receives the hardship distribution. 6. Section 3.1(c) of the Plan is amended in its entirety to read as follows: (c) Limitations on Deferral Contributions. The sum of a Participant's Deferral Contributions and his elective deferrals (within the meaning of Code section 402(g)(3)) under any other plans, contracts or arrangements of any Controlled Group Member will not exceed $10,500 or such other amount permitted under Code section 402(g) (as such amounts are adjusted for cost of living increases in the manner described in Code section 415(d)) for any taxable year of the Participant. A Participant's Deferral Contributions will also be subject to the deferral percentage limitation set forth in Section 10.6. In the event a Participant's Deferral Contributions and other elective deferrals (whether or not under a plan, contract or arrangement of a Controlled Group Member) for any taxable year exceed the foregoing $10,500 limitation, the excess allocated by the Participant to Deferral Contributions (adjusted for Trust Fund earnings and losses in the manner described in Section 10.6(d)) may, in the discretion of the Committee, be distributed to the Participant no later than April 15 following the close of such taxable year. The amount of Deferral Contributions distributed to a Participant for a Plan Year pursuant to 2 3 this Section will be reduced by any excess Deferral Contributions previously distributed to him pursuant to Section 10.6(c) for the same Plan Year. 7. Section 3.2 of the Plan ("Participating Employer Matching Contributions") is amended by the addition of the following introductory sentence: The provisions of this Section will apply to only those Participants who have satisfied the eligibility requirements of Section 2.1(b). 8. The first sentence of Section 3.3 of the Plan ("Profit Sharing Contributions") is amended in its entirety, effective as of July 1, 2000, to read as follows: The Participating Employers will pay to the Trustee as a profit sharing contribution for each payroll period an amount equal to 2% of the Compensation paid on and after July 1, 2000, to each Participant who is eligible to receive a 75% matching contribution under Section 3.2(a) and who is employed by a Participating Employer on the last day of the payroll period. 9. The first sentence of Section 4.1 of the Plan ("Establishment of Accounts") is amended to read as follows: The Committee will establish a Deferral Contribution Account for each Participant, and to the extent applicable, a Matching Contribution Account, a Profit Sharing Account and a Transfer Account. 10. Section 4.4(b)(ii) of the Plan is amended in its entirety to read as follows: (ii) Special Rule for Deferral Contributions to Purchase Company Stock. Deferral Contributions that are to be invested in Company Stock will be invested by the Trustee in short-term interest-bearing instruments pending the purchase of Company Stock with such contributions. Interest earned on such Deferral Contributions will be accumulated until allocated to Participants' Deferral Contribution Accounts in the manner provided in this paragraph. As soon as practicable after the last day of each calendar quarter, the Trustee will purchase additional shares of Company Stock with accumulated interest, and the additional shares of Company Stock will be credited to each Deferral Contribution Account by the Committee as net income of the Trust Fund, in a uniform and nondiscriminatory manner, based on the ratio that the amount of each eligible Participant's Deferral Contribution Account that is invested in Company Stock as of the last day of such calendar quarter bears to the total amount of all eligible Participants' Deferral Contribution Accounts that is invested in Company Stock as of the last day of such calendar quarter. For purposes of this paragraph, an "eligible Participant" with respect to a calendar quarter is a Participant who is an Employee on the last day of the calendar quarter and who has invested a portion of his Deferral Contribution Account in Company Stock as of the last day of the calendar quarter. 3 4 11. The caption of Section 6.1(b) of the Plan is amended to read "Form of Distributions prior to April 1, 2001." 12. Section 6.1(c) of the Plan is redesignated as Section 6.1(d), and Section 6.1 of the Plan is amended by the addition of a new subsection (c), which will read as follows: (c) Form of Distributions after March 31, 2001. Distributions made after March 31, 2001, will be in the form of a single lump sum payment. 13. The first sentence of Section 6.1(d) of the Plan ("Participant's Consent to Certain Payments") is amended to read as follows: If the amount of a Participant's vested Account balances exceed $3,500 ($5,000 for Plan Years beginning after December 31, 1997), the Committee will not distribute the Participant's vested Account balances to him prior to the date distributions are required to begin under Article 11 following his attainment of age 70 1/2, unless he elects to receive a distribution at any earlier date following termination of employment. 14. The first sentence of Section 6.4 of the Plan ("Distribution Procedures") is amended to read as follows: Distributions pursuant to Sections 6.2 and 6.3 will be made as soon as practicable following the Committee's approval of the Participant's written request for withdrawal and will be made in the form described in Section 6.1(b) or Section 6.1(c), as applicable. 15. The second sentence of Section 7.4(a) of the Plan ("Distributions to Beneficiaries -- General Provisions") is amended to read as follows: The Participant's vested Account balances will be distributed to the Beneficiary in the same form or forms that would have been available to the Participant at the time of the Beneficiary's distribution election. 16. The second sentence of Section 11.2(b) ("General Restrictions -- Lump Sum Distribution Required") is amended, effective as of July 1, 2000, to read as follows: A lump sum distribution for this purpose will be a distribution described in Code section 402(e)(4)(D) (without regard to subclauses (I), (II), (III) and (IV) of clause (i) thereof.) 17. The second sentence of Section 11.3 of the Plan ("Restrictions on Commencement of Distributions") is amended, effective as of July 1, 2000, to read as follows: Unless a Participant elects otherwise in writing, distribution of the Participant's vested interest in his account will begin no later than the 60th day after the close of the Plan Year in which occurs the latest of (i) the date on which the Participant attains age 65, (ii) the 4 5 tenth anniversary of the Plan Year in which the Participant began participation in the Plan, or (iii) the Participant's termination of employment. 18. The second sentence of Section 11.4 of the Plan ("Restrictions on Delay of Distributions") is amended to read as follows: Distribution of a Participant's entire vested and nonforfeitable interest will be made not later than April 1 following the calendar year (i) in which he attains age 70 1/2, or (ii) in which his employment with the Controlled Group terminates, if later, except that a distribution to a Participant who is a 5-percent owner (as such term is defined in Code section 416(i)(l)(B)(i)) with respect to the Plan Year in which he attains age 70 1/2 will be made pursuant to clause (i). 19. Section 11.6 of the Plan is amended to read as follows: 11.6 Restrictions in the Event of Death. Upon the death of a Participant, the following distribution provisions will apply to limit the Beneficiary's ability to delay distributions. If the Participant dies after distribution of his benefit has begun, the remaining portion of his benefit will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death; but if he dies before distribution of his benefit commences, his entire benefit will be distributed in a single lump sum payment no later than December 31 of the fifth calendar year following the date of the Participant's death. If the designated Beneficiary is the Participant's surviving spouse, the date that distribution is required will not be earlier than December 31 of the calendar year in which the Participant would have attained age 70 1/2, and, if the spouse dies before payment is made, distribution will be made to the spouse's Beneficiary in accordance with the preceding sentence with the required distribution date measured from the date of the spouse's death. Any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority. Executed at Dallas, Texas, this 20th day of December, 2000. A. H. BELO CORPORATION By /s/ MARIAN SPITZBERG ------------------------------------- Marian Spitzberg Senior Vice President/Human Resources 5 EX-10.2.7 7 d84902ex10-2_7.txt RETIREMENT AGREEMENT-WARD L. HUEY, JR. 1 EXHIBIT 10.2(7) RETIREMENT AGREEMENT This RETIREMENT AGREEMENT (the "Agreement") is entered into as of the 3rd day of November, 2000, by and between A. H. Belo Corporation, a Delaware corporation with its principal executive offices at 400 South Record Street, Dallas, Texas 75202 ("Belo"), and WARD L. HUEY, JR., an individual residing at 4000 Miramar, Dallas, Texas 75205 ("WLH"). WITNESSETH: WHEREAS, WLH has made significant contributions to Belo, including its subsidiaries and affiliates (collectively, the "Companies"), for many years and is presently serving as Belo's Vice Chairman of the Board and President of the Broadcast Division and in a variety of other capacities; and WHEREAS, WLH desires to retire and resign from full-time service to the Companies; and WHEREAS, WLH's intimate knowledge of the business and affairs of the Companies is of material value to the Companies; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties do hereby agree as follows: Section 1. Scheduled Retirement. Unless WLH earlier resigns or is terminated for cause, WLH shall resign and retire effective December 31, 2000 (the "Retirement Date") from all offices, directorships, committees and other positions held by him with Belo and its subsidiaries and affiliates, except that WLH shall continue to serve as a trustee of The Belo Foundation at the pleasure of the Foundation's board, but no later than December 31, 2003. 2 Section 2. Events Upon Retirement. WLH's resignation and retirement shall result in the receipt of additional compensation (to which he would not otherwise be entitled) and the treatment of his benefits as follows: (a) Additional Compensation. WLH shall receive additional compensation in the amount of $1,016,126, payable in the amount of $500,000 on or before the Retirement Date and $516,126 within 15 days after the Retirement Date. (b) Bonus. WLH shall be eligible for any 2000 year-end bonus from Belo as determined and paid pursuant to Belo's Executive Compensation Plan ("ECP"). (c) Stock Options. The table below sets forth all unexercised options granted to WLH under the terms of Belo's 1986 Long Term Incentive Plan and the 1995 Executive Compensation Plan. Upon the Retirement Date under the terms of the Plans, all of WLH's unvested options shall vest and shall remain exercisable throughout their respective terms.
Number of Date of Exercise Number of Unvested Date of Grant Price Vested options options Total Termination -------- -------- -------------- ---------- ----- ----------- 12/15/93 $12.19 72,400 0 72,400 12/15/03 12/14/94 $13.34 72,900 0 72,900 12/14/04 12/13/95 $17.38 118,000 0 118,000 12/13/05 12/18/96 $17.75 121,000 0 121,000 12/18/06 12/18/96 $17.75 0 200,000 200,000 12/18/06 12/19/97 $26.38 93,800 40,200 134,000 12/19/07 12/16/98 $17.75 56,000 84,000 140,000 12/16/08 12/16/99 $19.13 0 240,000 240,000 12/16/09
(d) G. B. Dealey Pension Plan. VLH shall participate in the G. B. Dealey Retirement Pension Plan as an employee of Belo through the Retirement Date, but not thereafter except as provided under the terms of such Plan. -2- 3 (e) Employee Savings Plan ("401(k) Plan"). WLH shall participate in the 401(k) Plan as an employee of Belo through the Retirement Date, but not thereafter except as provided under the terms of such Plan. (f) Management Security Plan. WLH shall be entitled to those benefits accrued to him by virtue of his participation in the Management Security Plan through the Retirement Date. (g) Supplemental Executive Retirement Plan (SERP). Within 15 days after the Retirement Date, WLH shall receive the amount in his vested SERP account as of such date, which amount shall be a minimum of $2,839,883. (h) Medical/Dental Coverage. On the Retirement Date, WLH (as an employee) and his spouse cease to be covered under Belo's medical and dental and other employee benefit plans. Within 15 days after the Retirement Date, WLH shall receive a separate lump sum payment in the amount of $25,000 to assist in defraying the expenses of WLH and his spouse in obtaining continuing medical coverage through age 65. (i) Life Insurance. WLH's Company-sponsored life insurance shall terminate as of the Retirement Date. (j) Computer and Related Equipment. WLH shall be entitled to retain the computers, installed software, and related electronic equipment previously provided him by Belo. (k) Accrued Vacation. Within 15 days after the Retirement Date, WLH shall receive a cash payment for his accrued but unused vacation, if any. -3- 4 Section 3. Retention as a Consultant. For the period from January 1, 2001 through December 31, 2003 (the "Retention Period"), WLH shall be available to consult and perform such duties with respect to the business and affairs of Belo and its subsidiaries and affiliates on a part time basis as may be reasonably requested from time to time by the Chief Executive Officer of Belo (the "CEO"). WLH shall be given reasonable advance notice when his advice or services are desired and shall devote such part of his time to performing such services as shall be reasonably necessary to perform them effectively; provided, however, that WLH shall not be required to render such services during periods where he is unable to do so on account of illness, death or other incapacity or other reasonable cause, which shall include vacation or other business matters. During the Retention Period, the following provisions shall be applicable: (a) Duties. WLH shall be required to devote such time to the business and affairs of Belo during regular business hours as may be reasonably necessary to perform the services being requested of him, and shall perform all such services conscientiously, faithfully and in the best interest of Belo. (b) Compensation. Within 15 days after the Retirement Date, WLH shall receive the sum of $2,734,881, constituting a non-refundable payment in advance for his performance during the Retention Period. (c) Nature of Relationship. It is understood and agreed that the relationship of WLH to Belo shall be that of an independent contractor and not an employee. WLH shall have no authority to bind Belo or any of its subsidiaries or affiliates. (d) Expenses. Belo shall reimburse WLH for all reasonable expenses incurred by WLH in connection with the performance of his duties described in this Section 3, but only to the extent approved in advance by the CEO. -4- 5 (e) Insurance, Benefits and Office Support. Except as otherwise provided in this Agreement, Belo shall not provide WLH with, or pay or reimburse WLH for, any office space, club dues, insurance, secretarial support or any other benefits which might otherwise have been available to him prior to the Retirement Date. Section 4. Confidentiality. WLH agrees that he shall not, during the term 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 confidential dealings or other confidential or proprietary information concerning the business, finances, transactions or affairs of the Companies. WLH hereby certifies that he has returned or will promptly return all files, records or information of any sort with respect to such confidential dealings or other confidential or proprietary information of or concerning the Companies. WLH acknowledges that, in his employment with Belo, he acquired confidential and proprietary information of a highly sensitive nature, and that the protection of this information is critical to the Companies. WLH further acknowledges that he received sophisticated training and development in the media and communications business while employed by Belo. Section 5. Covenant Not to Compete. In consideration of the promises and payments made or to be made by Belo pursuant to this Agreement, WLH agrees that prior to December 31, 2003: (a) Except as approved in writing in advance by the CEO, WLH will not, as principal, partner, officer, director, agent, employee or consultant or in any other capacity, engage in, assist, or advise any person or firm engaged in any newspaper, television or radio broadcasting, cable or other business which competes with the Companies or their affiliates and which persons or firms are -5- 6 located within 100 miles of the principal offices of any newspaper, television broadcasting station or cable news service operated by the Companies as