UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-8598

Belo Corp.

(Exact name of registrant as specified in its charter)

Delaware		75-0135890
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification no.)

P. O. Box 655237
Dallas, Texas		75265-5237
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (214) 977-6606

Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at April 30, 2010
Common Stock, $1.67 par value		102,939,765

 

 

BELO CORP.
FORM 10-Q
TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures about Market Risk			18
Item 4. Controls and Procedures			18
PART II OTHER INFORMATION
Item 1. Legal Proceedings			18
Item 1A. Risk Factors			18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			18
Item 3. Defaults Upon Senior Securities			19
Item 4. Submission of Matters to a Vote of Security Holders			19
Item 5. Other Information			19
Item 6. Exhibits			19
Signatures			24
Exhibit 21
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I.

Item 1.		Financial Statements

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Belo Corp. and Subsidiaries

		Three months ended March 31,
In thousands, except per share amounts (unaudited)		2010				2009
Net Operating Revenues		$	154,332			$	133,536
Operating Costs and Expenses
Station salaries, wages and employee benefits			51,224				52,673
Station programming and other operating costs			45,631				48,364
Corporate operating costs			9,609				8,950
Pension contribution reimbursement			(4,072	)			—
Depreciation			9,243				10,792
Total operating costs and expenses			111,635				120,779
Earnings from operations			42,697				12,757
Other Income and Expense
Interest expense			(19,888	)			(14,580	)
Other income (expense), net			(267	)			16,369
Total other income and expense			(20,155	)			1,789
Earnings before income taxes			22,542				14,546
Income taxes			9,000				5,635
Net earnings		$	13,542			$	8,911
Net earnings per share — Basic		$	.13			$	.09
Net earnings per share — Diluted		$	.13			$	.09
Dividends declared per share		$	—			$	0.075

See accompanying Notes to Consolidated Condensed Financial Statements.

CONSOLIDATED CONDENSED BALANCE SHEETS
Belo Corp. and Subsidiaries

		March 31,				December 31,
In thousands, except share and per share amounts (unaudited)		2010				2009
Assets
Current assets:
Cash and temporary cash investments		$	4,916			$	4,800
Accounts receivable, net			128,009				139,911
Other current assets			28,589				31,413
Total current assets			161,514				176,124
Property, plant and equipment, net			174,762				177,475
Intangible assets, net			725,399				725,399
Goodwill			423,873				423,873
Other assets			76,005				81,590
Total assets		$	1,561,553			$	1,584,461
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	17,362			$	20,736
Accrued expenses			46,244				41,922
Short-term pension obligation			12,249				14,277
Accrued interest payable			18,409				10,682
Income taxes payable			5,187				12,052
Deferred revenue			4,063				4,228
Total current liabilities			103,514				103,897
Long-term debt			993,443				1,028,219
Deferred income taxes			175,354				169,888
Pension obligation			178,623				182,065
Other liabilities			23,428				28,561
Shareholders’ equity:
Preferred stock, $1.00 par value. Authorized 5,000,000 shares; none issued
Common stock, $1.67 par value. Authorized 450,000,000 shares
Series A: Issued 91,305,751 shares at March 31, 2010 and 90,956,337 shares at December 31, 2009			152,481				151,897
Series B: Issued 11,634,014 shares at March 31, 2010 and 11,642,354 shares at December 31, 2009			19,429				19,443
Additional paid-in capital			913,237				911,989
Accumulated deficit			(858,371	)			(871,913	)
Accumulated other comprehensive loss			(139,585	)			(139,585	)
Total shareholders’ equity			87,191				71,831
Total liabilities and shareholders’ equity		$	1,561,553			$	1,584,461

See accompanying Notes to Consolidated Condensed Financial Statements.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Belo Corp. and Subsidiaries

		Three months ended March 31,
In thousands (unaudited)		2010				2009
Operations
Net earnings		$	13,542			$	8,911
Adjustments to reconcile net earnings to net cash provided by operations:
Gain on repurchase of senior notes			—				(14,905	)
Depreciation			9,243				10,792
Pension contribution			(6,787	)			—
Employee retirement expense			1,225				885
Deferred income tax			6,399				—
Share-based compensation			2,147				(82	)
Other non-cash expenses			(3,237	)			(2,630	)
Equity income from partnerships			166				144
Other, net			(1,309	)			(2,784	)
Net change in operating assets and liabilities:
Accounts receivable			11,300				24,634
Other current assets			4,641				(136	)
Accounts payable			(5,663	)			(6,993	)
Accrued expenses			4,516				(6,342	)
Accrued interest payable			7,950				1,948
Income taxes payable			(6,455	)			(8,611	)
Net cash provided by operations			37,678				4,831
Investments
Capital expenditures			(2,691	)			(1,060	)
Other, net			79				2,314
Net cash provided by (used for) investments			(2,612	)			1,254
Financing
Net proceeds from revolving debt			11,000				47,800
Payments on revolving debt			(46,000	)			(22,400	)
Purchase of senior notes			—				(25,260	)
Payment of dividends on common stock			—				(7,687	)
Net proceeds from exercise of stock options			26				—
Excess tax benefit from option exercises			24				—
Net cash used for financing			(34,950	)			(7,547	)
Net increase (decrease) in cash and temporary cash investments			116				(1,462	)
Cash and temporary cash investments at beginning of period			4,800				5,770
Cash and temporary cash investments at end of period		$	4,916			$	4,308

