Tribune Media Company Reports Second Quarter 2017 Results
NEW YORK, Aug. 9, 2017 /PRNewswire/ -- Tribune Media Company (the "Company") (NYSE: TRCO) today reported its results for the three months and six months ended June 30, 2017.
SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS (compared to second quarter 2016)
-- Consolidated operating revenues fell 2% to $469.5 million; excluding
political advertising and real estate revenues, consolidated operating
revenues increased 2%
-- Strategic shift at WGN America to a higher return original programming
strategy resulted in $20 million of additional expense for cancellation
costs, accelerated amortization of license fees and the write-off of
certain other capitalized program development projects
-- Consolidated operating profit, which includes the above $20 million of
additional expenses at WGN America, was $18.3 million, compared to $56.2
million for the second quarter of 2016
-- Consolidated Adjusted EBITDA, which includes the above $20 million of
additional expenses at WGN America, decreased to $95.4 million from
$125.1 million in the second quarter of 2016
-- Total Television and Entertainment net advertising revenues (which
include political and digital revenues) fell 7%, to $312.9 million
-- Retransmission revenues increased 26% to $105.0 million
-- Carriage fee revenues increased 5% to $31.9 million
-- Cash distributions from TV Food Network were $38.1 million
-- FCC spectrum auction proceeds of $185 million were received by the
Company in the third quarter of 2017 with remaining proceeds of $5
million expected in the second half of 2017
-- CareerBuilder sale closed on July 31, 2017 and the Company received cash
of $158 million while retaining an approximate 7% ownership interest on
a fully diluted basis
"Our financial results for the second quarter reflect our focus on continued expense management and positioning the company for long-term profitable growth," said Peter Kern, Tribune Media's Chief Executive Officer. "We saw strong sequential growth in retransmission revenues during the quarter, which helped offset some softness in core advertising at the national level. While our overall performance was significantly affected by non-recurring expenses and accelerated amortization related to the shift in programming strategy at WGN America, those changes are now behind us, and we expect a much more profitable 2018 with more original hours than the network has ever carried. We continue to aggressively manage expenses across the business; adjusted for the non-recurring costs at WGN America, total consolidated cash expenses were flat despite the continuing increases in network affiliate fees and the increased level of original programming amortization. We also continued monetizing non-core assets, as we sold several real estate properties in the first half of the year, and more recently participated in the sale of CareerBuilder and received a significant portion of our spectrum proceeds. Finally, we remain on track to close our previously announced transaction with Sinclair."
SECOND QUARTER AND YEAR-TO-DATE RESULTS
Consolidated
Consolidated operating revenues for the second quarter of 2017 were $469.5 million compared to $479.8 million in the second quarter of 2016, representing a decrease of $10.3 million, or 2%. The decrease was primarily driven by lower core advertising and political advertising, as well as a decrease in real estate revenues as a result of the sales of certain properties in 2016 and 2017. These declines were partially offset by increases in retransmission and carriage fee revenues.
For the six months ended June 30, 2017, consolidated operating revenues were $909.4 million compared to $948.3 million in the six months ended June 30, 2016, representing a decrease of $38.8 million, or 4%.
Consolidated operating profit was $18.3 million for the second quarter of 2017 compared to operating profit of $56.2 million for the second quarter of 2016, representing a decrease of $37.9 million. The decrease was primarily attributable to lower Television and Entertainment operating profit as a result of higher programming expenses driven by $20 million of additional expense related to the strategic shift toward more profitable original programming at WGN America and a higher operating loss in Corporate and Other due to lower revenues driven by the sale of real estate properties in 2016 and 2017 and higher transaction-related costs. For the six months ended June 30, 2017, consolidated operating profit decreased $83.1 million to $3.1 million from an operating profit of $86.2 million in the six months ended June 30, 2016.
In the second quarter of 2017, the Company recorded a non-cash pretax impairment charge of $58.8 million ($44.5 million after tax), or $0.51 per common share, to further write down its investment in CareerBuilder based on the transaction value contemplated in the CareerBuilder sale agreement. In the six months ended June 30, 2017, the total non-cash pretax impairment charges to write down the Company's investment in CareerBuilder totaled $181 million ($124.5 million after tax), or $1.43 per common share.
