Belo Corp. Series A (BLC) filed Quarterly Report for the period ended 2009-09-30.
BELO CORPORATION is the largest pure-play publicly-traded television station company in the nation. The Company owns and operates twenty television stations including ABC CBS NBC FOX CW and MyNetwork TV affiliates reaching 14 percent of U.S. television households and their associated Web sites in 15 highly-attractive markets across the United States. Nearly all Belo stations rank first or second in their local market based on audience reach. Belo operates nine stations in seven of the top 25 markets in the nation with six stations located in the fast-growing top-15 markets of Dallas/Fort Worth Houston Seattle/Tacoma and Phoenix. Belo Corp. operates more than 25 Web sites building on the Company's well-established local and regional brands to generate new customer relationships. Additionally the Company has leveraged its local television assets to create regional cable news channels in Texas the Northwest and Arizona increasing its impact in those regions. Belo Corp. Series A has a market cap of $476.7 million; its shares were traded at around $4.65 with a P/E ratio of 9 and P/S ratio of 0.7. Belo Corp. Series A had an annual average earning growth of 0.5% over the past 10 years.
Highlight of Business Operations:
For the three months ended September 30, 2009, station salaries, wages and employee benefits decreased $9,521, or 16.8 percent, primarily due to decreases in salary expense of $5,358, 401(k) Plan expense of $2,262, and vacation expense of $1,481 (due to an announced change to the Company’s vacation policy). Station programming and other operating costs decreased $2,595, or 4.9 percent, with decreases in most expense categories, including a $1,072 decrease in advertising expense. In 2005, the Federal Communications Commission (FCC) allowed a major wireless provider to finance the replacement of analog newsgathering equipment with digital equipment. The Company recognized credits for this replacement of $1,964 in the third quarter 2008, as two Belo markets converted to this digital equipment in the third quarter 2008 versus no Belo markets in the third quarter 2009. Corporate operating costs increased $1,789, or 30 percent, in the third quarter 2009, primarily due to a $1,129 decrease in the credit to pension expense and a $1,084 increase in share-based compensation associated with the increase in the Company’s share price.
For the nine months ended September 30, 2009, station salaries, wages and employee benefits decreased $30,640, or 17.4 percent, primarily due to decreases in salary expense of $13,816, 401(k) Plan expense of $5,322, vacation expense of $4,554 (due to the policy change noted above), pension transition supplement expense of $2,696, sales commissions of $1,972, bonus expense of $1,509 and self-insured medical insurance costs of $1,409. Station programming and other operating costs decreased $9,103, or 5.8 percent, with decreases in most expense categories, including a $5,683 decrease in advertising expense and a $2,450 decrease in national representation fees. For the nine month period, the credits recognized for the replacement of analog equipment pursuant to the FCC decision discussed above were $2,634 and $6,857 for 2009 and 2008, respectively, as two Belo markets converted to this digital equipment in the first nine months of 2009 versus seven Belo markets in the first nine months of 2008. Corporate operating costs remained consistent with the same period in 2008, with a decrease in the credit to pension expense of $3,158 and an increase in technology costs of $2,692 being partially offset by a decrease in compensation and bonus expense of $1,777 and a decrease in various other expenses of $4,302.
Interest expense decreased in the three and nine months ended September 30, 2009, primarily due to the repayment of $350,000 of outstanding 8% Senior Notes in the fourth quarter of 2008 with funds from the Company’s revolving credit facility, which has a lower interest rate. Additionally, in the fourth quarter 2008 and the first quarter 2009, the Company purchased a total of $74,075 of the Company’s outstanding 6 3/4% Senior Notes due in 2013 and $10,000 of the Company’s outstanding 7 1/4% Senior Debentures due in 2027 for a total cost of $52,048. The purchases were also funded with lower rate borrowings under the credit facility.
Other income, net decreased $1,200 in the third quarter 2009 compared to the third quarter 2008 due primarily to a $1,273 loss on the sale of a non-operating asset. Other income, net increased $11,291 in the first nine months of 2009 compared to the first nine months of 2008 primarily due to a $14,905 gain related to the Company’s first quarter 2009 purchase of debt securities discussed above and a gain of $1,616 on the sale of the Company’s interest in a Web-site joint venture in the first half of 2009. These increases were partially offset by the loss on the asset sale mentioned above.
Income taxes decreased $93,226 for the three months ended September 30, 2009, compared with the three months ended September 30, 2008, due to the tax benefit related to the impairment charge booked in the third quarter 2009. Income taxes decreased $121,310 for the nine months ended September 30, 2009, compared with the nine months ended September 30, 2008, due to the tax benefit related to the impairment charge recorded in the third quarter 2009, lower earnings before taxes and a one-time tax charge in the first nine months of 2008 related to the spin-off of the Company’s newspaper businesses and related assets. Although the spin-off otherwise qualifies for tax-free treatment to shareholders, the Company (but not its shareholders) recognized for tax purposes approximately $51,900 of previously deferred intercompany gains related to the transfer of certain intangibles to A. H. Belo, resulting in a federal income tax obligation estimated at $18,235 as of September 30, 2008.
Based on assessments performed as of September 30, 2009, the Company recorded a non-cash impairment charge of $242,144 reflecting the reduction in the fair value of the Company’s FCC licenses in 10 of its markets. Of this amount, $84,584 related to the Phoenix, Arizona market, $52,727 related to the Seattle, Washington market, $27,807 related to the Portland, Oregon market, $13,133 related to the St. Louis, Missouri market, $14,383 related to the Louisville, Kentucky market, $10,518 related to the Austin, Texas market, $10,212 related to the San Antonio, Texas market, $10,128 related to the Tucson, Arizona market, $9,597 related to the Spokane, Washington market, and $9,055 related to the Boise, Idaho market. The impairment charges related to FCC licenses resulted primarily from a decline in the fair value of the individual businesses due to lower projected cash flows versus historical estimates, particularly in the first few years of projection, and an increase in prevailing average costs of capital from prior year. These lower projected cash flows reflect generally slower expected growth due to the current recessionary environment and related advertising downturn. On a comparative basis, there were no FCC license impairments recorded in either the three months or nine months ended September 30, 2008.
BLC is in the portfolios of Michael Price of MFP Investors LLC, Kenneth Fisher of Fisher Asset Management, LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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