July 22, 2005

Belo reports results for second quarter 2005

Dallas, TX - Belo Corp. (NYSE: BLC) today reported net earnings per share for the second quarter of 2005 of $0.36. Net earnings per share in the second quarter of 2004 were $0.39, including a favorable settlement of a property tax matter in Providence of $2.5 million on a pre-tax basis, which equates to $1.5 million on an after-tax basis or $0.01 per share. Belo's consolidated revenue for the second quarter of 2005 was down 0.6 percent due to the expected absence of significant political revenue at Belo's television stations. Operating costs and expenses increased 2.3 percent versus the prior year. Consolidated earnings from operations and EBITDA decreased 9.2 percent and six percent, respectively.


In the second quarter of 2005, had Belo expensed stock options, pro forma net earnings per share would have been $0.35 compared to the $0.36 reported today. Pro forma net earnings per share in the second quarter of 2004 would have been $0.37 compared to the reported net earnings per share of $0.39. The Company currently plans to begin expensing stock options in accordance with the new accounting rules in the first quarter of 2006.

Second Quarter in Review
Robert W. Decherd, Belo's chairman, president, and chief executive officer, said, "All in all, we were pleased with Belo's second quarter financial performance. Within the Newspaper Group, revenues for The Providence Journal and The Press-Enterprise increased by seven percent on a combined basis versus the prior year. Revenues at The Dallas Morning News improved significantly relative to the first quarter of 2005. Innovative new products launched by the Newspaper Group in late 2003 are well ahead of schedule and contributed significantly to Newspaper Group revenue growth. Collectively, these new products reported positive earnings from operations and EBITDA in the second quarter.

"While Television Group results were affected by the anticipated decline in political revenues, initiatives implemented by Belo's sales teams offset much of the decline. Expenses increased minimally as we continue to manage controllable costs in a disciplined manner. And, the Company's strategy initiatives positively impacted Belo's second quarter financial results, as they did in the first quarter."


Television Group revenue decreased 3.6 percent in the second quarter with a 4.1 percent decrease in spot revenues due to the absence of significant political revenue. Political revenues were $1.9 million in the second quarter of 2005 compared to $7.5 million in the second quarter of 2004. Local spot was down 0.2 percent and national spot was down 2.2 percent. Advertising revenues from Belo's Television Group Web sites were 41 percent greater than the second quarter of the prior year.


Television Group operating costs and expenses increased one percent in the second quarter with a decrease in programming expense of 3.4 percent. Earnings from operations for the Television Group decreased 11 percent in the second quarter and segment EBITDA decreased 9.4 percent.


Newspaper Group total revenue increased 2.5 percent in the second quarter of 2005, with flat revenues at The Dallas Morning News, a 4.8 percent increase at The Providence Journal and an increase of nine percent at The Press-Enterprise in Riverside. Advertising revenues for the Newspaper Group increased 2.7 percent compared with the second quarter of 2004. Excluding classified automotive revenue, which decreased 12.4 percent, advertising revenues would have increased about 4.4 percent. Revenues associated with the Newspaper Group's Web sites increased almost 40 percent in the second quarter.


Newspaper Group retail and general advertising revenues decreased 1.7 percent and 11 percent, respectively, in the second quarter. Retail advertising was soft in Dallas and Providence and up in Riverside. Classified revenues were up 10 percent in the second quarter led by a 34 percent increase in classified real estate revenue and a 14 percent increase in classified employment revenue.


The Newspaper Group's new products, principally Quick and al dia at The Dallas Morning News and the d at The Press-Enterprise in Riverside, grew impressively in the second quarter, generating $4.2 million of revenue, a 54 percent increase over revenue of $2.7 million in the second quarter of 2004. Expenses associated with the new products decreased from $4.6 million in the second quarter of 2004 to $3.9 million in the second quarter of 2005. Earnings from operations related to these new products were $254,000 in the second quarter of 2005 versus a $2.0 million loss in the second quarter of 2004. The second quarter of 2005 marked the first time that the new products contributed positive earnings from operations and EBITDA to Newspaper Group segment results.


Newspaper Group operating costs and expenses increased 3.8 percent versus the second quarter of 2004 including $2.4 million in expense related to the implementation of the Circulation Review Team's initiatives at The Dallas Morning News and comparing to second quarter 2004 figures that included a property tax credit of $2.5 million recorded at The Providence Journal. Excluding these items, Newspaper Group operating costs increased less than one percent. Newsprint expense increased slightly with an eight percent increase in net cost per ton offset by a similar decrease in consumption. Newspaper Group earnings from operations and segment EBITDA decreased 2.3 percent and 2.5 percent, respectively, in the second quarter.


Revenues in Belo's Other segment, consisting primarily of NorthWest Cable News and Texas Cable News ("TXCN"), decreased 17 percent and expenses decreased 30 percent in the second quarter of 2005 due to the refinement of TXCN's operations and programming. TXCN's contribution to Other segment EBITDA improved by more than $400,000 in the second quarter of 2005. Total Other segment EBITDA increased to $832,000 in the second quarter of 2005 from $149,000 in the second quarter of 2004. Earnings from operations also improved significantly in the second quarter to $226,000 compared with a loss of $611,000 in the second quarter of last year. The second quarter of 2005 marked the first time that the Other segment has recorded positive earnings from operations.


Corporate operating costs and expenses in the second quarter of 2005 were 7.7 percent higher than the prior year due primarily to the allocation to the Corporate segment of interactive media expenses previously included in the Interactive Media segment.