Consolidated loss from continuing operations was $29.8 million in the second quarter of 2017 compared to $152.6 million in the second quarter of 2016. Diluted loss per common share from continuing operations for the second quarter of 2017 was $0.34 compared to $1.66 for the second quarter of 2016. Adjusted diluted earnings per share ("Adjusted EPS") for the second quarter of 2017 was $0.36 compared to $0.52 for the second quarter of 2016. Both diluted loss per common share and Adjusted EPS in the second quarter of 2017 include a $2.7 million, or $0.03 per share, benefit primarily related to expected refunds of interest paid on prior tax assessments and in the second quarter of 2016 include a $1.8 million, or $0.02 per share, benefit related to certain state income tax matters and other adjustments.
Consolidated loss from continuing operations was $131.0 million for the six months ended June 30, 2017 compared to $137.5 million for the six months ended June 30, 2016. For the six months ended June 30, 2017, diluted loss per common share from continuing operations was $1.51 compared to $1.50 for the six months ended June 30, 2016. Adjusted EPS for the six months ended June 30, 2017 was $0.30 compared to $0.74 for the six months ended June 30, 2016. Both diluted loss per common share and Adjusted EPS include an income tax benefit of $2.1 million, or $0.02 per share, for the six months ended June 30, 2017 and an income tax charge of $2.0 million, or $0.02 per share, for the six months ended June 30, 2016 related to certain tax adjustments.
Net loss was $30.4 million in the second quarter of 2017 compared to $161.6 million in the second quarter of 2016. Net loss was $116.0 million for the six months ended June 30, 2017 compared to $150.5 million for the six months ended June 30, 2016.
Consolidated Adjusted EBITDA decreased to $95.4 million in the second quarter of 2017 from $125.1 million in the second quarter of 2016, representing a decrease of $29.7 million, or 24%. The decrease in consolidated Adjusted EBITDA was primarily attributable to higher programming expenses and lower net core advertising and political advertising revenues. This decline was partially offset by increased retransmission revenues and carriage fees revenues. For the six months ended June 30, 2017, consolidated Adjusted EBITDA decreased $69.1 million, or 31%, to $152.9 million as compared to $222.0 million in the six months ended June 30, 2016.
Cash distributions from TV Food Network in the second quarter of 2017 were $38.1 million compared to $36.3 million in the second quarter of 2016. Cash distributions for the six months ended June 30, 2017 were $149.7 million compared to $125.6 million for the six months ended June 30, 2016.
Television and Entertainment
Revenues were $466.1 million in the second quarter of 2017 compared to $468.1 million in the second quarter of 2016, a decrease of $2.1 million. The decrease was driven by a $17.2 million decrease in net core advertising revenue and an $8.9 million decrease in net political advertising revenue, and was largely offset by an increase in retransmission revenues of $21.7 million, or 26%, and an increase in carriage fee revenues of $1.5 million, or 5%.
Television and Entertainment segment revenues for the six months ended June 30, 2017 were $902.1 million compared to $924.0 million for the six months ended June 30, 2016, a decrease of $21.9 million, or 2%. The decrease was driven by a $35.0 million, or 6%, decrease in net core advertising and a $22.6 million decrease in net political advertising, and was partially offset by an increase in retransmission revenues of $32.4 million, or 19%, and an increase in carriage fee revenues of $4.1 million, or 7%.
Television and Entertainment operating profit was $50.2 million for the second quarter of 2017 compared to $83.3 million for the second quarter of 2016, a decrease of $33.1 million, or 40%. The decrease was primarily due to increased programming expense of $34.3 million, primarily due to $20 million of additional expense related to the shift in programming strategy at WGN America in the second quarter of 2017, which included cancellation costs for Outsiders and Underground and the associated accelerated amortization of the remaining program assets for both shows as well as the write-off of certain other capitalized program development projects. The remaining increase was due to $8 million of higher network affiliate fees and $6 million of higher amortization of license fees primarily related to original programming that aired in the quarter.
Television and Entertainment Adjusted EBITDA was $111.7 million for the second quarter of 2017 compared to $141.7 million in the second quarter of 2016, a decrease of $30.0 million, or 21%, primarily due to increased programming expenses, as described above, as well as lower advertising revenues.
For the six months ended June 30, 2017, Television and Entertainment operating profit was $70.2 million as compared to $142.0 million for the six months ended June 30, 2016, a decrease of $71.7 million, or 51%. Television and Entertainment Adjusted EBITDA was $186.9 million as compared to $257.7 million for the six months ended June 30, 2016, a decrease of $70.8 million, or 27%.
