Belo Corp. Series A Reports Operating Results (10-Q)

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Jul 30, 2010
Belo Corp. Series A (BLC, Financial) filed Quarterly Report for the period ended 2010-06-30.

Belo Corp. Series A has a market cap of $672.2 million; its shares were traded at around $6.53 with a P/E ratio of 13.4 and P/S ratio of 1.2. BLC is in the portfolios of John Keeley of Keeley Fund Management, Jim Simons of Renaissance Technologies LLC, Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

Non-political advertising revenues increased $17,295, or 13.7 percent, in the three months ended June 30, 2010, compared to the three months ended June 30, 2009. This increase is primarily due to a $16,612, or 14.3 percent, increase in local and national spot revenue. Spot revenue increased primarily in the automotive, retail, grocery, healthcare and home improvement categories. Internet advertising revenues increased $968, or 13.6 percent. Political advertising revenues increased $654 in the second quarter 2010 as compared with the second quarter 2009. Political revenues are generally higher in even-numbered years than in odd-numbered years due to elections for various state and national offices. Other revenues increased primarily due to increases in retransmission revenues.

Station salaries, wages and employee benefits increased $6,375, or 14.0 percent, in the three months ended June 30, 2010, compared to the three months ended June 30, 2009. This increase is primarily due to a 2009 credit for vacation accruals of $3,007 due to the Companys decision to convert to a paid-time-off (PTO) vacation policy in the second quarter 2009, bonus accruals of $1,528 in the second quarter 2010 compared to virtually no bonus expense in 2009, and increases in pension and pension transition expenses of $1,571. Station programming and other operating costs decreased $2,205, or 4.5 percent, in the three months ended June 30, 2010, compared to the three months ended June 30, 2009, primarily related to a non-cash expense reduction of $2,360 relating to a 2005 Federal Communications Commission (FCC) decision that allowed a major wireless provider to finance the replacement of analog newsgathering equipment with digital equipment in exchange for stations vacating the analog spectrum earlier than required. Two Belo markets converted to this digital equipment in the second quarter 2010 and only one Belo market converted in the second quarter 2009. Corporate operating costs increased $2,657 in the second quarter 2010, primarily related to an increase of $1,589 in pension and pension transition expenses and an increase of $1,092 in bonus expense. Decreases in other corporate operating costs offset a $1,635 insurance reimbursement recognized in the second quarter of 2009.

Station salaries, wages and employee benefits increased $4,926, or 5.0 percent, in the six months ended June 30, 2010, compared to the six months ended June 30, 2009. This increase is primarily due to increases in bonus accruals of $3,339, a 2009 credit for vacation accruals of $2,979 due to the second quarter 2009 decision to convert to a PTO vacation policy, a 2009 credit of $2,110 for self-insured medical costs, and increases in pension and pension transition expenses of $2,482. These increases were partially offset by decreases in severance costs of $2,517, 401(k) plan expense of $1,896 and salary expense of $1,566. Station programming and other operating costs decreased $4,938 or 5.1 percent, primarily due to a non-cash expense reduction of $4,381, relating to a 2005 Federal Communications Commission (FCC) decision that allowed a major wireless provider to finance the replacement of analog newsgathering equipment with digital equipment in exchange for stations vacating the analog spectrum earlier than required. Six Belo markets converted to this digital equipment in the first half of 2010 and only two Belo markets converted in the first half of 2009. Corporate operating costs increased $3,316 in the six months ended June 30, 2010, primarily related to increases in bonus expense of $2,463, pension and pension transition expenses of $1,848, and share-based compensation expense of $1,299. These increases were partially offset by a decrease in technology related expenses of $2,149.

Belos current 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. A. H. Belo is required to reimburse the Company for 60 percent of each contribution the Company makes to the Pension Plan. For the three and six months ended June 30, 2010, the Company made Pension Plan contributions of $7,000 and $13,787, respectively, and received reimbursements from A. H. Belo of $4,200 and $8,272, respectively. Pension contribution reimbursements received from A. H. Belo are classified as a credit to operating costs and expenses in the consolidated statement of operations.

Interest expense increased $4,483 and $9,791 in the three and six months ended June 30, 2010, respectively, primarily due to increased interest costs associated with the issuance of $275,000 in 8% Senior Notes in November 2009, and the amortization of the discount and refinancing costs associated with the note offering. These borrowings were previously included in the Companys lower-rate revolving credit facility. Other income (expense), net increased $3,180 in the second quarter 2010 compared to the second quarter 2009, due primarily to costs recognized in the second quarter 2009 of $947 related to the relocation of the Companys bureau in Washington, DC, and a $500 increase in an investment reserve. Other income (expense), net decreased $13,456 in the six months ended June 30, 2010, primarily due to a $14,905 gain related to the Companys first quarter 2009 purchase of debt securities. The debt securities were purchased on the open market at a discount. Additionally, in the first quarter 2009, the Company sold its interest in a Web site joint venture for a gain of $1,616.

At June 30, 2010, Belo had $885,669 in fixed-rate debt securities as follows: $175,568 of 63/4% Senior Notes due 2013; $270,101 of 8% Senior Notes due 2016; $200,000 of 73/4% Senior Debentures due 2027; and $240,000 of 71/4% Senior Debentures due 2027. The weighted average effective interest rate for the fixed-rate debt instruments is 7.5%.

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