of the date of this Agreement. For purposes of the 100-mile radius referred to above, the location of competing persons or firms shall be deemed to be the location with which WLH would actually be working. Nothing in this section shall be deemed to prevent WLH from owning directly or indirectly any publicly-held securities or other passive investments in any such competing entities. WLH acknowledges that the covenants in Sections 4 and 5 will not unreasonably limit his ability to earn a living. (b) No Solicitation. WLH shall not directly or indirectly for his own account or for the benefit of any other party (i) solicit, induce, or entice any employee or subcontractor of the Companies to terminate his/her employment or contract with the Companies, or (ii) solicit, induce, or entice any customer of the Companies to establish a business relationship with competitors within the geographic markets specified in Section 5(a). Section 6. Non-Exclusive Remedies. WLH recognizes and acknowledges that the Companies would suffer irreparable harm and substantial loss if WLH violated any of the terms and provisions of Section 5. Accordingly and because of the fact that the actual damages which might be sustained by the Companies as a result of any breach of the foregoing Section 5 would be difficult, if not impossible, to ascertain, WLH agrees, at the election of the Companies and in addition to, and not in lieu of, the Companies' right to seek all other remedies and damages which the Companies may have at law or in equity for such breach, that the Companies shall be entitled to injunctive relief restraining WLH from violating such terms and provisions of this -6- 7 Agreement. It is the express intention of the parties to this Agreement to comply with all laws which may be applicable to this Agreement. Should any restriction contained in Section 5 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 WLH breaches any of the terms and provisions contained in this Agreement, including Section 5, the Companies shall have the right to cease making any further payments or providing any other benefits or consideration pursuant to Sections 2 and 3. Section 7. Publicity/Press Release. Belo and WLH mutually agree that each shall refrain from making any public statement that is materially inconsistent with the press release issued by Belo on July 10, 2000 (the "Press Release"). Section 8. Release. (a) WLH, in consideration of the payments to be made by Belo and the provision of the other benefits herein, hereby irrevocably and unconditionally releases and forever discharges the Companies and their past and present officers, trustees, directors, agents, employees, representatives, successors and assigns, and the Companies, in consideration of the premises and promises made by WLH, irrevocably and unconditionally release and forever discharge WLH and his heirs, agents, personal representatives, estate, successors and assigns from any and all suits, actions, charges, causes of action, 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 -7- 8 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 WLH's employment with Belo, as well as the separation of his employment with Belo; 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 1967 ("ADEA") (for all Claims arising through the date WLH signs 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 Belo, 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 Belo'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 Companies and WLH under this Agreement, or (ii) any Claims arising out of or related to fraud, dishonesty, gross negligence or willful misconduct of WLH or the Companies. WLH and the Companies also specifically release the released parties from any -8- 9 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 Companies and their past and present officers, trustees, directors, agents, employees, representatives, successors and assigns, jointly and severally, and WLH and his heirs, agents, personal representatives, estate, successors and assigns. On the Retirement Date, WLH and the Companies shall each execute and deliver to the other an updated release substantially in the form attached hereto. (b) In order to comply with the Older Workers' Benefit Protection Act, it is necessary that Belo advise WLH 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 2l days during which WLH may consider whether to accept or reject the offer. As part of this Agreement, WLH is asked to specifically waive any and all rights and claims arising under the ADEA. By his execution of this Agreement, WLH 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) WLH or his attorney has made such investigation of the facts pertaining to this Agreement (including the release) as may be necessary; and (iii) WLH understands that he has the right within seven days after his signing this Agreement to revoke his execution of this Agreement to the extent that this Agreement waives or releases all rights and claims under the ADEA. If WLH so revokes his execution of this Agreement, the Agreement shall nevertheless remain in effect for all other purposes; provided, however that the payments to be made -9- 10 under Section 2(a) shall be in the amount of $10,000 and no payments shall be made under Section 3(b). (c) Notwithstanding Sections 8(a) and (b) above, WLH shall be entitled to the same rights to and benefits of indemnification and directors and officers insurance coverage to the extent provided current directors and officers of the Companies, and this Agreement shall not release or discharge any of such rights or benefits. Section 9. Arbitration Agreement. The parties hereto do not intend any provision of this Agreement to modify their existing Arbitration Agreement dated April 22, 1994. Section 10. Miscellaneous. This Agreement represents the entire understanding and agreement between the parties 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 and their respective heirs, executors, administrators, successors and permitted assigns. WLH 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 Companies shall have no further liability hereunder; provided that, the foregoing prohibitions will not apply to any transfer resulting from the death of WLH. 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. Section 11. Taxes; Securities Laws. WLH agrees that Belo is obligated to deduct and withhold certain amounts payable by Belo to WLH pursuant to this Agreement for taxes and -10- 11 other amounts required by law on account of the compensation and other benefits described in this Agreement. WLH also agrees that he will comply with all provisions of the federal securities laws, to the extent still applicable, in trading of Belo's securities referenced herein. Section 12. Further Assurances. From time to time after the execution of this Agreement, each of Belo and WLH 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 /s/ WARD L. HUEY, JR. By: /s/ ROBERT W. DECHERD - ---------------------------- ---------------------------- WARD L. HUEY, JR. Robert W. Decherd Chairman of the Board, President and Chief Executive Officer -11- EX-12 8 d84902ex12.txt RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 A. H. BELO CORPORATION Computation of Ratio of Earnings to Fixed Charges (Dollars in thousands)
Year Ended December 31, ---------------------------------------------------- 1996 1997 1998 1999 2000 -------- -------- -------- -------- -------- Earnings: Earnings before income taxes and the cumulative effect of accounting changes $144,040 $154,122 $130,460 $276,453 $266,834 Add: Total fixed charges 29,009 94,069 112,082 116,032 137,808 Less: Interest capitalized 255 510 1,680 2,552 2,398 -------- -------- -------- -------- -------- Adjusted earnings $172,794 $247,681 $240,862 $389,933 $402,244 ======== ======== ======== ======== ======== Fixed Charges: Interest $ 27,898 $ 91,288 $109,318 $113,160 $135,178 Portion of rental expense representative of the interest factor(1) 1,111 2,781 2,764 2,872 2,630 -------- -------- -------- -------- -------- Total fixed charges $ 29,009 $ 94,069 $112,082 $116,032 $137,808 ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 5.96 x 2.63 x 2.15 x 3.36 x 2.92 x ======== ======== ======== ======== ========
- ---------- (1) For purposes of calculating fixed charges, an interest factor of one third was applied to total rent expense for the period indicated. EX-13 9 d84902ex13.txt PORTIONS OF THE 2000 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13 PORTIONS OF THE COMPANY'S 2000 ANNUAL REPORT TO SHAREHOLDERS 2 MARKET DATA The following table lists the high and low trading prices and the closing prices for Series A Common Stock as reported on the New York Stock Exchange for each of the quarterly periods in the last two years, and cash dividends attributable to each quarter.
HIGH LOW CLOSE DIVIDENDS ------ ------ ------ --------- 2000 Fourth Quarter $19.50 $15.20 $16.00 $.07 Third Quarter $20.00 $16.75 $18.44 $.07 Second Quarter $18.06 $14.88 $17.31 $.07 First Quarter $18.88 $12.31 $17.88 $.07 1999 Fourth Quarter $20.75 $17.63 $19.06 $.07 Third Quarter $20.63 $18.06 $19.13 $.07 Second Quarter $24.50 $17.50 $19.69 $.06 First Quarter $19.94 $16.38 $18.25 $.06
On February 28, 2001, the closing price for the Company's Series A Common Stock as reported on the New York Stock Exchange was $18.00. The approximate number of shareholders of record of the Series A and Series B Common Stock at the close of business on such date was 8,721 and 603, respectively. 1 3 SELECTED FINANCIAL DATA The following table presents selected financial data of the Company for each of the five years in the period ended December 31, 2000. For a more complete understanding of this selected financial data, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Consolidated Financial Statements" and "Notes to Consolidated Financial Statements."
In thousands, except share and per share amounts 2000 1999 1998 1997 1996 ----------- ----------- ----------- ----------- ----------- Broadcasting revenues (a) $ 699,503 $ 598,637 $ 593,426 $ 522,560 $ 333,396 Newspaper publishing revenues (b) 872,688 816,976 784,327 693,777 487,560 Interactive media revenues 10,401 6,520 3,214 718 -- Other revenues (c) 14,345 11,849 10,736 17,149 3,352 Intercompany eliminations (d) (8,125) -- -- -- -- ----------- ----------- ----------- ----------- ----------- Net operating revenues $ 1,588,812 $ 1,433,982 $ 1,391,703 $ 1,234,204 $ 824,308 =========== =========== =========== =========== =========== Net earnings (e) $ 150,825 $ 178,306 $ 64,902 $ 82,972 $ 87,505 =========== =========== =========== =========== =========== Per share amounts: Basic earnings per share (e) $ 1.29 $ 1.51 $ .53 $ .72 $ 1.07 Diluted earnings per share (e) $ 1.29 $ 1.50 $ .52 $ .71 $ 1.05 Cash dividends paid $ .28 $ .26 $ .24 $ .22 $ .21 Segment data: Operating cash flow: (f) Broadcasting (g) $ 309,553 $ 245,925 $ 238,743 $ 216,654 $ 122,837 Newspaper publishing (h) $ 251,318 $ 236,167 $ 210,351 $ 206,440 $ 127,945 Interactive media $ (24,947) $ (8,365) $ (2,687) $ (1,542) $ -- Other $ (3,571) $ (4,990) $ (4,182) $ (7,672) $ (865) Operating cash flow margins: Broadcasting (g) 44.3% 41.1% 40.2% 41.5% 36.8% Newspaper publishing (h) 28.8% 28.9% 26.8% 29.8% 26.2% Interactive media -- -- -- -- -- Other -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total assets (a) (b) $ 3,893,260 $ 3,976,264 $ 3,539,089 $ 3,622,954 $ 1,224,072 Long-term debt (i) $ 1,789,600 $ 1,849,490 $ 1,634,029 $ 1,614,045 $ 631,857
(a) The Company purchased nine television stations as part of The Providence Journal Company ("PJC") acquisition in February 1997, KENS in October 1997 and KTVK in November 1999. KMOV was acquired in exchange for KIRO in June 1997 and KVUE was acquired in June 1999 in exchange for KXTV. Belo also sold KASA and KHNL in October 1999 and KOTV in December 2000. (b) The Company purchased The Eagle in December 1995, the Messenger-Inquirer in January 1996, The Providence Journal in February 1997, The Gleaner in March 1997, The Press-Enterprise in July 1997 and the Denton Record-Chronicle in June 1999. Belo sold The Gleaner, The Eagle and the Messenger-Inquirer on November 1, December 1 and December 31, 2000, respectively. (c) "Other" includes revenues associated with the Company's cable news operations (beginning in March 1997) and television production subsidiary. The operations of the television production subsidiary were terminated in December 1998. From March 1997 through June 1997, "Other" also included a cable network acquired in connection with the PJC acquisition. The cable network was subsequently disposed of and its operations are excluded effective July 1, 1997. (d) The intercompany elimination removes $6,677, $1,308, $82 and $58 of revenues for the year ended December, 2000 for Broadcasting, Newspaper publishing, Interactive media and Other, respectively, for advertising provided primarily to the Interactive media segment. (e) Net earnings in 2000 include the following after tax non-recurring transactions: 1) $65,367 (56 cents per share) gain on the sales of KOTV, the Messenger-Inquirer, The Eagle and The Gleaner; 2) $12,190 (10 cents per share) gain on a legal settlement and 3) $18,331 (16 cents per share) reserve for Internet investments. Net earnings in 1999 include the following after-tax gains for certain non-recurring transactions: 1) $49,060 (41 cents per share) non-cash gain on the exchange of KXTV for KVUE; 2) $16,348 (14 cents per share) gain on the sale of KASA and KHNL and 3) $28,489 (24 cents per share) gain on the sale of Belo's investment in Falcon Communications. (f) Operating cash flow is defined as segment earnings from operations plus depreciation and amortization. Operating cash flow is used in the broadcasting and 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. (g) Broadcasting operating cash flow in 1998 includes a non-recurring charge for a voluntary early retirement program and other employee reduction initiatives totaling $6,996. (h) Newspaper publishing operating cash flow in 1998 includes certain voluntary early retirement charges of $6,344 and excludes a non-cash charge of $11,478 for the write-down of a press at The Dallas Morning News. (i) Long-term debt decreased in 2000 due to cash proceeds from the sale of subsidiaries (partially offset by the repurchase of 9,642,325 shares of the Company's stock for $171,712) and increased in 1997 and 1999 due primarily to net borrowings of $1,100,545 and $298,796, respectively, to finance various acquisitions and in 1998 due primarily to the repurchase of 6,727,400 shares of the Company's stock for $129,786. 2 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is an owner and operator of 17 television stations and publisher of four daily newspapers. The following table sets forth the Company's major media assets by segment as of December 31, 2000: Television Broadcasting
Network Market Market Rank(a) Station Affiliation Status Acquired ------ -------------- ------- ----------- ------ -------- 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 Owned (b) March 2000(b) Phoenix 17 KTVK IND Owned November 1999 Phoenix 17 KASW WB Owned (b) March 2000(b) St. Louis 22 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 San Antonio 37 KBEJ UPN LMA (c) Hampton/Norfolk 41 WVEC ABC Owned February 1984 New Orleans 42 WWL CBS Owned June 1994 Louisville 48 WHAS ABC Owned February 1997 Austin 58 KVUE ABC Owned June 1999 Tucson 71 KMSB FOX Owned February 1997 Tucson 71 KTTU(d) UPN LMA (d) Spokane 77 KREM CBS Owned February 1997 Spokane 77 KSKN UPN/WB(e) LMA (d) Boise 123 KTVB NBC Owned February 1997
Newspaper Publishing
Daily Sunday Newspaper Location Acquired Circulation(g) Circulation(g) --------- -------- -------- -------------- -------------- The Dallas Morning News ("DMN") Dallas, TX (f) 520,157 785,758 The Providence Journal ("PJ") Providence, RI February 1997 162,358 230,636 The Press-Enterprise ("PE") Riverside, CA July 1997 166,935 174,636 Denton Record-Chronicle Denton, TX June 1999 15,835 19,443