Corporate and Other
Real estate revenues for the second quarter of 2017 were $3.5 million, compared to $11.7 million for the second quarter of 2016, representing a decrease of $8.2 million, or 70%. The decrease was primarily driven by lower revenues due to the sale of real estate properties in 2016 and 2017. Real estate revenues for the six months ended June 30, 2017 were $7.3 million, compared to $24.3 million for the six months ended June 30, 2016, representing a decrease of $16.9 million, or 70%.
Corporate and Other operating loss for the second quarter of 2017 was $31.9 million compared to a loss of $27.1 million for the second quarter of 2016. The increase in the loss was primarily attributable to lower real estate revenues, as described above, and higher transaction-related costs. Corporate and Other Adjusted EBITDA represented a loss of $16.3 million for the second quarter of 2017 compared to a loss of $16.6 million for the second quarter of 2016. The loss was down slightly from the second quarter of 2016 despite the loss of real estate revenues from property sales as a result of lower costs. For the six months ended June 30, 2017, Corporate and Other operating loss was $67.1 million compared to $55.8 million for the six months ended June 30, 2016. Corporate and Other Adjusted EBITDA represented a loss of $33.9 million, compared to a loss of $35.6 million for the six months ended June 30, 2016.
Discontinued Operations
On December 19, 2016, the Company entered into an agreement with Nielsen Holding and Finance B.V. ("Nielsen") to sell equity interests in substantially all of the Digital and Data business operations for $560 million in cash, subject to certain purchase price adjustments (the "Gracenote Sale"). The Company completed the sale on January 31, 2017 and received gross proceeds of $584 million, including a purchase price adjustment of $3 million. The historical results of operations for the businesses included in the Gracenote Sale are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this release are to Tribune Media Company's continuing operations.
RETURN OF CAPITAL TO SHAREHOLDERS
Quarterly Dividend
On August 2, 2017, the Board of Directors (the "Board") declared a quarterly cash dividend on the Company's common stock of $0.25 per share to be paid on September 5, 2017 to holders of record of the Company's common stock and warrants as of August 21, 2017. Future dividends will be subject to the discretion of the Board and the terms of the agreement and plan of merger between the Company and Sinclair Broadcast Group, Inc. ("Sinclair"), dated May 8, 2017 (the "Merger Agreement"), which limits our ability to pay dividends, except for the payment of quarterly cash dividends not to exceed $0.25 per share and consistent with record and payment dates in 2016.
Stock Repurchase Program
As of August 8, 2017, the remaining authorized amount under the current stock repurchase program totaled $168 million. The terms of the Merger Agreement prohibit the Company from engaging in additional share repurchases.
RECENT DEVELOPMENTS
Sinclair Acquisition
On May 8, 2017, the Company entered into a Merger Agreement with Sinclair, providing for the acquisition by Sinclair of all of the outstanding shares of the Company's Class A common stock and Class B common stock by means of a merger of Samson Merger Sub Inc., a wholly owned subsidiary of Sinclair, with and into Tribune Media Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Sinclair. See "Important Additional Information and Where to Find It" below.
On August 2, 2017, the Company received a request for additional information and documentary material, often referred to as a "second request", from the United States Department of Justice (the "DOJ") in connection with the Merger Agreement. The second request was issued under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Sinclair received a substantively identical request for additional information and documentary material from the DOJ in connection with the transactions contemplated by the Merger Agreement. Consummation of the transactions contemplated by the Merger Agreement is conditioned on expiration of the waiting period applicable under the HSR Act, among other conditions. Issuance of the second request extends the waiting period under the HSR Act until 30 days after Sinclair and the Company have substantially complied with the second request, unless the waiting period is terminated earlier by the DOJ or the parties voluntarily extend the time for closing.
Sale of Digital and Data Business
The Company completed the Gracenote Sale on January 31, 2017 and received gross proceeds of $581 million. In the second quarter of 2017, the Company received additional proceeds of $3 million as a result of purchase price adjustments. In the six months ended June 30, 2017, the Company recognized a pretax gain of $35 million as a result of the sale. On February 1, 2017, the Company used $400 million of proceeds from the Gracenote Sale to pay down a portion of the Company's term loan facility.
Real Estate Transactions
In the six months ended June 30, 2017, the Company sold six properties for net proceeds totaling $60 million, as further described below. The Company defines net proceeds as pretax cash proceeds on the sale of properties, net of associated selling costs.
On January 26, 2017, the Company sold its Denver, CO property for net proceeds of $23 million, which approximated the carrying value, and entered into a lease for the property. On January 31, 2017, the Company sold one of its Chicago, IL properties for net proceeds of $22 million and entered into a lease with a term of 10 years, subject to renewal, retaining the use of more than a minor portion of the property. The Company recorded a deferred pretax gain of $13 million on the sale, which will be amortized over the life of the lease in accordance with sale-leaseback accounting guidance.
