October 22, 2004

Belo reports results for third quarter 2004

Dallas, TX - Belo Corp. (NYSE: BLC) today reported net earnings per share for the third quarter of 2004 of $0.10, compared with $0.27 in the third quarter of 2003. The third quarter of 2004 includes three special charges totaling $0.22 per share. The Company incurred a charge related to the circulation overstatement at The Dallas Morning News of $24.0 million on a pre-tax basis, which equates to $14.9 million on an after-tax basis or $0.13 per share. The Company also recorded a charge related to discontinuing the Belo/Time Warner cable news joint ventures of $11.7 million on a pre-tax basis, which equates to $7.5 million on an after-tax basis or $0.06 per share. In addition, the Company recorded a charge for severance costs resulting from a Company-wide reduction-in-force of $5.8 million on a pre-tax basis, which equates to $3.6 million on an after-tax basis or $0.03 per share.

Belo's consolidated revenues increased 5.2 percent in the third quarter of 2004, versus the third quarter of 2003, with Television Group revenue up 6.6 percent and Newspaper Group revenue up 3.3 percent. Consolidated operating costs and expenses increased 14.5 percent in the third quarter, with 10.6 percentage points, or $30 million, of the increase attributable to the special charges.

Had Belo expensed stock options under the current accounting standard in the third quarter of 2004, pro forma net earnings per share would have been $0.08 compared to the $0.10 reported today. Pro forma net earnings per share in the third quarter of 2003 would have been $0.25 compared to the reported net earnings per share of $0.27.

Third Quarter 2004 in Review
Robert W. Decherd, Belo's chairman, president, and chief executive officer, said, "Belo achieved solid operating results in the third quarter of 2004 despite continued challenges in theDallas/Fort Worth economy. Belo's consolidated revenues grew more than five percent in the third quarter, led by political and Olympics revenue in the Television Group and double-digit revenue growth at The Press-Enterprise in Riverside. Through the first nine months of 2004, Belo's revenue has increased almost seven percent with strong growth in net earnings, before the three special charges."

Television Group revenue increased 6.6 percent in the third quarter with a 6.8 percent increase in spot revenues. Political revenues were $12.5 million in the third quarter of 2004, representing about 7 percent of Belo's Television Group revenue. Spot revenue growth was also boosted by $9.7 million of Olympics revenue at our NBC-affiliated stations. Excluding political, local revenues increased 3.4 percent while national revenues decreased 3.6 percent. EBITDA for the Television Group increased 9.5 percent in the third quarter. The Television Group's operating costs and expenses increased 3.6 percent, including a $652,000 charge related to the Company-wide reduction-in-force, with planned increases in bonus expense and benefits accounting for most of the remaining increase. Television Group earnings from operations increased 12.3 percent versus the third quarter of last year.

Newspaper Group total revenue increased 3.3 percent in the third quarter of 2004, with a decrease of 0.2 percent at The Dallas Morning News, an increase of 3.4 percent at The Providence Journal and an increase of 16.1 percent at The Press-Enterprise in Riverside. Advertising revenues for the Newspaper Group increased 2.9 percent compared with the third quarter of 2003. If Belo's print and online publishing revenues were combined for the third quarter, Belo's Newspaper Group total revenue would have increased 3.8 percent versus the third quarter of 2003, with a 3.5 percent increase in advertising revenues. On a reported basis,
classified revenues increased 7.3 percent while retail and general revenues decreased 3.2 percent and 2.4 percent, respectively. Solid increases in classified employment and classified real estate revenues were noted at all three of Belo's major newspapers. Including online revenues, classified employment revenues and classified real estate revenues increased 15 percent and 27.2 percent, respectively, in the third quarter, while classified automotive revenues decreased 8.5 percent.