Interactive Media Belo Interactive, Inc. Includes the Web site operations of Belo's operating companies, interactive alliances and Internet-based products and services. Other Northwest Cable News ("NWCN") Cable news channel distributed to approximately 2 million homes in the Pacific Northwest. Texas Cable News ("TXCN") Cable news channel distributed to approximately 1 million homes in Texas. (a) Market rank is based on the relative size of the television market, or Designated Market Area ("DMA"), among the 210 generally recognized DMAs in the United States, based on November 2000 Nielsen estimates. (b) Belo acquired KONG-TV and KASW-TV, previously operated under local marketing agreements ("LMAs"), on March 1, 2000. (c) Belo entered into an agreement to operate KBEJ-TV under an LMA in May 1999; the station's on-air date was August 3, 2000. (d) Belo has managed KTTU-TV and KSKN-TV under LMAs since February 1997. Belo has agreed to purchase KTTU-TV, subject to Federal Communications Commission ("FCC") approval. (e) The primary affiliation is with UPN. The WB network is currently a secondary affiliation. (f) The first issue of The Dallas Morning News was published by Belo on October 1, 1885. (g) Average paid circulation for the six months ended September 30, 2000 and 1999, respectively, according to the Audit Bureau of Circulation's FAS-FAX report, except for The Providence Journal, for which 2000 circulation data is taken from the Audit Bureau of Circulation's FAS-FAX supplement; and except for the Denton Record-Chronicle, for which 2000 circulation data is taken from the Certified Audit of Circulations Report for the six-month period ended September 30, 2000 and 1999 circulation data is taken from the Certified Audit of Circulations Report for the twelve-month period ended December 31, 1999. 3 5 The Company depends on advertising as its principal source of revenues. As a result, the Company's operations are sensitive to changes in the economy, particularly in the Dallas/Fort Worth metropolitan area, where its two largest properties are located. The Company also derives revenues, to a much lesser extent, from the daily sale of newspapers and from compensation paid by networks to its television stations for broadcasting network programming. All references to earnings per share represent diluted earnings per share. Statements in "Management's Discussion and Analysis of Financial Position and Results of Operations" and "Market Risks" and elsewhere in this Annual Report to Shareholders concerning Belo's business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures, investments 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, 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 Belo's other public disclosures, filings with the Securities and Exchange Commission, and elsewhere in this Annual Report to Shareholders. RESULTS OF OPERATIONS (dollars in thousands, except per share amounts) 2000 COMPARED WITH 1999 Results for 2000 include the effect of the following acquisitions and dispositions: The acquisition of KONG in Seattle/Tacoma, Washington and KASW in Phoenix, Arizona on March 1, 2000 (both stations were previously operated by Belo under LMAs); the sale of The Gleaner in Henderson, Kentucky on November 1, 2000; the sale of The Eagle in Bryan-College Station, Texas on December 1, 2000; and the sales of the Messenger-Inquirer in Owensboro, Kentucky and KOTV in Tulsa, Oklahoma, both of which were effective December 31, 2000. Consolidated Results of Operations Belo recorded net earnings of $150,825 or $1.29 per share in 2000 compared with net earnings of $178,306 or $1.50 per share in 1999. Net earnings in 2000 included gains on the sales of The Gleaner, The Eagle, the Messenger-Inquirer and KOTV of $104,628 ($65,367 net of taxes or 56 cents per share), a non-recurring benefit related to a legal settlement of $18,953 ($12,190 net of taxes or 10 cents per share), a reserve related to certain Internet investments of $28,500 ($18,331 net of taxes or 16 cents per share) and other non-recurring charges of $4,204 (3 cents per share). The other non-recurring charges include early retirement charges, a programming write-down and a charge related to an advertiser's year-end bankruptcy. Net earnings in 1999 included a non-cash gain on the exchange of KXTV for KVUE of $50,312 ($49,060 net of taxes or 41 cents per share), a gain on the sale of KASA and KHNL of $20,448 ($16,348 net of taxes or 14 cents per share) and a $47,006 gain ($28,489 net of taxes or 24 cents per share) on the sale of its investment in Falcon Communications. Net non-recurring charges of $2,398 (2 cents per share) were also recorded in December 1999 for certain programming adjustments and early retirement charges. Depreciation and amortization expense in 2000 was $184,972, compared with $168,961 in 1999. Depreciation expense was higher in 2000 due to depreciation of prior year capital expenditures. Amortization expense increased due to the acquisitions of KVUE, the Denton Record-Chronicle, KTVK, KASW and KONG, offset somewhat by the dispositions in 1999 of KXTV, KASA and KHNL. Dispositions in 2000 occurred very late in the year and had a minimal impact on year over year amortization expense. Interest expense in 2000 was $132,780, an increase of approximately 20 percent over 1999 expense of $110,608. The increase is due to higher average debt levels during 2000 as a result of acquisitions, investments and share repurchases and higher weighted average interest rates in 2000 compared with 1999. The effective tax rate in 2000 was 43.5 percent, compared with 35.5 percent in 1999. The 1999 effective rate was lower due to non-taxable gains on like-kind exchanges. The 2000 rate was affected by higher taxable earnings as a result of the 2000 dispositions. Excluding the effect of these transactions, the effective rates in 2000 and 1999 would have been 47.3 percent and 45.1 percent, respectively. 4 6 Segment Results of Operations To enhance comparability of Belo's segment results of operations for the years ended December 31, 2000 and 1999, certain information is presented on an "as adjusted" basis and takes into account the 2000 dispositions of The Gleaner, The Eagle, the Messenger-Inquirer and KOTV, the 1999 exchange of KXTV for KVUE, the 1999 acquisitions of the Denton Record-Chronicle and KTVK, including the rights to operate KASW under an LMA, and the 1999 dispositions of KASA and KHNL, as if each transaction had occurred at the beginning of 1999, and other non-recurring items previously discussed. The discussion that follows compares segment operations on an "as adjusted" basis only.
As Adjusted As Reported -------------------------------- ------------------------------- % % Year ended December 31, 2000 1999 Change 2000 1999 Change -------- -------- ------ -------- -------- ------ Net Operating Revenues: Broadcasting $680,452 $618,659 10.0% $699,503 $598,637 16.8% Newspaper publishing 831,154 780,277 6.5% 872,688 816,976 6.8% Interactive media 10,133 7,037 44.0% 10,401 6,520 59.5% Other 14,345 11,849 21.1% 14,345 11,849 21.1% Eliminations (7,898) --- N/A (8,125) --- N/A Operating Cash Flow: (1) Broadcasting $305,204 $253,422 20.4% $309,553 $245,925 25.9% Newspaper publishing 240,190 225,455 6.5% 251,318 236,167 6.4% Interactive media (24,306) (8,155) (198.1)% (24,947) (8,365) (198.2)% Other (3,571) (4,990) 28.4% (3,571) (4,990) 28.4%
(1) All references herein to segment operating cash flow refer to segment earnings from operations plus depreciation and amortization, as defined in "Selected Financial Data." Operating cash flow as defined should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. BROADCASTING DIVISION Broadcasting revenues in 2000 were $680,452, an increase of $61,793 or 10 percent over 1999 broadcasting revenues of $618,659. Double-digit revenue increases were realized by several Belo television stations, including seven stations in the top 30 markets (WFAA in Dallas/Fort Worth, KING and KONG in Seattle/Tacoma, KASW in Phoenix, KMOV in St. Louis, KGW in Portland and WCNC in Charlotte). The presidential election as well as the senatorial, congressional and gubernatorial races that occurred in many states contributed to political advertising revenues of just over $50,000 in 2000, compared with political advertising revenues of approximately $10,500 in 1999. In addition, Belo's four NBC stations had over $10,000 in revenue attributable to the broadcast of the Summer Olympics. Local revenues at Belo's television stations increased 5.8 percent in 2000 while national revenues were up 1.4 percent for the year. Broadcasting operating cash flow for 2000 was $305,204, an increase of 20.4 percent over 1999 operating cash flow of $253,422. The 2000 broadcasting operating cash flow margin was 44.9 percent, compared with 41 percent in 1999. Cash expenses in 2000 increased 2.7 percent over 1999 cash expenses. Salaries, wages and employee costs in 2000 increased 5.8 percent over such costs in 1999 primarily due to an increase in incentive bonuses and overtime associated with election coverage. Outside services and outside solicitation expenses were higher in 2000 than 1999, offset somewhat by savings in programming expense. NEWSPAPER PUBLISHING DIVISION Newspaper publishing revenues of $831,154 increased 6.5 percent in 2000 compared to 1999 revenues of $780,277. Revenues increased at all of the Company's newspapers, including 6.2 percent at The Dallas Morning News, 3.9 percent at The Providence Journal and 12.1 percent at The Press-Enterprise. Advertising revenues comprised 87 percent of total newspaper publishing revenues in 2000, circulation revenues accounted for 11 percent and commercial printing contributed most of the remainder. 5 7 Newspaper volume is measured in column inches. Volume for DMN was as follows (in thousands):
Year ended December 31, 2000 1999 % Change ----- ----- -------- Full-run ROP inches(1) Classified 1,973 1,931 2.2% Retail 992 1,040 (4.6)% General 379 340 11.5% ----- ----- ---- Total 3,344 3,311 1.0%
(1) Full-run ROP inches refer to the number of column inches of display and classified advertising that is printed and distributed in all editions of the newspaper. DMN general advertising revenues were up 19.5 percent in 2000 compared with 1999. The increase in general advertising revenues resulted from both higher average rates and increased volumes. Volume increases were reported in the automotive and telecom categories. Retail advertising revenues were up 1.3 percent on higher rates and lower volumes, primarily in the department store category. Classified advertising revenues increased 5.9 percent in 2000 compared with 1999 due to higher average rates and increased volumes, particularly in the employment, automotive and real estate advertising categories. Circulation revenue decreased approximately 2 percent in 2000 compared with 1999, primarily due to lower average rates to the newspaper's distributors, offset somewhat by a slight increase in circulation volumes. Revenues in all major advertising categories at PJ were higher in 2000 compared with 1999, with general advertising up 8.9 percent, classified up 6.7 percent and retail up approximately 5 percent. The increase in general advertising revenues in 2000 compared with 1999 was due to higher average rates while volumes remained flat. The classified advertising revenue increase was primarily due to higher rates, particularly in the employment category. The retail advertising revenue increase was due to both higher average rates and increased linage from the amusements, banks and furniture categories. Circulation revenues at PJ decreased 1.5 percent in 2000 compared with 1999. Total revenues at PE were up 12.1 percent in 2000 compared with 1999, led by increases in classified advertising revenue and other advertising revenue of 18.6 percent and 28.7 percent, respectively. The increase in classified advertising revenue was due to an increase in rates, which more than offset a decline in volumes. An increase of approximately 4 percent in general advertising revenue resulted from an increase in average rates. Retail advertising revenues declined approximately 3.3 percent due to declines in the electronics, food and theater categories. Circulation revenues increased by approximately 4 percent primarily due to increases in daily and Sunday circulation volumes. Newspaper publishing operating cash flow for 2000 was $240,190, an increase of 6.5 percent compared with $225,455 in 1999. Operating cash flow margins remained flat at 28.9 percent for both 2000 and 1999 despite an increase in cash expenses of approximately 6.5 percent in 2000 as compared to 1999. Newsprint expense increased 7.6 percent in 2000 compared with 1999, due to industry-wide newsprint price increases. In addition, salaries, wages and employee benefits increased approximately 5.5 percent in 2000 as compared to 1999 due to an increase in the number of employees and higher incentive bonuses. Other operating expenses were up 10.8 percent over 1999 due to increases in outside services, distribution expense, bad debt expense and features and news services. INTERACTIVE MEDIA Belo Interactive, Inc. ("BI") revenues for 2000 were $10,133, an increase of $3,096, approximately 44 percent, over 1999 revenues of $7,037. BI's revenues in 2000 and 1999 were principally derived from advertising revenues on its various Web sites and, to a much lesser extent, fees generated from Internet service provider subscriptions and data retrieval services. The revenue improvement is due to the increased focus placed on this newly emerging segment, particularly with the addition of a dedicated management team in mid-1999. The 2000 cash flow deficit of $24,306 includes $7,898 of intercompany advertising expense. The 1999 cash flow deficit was $8,155. The increase in the deficit is the result of expenses exceeding revenues at the existing interactive operations and start-up spending at BI. 6 8 OTHER Other revenues of $14,345 in 2000 were 21.1 percent higher than 1999 revenues of $11,849 due to revenue increases at NWCN and TXCN. The operating cash flow deficit decreased to $3,571 in 2000 from $4,990 in 1999 reflecting a decrease in the cash flow deficit at TXCN between the periods and positive cash flow at NWCN, its first surplus since it began operations in 1995. 1999 COMPARED WITH 1998 Results for 1999 included the effect of the following acquisitions and dispositions: The exchange of KXTV in Sacramento, California for KVUE in Austin, Texas, effective June 1, 1999; the purchase of Denton Publishing Company, publisher of the Denton Record-Chronicle on June 30, 1999; the sale of stations KASA in Albuquerque, New Mexico and KHNL in Honolulu, Hawaii along with rights to operate KFVE, also in Honolulu, under a local marketing agreement, effective October 29, 1999; and the purchase of KTVK in Phoenix, Arizona along with rights to operate KASW under an LMA, effective November 1, 1999. Consolidated Results of Operations Belo recorded net earnings of $178,306 or $1.50 per share in 1999 compared with net earnings of $64,902 or 52 cents per share in 1998. Net earnings in 1999 included a gain on the exchange of KXTV for KVUE of $50,312 ($49,060 net of taxes or 41 cents per share), a gain on the sale of KASA and KHNL of $20,448 ($16,348 net of taxes or 14 cents per share) and a $47,006 gain ($28,489 net of taxes or 24 cents per share) on the sale of its investment in Falcon Communications. Net non-recurring charges of $2,398 (2 cents per share) were also recorded in December 1999 for certain programming adjustments and early retirement charges. Net earnings in 1998 included non-recurring charges of $26,157 ($15,937 net of taxes or 13 cents per share), comprised of an $11,478 non-cash charge for the write-down of a press at DMN, separation costs of $14,229 associated with a voluntary early retirement program and other employee reduction initiatives and $450 for severance and asset disposal costs related to the termination of operations of Belo's programming subsidiary. Also in 1998, Belo realized a net gain of two cents per share related to the disposition of its investment in Peapod, Inc. stock. Depreciation and amortization expense in 1999 was $168,961, compared with $159,442 in 1998, excluding the $11,478 press write-down. The increase in 1999 was due primarily to depreciation expense for 1998 capital additions and amortization expense due to the incremental increase in intangibles from current year acquisitions and dispositions. Interest expense in 1999 was $110,608, an increase of 2.8 percent over 1998 expense of $107,638. The increase was due to higher debt levels in 1999 as a result of acquisitions and share repurchases in the second half of 1998, slightly offset by the effect of weighted average interest rates that were slightly lower in 1999 compared with 1998. The effective tax rate in 1999 was 35.5 percent, compared with 50.3 percent in 1998. The rate in 1998 was affected by lower pre-tax earnings and higher state tax rates while the 1999 effective rate was lower due to non-taxable gains on like-kind exchanges. Excluding the effect of these transactions, the 1999 effective rate would have been 45.1 percent. 7 9 Segment Results of Operations To enhance comparability of Belo's segment results of operations for the years ended December 31, 1999 and 1998, certain information is presented on an "as adjusted" basis and takes into account the 1999 exchange of KXTV for KVUE, the acquisitions of the Denton Record-Chronicle and KTVK and the disposition of KASA and KHNL, as if each transaction had occurred at the beginning of 1998. Adjusted results for 1999 and 1998 exclude consideration of all 2000 acquisitions and dispositions; accordingly, the 1999 "as adjusted" results in the table above differ from those reflected in the 2000 versus 1999 table shown previously. The discussion that follows compares segment operations on an "as adjusted" basis only.