On April 21, 2017, the Company sold two of its Chicago, IL properties for net proceeds of less than $1 million. On May 22, 2017, the Company sold two of its Baltimore, MD properties for net proceeds of $15 million. The net proceeds on the sales of these properties approximated their respective carrying values.
On August 4, 2017, the Company sold its Williamsburg, VA property for net proceeds of $1 million.
As of August 9, 2017, the Company has agreements for the sales of certain properties located in Costa Mesa, CA and Fort Lauderdale, FL. These transactions are expected to close during the second half of 2017. However, the closing of these transactions is subject to certain adjustments and customary closing conditions and there can be no assurance that these sales will be completed in a timely manner or at all.
On June 2, 2016, the Company sold its Allentown, PA property for net proceeds of $8 million and on May 2, 2016, the Company sold its Deerfield Beach, FL property for net proceeds of $24 million. In the second quarter of 2016, the Company recorded a net loss of less than $1 million on the sale of these properties that is included in SG&A.
FCC Spectrum Auction
On April 13, 2017, the Federal Communications Commission (the "FCC") announced the conclusion of the incentive auction, the results of the reverse and forward auction and the repacking of broadcast television spectrum. The Company participated in the auction and anticipates receiving approximately $190 million in pretax proceeds resulting from the auction. The anticipated proceeds reflect the FCC's acceptance of one or more bids placed by the Company or channel share partners of television stations owned or operated by the Company during the auction to modify and/or surrender spectrum used by certain of such bidder's television stations. As of August 9, 2017, the Company has received approximately $185 million in pretax proceeds (including $21 million of proceeds received by Dreamcatcher Broadcasting LLC ("Dreamcatcher")), with approximately $5 million in pretax proceeds remaining to be paid to the Company. The Company expects to receive the remaining auction proceeds in the second half of 2017, however, the Company cannot predict the exact timing of remaining payments. The Company expects to use approximately $102 million of after-tax proceeds to prepay a portion of the Term Loan Facility. Any proceeds received by the Dreamcatcher stations as a result of the incentive auction are required to be first used to prepay the Dreamcatcher Credit Facility. Therefore, after-tax proceeds of $12.6 million received by the Dreamcatcher stations as a result of the incentive auction will be used to prepay a substantial portion of the Dreamcatcher Credit Facility.
CareerBuilder
On June 19, 2017, TEGNA announced it entered into an agreement, together with the other owners of CareerBuilder, to sell CareerBuilder to an investor group led by investment funds managed by affiliates of Apollo Global Management, LLC and the Ontario Teachers' Pension Plan Board. As a result, in the three months ended June 30, 2017, the Company recorded a non-cash pretax impairment charge of $59 million to further write down its investment in CareerBuilder based on the transaction value contemplated in the agreement. The transaction closed on July 31, 2017, and the Company received cash of $158 million, which included an excess cash distribution of $16 million. Subsequent to the sale, the Company's ownership in CareerBuilder declined to approximately 7%, on a fully diluted basis.
In the six months ended June 30, 2017, the total non-cash pretax impairment charges to write down the Company's investment in CareerBuilder totaled $181 million. The write downs resulted from declines in the fair value of the investment that the Company determined to be other than temporary.
Consent Solicitation
On June 22, 2017, the Company announced that it had received consents from 93.23% of holders of the Company's 5.875% Senior Notes due 2022 (the "Notes") outstanding as of the record date of June 12, 2017, to effect certain proposed amendments to the Indenture (as defined below). The Company undertook the consent solicitation at the request and expense of Sinclair in accordance with the terms of the Merger Agreement. In conjunction with receiving the requisite consents, on June 22, 2017, the Company, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee for the Notes, entered into the fourth supplemental indenture (the "Supplemental Indenture") to the indenture governing the Notes, dated as of June 24, 2015 (as supplemented and amended, the "Indenture"), to effect the proposed amendments to (i) eliminate any requirement for the Company to make a "Change of Control Offer" (as defined in the Indenture) to holders of the Notes in connection with the transactions contemplated by the Merger Agreement, (ii) clarify the treatment under the Indenture of the proposed structure of the Merger and to facilitate the integration of the Company and its subsidiaries and the Notes with and into Sinclair's debt capital structure, and (iii) eliminate the expense associated with producing and filing with the Securities and Exchange Commission ("SEC") separate financial reports for Sinclair Television Group, Inc., a wholly-owned subsidiary of Sinclair, as successor issuer of the Notes, if Sinclair or any other parent entity of the successor issuer of the Notes, in its sole discretion, provides an unconditional guarantee of the payment obligations of the successor issuer under the Notes (collectively, the "Amendments"). The Supplemental Indenture became effective immediately upon execution, but the Amendments will not become operative until immediately prior to the effective time of the Merger.