See accompanying Notes to Consolidated Condensed Financial Statements.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Belo Corp. and Subsidiaries
(in thousands, except per share amounts)

(1)		The accompanying unaudited consolidated condensed financial statements of Belo Corp. and subsidiaries (the Company or Belo) have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
		The Company’s operating segments are defined as its television stations and cable news channels within a given market. The Company has determined that all of its operating segments meet the criteria under Accounting Standards Codification (ASC) 280-10.
		In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.
		All amounts are in thousands, except per share amounts, unless otherwise indicated.
(2)		On February 8, 2008, the Company completed the spin-off of its former newspaper businesses and related assets into A. H. Belo Corporation (A. H. Belo), which has its own management and board of directors. Except as noted below, the Company has no further ownership interest in A. H. Belo or in any newspaper businesses or related assets, and A. H. Belo has no ownership interest in the Company or any television station businesses or related assets. Belo has not recognized any revenues or costs generated by A. H. Belo that would have been included in its financial results were it not for the spin-off. Belo’s relationship with A. H. Belo is governed by a separation and distribution agreement, a services agreement, a tax matters agreement, an employee matters agreement, and certain other agreements between the two companies or their respective subsidiaries. Belo and A. H. Belo also co-own certain downtown Dallas, Texas real estate through a limited liability company. Belo and A. H. Belo also co-own other investments in third party businesses and have some overlap in board members and shareholders. Although the services related to these agreements generate continuing cash flows between Belo and A. H. Belo, the amounts are not significant to the ongoing operations of the Company. In addition, the agreements and other relationships do not provide Belo with the ability to significantly influence the operating or financial policies of A. H. Belo and, therefore, do not constitute significant continuing involvement. Additionally, A. H. Belo is required to reimburse the Company for 60 percent of each contribution the Company makes to the Pension Plan.
(3)		The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share for the three months ended March 31, 2010 and 2009.

		2010				2009
Income (Numerator)
Net income		$	13,542			$	8,911
Less: Income to participating securities			217				93
Income available to common stockholders			13,325				8,818
Shares (Denominator)
Weighted average shares outstanding (basic)			102,809				102,378
Dilutive effect of employee stock options			416				16
Dilutive effect of restricted stock units (RSU)			—				—
Adjusted weighted average shares outstanding			103,225				102,394
Earnings per share:
Basic		$	.13			$	.09
Diluted		$	.13			$	.09