Newspaper Group operating costs and expenses increased 20.6 percent in the third quarter, with 16.4 percentage points, or $24.6 million, of the increase attributable to the special charges. Another 2.4 percentage points of the variance is related to new products, principally Quick and al dia at The Dallas Morning News and the d at The Press-Enterprise in Riverside, all of which launched in the second half of 2003. The Newspaper Group incurred $4.3 million of expense associated with these new products in the third quarter with only $758,000 of comparative expenses in the third quarter of 2003. On a reported basis, EBITDA for the Newspaper Group decreased 55.8 percent in the third quarter, with earnings from operations down 71.9 percent.

Belo Interactive generated revenue of $7.9 million during the third quarter of 2004, compared to $6.3 million in the third quarter of 2003, an increase of 24.7 percent. In the third quarter of 2004, Belo Interactive achieved positive EBITDA for the first time on a quarterly basis since its formation in May 1999. Belo Interactive's EBITDA improved to $44,000 in the third quarter of 2004 from an EBITDA deficit of $1.1 million in the third quarter of 2003. Belo Interactive's loss from operations was $947,000 in the third quarter compared with $1.9 million in the third quarter of 2003.

Revenues in Belo's Other segment, consisting primarily of NorthWest Cable News and Texas Cable News, increased 2.4 percent in the third quarter of 2004 to $5.3 million. These businesses generated EBITDA of $314,000 in the third quarter of 2004 compared with EBITDA of $220,000 in the third quarter of 2003. The loss from operations was $316,000 in the third quarter of 2004 compared with a loss of $432,000 in the third quarter of last year.

Corporate's operating costs and expenses in the third quarter of 2004 were 46.1 percent higher than the prior year; 38.5 percentage points, or $4.7 million, of the increase is attributable to the special charges.

Non-GAAP Financial Measures
A reconciliation of EBITDA to net earnings, and reconciliations of other non-GAAP financial measures noted in this release to the most directly comparable financial measure presented in accordance with GAAP, are set forth in exhibits to this release.

Fourth Quarter 2004 Outlook
Regarding Belo's outlook for the fourth quarter of 2004, Decherd said, "Political revenue continues strong in Washington, Oregon and Missouri. Belo's Television Group expects to record approximately $20 million of political revenue in October, fueling spot revenue growth exceeding 20 percent for the month. We currently expect spot revenues to be up in the mid-single digits in November. For the fourth quarter overall, Television Group spot revenues should increase in the low-double digits.

"For the Newspaper Group, we expect continued solid advertising revenue growth in Providence of five to six percent in the fourth quarter. We expect the outstanding revenue growth we've seen in Riverside all year to continue in the fourth quarter with advertising revenues up in the 12 to 14 percent range at The Press-Enterprise. These strong results will be tempered by a low-to-mid single-digit decrease in advertising revenue at The Dallas Morning News. The circulation overstatement at The Morning News is expected to affect fourth quarter revenues with a decrease of approximately $3 million in preprint revenue and indirectly through dilution from the advertiser credit bank usage by about $4 million. Total Newspaper Group revenues are expected to be flat to up one percent in the fourth quarter.

"Currently, we expect fourth quarter operating costs and expenses to increase about four percent. The fourth quarter will include savings of about $2.6 million in direct compensation and benefits related to the reduction-in-force. As in the third quarter of 2004, we anticipate higher medical insurance and pension costs. Television Group bonuses and commissions will be higher versus the prior year due to improved revenue and operating performance. Belo's newsprint expense in the fourth quarter should be about four percent higher than the fourth quarter of 2003.

"Belo Interactive's earnings from operations are currently expected to be slightly positive in the fourth quarter versus a $1.7 million loss from operations in the fourth quarter of 2003.

"The Company's total depreciation and amortization expense should be flat to up slightly versus the fourth quarter of last year. Interest expense will be about three percent less
than the fourth quarter of 2003 as a result of lower debt levels. The Company's effective tax rate for the fourth quarter should be about 38.6 percent."