In light of the Company's previously announced transaction with Sinclair and the pendency of the proxy statement/prospectus filed with the SEC in connection with such transaction, Tribune Media is not providing financial guidance for the full year 2017 in this release, nor is the Company conducting a conference call regarding its second quarter 2017 financial results. See "Important Additional Information and Where to Find It" below.
Tribune Media Company (NYSE: TRCO) is home to a diverse portfolio of television and digital properties driven by quality news, entertainment and sports programming. Tribune Media is comprised of Tribune Broadcasting's 42 owned or operated local television stations reaching approximately 50 million households, national entertainment cable network WGN America, whose reach is approximately 80 million households, Tribune Studios, and a variety of digital applications and websites commanding 60 million monthly unique visitors online. Tribune Media also includes Chicago's WGN-AM and the national multicast networks Antenna TV and THIS TV. Additionally, the Company owns and manages a significant number of real estate properties across the U.S. and holds a variety of investments, including a 31% interest in Television Food Network, G.P., which operates Food Network and Cooking Channel. For more information please visit www.tribunemedia.com.
Important Additional Information and Where to Find It
In connection with the Merger, Sinclair has filed with the SEC a registration statement on Form S-4 (File No. 333-2219135) (as may be amended from time to time, the "Registration Statement") that includes a preliminary proxy statement of Tribune and that also will constitute a prospectus of Sinclair. These materials are not final and may be amended. Tribune will file with the SEC a definitive version of the proxy statement, which will be sent or provided to Tribune stockholders when available. Tribune and Sinclair may also file other documents with the SEC regarding the proposed transaction. This document is not a substitute for the proxy statement/prospectus or definitive registration statement or any other document which Tribune or Sinclair may file with the SEC. INVESTORS AND SECURITY HOLDERS OF TRIBUNE ARE URGED TO READ THE REGISTRATION STATEMENT, THE PROXY STATEMENT/PROSPECTUS AND THE DEFINITIVE VERSIONS THEREOF AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the Registration Statement and the definitive versions of these materials and other documents filed with the SEC (when available) by Tribune or Sinclair through the web site maintained by the SEC at www.sec.gov or by contacting the investor relations department of Tribune at the following:
Tribune Media Company
435 North Michigan Avenue
Chicago, Illinois 60611
Attention: Investor Relations
(646) 563-8296
Participants in the Solicitation
Tribune and Sinclair and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Tribune's directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is contained in Tribune's Form 10-K for the year ended December 31, 2016, its proxy statement filed on March 24, 2017 and the proxy statement of Tribune contained in the Registration Statement, which are filed with the SEC. Information regarding Sinclair's directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is contained in Sinclair's Form 10-K for the year ended December 31, 2016 and its proxy statement filed on April 21, 2017. These documents may be obtained free of charge from the sources indicated above.