		For the three months ended March 31, 2010, the Company excluded 10,777 options and 421 RSUs because to include them would be anti-dilutive. For the three months ended March 31, 2009, the Company excluded 12,825 options and 1,046 RSUs because to include them would be anti-dilutive.
(4)		On January 1, 2010, the Company adopted the amendment to ASC 820-10, which expands fair value disclosure requirements. These disclosures are effective for fiscal years beginning after December 15, 2009. This amendment affects disclosure requirements only and has no effect on the Company’s financial position or results of operations.
(5)		Goodwill and indefinite-lived intangible assets (FCC licenses) are required to be tested at least annually for impairment or between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying amount. The Company’s indefinite-lived intangible assets represent FCC licenses in markets (as defined by Nielsen Media Research’s Designated Market Area report) where the Company’s stations operate. Goodwill is evaluated by reporting unit, with each reporting unit consisting of the television station(s) and cable news operations within a market. The Company measures the fair value of goodwill and indefinite-lived intangible assets annually as of December 31.
		Fair value estimates are inherently sensitive, particularly with respect to FCC licenses. For goodwill, management’s process involved analyzing the key estimates and assumptions used to determine the discounted cash flow calculations of estimated fair value for Belo reporting units. Significant assumptions used in these estimates include projected revenues and related growth rates over time and in perpetuity, forecasted operating margins, estimated tax rates, capital expenditures, and required working capital needs, and an appropriate risk-adjusted weighted-average cost of capital. For FCC licenses, management’s process involved analyzing key estimates and assumptions used to determine the discounted cash flow calculations of estimated fair value for Belo’s FCC licenses. Significant assumptions include costs and time associated with start-up, initial capital investments, and forecasts related to overall market performance over time. Based on the Company’s review, management believes that the fair values of its reporting units and indefinite-lived intangible assets exceed their carrying amounts at March 31, 2010; therefore, no adjustment to goodwill or indefinite-lived intangible assets is necessary.
(6)		At March 31, 2010, Belo had $885,443 in fixed-rate debt securities as follows: $175,533 of 63/4% Senior Notes due 2013, $269,910 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%.
		At March 31, 2010, Belo also had variable-rate debt under a credit agreement (Amended 2009 Credit Agreement). The Company is required to maintain certain leverage and interest ratios specified in the agreement. The leverage ratio is generally defined as the ratio of debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At March 31, 2010, the Company’s leverage ratio was 5.0, its interest coverage ratio was 2.9 and its senior leverage ratio was 0.5. As of March 31, 2010, the balance outstanding under the Amended 2009 Credit Agreement was $108,000, the weighted average interest rate was 4.2 percent, and all unused borrowings were available for borrowing. At March 31, 2010, the Company was in compliance with all debt covenant requirements.
		At March 31, 2010, the fair value of Belo’s 63/4% Senior Notes due May 30, 2013, 8% Senior Notes due November 15, 2016, 73/4% Senior Debentures due June 1, 2027, and 71/4% Senior Debentures due September 15, 2027, was estimated to be $178,564, $288,750, $165,000, and $194,400, respectively. The fair value is estimated 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 (Level 1 inputs). The Company believes the credit facility, as recorded, approximates fair value as the interest rates are variable based on current market rates.
		In the first quarter 2009, the Company purchased $40,500 of the outstanding 63/4% Senior Notes due May 30, 2013, for a total cost of $25,260. These purchases were funded with borrowings under the credit facility.

(7)

In November 2009, the Company issued Senior Notes that are fully and unconditionally guaranteed by each of the Company’s 100%-owned subsidiaries as of the date of issuance. Accordingly, the following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows of Belo as parent, the guarantor subsidiaries consisting of Belo’s current 100%-owned subsidiaries, and eliminations necessary to arrive at the Company’s information on a consolidated basis. These statements are presented in accordance with the disclosure requirements under Securities and Exchange Commission Regulation S-X, Rule 3-10.

Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2010
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Net Operating Revenues		$	—			$	154,332			$	—			$	154,332
Operating Costs and Expenses
Station salaries, wages and employee benefits			—				51,224				—				51,224
Station programming and other operating costs			—				45,631				—				45,631
Corporate operating costs			8,784				825				—				9,609
Pension contribution reimbursement			(4,072	)			—				—				(4,072	)
Depreciation			611				8,632				—				9,243
Total operating costs and expenses			5,323				106,312				—				111,635
Earnings (loss) from operations			(5,323	)			48,020				—				42,697
Other Income and Expense
Interest expense			(19,855	)			(33	)			—				(19,888	)
Intercompany interest			1,703				(1,703	)			—				—
Other expense, net			(167	)			(100	)			—				(267	)
Total other income and expense			(18,319	)			(1,836	)			—				(20,155	)
Earnings (loss) before income taxes			(23,642	)			46,184				—				22,542
Income tax benefit (expense)			10,120				(19,120	)			—				(9,000	)
Equity in earnings (loss) of subsidiaries			27,064				—				(27,064	)			—
Net earnings (loss)		$	13,542			$	27,064			$	(27,064	)		$	13,542

Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2009
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Net Operating Revenues		$	—			$	133,536			$	—			$	133,536
Operating Costs and Expenses
Station salaries, wages and employee benefits			—				52,673				—				52,673
Station programming and other operating costs			—				48,364				—				48,364
Corporate operating costs			8,251				699				—				8,950
Depreciation			1,342				9,450				—				10,792
Total operating costs and expenses			9,593				111,186				—				120,779
Earnings (loss) from operations			(9,593	)			22,350				—				12,757
Other Income and Expense
Interest expense			(14,540	)			(40	)			—				(14,580	)
Intercompany interest			1,703				(1,703	)			—				—
Other income, net			14,642				1,727				—				16,369
Total other income and expense			1,805				(16	)			—				1,789
Earnings (loss) before income taxes			(7,788	)			22,334				—				14,546
Income tax benefit (expense)			3,678				(9,313	)			—				(5,635	)
Equity in earnings (loss) of subsidiaries			13,021				—				(13,021	)			—
Net earnings (loss)		$	8,911			$	13,021			$	(13,021	)		$	8,911