As Adjusted As Reported -------------------------------- ------------------------------- % % Year ended December 31, 1999 1998 Change 1999 1998 Change -------- -------- ------ -------- -------- ------- Net Operating Revenues: Broadcasting $637,293 $627,010 1.6% $598,637 $593,426 0.9% Newspaper publishing 822,655 795,623 3.4% 816,976 784,327 4.2% Interactive media 7,289 3,823 90.7% 6,520 3,214 102.9% Other 11,849 10,736 10.4% 11,849 10,736 10.4% Operating Cash Flow:(1) Broadcasting $257,111 $250,796 2.5% $245,925 $238,743 3.0% Newspaper publishing(2) 236,543 211,219 12.0% 236,167 210,351 12.3% Interactive media (8,106) (2,575) (214.8)% (8,365) (2,687) (211.3)% Other (4,990) (4,182) (19.3)% (4,990) (4,182) (19.3)%
(1) All references herein to segment operating cash flow refer to segment earnings from operations plus depreciation and amortization, as defined in "Selected Financial Data." Operating cash flow as defined should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (2) Both as reported and as adjusted operating cash flow for newspaper publishing in 1998 exclude the effect of the $11,478 non-cash charge to write down a press at DMN. BROADCASTING DIVISION Broadcasting revenues in 1999 were $637,293, an increase of $10,283 over 1998 broadcasting revenues of $627,010. This improvement came despite more than $40,000 of political and Olympic related advertising revenues in 1998, which was an election year in many states, compared with $10,550 in political advertising revenues in 1999. Revenues improved most significantly in the Dallas/Fort Worth, Seattle/Tacoma, Phoenix, Charlotte and Austin markets, primarily in the automotive and .com advertising categories. Revenues declined in Houston, St. Louis, Portland, Hampton/Norfolk, Louisville and Spokane due primarily to political advertising losses compared with 1998. Excluding political revenues in 1999 and 1998, spot advertising revenues increased 6.1 percent in 1999 compared with 1998. Broadcasting operating cash flow of $257,111 in 1999 was 2.5 percent better than operating cash flow of $250,796 in 1998. The 1999 broadcasting operating cash flow margin was 40.3 percent, compared with 40 percent in 1998. Cash expenses in 1999 were up 1.1 percent over 1998 cash expenses. Excluding the effect of a $6,996 charge in 1998 for early retirement and other employee reduction initiatives and a $2,632 charge in 1999 for programming write-downs, operating cash flow in 1999 increased .8 percent over 1998 operating cash flow, the operating cash flow margin was 40.8 percent and 41.1 percent in 1999 and 1998, respectively, and 1999 cash expenses increased 2.3 percent over 1998 cash expenses. Excluding the charges, salaries, wages and employee benefits costs in 1999 were flat compared with 1998, and other production, distribution and operating costs in 1999 increased 3.8 percent over 1998 primarily due to higher programming costs. Outside services and sales project expenses were also higher in 1999 than 1998, offset somewhat by savings in communications expense. 8 10 NEWSPAPER PUBLISHING DIVISION Newspaper publishing revenues of $822,655 for 1999 increased 3.4 percent over 1998 revenues of $795,623. Revenues increased at each of Belo's major market newspapers, including 1.8 percent at The Dallas Morning News, 4.9 percent at The Providence Journal and 10 percent at The Press-Enterprise. In 1999, advertising revenues comprised 85 percent, circulation revenues accounted for 12 percent and commercial printing contributed most of the remainder of total newspaper publishing revenues. Newspaper volume is measured in column inches. Volume for DMN was as follows (in thousands):
Year ended December 31, 1999 1998 % Change ------ ------ -------- Full-run ROP inches(1) Classified 1,931 1,989 (2.9)% Retail(2) 1,040 1,053 (1.2)% General 340 304 11.8% ------ ------ ---- Total 3,311 3,346 (1.0)%
(1) Full-run ROP inches refer to the number of column inches of display and classified advertising that is printed and distributed in all editions of the newspaper. (2) Full-run ROP inches for the Retail category have been restated to conform to current year presentation. DMN classified advertising revenues declined 5.4 percent in 1999 compared with 1998 due to lower volumes in employment advertising, which had been down over the previous 18 months due in part to low unemployment levels in the Dallas/Fort Worth metropolitan area. Real estate and automotive classified advertising volumes improved, partially offsetting the declines in the employment category. Retail advertising revenue at DMN improved 3.3 percent overall, despite the 1.2 percent decline in full-run retail volume, due to higher average rates. Department store linage was flat in 1999 when compared with 1998 linage. General advertising revenues increased 24 percent as both average rates and volumes were higher in 1999 than in 1998. Circulation revenues at DMN were up 1.6 percent over 1998 due to both slightly higher daily and Sunday circulation volumes, as well as the effect of a home delivery rate increase implemented at the end of 1998. Revenues in all major advertising categories at PJ were higher in 1999 compared with 1998, with classified up 5.7 percent, retail up 8.4 percent and general advertising up 7.1 percent. The classified advertising revenue increase was primarily due to higher rates, particularly in the employment and automotive categories. The retail advertising revenue increase was due to both higher average rates and increased linage from the amusements, automotive and department store categories. The increase in general advertising revenues in 1999 compared with 1998 was due to volume gains in the automotive, tobacco and travel categories offset somewhat by lower average rates. Circulation revenues at PJ were flat in 1999 compared with 1998. Total revenues at PE were up 10 percent in 1999 compared with 1998, led by substantial increases in classified and general advertising, which increased 11.3 percent and 12 percent, respectively. The increase in classified advertising was due to improved linage in employment, automotive and real estate combined with higher average rates. Higher general advertising revenue was due to increased linage in the automotive and telecommunications categories, offset somewhat by lower average rates. Retail advertising improved 1.5 percent in 1999 compared with 1998 and circulation revenues were higher by 3.4 percent due to increased volume for daily and Sunday deliveries. Newspaper operating cash flow for 1999 was $236,543, an increase of 12 percent compared with $211,219 in 1998. Operating cash flow margin was 28.8 percent in 1999 compared with 26.5 percent in 1998. Cash expenses in 1999 were up .3 percent over 1998. Excluding the effect of early retirement charges of $690 and $6,344 in the fourth quarters of 1999 and 1998, respectively, operating cash flow increased 9 percent, the operating cash flow margin improved from 27.3 percent to 28.8 percent and cash expenses increased 1.3 percent. Substantial savings in newsprint, ink and other supplies expense were realized in 1999 as the net average cost per metric ton of newsprint in 1999 was 14 percent lower than in 1998. Communications expense was also lower in 1999 compared with 1998. These savings were offset, however, by higher 1999 compensation and benefits expense, due to incentive bonuses and an increase in the number of employees and higher outside services and advertising and promotion costs. 9 11 INTERACTIVE MEDIA Revenues in the interactive media segment for 1999 were $7,289 compared with $3,823 in 1998. The cash flow deficit grew to $8,106 in 1999 compared to $2,575 in 1998 as a result of expenses exceeding revenues at the interactive operations and start-up spending at BI. OTHER Other revenues of $11,849 in 1999 were 10.4 percent higher than 1998 revenues of $10,736 due to an increase at NWCN and the start-up of TXCN, which began broadcasting on January 1, 1999. The operating cash flow deficit in 1999 of $4,990 was primarily due to start-up efforts at TXCN, as NWCN produced near break-even results for the first time since it began operations in 1995. LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except share and per share amounts) Net cash provided by operations, bank borrowings and term debt are Belo's primary sources of liquidity. On an as reported basis, 2000 net cash provided by operations was $253,428, compared with $220,814 in 1999. Net cash provided by operations was used primarily to fund capital expenditures, investments, acquisitions and common stock dividends. Net cash provided by operations, along with cash proceeds from the sale of subsidiaries of $233,316 was used to repurchase $171,712 of treasury stock and pay down debt. As a result, total debt decreased $66,547 from December 31, 1999. At December 31, 2000, Belo 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 these debt instruments is 7.3 percent. Belo also has $500,000 of additional debt securities available for issuance under a shelf registration statement filed in April 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 December 31, 2000, Belo had a $1 billion variable-rate revolving credit agreement with a syndicate of 24 banks under which borrowings were $725,000. 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 Belo and with the consent of the participating banks. In addition, Belo had $58,100 of short-term unsecured notes outstanding at December 31, 2000. These borrowings may be converted at Belo's option to revolving debt. Accordingly, such borrowings are classified as long-term in Belo's financial statements. Available borrowings under Belo's revolving credit agreement at December 31, 2000 were $275,000. Belo is required to maintain certain financial ratios as of the end of each quarter, as defined in its revolving credit agreement. For the four quarters ended December 31, 2000, Belo's ratio of funded debt to pro forma operating cash flow, which is not to exceed 5.0, was 3.8. Belo's interest coverage ratio for the four quarters ended December 31, 2000 was 3.6 times, compared with a minimum coverage requirement of 2.5 times. On March 1, 2000, Belo acquired KONG in Seattle/Tacoma, Washington and KASW in Phoenix, Arizona for $16,100 in cash. Belo previously operated the stations under local marketing agreements. During the fourth quarter of 2000, Belo sold The Gleaner in Henderson, Kentucky, The Eagle in Bryan-College Station, Texas, the Messenger-Inquirer in Owensboro, Kentucky and KOTV, the CBS affiliate in Tulsa, Oklahoma, for cash proceeds of $233,316. On July 28, 2000, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 25,000,000 shares of Belo common stock. The Company had 2,759,044 shares remaining under a previous authorization. During 2000, Belo purchased 9,642,325 treasury shares for an aggregate cost of $171,712. The remaining authorization for the repurchase of shares as of December 31, 2000 was 18,116,719 shares. During 2000, Belo paid dividends of $32,814 or 28 cents per share on Series A and Series B Common Stock outstanding, compared with $30,772 or 26 cents per share during 1999. Total capital expenditures for 2000 were $104,427. Belo's television stations spent $41,528, primarily on new broadcast equipment, including $16,469 for equipment to be used in the transmission of digital television ("DTV"). Newspaper publishing capital expenditures of $44,490 included $20,025 related to the installment of a new press at DMN and amounts for certain equipment and system replacements. Capital spending in 2001 is expected to be approximately $112,000 and includes $15,000 for additional DTV expenditures. The $112,000 also includes approximately $11,000 for system initiatives and other equipment at BI. As of December 31, 2000, required future 10 12 payments for capital projects in 2001 were approximately $15,000, which includes $12,100 for DTV equipment and press equipment. Belo expects to finance future capital expenditures using cash generated from operations and, when necessary, borrowings under the revolving credit agreement. In 1999 and 2000, Belo made investments in other businesses, including approximately $63,000 in Internet-related companies. During the fourth quarter of 2000, Belo recorded a reserve of $28,500 related to certain of the Internet investments, recognizing a decline in value considered to be other than temporary. The expenses of Belo's interactive operations will continue to exceed revenues in 2001 as it continues to develop its business. The 2001 operating cash flow deficit for BI is expected to be approximately $17,000. In 2000, Belo announced the formation of a series of news partnerships with Time Warner Cable. The Time Warner agreements call for the creation of 24-hour news channels in Houston and San Antonio. During 2000, an investment of $900 was made related to the Time Warner partnerships. Belo expects to make additional investments of $13,500 in the Time Warner partnerships during 2001, the majority of which will be used to fund capital expenditures. The Company believes its current financial condition and credit relationships are adequate to fund both its current obligations as well as near-term growth. OTHER MATTERS On January 25, 2001, Belo announced that it had agreed to purchase KTTU-TV, the UPN affiliate in the Tucson, Arizona television market, for $18,000 in cash, subject to approval by the FCC. Belo currently operates KTTU under a local marketing agreement with Clear Channel Communications, Inc. MARKET RISKS The market risk inherent in Belo's financial instruments represents the potential loss arising from adverse changes in interest rates. Belo's strategy in managing its exposure to interest rate changes is to maintain a balance of fixed and variable-rate debt instruments. See Note 4 to the Consolidated Financial Statements for information concerning the contractual interest rates of Belo's debt. At December 31, 2000 and 1999, the fair value of Belo's fixed-rate debt was estimated to be $918,680 and $948,435, respectively, using quoted market prices and yields obtained through independent pricing sources, taking into consideration the underlying terms of the debt, such as the coupon rate and term to maturity. The carrying value of fixed-rate debt at December 31, 2000 and 1999 was $1,000,000. Various financial instruments issued by Belo are sensitive to changes in interest rates. Interest rate changes would result in gains or losses in the market value of Belo's fixed-rate debt due to differences between the current market interest rates and the rates governing these instruments. A hypothetical 10 percent decrease in interest rates would increase the fair value of the Company's fixed-rate debt by $52,741 at December 31, 2000 ($57,521 at December 31, 1999). With respect to the floating-rate debt, a 10 percent change in interest rates would result in annual changes in Belo's pre-tax earnings and cash flows of $5,538 and $5,530, at December 31, 2000 and 1999, respectively. In addition to interest rate risk, Belo has exposure to changes in the price of newsprint. The average price of newsprint is expected to be higher in 2001 than in 2000, although future prices for newsprint cannot be predicted with certainty. Belo believes the newsprint environment for 2001, giving consideration to both cost and supply, to be manageable through existing relationships and sources. During 1999 and 2000, as part of its overall interactive strategy, Belo made investments in Internet-related companies which, in most instances, are in the form of illiquid securities of private companies. These companies typically are in an early stage of development and may incur substantial losses. In the fourth quarter of 2000, Belo recorded a reserve of $28,500 related to its Internet investments. Belo may incur additional charges related to the valuation of these investments if the companies are not successful. A 10 percent change in the value of these investments would result in a change in fair value of approximately $3,500. 