Belo's total depreciation and amortization expense decreased 2.6 percent in the second quarter of 2005 compared with the second quarter of 2004. Other income (expense), net improved significantly in the second quarter of 2005 due to the discontinuation in July 2004 of the cable news joint ventures with Time Warner in Charlotte, Houston and San Antonio.


Long-term debt at June 30, 2005, was $1.16 billion, down $6 million from December 31, 2004. Capital spending in the second quarter was $9 million. The Company repurchased more than 1.4 million shares in the second quarter for a total of $34 million. This share count is about 1.2 million shares more than options exercised. Year to date, the Company has repurchased 2.3 million shares, 1.8 million shares more than stock options exercised.


Interest expense decreased $333,000, or 1.5 percent, in the second quarter, due mostly to lower debt levels versus the prior year. Belo's leverage ratio, as defined in the Company's bank agreement, was 2.5 times at June 30, 2005.

Non-GAAP Financial Measures
A reconciliation of Consolidated EBITDA to net earnings is set forth in an exhibit to this release.

Third Quarter 2005 Outlook
Regarding Belo's outlook for the third quarter of 2005, Dennis Williamson, senior corporate vice president and chief financial officer, said, "In the third quarter of 2005, Belo will cycle against special charges recorded in the third quarter of 2004, which total $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. Finally, 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.

"The charges associated with the circulation overstatement and the reduction-in-force will affect revenue and expense comparisons in the third quarter. The charge associated with the discontinuation of the cable news joint ventures was recorded in Other income (expense), below the earnings from operations line.


"Belo's Television Group generated $22 million of political and Olympics revenue in the third quarter of 2004. We currently expect only about $500,000 of political revenue in the third quarter of 2005 and there will be no Olympics revenue. In July, Television Group spot revenues, including political, are pacing down six to seven percent. For the third quarter overall, we expect Television Group spot revenue to be down in the mid-to-high single digits with spot revenue, excluding political, close to flat with last year. In addition, revenues associated with the Television Group's Web sites should increase from $2.3 million in the third quarter of 2004 to approximately $3.3 million this year.


"Belo's Newspaper Group revenues will fluctuate month to month in the third quarter due to the number of Sundays in each month versus the prior year. July 2005 has one more Sunday than last year, August 2005 has one less Sunday and September 2005 has one more Sunday. For the third quarter overall, we gain one Sunday versus the third quarter of 2004.


"Total revenue for the Newspaper Group will compare to a third quarter 2004 figure that was reduced by $19.6 million as a result of the circulation overstatement charge. Total revenue comparisons will also be affected by approximately $4 million of incremental revenue in the third quarter of 2005 associated with implementing Morning News Circulation Review Team initiatives. Advertising revenue comparisons are not affected by these items.


"We currently expect Newspaper Group advertising revenues to increase in the mid-single digits in the third quarter with ad revenues up low-to-mid single digits at The Dallas Morning News, mid-single digits at The Providence Journal and high-single digits at The Press-Enterprise.


"Operating costs and expenses comparisons will be favorably affected by the charges related to the circulation overstatement and the reduction-in-force. Third quarter 2004 expenses include $4.4 million related to the circulation overstatement and $5.8 million related to the reduction-in-force. The implementation of The Dallas Morning News Circulation Review Team initiatives will increase third quarter 2005 expenses by about $6 million. On a reported basis, which considers all of these items, the Company expects to report an increase of about four percent in operating costs and expenses in the third quarter of 2005. Advertising and promotion expense should be significantly higher to support incremental marketing initiatives in key Belo markets. Other sales-related costs, including direct marketing for newspaper subscription sales and television advertiser incentive costs, will be higher in the third quarter of 2005. The Company currently expects newsprint expense to increase more than 10 percent with consumption close to flat with the third quarter of 2004. Programming expense should decrease about five percent.

"Belo's total depreciation and amortization expense in the third quarter is expected to be about three percent higher than last year. Interest expense should decrease about two percent. The effective tax rate for the third quarter should be close to the second quarter 2005 rate of 38 percent."

Belo continues to expect earnings per share for full-year 2005 to be in the range of $1.17 to $1.24 per share. While analysts' full-year estimates are within this range, the Company believes second half estimates may currently be weighted too heavily toward the third quarter. Belo will provide information on operating trends in its monthly statistical reports.

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 7,600 employees and $1.5 billion in annual revenues, Belo operates in some of America's most dynamic markets in Texas, the Northwest, the Southwest, Rhode Island, and the Mid-Atlantic. Belo owns 19 television stations, six of which are in the 15 largest U.S. broadcast markets. The Company also 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). The Company also publishes specialty publications targeting young adults, affluent populations and the fast-growing Hispanic market, including Quick and al dia in Dallas/Fort Worth, and the d, El D and La Prensa in Riverside. Belo operates more than 30 Web sites associated with its operating companies. Additional information is available at www.belo.com or by contacting Carey Hendrickson, vice president/Investor Relations & Corporate Communications, at 214-977-6626.

Statements in this communication concerning Belo's business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures, investments, future financings 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; newspaper circulation matters, including changes in readership, and audits and related actions (including the censure of The Dallas Morning News) by the Audit Bureau of Circulations; technological changes, including the transition to digital television and the development of new systems to distribute television and other audio-visual content; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; regulatory 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 and dispositions; 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.

View tables