Condensed Consolidating Balance Sheet
As of March 31, 2010
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and temporary cash investments		$	3,918			$	998			$	—			$	4,916
Accounts receivable, net			160				127,849				—				128,009
Other current assets			9,747				18,842				—				28,589
Total current assets			13,825				147,689				—				161,514
Property, plant and equipment, net			4,281				170,481				—				174,762
Intangible assets, net			—				725,399				—				725,399
Goodwill, net			—				423,873				—				423,873
Deferred income taxes			75,161				—				(75,161	)			—
Intercompany receivable			365,312				—				(365,312	)			—
Investment in subsidiaries			829,411				—				(829,411	)			—
Other assets			47,330				28,675				—				76,005
Total assets		$	1,335,320			$	1,496,117			$	(1,269,884	)		$	1,561,553
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	8,058			$	9,304			$	—			$	17,362
Accrued expenses			20,487				25,757				—				46,244
Short-term pension obligation			12,249				—				—				12,249
Income taxes payable			5,187				—				—				5,187
Deferred revenue			—				4,063				—				4,063
Accrued interest payable			18,409				—				—				18,409
Total current liabilities			64,390				39,124				—				103,514
Long-term debt			993,443				—				—				993,443
Deferred income taxes			—				250,515				(75,161	)			175,354
Pension obligation			178,623				—				—				178,623
Intercompany payable			—				365,312				(365,312	)			—
Other liabilities			11,673				11,755				—				23,428
Total shareholders’ equity			87,191				829,411				(829,411	)			87,191
Total liabilities and shareholders’ equity		$	1,335,320			$	1,496,117			$	(1,269,884	)		$	1,561,553

Condensed Consolidating Balance Sheet
As of December 31, 2009
(in thousands)

						Guarantor
		Parent				Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and temporary cash investments		$	3,646			$	1,154			$	—			$	4,800
Accounts receivable, net			361				139,550				—				139,911
Other current assets			11,193				20,220				—				31,413
Total current assets			15,200				160,924				—				176,124
Property, plant and equipment, net			4,655				172,820				—				177,475
Intangible assets, net			—				725,399				—				725,399
Goodwill, net			—				423,873				—				423,873
Deferred income taxes			77,210				—				(77,210	)			—
Intercompany receivable			431,275				—				(431,275	)			—
Investment in subsidiaries			782,606				—				(782,606	)			—
Other assets			51,594				29,996				—				81,590
Total assets		$	1,362,540			$	1,513,012			$	(1,291,091	)		$	1,584,461
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	10,882			$	9,854			$	—			$	20,736
Accrued expenses			17,181				24,741				—				41,922
Short-term pension obligation			14,277				—				—				14,277
Income taxes payable			12,052				—				—				12,052
Deferred revenue			—				4,228				—				4,228
Accrued interest payable			10,682				—				—				10,682
Total current liabilities			65,074				38,823				—				103,897
Long-term debt			1,028,219				—				—				1,028,219
Deferred income taxes			—				247,098				(77,210	)			169,888
Pension obligation			182,065				—				—				182,065
Intercompany payable			—				431,275				(431,275	)			—
Other liabilities			15,351				13,210				—				28,561
Total shareholders’ equity			71,831				782,606				(782,606	)			71,831
Total liabilities and shareholders’ equity		$	1,362,540			$	1,513,012				(1,291,091	)		$	1,584,461

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2010
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Total
Operations
Net cash provided by (used for) operations		$	(11,244	)		$	48,922			$	37,678
Investments
Capital expenditures			(339	)			(2,352	)			(2,691	)
Other, net			—				79				79
Net cash used for investments			(339	)			(2,273	)			(2,612	)
Financing
Net proceeds from revolving debt			11,000				—				11,000
Payments on revolving debt			(46,000	)			—				(46,000	)
Net proceeds from exercise of stock options			26				—				26
Excess tax benefit from option exercises			24				—				24
Intercompany activity			46,805				(46,805	)			—
Net cash provided by (used for) financing activities			11,855				(46,805	)			(34,950	)
Net increase (decrease) in cash and temporary cash investments			272				(156	)			116
Cash and temporary cash investments at beginning of period			3,646				1,154				4,800
Cash and temporary cash investments at end of period		$	3,918			$	998			$	4,916

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2009
(in thousands)(unaudited)