11 13 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Belo Corp. We have audited the accompanying consolidated balance sheets of Belo Corp. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Belo Corp. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Dallas, Texas February 8, 2001 12 14 CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, ----------------------------------------- In thousands, except per share amounts 2000 1999 1998 ----------- ----------- ----------- NET OPERATING REVENUES (Note 3) Broadcasting $ 699,503 $ 598,637 $ 593,426 Newspaper publishing 872,688 816,976 784,327 Interactive media 10,401 6,520 3,214 Other 14,345 11,849 10,736 Intercompany elimination (8,125) -- -- ----------- ----------- ----------- Total net operating revenues 1,588,812 1,433,982 1,391,703 ----------- ----------- ----------- OPERATING COSTS AND EXPENSES Salaries, wages and employee benefits (Note 6) 532,492 482,256 455,526 Other production, distribution and operating costs (Note 8) 400,293 356,717 343,582 Newsprint, ink and other supplies 168,329 161,553 173,911 Depreciation 100,706 91,819 84,578 Amortization (Note 3) 84,266 77,142 74,864 Non-recurring charges (Note 2) -- -- 26,157 ----------- ----------- ----------- Total operating costs and expenses 1,286,086 1,169,487 1,158,618 ----------- ----------- ----------- Earnings from operations 302,726 264,495 233,085 ----------- ----------- ----------- OTHER INCOME AND EXPENSE Interest expense (Note 4) (132,780) (110,608) (107,638) Gains on the sale of subsidiaries and investments (Notes 3 and 10) 104,628 117,766 -- Other, net (Note 10) (7,740) 4,800 5,013 ----------- ----------- ----------- Total other income and expense (35,892) 11,958 (102,625) ----------- ----------- ----------- EARNINGS Earnings before income taxes 266,834 276,453 130,460 Income taxes (Note 5) 116,009 98,147 65,558 ----------- ----------- ----------- Net earnings (Note 12) $ 150,825 $ 178,306 $ 64,902 =========== =========== =========== Net earnings per share (Note 11): Basic $ 1.29 $ 1.51 $ .53 Diluted $ 1.29 $ 1.50 $ .52 Weighted average shares outstanding (Note 11): Basic 116,754 118,322 123,508 Diluted 117,198 119,177 124,836 Dividends per share $ .28 $ .26 $ .24 ----------- ----------- -----------
See accompanying Notes to Consolidated Financial Statements. 13 15 CONSOLIDATED BALANCE SHEETS
ASSETS December 31, ----------------------- In thousands 2000 1999 ---------- ---------- Current assets: Cash and temporary cash investments $ 87,680 $ 45,593 Accounts receivable (net of allowance of $8,311 and $6,881 at December 31, 2000 and 1999, respectively) 274,555 245,949 Inventories 24,928 23,539 Deferred income taxes (Note 5) 13,415 13,288 Other current assets 20,447 23,589 ---------- ---------- Total current assets 421,025 351,958 Property, plant and equipment, at cost: Land 75,201 78,090 Buildings and improvements 280,051 280,244 Broadcast equipment 298,799 303,447 Newspaper publishing equipment (Note 2) 281,314 255,182 Other 197,258 176,985 Advance payments on plant and equipment expenditures (Note 8) 45,286 53,044 ---------- ---------- Total property, plant and equipment 1,177,909 1,146,992 Less accumulated depreciation 540,264 491,990 ---------- ---------- Property, plant and equipment, net 637,645 655,002 Intangible assets, net (Note 3) 2,710,209 2,853,192 Other assets (Note 10) 124,381 116,112 ---------- ---------- Total assets $3,893,260 $3,976,264 ---------- ----------
14 16 CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, ----------------------- In thousands, except share and per share amounts 2000 1999 ---------- ---------- Current liabilities: Accounts payable $ 74,979 $ 69,891 Accrued compensation and benefits 64,697 58,929 Other accrued expenses 62,466 50,395 Income taxes payable (Note 5) 64,096 45,038 Advance subscription payments 20,428 20,202 Accrued interest payable 16,017 15,383 ---------- ---------- Total current liabilities 302,683 259,838 Long-term debt (Note 4) 1,789,600 1,849,490 Deferred income taxes (Note 5) 404,221 422,465 Other liabilities 47,348 54,634 Commitments and contingent liabilities (Note 8) Shareholders' equity (Notes 7 and 9): 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 and outstanding 90,993,229 and 99,515,495 shares at December 31, 2000 and 1999, respectively; 151,959 166,191 Series B: Issued and outstanding 18,860,440 and 19,142,616 shares at December 31, 2000 and 1999, respectively. 31,497 31,968 Additional paid-in capital 825,103 885,522 Retained earnings 340,849 306,156 ---------- ---------- Total shareholders' equity 1,349,408 1,389,837 ---------- ---------- Total liabilities and shareholders' equity $3,893,260 $3,976,264 ---------- ----------
See accompanying Notes to Consolidated Financial Statements. 15 17 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Dollars in thousands Three years ended December 31, 2000 ----------------------------------------------------------------------------- COMMON STOCK Additional Shares Shares Paid-in Retained Series A Series B Amount Capital Earnings ----------- ---------- -------- ---------- --------- BALANCE AT DECEMBER 31, 1997 52,998,586 9,283,001 $104,011 $1,015,345 $ 203,276 Exercise of stock options 298,185 169,557 781 8,173 Change in valuation of incentive plans 392 Restricted shares (18,540) (31) (528) Tax benefit from long-term incentive plan 3,900 Employer's matching contribution to Savings and Investment Plan 267,824 447 6,912 Reclassification of unrealized gains subsequently recognized in net earnings Purchases and subsequent retirement of treasury stock (6,727,400) (11,235) (49,706) (68,845) Two-for-one stock split 53,306,307 9,347,634 104,632 (104,632) Net earnings 64,902 Cash dividends (29,694) Conversion of Series B to Series A 171,753 (171,753) ----------- ---------- -------- ---------- --------- BALANCE AT DECEMBER 31, 1998 100,028,891 18,896,263 $198,605 $ 879,856 $ 169,639 Exercise of stock options 391,430 121,800 857 5,620 Change in valuation of incentive plans 166 Tax benefit from long-term incentive plan 1,466 Employer's matching contribution to Savings and Investment Plan 407,027 680 7,207 Purchases and subsequent retirement of treasury stock (1,187,300) (1,983) (8,793) (11,017) Net earnings 178,306 Cash dividends (30,772) Conversion of Series B to Series A 282,474 (282,474) ----------- ---------- -------- ---------- --------- BALANCE AT DECEMBER 31, 1999 99,515,495 19,142,616 $198,159 $ 885,522 $ 306,156 Exercise of stock options 354,813 593 3,862 Tax benefit from long-term incentive plan 723 Employer's matching contribution to Savings and Investment Plan 483,070 807 7,287 Purchases and subsequent retirement of treasury stock (9,642,325) (16,103) (72,291) (83,318) Net earnings 150,825 Cash dividends (32,814) Conversion of Series B to Series A 765,246 (765,246) ----------- ---------- -------- ---------- --------- BALANCE AT DECEMBER 31, 2000 90,993,229 18,860,440 $183,456 $ 825,103 $ 340,849 Dollars in thousands Three years ended December 31, 2000 --------------------------------------- Accumulated Deferred Other Compensation- Comprehensive Restricted Income Shares Total ------------- ------------- ---------- BALANCE AT DECEMBER 31, 1997 $ 4,144 $ (772) $1,326,004 Exercise of stock options 8,954 Change in valuation of incentive plans 392 Restricted shares 772 213 Tax benefit from long-term incentive plan 3,900 Employer's matching contribution to Savings and Investment Plan 7,359 Reclassification of unrealized gains subsequently recognized in net earnings (4,144) (4,144) Purchases and subsequent retirement of treasury stock (129,786) Two-for-one stock split -- Net earnings 64,902 Cash dividends (29,694) Conversion of Series B to Series A -- -------- ------ ---------- BALANCE AT DECEMBER 31, 1998 $ -- $ -- $1,248,100 Exercise of stock options 6,477 Change in valuation of incentive plans 166 Tax benefit from long-term incentive plan 1,466 Employer's matching contribution to Savings and Investment Plan 7,887 Purchases and subsequent retirement of treasury stock (21,793) Net earnings 178,306 Cash dividends (30,772) Conversion of Series B to Series A -- -------- ------ ---------- BALANCE AT DECEMBER 31, 1999 $ -- $ -- $1,389,837 Exercise of stock options 4,455 Tax benefit from long-term incentive plan 723 Employer's matching contribution to Savings and Investment Plan 8,094 Purchases and subsequent retirement of treasury stock (171,712) Net earnings 150,825 Cash dividends (32,814) Conversion of Series B to Series A -- -------- ------ ---------- BALANCE AT DECEMBER 31, 2000 $ -- $ -- $1,349,408
See accompanying Notes to Consolidated Financial Statements. 16 18 CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH PROVIDED (USED) Years ended December 31, ----------------------------------- In thousands 2000 1999 1998 --------- --------- --------- OPERATIONS Net earnings $ 150,825 $ 178,306 $ 64,902 Adjustments to reconcile net earnings to net cash provided by operations: Net gain on sale of subsidiaries and investments (65,367) (93,897) -- Depreciation and amortization 184,972 168,961 159,442 Deferred income taxes (20,072) (10,817) 1,705 Non-cash charges for write-down of Internet investments and other non-recurring expenses 28,500 -- 11,764 Other non-cash expenses 8,840 16,107 12,303 Other, net (6,339) (10,099) (2,037) Net change in current assets and liabilities: Accounts receivable (29,022) (30,928) 9,560 Inventories and other current assets (1,978) (8,191) 575 Accounts payable 11,984 10,203 9,026 Accrued compensation and benefits 5,768 (93) (10,782) Other accrued liabilities 4,798 (3,673) (4,080) Income taxes payable (19,481) 4,935 (17,506) --------- --------- --------- Net cash provided by operations 253,428 220,814 234,872 --------- --------- --------- INVESTMENTS Capital expenditures (104,427) (92,386) (102,927) Acquisitions (26,805) (386,528) -- Proceeds from sale of subsidiaries and investments 233,316 155,266 7,995 Other investments (46,866) (44,462) -- Other, net 297 2,282 (4,999) --------- --------- --------- Net cash provided by (used for) investments 55,515 (365,828) (99,931) --------- --------- --------- FINANCING Net borrowings for acquisitions 16,100 298,796 -- Net proceeds from (payments on) revolving debt (82,647) (81,552) 23,184 Payments of dividends on stock (32,814) (30,772) (29,694) Net proceeds from exercise of stock options 4,217 6,477 8,954 Purchase of treasury stock (171,712) (21,793) (129,786) --------- --------- --------- Net cash provided by (used for) financing (266,856) 171,156 (127,342) --------- --------- --------- Net increase in cash and temporary cash investments 42,087 26,142 7,599 --------- --------- --------- Cash and temporary cash investments at beginning of year 45,593 19,451 11,852 Cash and temporary cash investments at end of year $ 87,680 $ 45,593 $ 19,451 --------- --------- --------- SUPPLEMENTAL DISCLOSURES (Note 13)
See accompanying Notes to Consolidated Financial Statements. 17 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A) Principles of Consolidation The consolidated financial statements include the accounts of Belo Corp. (the "Company" or "Belo") and its wholly-owned subsidiaries after the elimination of all significant intercompany accounts and transactions. For the year ended December 2000, the intercompany elimination removes $6,677, $1,308, $82 and $58 of revenues for Broadcasting, Newspaper publishing, Interactive media and Other, respectively, for advertising provided primarily to the Interactive media segment. All dollar amounts are in thousands, except per share amounts, unless otherwise indicated. Certain amounts for prior years have been reclassified to conform to the current year presentation. B) Cash and Temporary Cash Investments Belo considers all highly liquid instruments purchased with a remaining maturity of three months or less to be temporary cash investments. Such temporary cash investments are classified as available-for-sale and are carried at fair value. C) Accounts Receivable Accounts receivable are net of a valuation reserve that represents an estimate of amounts considered uncollectible. Expense for such uncollectible amounts, which is included in other production, distribution and operating costs, was $10,972, $7,131 and $6,497 in 2000, 1999 and 1998, respectively. Accounts written off during 2000, 1999 and 1998 were $9,542, $8,073 and $6,988, respectively. D) Inventories Inventories, consisting primarily of newsprint, ink and other supplies used in printing newspapers, are stated at the lower of average cost or market value. E) Property, Plant and Equipment Depreciation of property, plant and equipment is provided principally on a straight-line basis over the estimated useful lives of the assets as follows:
ESTIMATED USEFUL LIVES ------------ Buildings and improvements 5-30 years Broadcast equipment 5-15 years Newspaper publishing equipment 5-20 years Other 3-10 years