Non-GAAP Financial Measures
This press release includes a discussion of Adjusted EBITDA, and Adjusted EPS for the Company and Adjusted EBITDA for our operating segments (Television and Entertainment and Corporate and Other) and presents Broadcast Cash Flow for our Television and Entertainment segment. Adjusted EPS, Adjusted EBITDA and Broadcast Cash Flow are financial measures that are not recognized under GAAP. Adjusted EPS is calculated based on income (loss) from continuing operations before investment transactions, loss on extinguishment and modification of debt, certain special items (including severance), certain income tax charges, non-operating items, gain (loss) on sales of real estate, impairments and other non-cash charges and reorganization items per common share. Adjusted EBITDA for the Company is defined as income (loss) from continuing operations before income taxes, investment transactions, loss on extinguishment and modification of debt, interest and dividend income, interest expense, pension expense (credit), equity income and losses, depreciation and amortization, stock-based compensation, certain special items (including severance), non-operating items, gain (loss) on sales of real estate, impairments and other non-cash charges and reorganization items. Adjusted EBITDA for the Company's operating segments is calculated as segment operating profit plus depreciation, amortization, pension expense (credit), stock-based compensation, impairments and other non-cash charges, gain (loss) on sales of real estate and certain special items (including severance). Broadcast Cash Flow for the Television and Entertainment segment is calculated as Television and Entertainment Adjusted EBITDA plus broadcast rights amortization expense less broadcast rights cash payments. We believe that Adjusted EBITDA and Broadcast Cash Flow are measures commonly used by investors to evaluate our performance with that of our competitors. We also present Adjusted EBITDA because we believe investors, analysts and rating agencies consider it useful in measuring our ability to meet our debt service obligations. We further believe that the disclosure of Adjusted EPS, Adjusted EBITDA and Broadcast Cash Flow is useful to investors as these non-GAAP measures are used, among other measures, by our management to evaluate our performance. By disclosing Adjusting EPS, Adjusted EBITDA and Broadcast Cash Flow, we believe that we create for investors a greater understanding of, and an enhanced level of transparency into, the means by which our management operates our company. Adjusted EPS, Adjusted EBITDA and Broadcast Cash Flow are not measures presented in accordance with GAAP, and our use of these terms may vary from that of others in our industry. Adjusted EPS, Adjusted EBITDA and Broadcast Cash Flow should not be considered as an alternative to net income, operating profit, revenues, cash provided by operating activities or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. The tables at the end of this press release include reconciliations of consolidated Adjusted EPS and Adjusted EBITDA and segment Adjusted EBITDA and Broadcast Cash Flow to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements may include, but are not limited to, our proposed merger with Sinclair, the sale of CareerBuilder, our real estate monetization strategy, our cost savings initiatives, the timing and the receipt of remaining expected proceeds from the FCC spectrum auction, changes to our WGN America original programming, the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts. Important factors that could cause actual results, developments and business decisions to differ materially from these forward-looking statements are uncertainties discussed below and in the "Risk Factors" section of the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"). "Forward-looking statements" include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "may," "might," "will," "could" "should," "estimate," "project," "plan," "anticipate," "expect," "intend," "outlook," "seek," "designed," "assume," "implied," "believe" and other similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties.
The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements: risks associated with the ability to consummate the Merger with Sinclair and the timing of the closing of the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; the risk that the regulatory approvals for the proposed Merger with Sinclair may not be obtained or may be obtained subject to conditions that are not anticipated; risks related to the disruption of management time from ongoing business operations due to the Merger; the effect of the announcement of the Merger on our ability to retain and hire key personnel, on our ability to maintain relationships with advertisers and customers, and on our operating results and businesses generally; litigation in the connection with the Merger; changes in advertising demand and audience shares; competition and other economic conditions including incremental fragmentation of the media landscape and competition from other media alternatives; changes in the overall market for broadcast and cable television advertising, including through regulatory and judicial rulings; our ability to protect our intellectual property and other proprietary rights; our ability to adapt to technological