						Guarantor
		Parent				Subsidiaries				Total
Operations
Net cash provided by (used for) operations		$	(32,895	)		$	37,726			$	4,831
Investments
Capital expenditures			(1,060	)			—				(1,060	)
Other, net			1,000				1,314				2,314
Net cash provided by (used for) investments			(60	)			1,314				1,254
Financing
Net proceeds from revolving debt			47,800				—				47,800
Payments on revolving debt			(22,400	)			—				(22,400	)
Purchase of senior notes			(25,260	)			—				(25,260	)
Payment of dividends on common stock			(7,687	)			—				(7,687	)
Intercompany activity			39,479				(39,479	)			—
Net cash provided by (used for) financing activities			31,932				(39,479	)			(7,547	)
Net decrease in cash and temporary cash investments			(1,023	)			(439	)			(1,462	)
Cash and temporary cash investments at beginning of period			4,592				1,178				5,770
Cash and temporary cash investments at end of period		$	3,569			$	739			$	4,308

(8)

Belo has a long-term incentive plan under which awards may be granted to employees and outside directors in the form of non-qualified stock options, incentive stock options, restricted shares, restricted stock units (RSU), performance shares, performance units and stock appreciation rights. 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.

Share-based compensation cost for awards to Belo’s employees and non-employee directors was $2,932 and $673, for the three months ended March 31, 2010 and 2009, respectively. No compensation cost is recognized related to options issued by Belo but held by employees and non-employee directors of A. H. Belo.

(9)

The net periodic pension cost (benefit) for the three months ended March 31, 2010 and 2009 includes the following components:

		2010				2009
Interest cost on projected benefit obligation		$	8,163			$	8,304
Expected return on assets			(7,945	)			(8,655	)
Amortization of net loss			1,099				1,351
Net periodic pension cost		$	1,317			$	1,000

Belo’s 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. The Company expects to make contributions totaling $14,277 to the Pension Plan in 2010. A. H. Belo is required to reimburse the Company for 60 percent of each contribution the Company makes to the Pension Plan. Assuming contributions of $14,277 are made to the Pension Plan in 2010, the amount of reimbursement the Company will receive from A. H. Belo will be $8,566. For the three months ended March 31, 2010, the Company made Pension Plan contributions of $6,787 and received reimbursements from A. H. Belo of $4,072. Pension contribution reimbursements received are classified as a credit to operating costs and expenses in the consolidated statement of operations. The Company made no contributions to the Pension Plan during 2009. No plan assets are expected to be returned to the Company during the fiscal year ending December 31, 2010.

(10)

Under the terms of the separation and distribution agreement between the Company and A. H. Belo, A. H. Belo has agreed to indemnify the Company for any liability arising out of the lawsuits described in the following two paragraphs.

On October 24, 2006, 18 former employees of The Dallas Morning News filed a lawsuit against The Dallas Morning News, the Company, and others in the United States District Court for the Northern District of Texas. The plaintiffs’ lawsuit mainly consists of claims of unlawful discrimination and ERISA violations. In June 2007, the court issued a memorandum order granting in part and denying in part defendants’ motion to dismiss. In August 2007 and March 2009, the court dismissed certain additional claims. A trial date is set for March or April 2011. The Company believes the lawsuit is without merit and is vigorously defending against it.

On April 13, 2009, four former independent contractor newspaper carriers of The Press-Enterprise, on behalf of themselves and other similarly situated individuals, filed a purported class-action lawsuit against A. H. Belo, Belo, Press Enterprise Company, and as yet unidentified defendants in the Superior Court of the State of California, County of Riverside. The complaint alleges that the defendants violated California laws by allegedly improperly categorizing the plaintiffs and the purported class members as independent contractors rather than employees, and in doing so, allegedly failed to pay minimum, hourly and overtime wages to the purported class members and allegedly failed to comply with other laws and regulations applicable to an employer-employee relationship. Plaintiffs and purported class members are seeking minimum wages, unpaid regular and overtime wages, unpaid rest break and meal period compensation, reimbursement of expenses and losses incurred by them in discharging their duties, payment of minimum wage to all employees who failed to receive minimum wage for all hours worked in each payroll period, penalties, injunctive and other equitable relief, and reasonable attorneys’ fees and costs. The Company believes the lawsuit is without merit and is vigorously defending against these claims.

In addition to the proceedings disclosed above, a number of other legal proceedings are pending against the Company, including several actions for alleged libel and/or defamation. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on the consolidated results of operations, liquidity or financial position of the Company.

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollars in thousands, except per share amounts)

The following information should be read in conjunction with the Company’s Consolidated Condensed Financial Statements and related Notes filed as part of this report.

Overview

Belo Corp. (Belo or the Company), a Delaware corporation, began as a Texas newspaper company in 1842 and today is one of the nation’s largest publicly-traded pure-play television companies. The Company owns 20 television stations (nine in the top 25 U.S. markets) that reach 14 percent of U.S. television households, including ABC, CBS, NBC, FOX, CW and MyNetwork TV affiliates, and their associated Web sites, in 15 highly-attractive markets across the United States. The Company owns two local and two regional cable news channels and holds ownership interests in two others. Additionally, at March 31, 2010, the Company managed one television station through a local marketing agreement (LMA) which expired on April 24, 2010.