F) Intangible Assets, Net Intangible assets consist of excess cost over values assigned to tangible assets of purchased subsidiaries and are amortized primarily on a straight-line basis over 40 years. Accumulated amortization of intangible assets was $398,238 and $339,744 at December 31, 2000 and 1999, respectively. The carrying values of all intangible assets are periodically reviewed to determine whether impairment exists, and adjustments to net realizable value are made as needed. No such adjustments were required in any of the periods presented. G) Stock Options Stock options granted to employees and outside directors are accounted for using the intrinsic value of the options granted. Because it is Belo's policy to grant stock options at the market price on the date of the grant, the intrinsic value is zero, and therefore no compensation expense is recorded. H) Revenue Recognition Belo's primary sources of revenue are the sale of air time on its television stations, advertising space in published issues of its newspapers, and the sale of newspapers to distributors and individual subscribers. Broadcast revenue is recorded, net of agency commissions, when commercials are aired. Newspaper advertising revenue is recorded, net of agency commissions, when the advertisements are published in the newspaper. Proceeds from subscriptions are deferred and are included in revenue on a pro-rata basis over the term of the subscriptions. 18 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS I) Advertising Expense The cost of advertising is expensed as incurred. Belo incurred $31,678, $28,034 and $25,858 in advertising and promotion costs during 2000, 1999 and 1998, respectively. J) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. K) Recent Accounting Pronouncements In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - An Amendment of SFAS No. 133," which amended previously issued pronouncements and established reporting standards for derivative instruments and hedging activities that require an entity to recognize all derivatives as assets or liabilities measured at fair value. SFAS No. 138 is effective for financial statements issued for all fiscal quarters of fiscal years beginning after June 15, 2000. Belo will adopt SFAS No. 138 in the first quarter of fiscal 2001 and does not expect adoption to have a significant impact on its consolidated financial position or results of operations because the Company does not have significant derivative activity. NOTE 2: NON-RECURRING CHARGES Earnings from operations for 1998 include non-recurring charges of $26,157 comprised primarily of an $11,478 non-cash charge for the write-down of a press at The Dallas Morning News ("DMN") and separation costs of $14,229 associated with 189 employees who accepted a voluntary early retirement offer and 31 employees who were terminated under other employee reduction initiatives. The workforce reduction initiatives were the result of the Company's ongoing review of its operations and organizational structure. The press write-down followed a decision by DMN to replace one of its less productive presses with a new $36,000 WIFAG press that offers improved production capacity and greater flexibility. The write-down of the press resulted in a remaining estimated salvage value of $2,000. The salvage value was based upon a third-party estimate of current market rates for used press equipment. The press write-down resulted in lower annual depreciation expense of approximately $900. The $14,229 charge for certain employee-related costs includes $12,449 of cash payments made as of December 31, 1998, $946 made in January 1999 and the remaining $834 to be paid in monthly installments through December 31, 2001, under contractual arrangements. NOTE 3: ACQUISITIONS AND DISPOSITIONS On March 1, 2000, Belo acquired KONG-TV in Seattle/Tacoma, Washington and KASW-TV in Phoenix, Arizona for $16,100 in cash. Belo previously operated both stations under local marketing agreements. During the fourth quarter of 2000, Belo completed the sales of The Gleaner in Henderson, Kentucky, The Eagle in Bryan-College Station, Texas, the Messenger-Inquirer in Owensboro, Kentucky and KOTV (CBS) in Tulsa, Oklahoma. Cash proceeds of $233,316 were received and gains of $104,628 ($65,367 net of taxes) were recognized on the transactions. The Company's basis in these entities was primarily in intangible assets. The reduction in net intangible assets resulting from these sales, partially offset by increases resulting from 2000 acquisitions, will result in lower annual amortization expense of approximately $2,900. On June 1, 1999, Belo acquired ABC affiliate KVUE-TV in Austin, Texas, in exchange for ABC affiliate KXTV in Sacramento, California and $55,000 in cash consideration. The transaction was accounted for as a purchase and recorded based on the fair value of the assets exchanged, resulting in a non-cash gain on the transaction of $50,312 ($49,060 net of taxes). On October 29, 1999, Belo completed the sale of KASA-TV in Albuquerque, New Mexico, and KHNL-TV in Honolulu, Hawaii, along with its rights to operate KFVE-TV in Honolulu under a local marketing agreement, for $88,000. A gain of $20,448 ($16,348 net of taxes) was recognized on the transaction. 19 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On November 1, 1999, Belo completed the acquisition of independent television station KTVK-TV in Phoenix, Arizona, along with the rights to operate WB affiliate KASW-TV in Phoenix through a local marketing agreement and an option to purchase KASW-TV. The acquisition also included a 50 percent interest in a cable news joint venture. The acquisition price was $315,000 in cash and was partially funded with $88,000 in proceeds from the sale of KASA and KHNL, with the remaining funding provided by borrowings under Belo's revolving credit facility. The 1999 and 2000 acquisitions were accounted for as purchases and recorded based on the fair value of the assets acquired. In each transaction, substantially all of the purchase price was allocated to intangible assets, which are amortized on a straight-line basis over 40 years. Results of 1999 and 2000 acquisitions and dispositions have not been presented on a pro forma basis as the combined impact on results of operations was not material. NOTE 4: LONG-TERM DEBT Long-term debt consists of the following at December 31, 2000 and 1999:
2000 1999 ----------- ----------- 6-7/8% Senior Notes Due June 1, 2002 $ 250,000 $ 250,000 7-1/8% Senior Notes Due June 1, 2007 300,000 300,000 7-3/4% Senior Debentures Due June 1, 2027 200,000 200,000 7-1/4% Senior Debentures Due September 15, 2027 250,000 250,000 ----------- ----------- Fixed-rate debt 1,000,000 1,000,000 Revolving credit agreement, including short-term unsecured notes classified as long-term 783,100 842,900 Other 6,610 13,357 Less: current maturities of long-term debt (110) (6,767) ----------- ----------- Total $ 1,789,600 $ 1,849,490 ----------- -----------
The Company's long-term debt maturities for the five years following December 31, 2000 are $110 in 2001, $1,033,200 in 2002 and $0 in 2003, 2004 and 2005. Of the amount due in 2002, $725,000 represents revolving debt and $58,100 represents short-term unsecured notes which could be converted, at the Company's option, to revolving debt. At the end of 2000, Belo had a $1 billion revolving credit facility. Loans under the revolving credit agreement bear interest at a rate based, at Belo's option, on the bank's alternate base rate, certificate of deposit rate, LIBOR or competitive bid. The rate obtained through competitive bid is either a Eurodollar rate or a rate agreed to by Belo and the bank. At December 31, 2000 and 1999, the weighted average interest rates for borrowings under the revolving credit agreement, which includes a facility fee of up to 0.15 percent on the total commitment, were 7.1 percent and 6.6 percent, respectively. 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 Belo and with the consent of the participating banks. The carrying value of borrowings under Belo's revolving credit agreement approximates fair value. The revolving credit agreement contains certain covenants, including a requirement to maintain, as of the end of each quarter and measured over the preceding four quarters, (1) a Funded Debt to Pro Forma Operating Cash Flow ratio not exceeding 5.5 to 1.0, (2) a Funded Debt (excluding subordinated debt) to Pro Forma Operating Cash Flow ratio not exceeding 5.0 to 1.0 and (3) an Interest Coverage ratio of not less than 2.5 to 1.0, all as such terms are defined in the agreement. At December 31, 2000, Belo was in compliance with these requirements. 20 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During 2000, Belo used various short-term unsecured notes as an additional source of financing. The weighted average interest rate on this debt was 7.4 percent and 6.0 percent at December 31, 2000 and 1999, respectively. Due to Belo's intent to renew the short-term notes and its continued ability to refinance these borrowings on a long-term basis through its revolving credit agreement, $58,100 and $12,900 of short-term notes outstanding at December 31, 2000 and 1999, respectively, have been classified as long-term. During 1997, the Company issued $1 billion in fixed-rate debt. The net proceeds from these debt offerings were used to retire debt previously outstanding under the Company's revolving credit facility. At December 31, 2000, the weighted average effective interest rate on the fixed-rate debt was 7.3 percent and the fair value was $81,320 less than the carrying value. At December 31, 1999, the fair value of this same debt was $51,565 less than the carrying value. The fair value at December 31, 2000 and 1999, respectively, was estimated using quoted market prices for those publicly traded instruments. In 2000, 1999 and 1998, Belo incurred interest costs of $135,178, $113,160 and $109,318, respectively, of which $2,398, $2,552 and $1,680, respectively, were capitalized as components of construction cost. At December 31, 2000, Belo had outstanding letters of credit of $10,595 issued in the ordinary course of business. NOTE 5: INCOME TAXES Belo uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense for the years ended December 31, 2000, 1999 and 1998 consists of the following:
2000 1999 1998 --------- --------- --------- Current Federal $ 121,560 $ 109,459 $ 53,812 State 16,427 9,978 10,041 --------- --------- --------- Total current 137,987 119,437 63,853 Deferred Federal (24,707) (25,183) (2,200) State 2,729 3,893 3,905 --------- --------- --------- Total deferred (21,978) (21,290) 1,705 --------- --------- --------- Total tax expense $ 116,009 $ 98,147 $ 65,558 Effective tax rate 43.5% 35.5% 50.3% --------- --------- ---------
Income tax provisions for the years ended December 31, 2000, 1999 and 1998 differ from amounts computed by applying the applicable U.S. federal income tax rate as follows:
2000 1999 1998 --------- --------- --------- Computed expected income tax expense $ 93,392 $ 96,759 $ 45,661 Non-taxable gain on like-kind exchange -- (19,969) -- Amortization of excess cost 11,314 11,415 11,533 State income taxes 12,452 9,016 9,065 Other (1,149) 926 (701) --------- --------- --------- $ 116,009 $ 98,147 $ 65,558 --------- --------- ---------
21 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Significant components of Belo's deferred tax liabilities and assets as of December 31, 2000 and 1999 are as follows:
2000 1999 -------- -------- Deferred tax liabilities: Excess tax depreciation and amortization $449,138 $461,764 Basis differences in investments -- 2,724 Expenses deductible for tax purposes in a year different from the year accrued 1,212 779 Other 5,780 3,855 -------- -------- Total deferred tax liabilities 456,130 469,122 -------- -------- Deferred tax assets: Deferred compensation and benefits 7,438 9,457 State net operating losses 460 3,979 State taxes 7,326 6,208 Expenses deductible for tax purposes in a year different from the year accrued 27,658 25,489 Basis differences in investments 6,927 -- Other 15,515 14,812 -------- -------- Total deferred tax assets 65,324 59,945 -------- -------- Net deferred tax liability $390,806 $409,177 -------- --------
State net operating loss carryforwards are generally associated with entities acquired in the PJC acquisition and have expiration dates ranging from 2002 through 2004. NOTE 6: EMPLOYEE RETIREMENT PLANS Effective July 1, 2000, Belo amended its defined contribution plan to increase its contribution and close its noncontributory defined benefit plan to new participants. Current employees were given the option of continuing in the noncontributory defined benefit pension plan ("Pension Plan") and the current defined contribution plan ("Classic Plan") or selecting the new enhanced defined contribution plan ("Star Plan"). Employees who selected the Star Plan had their years of service in the Pension Plan frozen as of July 1, 2000. The Star Plan is a profit sharing plan intended to qualify under section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and to meet the requirements of Code section 401(k). The Star Plan covers substantially all employees that meet certain service requirements. Both the participants and Belo make contributions to the Star Plan. For each payroll period beginning July 1, 2000, Belo contributes an amount equal to 2 percent of the compensation paid to eligible employees and matches a specified percentage of employees' contributions under the Star Plan. Belo matches a percentage of the employees' contribution under the Classic Plan but does not make the 2 percent contribution of the participant's compensation. Belo's contributions to its defined contribution plans totaled $10,841, $9,556 and $8,267 in 2000, 1999 and 1998, respectively. Belo's Pension Plan covers individuals who were employees prior to July 2000. The benefits are based on years of service and the average of the employee's five consecutive years of highest annual compensation earned during the most recently completed 10 years of employment. The funding policy is to contribute annually to the Pension Plan amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws, but not in excess of the maximum tax deductible contribution. 22 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the Pension Plan's funded status and prepaid pension costs (included in Other assets on the Consolidated Balance Sheets) at December 31, 2000 and 1999:
2000 1999 --------- --------- Accumulated benefit obligation $(253,809) $(231,028) --------- --------- Projected benefit obligation $(315,069) $(297,864) Estimated fair value of plan assets 327,938 334,121 --------- --------- Funded status 12,869 36,257 Unrecognized net gain (12,154) (32,458) Unrecognized prior service cost 1,330 407 --------- --------- Prepaid pension cost $ 2,045 $ 4,206 --------- ---------
Changes in plan assets for the years ended December 31, 2000 and 1999 were as follows:
2000 1999 --------- --------- Fair value of plan assets at January 1, $ 334,121 $ 302,831 Actual return on plan assets 7,482 44,492 Benefits paid (13,665) (13,202) --------- --------- Fair value of plan assets at December 31, $ 327,938 $ 334,121 --------- ---------
Changes in plan benefit obligation for the years ended December 31, 2000 and 1999 were as follows:
2000 1999 --------- --------- Benefit obligation as of January 1, $ 297,864 $ 304,375 Actuarial gains (2,579) (27,359) Service cost 10,651 12,652 Interest cost 22,095 21,398 Benefits paid (13,665) (13,202) Amendments 703 -- --------- --------- Benefit obligation as of December 31, $ 315,069 $ 297,864 --------- ---------
The net periodic pension cost for the years ended December 31, 2000, 1999 and 1998 includes the following components:
2000 1999 1998 -------- -------- -------- Service cost - benefits earned during the period $ 10,651 $ 12,652 $ 11,089 Interest cost on projected benefit obligation 22,095 21,398 19,404 Expected return on assets (30,365) (27,328) (25,875) Amortization of: Net asset -- -- (371) Unrecognized prior service cost (220) (220) (220) Unrecognized loss -- 430 311 -------- -------- -------- Net periodic pension cost $ 2,161 $ 6,932 $ 4,338 -------- -------- --------
23 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assumptions used in accounting for the defined benefit plan are as follows:
2000 1999 1998 ---- ---- ---- Discount rate in determining benefit obligation 7.50% 7.75% 7.00% Discount rate in determining net periodic pension cost 7.75% 7.00% 7.25% Expected long-term rate of return on assets 9.75% 9.75% 10.25% Rate of increase in future compensation 5.50% 5.50% 5.50%
Belo also sponsors non-qualified retirement plans for key employees. Expense for the plans recognized in 2000, 1999 and 1998 was $1,026, $901 and $1,316, respectively. NOTE 7: LONG-TERM INCENTIVE PLAN Belo has a long-term incentive plan under which awards may be granted to employees in the form of incentive stock options, non-qualified stock options, restricted shares or performance units, the values of which are based on Belo's long-term performance. In addition, options may be accompanied by stock appreciation rights and limited stock appreciation rights. Rights and limited rights may also be issued without accompanying options. Cash-based bonus awards are also available under the plan. The non-qualified options granted to employees under Belo's long-term incentive plan become exercisable in cumulative installments over periods of three to seven years and expire after 10 years. Shares of common stock reserved for future grants under the plan were 7,381,936 and 469,549 at December 31, 2000 and 1999, respectively. Stock-based activity in the long-term incentive plan relates to non-qualified stock options and is summarized in the following table:
2000 1999 1998 ------------------------ ------------------------ ----------------------- Weighted Weighted Weighted Number of Average Number of Average Number of Average Options Price Options Price Options Price ---------- -------- ----------- -------- ----------- -------- Outstanding at January 1, 12,012,995 $18.35 9,406,008 $17.78 4,222,341 $34.31 Two-for-one stock split -- -- -- -- 3,951,488 $17.16 Granted 3,489,745 $17.28 3,288,670 $19.23 1,882,027 $18.16 Exercised (354,813) $12.56 (513,230) $12.62 (467,742) $11.47 Canceled (436,232) $19.92 (168,453) $21.58 (182,106) $19.77 ----------- ----------- ----------- Outstanding at December 31, 14,711,695 $18.19 12,012,995 $18.35 9,406,008 $17.78 Exercisable at December 31, 8,170,000 6,461,345 5,388,934 ---------- ------- ---------- ------- ------------ ------ Weighted average fair value of options granted $ 6.08 $ 5.82 $ 4.76 ---------- ------- ---------- ------- ----------- ------
24 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about non-qualified stock options outstanding at December 31, 2000:
Number of Weighted Average Weighted Average Number of Weighted Average Range of Options Remaining Exercise Options Exercise Exercise Prices Outstanding Life (years) Price Exercisable Price --------------- ----------- ---------------- ---------------- ----------- ---------------- $ 7 - 11 582,820 (a) 1.6 $ 9.23 582,820 $ 9.23 $12 - 16 1,218,736 (b) 3.4 $13.06 1,193,736 $13.01 $17 - 20 11,214,475 (c) 8.1 $17.99 4,721,080 $18.14 $22 - 27 1,695,664 (c) 6.9 $26.23 1,672,364 $26.28 ---------- --------- $ 7 - 27 14,711,695 7.3 $18.19 8,170,000 $18.42
(a) Comprised of Series A Shares (b) Comprised of Series A Shares, except for 25,000 Series B Shares (c) Comprised of Series B Shares Pro forma information regarding net earnings and earnings per share has been determined as if Belo had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for those options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2000, 1999 and 1998, respectively: risk-free interest rates of 5.61 percent, 6.40 percent and 4.62 percent, respectively; dividend yields of 1.62 percent, 1.35 percent and 1.33 percent, respectively; volatility factors of the expected market price of Belo's common stock of .288, .256 and .243, respectively; and weighted average expected lives of the options of approximately 7, 5 and 5 years, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The pro forma information presented below is not necessarily indicative of the effects on reported or pro forma net earnings for future years. The Company's pro forma information for the three years ended December 31, 2000 follows:
2000 1999 1998 -------- -------- ------- Pro forma net earnings $141,766 $172,313 $59,179 Pro forma net earnings per share $ 1.24 $ 1.47 $ .48
Belo's long-term incentive plan also provides for the grant of restricted shares of Series A Common Stock. These restricted shares generally vest over a four-year period and contain certain performance requirements for a portion of the shares. All restricted shares issued and outstanding became fully vested as of December 31, 1998. No additional restricted shares were granted in 1999 or 2000. Restricted stock activity for the year ended December 31, 1998 is summarized in the following table. Amounts shown in this table have not been retroactively restated to reflect the June 5, 1998 stock split.
1998 ----------------------- Price Shares Per Share --------- --------- Outstanding at January 1, 85,392 $27 - 56 Two-for-one stock split 84,332 $13 - 28 Vested (152,246) $13 - 28 Forfeited (17,478) $13 - 28 -------- -------- Outstanding at December 31, -- --
25 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A provision for restricted shares is made ratably over the restriction period. Expense recognized under the plan for restricted shares was $167 in 1998. NOTE 8: COMMITMENTS AND CONTINGENT LIABILITIES Belo is involved in certain claims and litigation related to its operations. In the opinion of management, liabilities, if any, arising from these claims and litigation would not have a material adverse effect on Belo's consolidated financial position, liquidity or results of operations. Commitments for the purchase of future broadcast rights totaled approximately $247,455, at December 31, 2000 for broadcasts scheduled through August 2007. Advance payments on plant and equipment expenditures at December 31, 2000 primarily relate to DTV equipment, newspaper production equipment and construction projects. Required future payments for capital expenditures for 2001, 2002, 2003 and 2004 are $15,454, $2,725, $1,076 and $1,594, respectively. Required future payments for capital expenditures in 2001 include $12,100 for DTV equipment at eleven of the Company's stations and $2,825 for a new press at The Press-Enterprise. Total lease expense for property and equipment was $7,890, $8,617 and $8,293 in 2000, 1999 and 1998, respectively. Future minimum rental payments for operating leases at December 31, 2000 are as follows:
Operating Leases --------- 2001 $ 6,922 2002 5,443 2003 4,046 2004 3,355 2005 2,862 2006 & beyond 7,624 ------- Total commitments $30,252
NOTE 9: COMMON AND PREFERRED STOCK Belo has two series of common stock authorized, issued and outstanding, Series A and Series B, each with a par value of $1.67 per share. The total number of authorized shares of common stock is 450,000,000 shares. The shares are identical except that Series B shares are entitled to 10 votes per share on all matters submitted to a vote of shareholders, while the Series A shares are entitled to one vote per share. Transferability of the Series B shares is limited to family members and affiliated entities of the holder. Series B shares are convertible at any time on a one-for-one basis into Series A shares. Shares of Belo's Series A Common Stock are traded on the New York Stock Exchange (NYSE symbol: BLC). There is no established public trading market for shares of Series B Common Stock. Each outstanding share of common stock is accompanied by one preferred share purchase right, which entitles shareholders to purchase 1/200 of a share of Series A Junior Participating Preferred Stock. The rights will not be exercisable until a party either acquires beneficial ownership of 30 percent of Belo's common stock or makes a tender offer for at least 30 percent of its common stock. At such time, each holder of a right (other than the acquiring person or group) will have the right to purchase common stock of Belo with a value equal to two times the exercise price of the right, which is initially $75 (subject to adjustment). In addition, if Belo is acquired in a merger or business combination, each right can be used to purchase the common stock of the surviving company having a market value of twice the exercise price of each right. Once a person or group has acquired 30 percent of the common stock but before 50 percent of the voting power of the common stock has been acquired, Belo may exchange each right (other than those held by the acquiring person or group) for one share of Company common stock (subject to adjustment). Belo may reduce the 30 percent threshold or may redeem the rights. The number of shares of Series A Junior Participating Preferred Stock reserved for possible conversion of these rights is equivalent 26 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to 1/200 of the number of shares of common stock issued and outstanding plus the number of shares reserved for options outstanding and for grant under the 2000 Executive Compensation Plan and for options outstanding under Belo's predecessor plans. The rights will expire in 2006, unless extended. Belo has in place a stock repurchase program authorizing the purchase of up to $2,500 of Company stock annually. In addition to 2,759,044 shares that were available for repurchase under a previous authorization, in July 2000, Belo's Board of Directors authorized the repurchase of up to 25,000,000 shares of common stock. As of December 31, 2000, Belo may purchase 18,116,719 shares under this authority. During 2000, 1999 and 1998, Belo purchased 9,642,325, 1,187,300 and 6,727,400 shares, respectively, of its Series A Common Stock at an aggregate cost of $171,712, $21,793 and $129,786, respectively. All shares were retired in the year of purchase. NOTE 10: OTHER INCOME AND EXPENSE During the fourth quarter of 2000, Belo recorded a gain of $18,953 ($12,190 net of taxes or 10 cents per share for the year) from a legal settlement. In 1999 and 2000, Belo made investments in other businesses, including approximately $63,000 in Internet-related companies. During the fourth quarter of 2000, Belo recorded a reserve of $28,500 ($18,331 net of taxes or 16 cents per share) related to certain of the Internet investments, recognizing a decline in value considered to be other than temporary. At December 31, 2000, the carrying value as adjusted by the reserve approximated the fair value of these investments. In November 1999, Belo sold its investment in Falcon Communications, a cable system operator, for estimated proceeds of $68,743. The gain on the sale was $47,006 before taxes of $18,517, for a net gain of $28,489 or 24 cents per share. In 1998, Belo sold 982,000 shares of Peapod, Inc. ("Peapod") common stock and donated 827,113 shares of Peapod common stock to the A. H. Belo Corporation Foundation. These transactions increased 1998 net earnings by $2,042 as the $6,244 charge for the charitable contribution was more than offset by the net gain on the disposition of shares and the tax benefit from the charitable contribution. NOTE 11: EARNINGS PER SHARE The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share for the three years ended December 31, 2000 (in thousands, except per share amounts):
2000 1999 1998 ------- ------- ------- Weighted average shares for basic earnings per share 116,754 118,322 123,508 Effect of employee stock options 444 855 1,328 ------- ------- ------- Weighted average shares for diluted earnings per share 117,198 119,177 124,836 Options excluded due to exercise price in excess of average market price Number outstanding 12,719 1,798 1,765 Weighted average exercise price $19.11 $26.19 $26.41 ------- ------- -------
27 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12: COMPREHENSIVE INCOME For the years ended December 31, 2000 and 1999, total comprehensive income of $150,825 and $178,306, respectively, was the same as reported income. Comprehensive income of $60,758 in 1998 was $4,144 less than the reported income of $64,902 due to a reduction totaling $5,251 (net of taxes of $2,827) for the reclassification of gains included in net earnings, partially offset by $1,107 (net of taxes of $596) for unrealized holding gains. NOTE 13: SUPPLEMENTAL CASH FLOW INFORMATION Supplemental cash flow information and significant non-cash investing and financing activities for the three years ended December 31, 2000, are as follows:
2000 1999 1998 -------- -------- -------- Supplemental cash flow information: Cash paid during the period for: Interest, net of amounts capitalized $132,146 $107,045 $107,763 Income taxes, net of refunds $116,539 $ 90,869 $ 84,407 Supplemental non-cash investing and financing activities: KXTV/KVUE asset exchange $ -- $112,098 $ -- -------- -------- --------