changes; availability and cost of quality network, syndicated and sports programming affecting our television ratings; the loss, cost and / or modification of our network affiliation agreements; our ability to renegotiate retransmission consent agreements with multichannel video programming distributors; our ability to realize the full value, or successfully complete the planned divestitures of our real estate assets; the incurrence of additional tax-related liabilities related to historical income tax returns; the payment of remaining proceeds associated with the spectrum auction, the potential impact of the modifications to and/or surrender of spectrum on operation of our television stations, the costs, terms and restrictions associated with the actions necessary to modify and/or surrender the spectrum; the incurrence of costs to address contamination issues at sites owned, operated or used by our businesses; adverse results from litigation, governmental investigations or tax-related proceedings or audits; our ability to settle unresolved claims filed in connection with our and certain of our direct and indirect wholly-owned subsidiaries' Chapter 11 cases and resolve the appeals seeking to overturn the bankruptcy court order confirming the First Amended Joint Plan of Reorganization for Tribune Company and its Subsidiaries; our ability to satisfy pension and other postretirement employee benefit obligations; our ability to attract and retain employees; the effect of labor strikes, lock-outs and labor negotiations; our ability to realize benefits or synergies from acquisitions or divestitures or to operate our businesses effectively following acquisitions or divestitures; the financial performance and valuation of our equity method investments; the impairment of our existing goodwill and other intangible assets; compliance with, and the effect of changes or developments in, government regulations applicable to the television and radio broadcasting industry; changes in accounting standards; the payment of cash dividends on our common stock; impact of increases in interest rates on our variable rate indebtedness or refinancings thereof; our indebtedness and ability to comply with covenants applicable to our debt financing and other contractual commitments; our ability to satisfy future capital and liquidity requirements; our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms and other events beyond our control that may result in unexpected adverse operating results. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this press release may not in fact occur. Any forward-looking information presented herein is made only as of the date of this press release and we undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
TRIBUNE MEDIA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Operating Revenues
Television and
Entertainment $466,061 $468,134 $902,094 $924,009
Other 3,456 11,662 7,333 24,259
----- ------
Total operating revenues 469,517 479,796 909,427 948,268
------- ------- ------- -------
Operating Expenses
Programming 157,084 122,803 298,330 246,970
Direct operating expenses 96,940 96,523 195,747 194,095
Selling, general and
administrative 141,576 148,127 301,435 308,761
Depreciation 13,927 14,467 27,498 28,909
Amortization 41,664 41,670 83,323 83,335
Total operating expenses 451,191 423,590 906,333 862,070
------- ------- ------- -------
Operating Profit 18,326 56,206 3,094 86,198
Income on equity
investments, net 40,761 44,306 77,798 82,558
Interest and dividend
income 548 228 1,053 360
Interest expense (40,185) (38,071) (78,943) (76,212)
Loss on extinguishment and
modification of debt - - (19,052) -
Gain on investment
transaction - - 4,950 -
Write-downs of investment (58,800) - (180,800) -
Other non-operating gain
(loss), net 71 (75) 45 421
Reorganization items, net (449) (366) (699) (800)
---- ---- ---- ----
(Loss) Income from
Continuing Operations
Before Income Taxes (39,728) 62,228 (192,554) 92,525
Income tax (benefit)
expense (9,905) 214,856 (61,519) 230,051
Loss from Continuing
Operations $(29,823) $(152,628) (131,035) (137,526)
(Loss) Income from
Discontinued Operations,
net of taxes (579) (8,935) 15,039 (12,944)
---- ------
Net Loss $(30,402) $(161,563) $(115,996) $(150,470)
======== ========= ========= =========
Basic (Loss) Earnings Per Common Share from:
Continuing Operations $(0.34) $(1.66) $(1.51) $(1.50)
Discontinued Operations (0.01) (0.10) 0.17 (0.14)
-----
Net Loss Per Common Share $(0.35) $(1.76) $(1.34) $(1.64)
====== ====== ====== ======
Diluted (Loss) Earnings Per Common Share
from:
Continuing Operations $(0.34) $(1.66) $(1.51) $(1.50)
Discontinued Operations (0.01) (0.10) 0.17 (0.14)
----- -----
Net Loss Per Common Share $(0.35) $(1.76) $(1.34) $(1.64)
====== ====== ====== ======
Regular dividends declared
per common share $0.25 $0.25 $0.50 $0.50
Special dividends declared
per common share $ - $ - $5.77 $ -
TRIBUNE MEDIA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except for share and per share data)
(Unaudited)
June 30, 2017 December 31, 2016
------------- -----------------
Assets
Current Assets
Cash and cash
equivalents $380,567 $577,658
Restricted cash and
cash equivalents 17,566 17,566
Accounts receivable
(net of allowances of
$17,320 and $12,504) 397,571 429,112
Broadcast rights 105,054 157,817
Income taxes receivable 15,515 9,056
Current assets of
discontinued
operations - 62,605