The Company believes the success of its media franchises is built upon providing the highest quality local and regional news, entertainment programming and service to the communities in which they operate. These principles have built relationships with viewers, readers, advertisers and online users and have guided Belo’s success.

The following table sets forth the Company’s major media assets as of March 31, 2010:

																						Number of								Station
						Station/				Year Belo												Commercial				Station				Audience
		Market				News				Acquired/				Network								Stations in				Rank in				Share in
Market		Rank(1)				Channel				Started				Affiliation				Channel				Market(2)				Market(3)				Market(4)
Dallas/Fort Worth			5			WFAA					1950			ABC					8				16				1				9
Dallas/Fort Worth			5			TXCN					1999			N/A					N/A				N/A				N/A				N/A
Houston			10			KHOU					1984			CBS					11				15				1	*			10
Phoenix			12			KTVK					1999			IND					3				13				5				5
Phoenix			12			KASW					2000			CW					61				13				7				2
Seattle/Tacoma			13			KING					1997			NBC					5				13				1	*			9
Seattle/Tacoma			13			KONG					2000			IND					16				13				6				1
Seattle/Tacoma			13			NWCN					1997			N/A					N/A				N/A				N/A				N/A
St. Louis			21			KMOV					1997			CBS					4				8				2				11
Portland(5)			22			KGW					1997			NBC					8				8				2				9
Charlotte			24			WCNC					1997			NBC					36				8				3	*			6
San Antonio			37			KENS					1997			CBS					5				10				2				10
San Antonio(6)			37			KCWX					—			CW					2				10				9				1
Hampton/Norfolk			43			WVEC					1984			ABC					13				8				1				11
Austin			48			KVUE					1999			ABC					24				7				1				10
Louisville			49			WHAS					1997			ABC					11				7				1				11
New Orleans(7)			51			WWL					1994			CBS					4				8				1				16
New Orleans(8)			51			WUPL					2007			MNTV					54				9				6				1
Tucson			66			KMSB					1997			FOX					11				9				4				7
Tucson			66			KTTU					2002			MNTV					18				9				6	*			1
Spokane			75			KREM					1997			CBS					2				7				1				14
Spokane			75			KSKN					2001			CW					22				7				5				2
Boise(9)(10)			112			KTVB					1997			NBC					7				5				1				21

The Company intends for the discussion of its financial condition and results of operations that follows to provide information that will assist in understanding the Company’s financial statements, the changes in certain key items in those statements from period to period and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect the Company’s financial statements.

The Company has network affiliation agreements with ABC, CBS, NBC, FOX, CW and MNTV. The Company’s affiliation agreement with ABC initially expired at the end of 2009, has been extended pursuant to a short-term extension and is currently under renegotiation. The Company expects modifications to the existing agreement and such modifications to include cash payments.

Generally, a substantial majority of the Company’s revenues are generated from the sale of local, regional and national advertising. Advertisers generally reduce their advertising spending during economic downturns which was seen throughout the prior year. Advertising conditions improved late in 2009 and have strengthened further in the first quarter of 2010. The Olympics, Super Bowl, increased political revenues and improved advertising conditions across a number of categories, particularly automotive, combined to contribute to better pricing and higher margins in the first quarter of 2010 as compared to the first quarter of 2009. Additional discussion regarding the Company’s results of operations in the first quarter of 2010 as compared to the first quarter of 2009 is provided below.

Results of Operations
(Dollars in thousands, except per share amounts)

						Percentage
Three Months ended March 31,		2010				Change				2009
Net operating revenues		$	154,332				15.6	%		$	133,536
Operating costs and expenses			111,635				(7.6	%)			120,779
Earnings from operations			42,697				234.7	%			12,757
Other income (expense)			(20,155	)			N/A				1,789
Earnings before income taxes			22,542				55.0	%			14,546
Income taxes			(9,000	)			59.7	%			(5,635	)
Net earnings		$	13,542				52.0	%		$	8,911

Net Operating Revenues

						Percentage
Three Months ended March 31,		2010				Change				2009
Non-political advertising		$	131,533				11.7	%		$	117,785
Political advertising			6,254				N/A				645
Other			16,545				9.5	%			15,106
Net operating revenues		$	154,332				15.6	%		$	133,536

Non-political advertising revenues increased $13,748, or 11.7 percent, in the first three months of 2010 as compared to the first three months of 2009. This increase is primarily due to a $13,237, or 12.2 percent, increase in local and national spot revenue. Spot revenue increased in most categories but primarily in the automotive, healthcare, financial services, grocery and retail categories. Internet advertising revenues increased $648, or 9.9 percent. Political advertising revenues increased $5,609 in the first quarter 2010 as compared with the first 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.