NOTE 14: INDUSTRY SEGMENT INFORMATION Belo operates in three primary segments: television broadcasting, newspaper publishing and interactive media. Operations in the broadcasting industry involve the sale of air time for advertising and the broadcast of news, entertainment and other programming. Belo's television stations are located in Dallas/Fort Worth, Houston, San Antonio and Austin, Texas; Seattle/Tacoma and Spokane, Washington; Phoenix and Tucson, Arizona; St. Louis, Missouri; Portland, Oregon; Charlotte, North Carolina; New Orleans, Louisiana; Hampton/Norfolk, Virginia; Louisville, Kentucky; and Boise, Idaho. Operations in the newspaper publishing industry involve the sale of advertising space in published issues, the sale of newspapers to distributors and individual subscribers and commercial printing. The Company's major publishing units are The Dallas Morning News, located in Dallas, Texas; The Providence Journal, located in Providence, Rhode Island; and The Press-Enterprise, located in Riverside, California. The Company has other newspaper operations in Arlington and Denton, Texas. The operations of the interactive media segment are conducted from corporate headquarters in Dallas, Texas and at each of Belo's individual operating units. Revenues for the interactive media segment result primarily from the sale of advertising on Belo operating unit Web sites and, to a much lesser extent, fees generated from Internet service provider subscriptions and data retrieval services. The Company's other industry segment is comprised primarily of cable news operations, which are located in Seattle, Washington and Dallas, Texas. Revenues in the other segment are generated from the sale of advertising time and subscription fees from local cable company operators. Belo's various operating segments share content at no cost. 28 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Selected segment data for the years ended December 31, 2000, 1999 and 1998 is as follows and includes reclassification of 1998 results related to the Interactive media segment, which were primarily included with newspaper publishing operations:
2000 1999 1998 ----------- ----------- ----------- Net operating revenues Broadcasting (a) $ 699,503 $ 598,637 $ 593,426 Newspaper publishing (b) 872,688 816,976 784,327 Interactive media 10,401 6,520 3,214 Other 14,345 11,849 10,736 Intercompany elimination (c) (8,125) -- -- ----------- ----------- ----------- $ 1,588,812 $ 1,433,982 $ 1,391,703 ----------- ----------- ----------- Earnings (loss) from operations Broadcasting (a)(d) $ 196,159 $ 143,200 $ 143,751 Newspaper publishing (b)(e) 189,310 176,985 138,289 Interactive media (26,743) (8,908) (2,778) Other (6,978) (7,726) (5,212) Corporate expenses (f) (49,022) (39,056) (40,965) ----------- ----------- ----------- $ 302,726 $ 264,495 $ 233,085 ----------- ----------- ----------- Depreciation and amortization Broadcasting $ 113,394 $ 102,725 $ 94,992 Newspaper publishing (g) 62,008 59,182 72,062 Interactive media 1,796 543 91 Other 3,407 2,736 1,030 Corporate 4,367 3,775 2,745 ----------- ----------- ----------- $ 184,972 $ 168,961 $ 170,920 ----------- ----------- ----------- Operating cash flow (h) Broadcasting $ 309,553 $ 245,925 $ 238,743 Newspaper publishing 251,318 236,167 210,351 Interactive media (24,947) (8,365) (2,687) Other (3,571) (4,990) (4,182) Corporate (44,655) (35,281) (38,220) ----------- ----------- ----------- $ 487,698 $ 433,456 $ 404,005 ----------- ----------- ----------- Identifiable assets Broadcasting $ 2,600,860 $ 2,665,186 $ 2,310,002 Newspaper publishing 1,027,320 1,100,817 1,063,384 Interactive media 48,350 21,143 128 Other 21,531 23,525 23,922 Corporate 195,199 165,593 141,653 ----------- ----------- ----------- $ 3,893,260 $ 3,976,264 $ 3,539,089 ----------- ----------- ----------- Capital expenditures Broadcasting $ 41,528 $ 40,859 $ 55,035 Newspaper publishing 44,490 40,036 25,847 Interactive media 12,007 124 -- Other 1,215 3,298 16,898 Corporate 5,187 8,069 5,147 ----------- ----------- ----------- $ 104,427 $ 92,386 $ 102,927 ----------- ----------- -----------
(a) Broadcasting results include KXTV through May 1999 and KASA and KHNL through October 1999. Results for KVUE are included beginning in June 1999 and KTVK results are reflected beginning in November 1999. (b) Publishing results include the operations of the Denton Record-Chronicle beginning in July 1999. Results for The Gleaner are included through October 2000 and results for The Eagle are included through November 2000. The sale of the Messenger-Inquirer was completed effective December 31, 2000. (c) The intercompany elimination removes $6,677, $1,308, $82 and $58 of revenues for the year ended December 2000 for Broadcasting, Newspaper publishing, Interactive media and Other, respectively, for advertising provided primarily to the Interactive media segment. (d) Broadcasting earnings from operations for 1998 include a $6,996 charge for early retirement costs and other employee reduction initiatives. (e) Newspaper publishing earnings from operations for 1998 include a non-cash charge for the write-down of a press at DMN of $11,478 and a charge of $6,344 for certain early retirement costs. (f) Corporate expenses in 2000 include approximately $3,795 for early retirement costs. (g) Newspaper publishing depreciation and amortization expense for 1998 includes the $11,478 non-cash charge for the write-down of a press at DMN. (h) Operating cash flow is defined as segment earnings from operations plus depreciation and amortization. Operating cash flow is used in the broadcasting and 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. 29 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15: QUARTERLY RESULTS OF OPERATIONS (unaudited) Following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2000 and 1999:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- 2000 Net operating revenues Broadcasting (a) $ 152,975 $ 183,800 $ 169,969 $ 192,759 Newspaper publishing (b) 206,117 223,374 218,048 225,149 Interactive media 2,187 2,565 2,904 2,745 Other 3,219 3,489 3,848 3,789 Intercompany elimination -- (990) (4,416) (2,719) --------- --------- --------- --------- $ 364,498 $ 412,238 $ 390,353 $ 421,723 --------- --------- --------- --------- Earnings (loss) from operations Broadcasting (a) $ 31,653 $ 58,480 $ 43,696 $ 62,330 Newspaper publishing (b) 43,729 51,096 45,433 49,052 Interactive media (3,545) (4,985) (9,880) (8,333) Other (1,508) (1,621) (1,431) (2,418) Corporate expenses (c) (11,091) (11,465) (11,668) (14,798) --------- --------- --------- --------- $ 59,238 $ 91,505 $ 66,150 $ 85,833 --------- --------- --------- --------- Net earnings (d) $ 15,393 $ 32,259 $ 17,522 $ 85,651 --------- --------- --------- --------- Basic earnings per share (d) $ .13 $ .27 $ .15 $ .76 Diluted earnings per share (d) $ .13 $ .27 $ .15 $ .76 --------- --------- --------- --------- 1999 Net operating revenues Broadcasting (e) $ 131,255 $ 157,885 $ 138,374 $ 171,123 Newspaper publishing (f) 191,344 204,708 202,038 218,886 Interactive media 1,259 1,448 1,884 1,929 Other 2,762 2,861 2,998 3,228 --------- --------- --------- --------- $ 326,620 $ 366,902 $ 345,294 $ 395,166 --------- --------- --------- --------- Earnings (loss) from operations Broadcasting (e) $ 21,479 $ 46,866 $ 28,777 $ 46,078 Newspaper publishing (f) 38,881 48,238 42,809 47,057 Interactive media (1,244) (1,576) (2,163) (3,925) Other (1,718) (1,948) (1,959) (2,101) Corporate expenses (8,157) (10,180) (9,724) (10,995) --------- --------- --------- --------- $ 49,241 $ 81,400 $ 57,740 $ 76,114 --------- --------- --------- --------- Net earnings (g) $ 12,590 $ 79,763 $ 16,588 $ 69,365 --------- --------- --------- --------- Basic earnings per share (g) $ .11 $ .68 $ .14 $ .59 Diluted earnings per share (g) $ .11 $ .67 $ .14 $ .58 --------- --------- --------- ---------
(a) Beginning in the first quarter of 2000, broadcasting operating results reflect the March 1 acquisition of KONG in Seattle, Washington and KASW in Phoenix, Arizona, previously operated under local marketing agreements. The sale of KOTV in Tulsa, Oklahoma was completed on December 31, 2000. (b) Fourth quarter 2000 results reflect the sale of The Gleaner in Henderson, Kentucky and The Eagle in Bryan-College Station, Texas on November 1 and December 1, respectively. The sale of the Messenger-Inquirer was completed effective December 31, 2000. (c) Corporate expenses in fourth quarter 2000 include approximately $3,795 in early retirement costs. (d) Net earnings and earnings per share in the fourth quarter of 2000 include gains of $65,367 (56 cents for the year) on the sales of The Gleaner, The Eagle, the Messenger-Inquirer and KOTV, a benefit of $12,190 (10 cents for the year) related to a legal settlement and an $18,331 (16 cents) reserve for certain Internet investments. (e) Beginning in the second quarter of 1999, broadcasting operating results reflect the exchange of KXTV in Sacramento, California for KVUE in Austin, Texas, effective June 1, 1999. Fourth quarter 1999 results reflect the sale of KASA in Albuquerque, New Mexico and KHNL in Honolulu, Hawaii on October 29, 1999 and the acquisition of KTVK in Phoenix, Arizona on November 1, 1999. (f) Beginning in third quarter 1999, newspaper publishing results include the operations of the Denton Record-Chronicle, which was acquired on June 30, 1999. (g) Net earnings and earnings per share in the second quarter of 1999 include a gain of $49,060 (41 cents) on the KXTV/KVUE exchange. Fourth quarter net earnings and earnings per share include a gain on the disposition of KASA and KHNL of $16,348 (14 cents) and a $28,489 (24 cents) gain on the sale of Belo's investment in Falcon Communications. 30 32 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The Management of Belo is responsible for the preparation of the consolidated financial statements, as well as for their integrity and objectivity. Those statements are prepared using accounting principles generally accepted in the United States, they include amounts that are based on our best estimates and judgments, and we believe they are not misstated due to material fraud or error. Management has also prepared the other information in the Annual Report and is responsible for its accuracy and its consistency with the financial statements. Management maintains a system of internal control that is designed to provide reasonable assurance of the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. This system of internal control provides for appropriate division of responsibility. Policies and procedures, as they relate to internal control, are updated as necessary and communicated to those employees having a significant role in the financial reporting process. Management continually monitors the system of internal control for compliance. Management believes that as of December 31, 2000, Belo's system of internal control is adequate to accomplish the objectives described above. Management recognizes, however, that no system of internal control can ensure the elimination of all errors and irregularities, and it recognizes that the cost of the internal controls should not exceed the value of the benefits derived. Finally, Management recognizes its responsibility for fostering a strong ethical climate within Belo according to the highest standards of personal and professional conduct, and this responsibility is delineated in Belo's written statement of business conduct. This statement of business conduct addresses, among other things, the necessity for due diligence and integrity, avoidance of potential conflicts of interest, compliance with all applicable laws and regulations, and the confidentiality of proprietary information. /s/ Robert W. Decherd Robert W. Decherd Chairman of the Board, President & Chief Executive Officer /s/ Dunia A. Shive Dunia A. Shive Executive Vice President/Chief Financial Officer 31 EX-21 10 d84902ex21.txt SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY (AS OF DECEMBER 31, 2000)
STATE OF NAME OF CORPORATION INCORPORATION - ------------------- ------------- NEWSPAPER PUBLISHING: The Dallas Morning News, L.P. d/b/a The Dallas Morning News Delaware The Providence Journal Company d/b/a Providence Journal-Bulletin Delaware Press-Enterprise Company d/b/a The Press-Enterprise California DFW Printing Company, Inc. Delaware DFW Suburban Newspapers, Inc. Delaware Denton Publishing Company d/b/a Denton Record-Chronicle Texas DMI Acquisition Sub., Inc. d/b/a Design Mail, Inc. Delaware TELEVISION BROADCASTING: KVUE Television, Inc. d/b/a KVUE, Channel 24 Delaware KHOU-TV, L.P. d/b/a KHOU, Channel 11 Delaware WFAA-TV, L.P. d/b/a WFAA, Channel 8 Delaware WVEC Television, Inc. d/b/a WVEC, Channel 13 Delaware WWL-TV, Inc. d/b/a WWL, Channel 4 Delaware KENS-TV, Inc. d/b/a KENS, Channel 5 Delaware KMOV-TV, Inc. d/b/a KMOV, Channel 4 Delaware KMSB-TV, Inc. d/b/a KMSB, Channel 11 Arizona WCNC-TV, Inc. d/b/a WCNC, Channel 36 North Carolina Belo Kentucky, Inc. d/b/a WHAS, Channel 11 Kentucky King Broadcasting Company d/b/a KING, Channel 5 Washington d/b/a KREM, Channel 2 d/b/a KTVB, Channel 7 d/b/a KGW, Channel 8 KTVK, Inc. d/b/a KTVK, Channel 3 Delaware KASW-TV, Inc. d/b/a KASW, Channel 61 Delaware KONG-TV, Inc. d/b/a KONG, Channel 16 Delaware King News Corporation d/b/a Northwest Cable News Washington Texas Cable News, Inc. d/b/a TXCN Delaware Hill Tower, Inc. Texas Texas Tall Tower Texas Belo Interactive, Inc. Delaware
Except as noted below, all of the subsidiaries are wholly-owned subsidiaries of the Company. The Company through wholly-owned subsidiaries owns 50% of the outstanding common stock of Hill Tower, Inc. and Texas Tall Tower. EX-23 11 d84902ex23.txt CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-30994, Form S-8 No. 33-32526, Form S-8 No. 33-18771, Form S-8 No. 33-61439, Form S-8 No. 333-43056 and Form S-3 No. 333-25579) pertaining to the Employee Savings and Investment Plan, Long-Term Incentive Plan, 1995 Executive Compensation Plan, 2000 Executive Compensation Plan and the registration of $1,500,000,000 of debt securities and warrants to purchase debt securities of Belo Corp. of our report dated February 8, 2001, with respect to the consolidated financial statements of Belo Corp. and subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 2000. Dallas, Texas March 12, 2001 -----END PRIVACY-ENHANCED MESSAGE-----