Full-Year 2005 Outlook
Decherd continued, "2005 will be a challenging year for most newspaper and local television companies. Political revenues for Belo's Television Group will be significantly less in 2005, likely in the $5-$10 million range, versus this year's expected political revenue of approximately $45 million. We will have no Olympics revenue in 2005 (versus approximately $10 million in 2004), the Super Bowl will be on Fox rather than one of the three networks where our affiliations are concentrated, and we expect a modest reduction in network compensation. Still, with solid mid-single digit revenue growth in spot revenue excluding political, Belo's Television Group revenues can be approximately flat from 2004.

"Newspaper Group revenues should grow in the mid-single digit range in 2005. Revenues at The Dallas Morning News will be somewhat impacted by advertisers' credit bank usage through at least the first quarter, and The Morning News will have difficult comparisons in preprint revenues based on lower circulation through the first three quarters of 2005. Still, we expect full-year growth in revenues at The Morning News in the low-to-mid single digits. Revenues at The Providence Journal should grow in the mid-single digits while revenues at The Press-Enterprise should increase in the high-single digits for full-year 2005."

Other Matters
The pre-tax charge of $24 million recorded by Belo in the third quarter of 2004 related to circulation matters at The Dallas Morning News includes cash payments to advertisers of approximately $21 million, and an additional $3 million to cover costs related primarily to the independent investigation of those matters.

Belo expects to receive approximately $7.1 million in proceeds from disposal of the assets of its former local cable news joint ventures with Time Warner, net of shutdown costs. Net of these proceeds, Belo recorded a pre-tax charge of $11.7 million in the third quarter of 2004 to reflect the discontinuation of the joint ventures. As noted on the second quarter conference call, the Company believes that discontinuation of these joint ventures will positively affect Belo's financial results in the near and long term. Belo reported a net loss in the third quarter related to the operations of the joint ventures of $862,000. This compares to net losses in the first and second quarters of 2004 of $3.1 million and $2.6 million, respectively. During the final twelve months of operations, Belo recorded approximately $10 million in losses related to the joint ventures.

As a part of the strategy alignment outlined in a press release and conference call on September 29, Belo announced that approximately 250 jobs would be eliminated Company-wide. The reduction-in-force will be completed this month and will save Belo about $2.6 million in compensation and benefits during the remainder of 2004. Annual savings in direct compensation and benefits due to the reduction-in-force will offset Company-wide regular increases in direct compensation and benefits for 2005.

Belo will continue to provide information on operating trends in its monthly statistical reports, and at the December Media Week conferences, Belo will update its fourth quarter 2004 outlook, provide more details about the Company's full-year 2005 expectations and discuss strategy conclusions regarding Texas Cable News and Belo's Internet operations.

About Belo
Belo Corp. is one of the nation's largest media companies with a diversified group of market-leading television, newspaper, cable and interactive media assets. A Fortune 1000 company with approximately 7,900 employees and $1.4 billion in annual revenues, Belo operates media franchises in some of America's most dynamic markets and regions, including Texas, the Northwest, the Southwest, Rhode Island, and the Mid-Atlantic. Belo owns 19 television stations (six in the top 15 markets); owns or operates seven cable news channels; and manages one television station through a local marketing agreement. Belo's daily newspapers are The Dallas Morning News, The Providence Journal, The Press-Enterprise (Riverside, CA) and the Denton Record-Chronicle (Denton, TX). Belo operates more than 30 Web sites, several interactive alliances and a broad range of Internet-based products. Additional information, including earnings releases and corporate communications, is available online at www.belo.com. For more information contact Carey Hendrickson, vice president/Investor Relations, at 214-977-6626.

Statements in this communication concerning the Company's business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures, investments, commitments, or other financial or operating items and other statements 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 other factors include, but are not limited to, changes in advertising demand, interest rates and newsprint prices; the current audit by the Audit Bureau of Circulations of The Dallas Morning News' circulation; 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; general economic conditions; and significant armed conflict, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K.


View a PDF of the financials