Operating Costs and Expenses

Station salaries, wages and employee benefits decreased $1,449, or 2.8 percent, primarily due to decreases in salary expense of $2,305, severance costs of $1,855, and 401(k) plan expense of $1,503. These decreases were partially offset by an increase in bonus expense of $1,811, medical expense of $1,008, share-based compensation of $855 and pension transition supplement plan expense of $780. Station programming and other operating costs decreased $2,733, or 5.7 percent, primarily related to a non-cash expense reduction of $2,019, 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. Four Belo markets converted to this digital equipment in the first quarter 2010 and only one Belo market converted in the first quarter 2009. Corporate operating costs increased $659, or 7.4 percent, in the first quarter 2010, primarily related to an increase of $1,405 in share-based compensation expense and an increase in bonus expense of $1,368. These increases were partially offset by decreases in legal expense, consulting expense and technology expense.

Belo’s 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 months ended March 31, 2010, the Company made Pension Plan contributions of $6,787, and received reimbursements from A. H. Belo of $4,072. Pension contribution reimbursements received are classified as a credit to operating costs and expenses in the consolidated statement of operations.

Other income (expense)

Interest expense increased $5,308, or 36.4 percent, due primarily 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 Company’s lower-rate revolving credit facility. Other income (expense), net decreased $16,636 in the first quarter 2010 compared to the first quarter 2009 primarily due to a $14,905 gain related to the Company’s 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.

Income taxes increased $3,365, or 59.7 percent, for the three months ended March 31, 2010, compared with the three months ended March 31, 2009, primarily due to an increase in taxable income in 2010 as compared to 2009.

Station EBITDA

						Percentage
Three Months ended March 31,		2010				Change				2009
Station EBITDA		$	57,477				76.9	%		$	32,499
Corporate operating costs and expenses			(9,609	)			7.4	%			(8,950	)
Depreciation and amortization			(9,243	)			(14.4	%)			(10,792	)
Pension contribution reimbursement			4,072				100.0	%			—
Net earnings from operations		$	42,697				234.7	%		$	12,757

Belo’s management uses Station EBITDA as the primary measure of profitability to evaluate operating performance and to allocate capital resources and bonuses to eligible operating company employees. Station EBITDA represents the Company’s earnings from operations before interest expense, income taxes, depreciation, amortization, impairment charges, pension contribution reimbursement and corporate operating costs and expenses. Other income (expense), net is not allocated to television station earnings from operations because it consists primarily of equity in earnings (losses) from investments in partnerships and joint ventures and other non-operating income (expense). Station EBITDA is a common alternative measure of performance used by investors, financial analysts and rating agencies to evaluate financial performance.

For the three months ended March 31, 2010, Station EBITDA increased $24,978, or 76.9 percent, compared with the three months ended March 31, 2009. This increase was due to the revenue increases and expense reductions discussed above.

Liquidity and Capital Resources

Net cash provided by operating activities, bank borrowings and long-term debt are Belo’s primary sources of liquidity.

Operating Cash Flows

Net cash provided by operations was $37,678 in the first quarter 2010 compared with $4,831 in the first quarter 2009. The 2010 operating cash flows were primarily provided by net earnings adjusted for non-cash charges and routine changes in working capital. The 2009 operating cash flows were primarily provided by net earnings adjusted for non-cash charges. Additionally, cash provided by a decrease in accounts receivable in the first quarter of 2009 was mostly offset by routine changes in other working capital items.

The Company made $6,787 in contributions to its Pension Plan during the first quarter of 2010 and expects to make a total of $14,277 in contributions to its Pension Plan during the year ended December 31, 2010. No pension contributions were made or required to be made in 2009. As previously discussed, A. H. Belo is obligated to reimburse the Company for 60 percent of any contributions the Company makes to its Pension Plan. Such reimbursements totaled $4,072 during the first quarter of 2010.

Investing Cash Flows

Net cash flows used for investing activities were $2,612 in the first quarter 2010 compared to $1,254 provided by investing activities in the first quarter 2009. The 2010 investing cash flows were primarily used for capital expenditures and the 2009 cash flows were primarily provided by the Company’s sale of its interest in a Web site joint venture for a gain of $1,616.

Capital Expenditures

Total capital expenditures were $2,691 in the first quarter 2010 compared with $1,060 in the first quarter 2009.

Financing Cash Flows

Net cash flows used for financing activities were $34,950 in the first quarter 2010 compared with $7,547 in the first quarter 2009. The 2010 financing activity cash flows consisted primarily of borrowings and repayments under the Company’s revolving credit facility. The 2009 financing activity cash flows consisted primarily of borrowings and repayments under the Company’s revolving credit facility, purchase of debt securities and dividends on common stock.

Long-Term Debt

At March 31, 2010, Belo had $885,443 in fixed-rate debt securities as follows: $175,533 of 6³/4% Senior Notes due 2013, $269,910 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%.

At March 31, 2010, Belo also had variable-rate debt under a credit agreement (Amended 2009 Credit Agreement). The Company is required to maintain certain leverage and interest ratios specified in the agreement. The leverage ratio is generally defined as the ratio of debt to cash flow and the senior leverage ratio is generally defined as the ratio of the debt under the credit facility to cash flow. The interest coverage ratio is generally defined as the ratio of interest expense to cash flow. At March 31, 2010, the Company’s leverage ratio was 5.0, its interest coverage ratio was 2.9 and its senior leverage ratio was 0.5. As of March 31, 2010, the balance outstanding under the Amended 2009 Credit Agreement was $108,000, the weighted average interest rate was 4.2 percent, and all unused borrowings were available for borrowing. At March 31, 2010, the Company was in compliance with all debt covenant requirements.

Share Repurchase Program

The Company has a stock repurchase program pursuant to authorization from Belo’s Board of Directors in December 2005. There is no expiration date for this repurchase program. The remaining authorization for the repurchase of shares as of March 31, 2010, under this authority was 13,030,716 shares. During the first quarter 2010, no shares were repurchased under this program. The Amended 2009 Credit Agreement, which became effective November 15, 2009, does not permit share repurchases.

Other

The Company has various sources available to meet its 2010 capital and operating commitments, including cash on hand, short-term investments, internally-generated funds and a $460,750 revolving credit facility. The Company believes its resources are adequate to meet its foreseeable needs.

Recent Accounting Pronouncements

On January 1, 2010, the Company adopted the amendment to ASC 820-10, which expands fair value disclosure requirements. These disclosures are effective for fiscal years beginning after December 15, 2009. This amendment affects disclosure requirements only and has no effect on the Company’s financial position or results of operations.

Forward-Looking Statements

Statements in this Form 10-Q concerning Belo’s business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures, investments, future financings, impairments, pension matters, and 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, uncertainties regarding the costs, consequences (including tax consequences) and other effects of the Company’s spin-off distribution of its newspaper businesses and related assets to A. H. Belo and the associated agreements between the Company and A. H. Belo relating to various matters; changes in capital market conditions and prospects, and other factors such as changes in advertising demand, interest rates and programming and production costs; changes in viewership patterns and demography, and actions by Nielsen; changes in the network-affiliate business model for broadcast television; technological changes, and the development of new systems to distribute television and other audio-visual content; changes in the ability to secure, and in the terms of, carriage of Belo programming on cable, satellite, telecommunications and other program distribution methods; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; Federal Communications Commission and other regulatory, tax and legal changes; adoption of new accounting standards or changes in existing accounting standards by the Financial Accounting Standards Board or other accounting standard-setting bodies or authorities; the effects of Company acquisitions, dispositions, co-owned ventures and investments; pension plan matters; general economic conditions; and significant armed conflict, as well as other risks detailed in Belo’s other public disclosures, and filings with the Securities and Exchange Commission (“SEC”), including the Annual Report on Form 10-K.

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Other than as disclosed, there have been no material changes in the Company’s exposure to market risk from the disclosure included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Item 4.		Controls and Procedures

During the quarter ended March 31, 2010, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Belo’s internal control over financial reporting.

The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s president and Chief Executive Officer and senior vice president/Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based upon that evaluation, the president and Chief Executive Officer and senior vice president/Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective such that information relating to the Company (including its consolidated subsidiaries) required to be disclosed in the Company’s SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to the Company’s management, including the president and Chief Executive Officer and senior vice president/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

PART II.

Item 1.		Legal Proceedings

In addition to the proceedings previously disclosed (see Note 10 to the Consolidated Condensed Financial Statements in Part I, Item 1) for which there are no material developments to report, a number of other legal proceedings are pending against the Company, including several actions for alleged libel and/or defamation. In the opinion of management, liabilities, if any, arising from these other legal proceedings would not have a material adverse effect on the results of operations, liquidity or financial position of the Company.

Item 1A.		Risk Factors

There have been no material changes in the Company’s risk factors from the disclosure included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

There have been no unregistered sales of equity securities in the last three years.

Issuer Purchases of Equity Securities

None.

Item 3.		Defaults Upon Senior Securities

None.

Item 4.		Submission of Matters to a Vote of Security Holders