Prepaid expenses 22,130 35,862
Other 7,724 6,624
----- -----
Total current assets 946,127 1,296,300
------- ---------
Properties
Property, plant and
equipment 644,422 711,068
Accumulated
depreciation (210,800) (187,148)
-------- --------
Net properties 433,622 523,920
------- -------
Other Assets
Broadcast rights 144,998 153,457
Goodwill 3,228,585 3,227,930
Other intangible
assets, net 1,735,938 1,819,134
Non-current assets of
discontinued
operations - 608,153
Assets held for sale 54,282 17,176
Investments 1,423,182 1,674,883
Other 78,541 80,098
------ ------
Total other assets 6,665,526 7,580,831
--------- ---------
Total Assets $8,045,275 $9,401,051
========== ==========
TRIBUNE MEDIA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except for share and per share data)
(Unaudited)
June 30, 2017 December 31, 2016
------------- -----------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $46,305 $60,553
Debt due within one year (net of unamortized discounts
and debt issuance costs of $3,786 and $7,917) 17,878 19,924
Income taxes payable 52,307 21,166
Employee compensation and benefits 68,276 77,123
Contracts payable for broadcast rights 207,895 241,255
Deferred revenue 11,633 13,690
Interest payable 30,042 30,305
Current liabilities of discontinued operations - 54,284
Other 40,870 32,553
Total current liabilities 475,206 550,853
------- -------
Non-Current Liabilities
Long-term debt (net of unamortized discounts and debt
issuance costs of $37,421 and $38,830) 3,010,784 3,391,627
Deferred income taxes 836,354 984,248
Contracts payable for broadcast rights 275,088 314,840
Pension obligations, net 434,273 444,401
Postretirement, medical, life and other benefits 10,657 11,385
Other obligations 79,833 62,700
Non-current liabilities of discontinued operations - 95,314
--- ------
Total non-current liabilities 4,646,989 5,304,515
--------- ---------
Total Liabilities 5,122,195 5,855,368
--------- ---------
Commitments and Contingent Liabilities
Shareholders' Equity
Preferred stock ($0.001 par value per share)
Authorized: 40,000,000 shares; No shares issued and
outstanding at June 30, 2017 and at December 31, 2016 - -
Class A Common Stock ($0.001 par value per share)
Authorized: 1,000,000,000 shares; 101,284,525 shares
issued and 87,182,340 shares outstanding at June 30,
2017 and 100,416,516 shares issued and 86,314,063
shares outstanding at December 31, 2016 101 100
Class B Common Stock ($0.001 par value per share)
Authorized: 1,000,000,000 shares; Issued and
outstanding: 5,605 shares at June 30, 2017 and at
December 31, 2016 - -
Treasury stock, at cost: 14,102,185 shares at June 30,
2017 and 14,102,453 shares at December 31, 2016 (632,194) (632,207)
Additional paid-in-capital 4,044,480 4,561,760
Retained deficit (424,355) (308,105)
Accumulated other comprehensive loss (71,872) (81,782)
------- -------
Total Tribune Media Company shareholders' equity 2,916,160 3,539,766
Noncontrolling interest 6,920 5,917
----- -----
Total shareholders' equity 2,923,080 3,545,683
--------- ---------
Total Liabilities and Shareholders' Equity $8,045,275 $9,401,051
========== ==========
TRIBUNE MEDIA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Six Months Ended
----------------
June 30, 2017 June 30, 2016
------------- -------------
Operating Activities
Net loss $(115,996) $(150,470)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Stock-based compensation 22,093 18,003
Pension credit, net of
contributions (11,024) (12,055)
Depreciation 27,498 34,857
Amortization of contract
intangible assets and
liabilities 429 (8,048)
Amortization of other
intangible assets 83,323 98,799
Income on equity investments,
net (77,798) (82,558)
Distributions from equity
investments 149,650 125,604
Non-cash loss on
extinguishment and
modification of debt 6,823 -
Original issue discount
payments (6,873) -
Write-downs of investment 180,800 -
Amortization of debt issuance
costs and original issue
discount 4,127 5,559
Gain on sale of business (34,510) -
Gain on investment transaction (4,950) -
Impairments of real estate 757 14,600
(Gain) loss on sales of real
estate, net (300) 449
Other non-operating gain, net (45) (421)
Changes in working capital items:
Accounts receivable, net 32,074 18,256
Prepaid expenses and other
current assets 14,659 27,120
Accounts payable (8,896) 4,498
Employee compensation and
benefits, accrued expenses
and other current liabilities (17,014) (30,405)
Deferred revenue (2,726) (5,693)
Income taxes 24,756 151,485
Change in broadcast rights,
net of liabilities (11,893) (49,261)
Deferred income taxes (141,944) 57,489
Other, net 9,594 23,511
----- ------
Net cash provided by operating
activities 122,614 241,319
------- -------
TRIBUNE MEDIA COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Six Months Ended
----------------
June 30, 2017 June 30, 2016
------------- -------------
Investing Activities
Capital
expenditures (28,099) (35,431)
Investments - (3,451)
Net
proceeds
from
the
sale
of
business 557,793 -
Proceeds
from
sales
of
real
estate
and
other
assets 59,751 33,702
Proceeds
from
the
sale
of
investment 4,950 -
Distribution
from
cost
investment 805 -
Transfers
from
restricted
cash - 297
Net
cash
provided
by
(used
in)
investing
activities 595,200 (4,883)
------- ------
Financing Activities
Long-
term
borrowings 202,694 -
Repayments
of
long-
term
debt (589,661) (13,920)
Long-
term
debt
issuance
costs (1,689) (784)
Payments
of
dividends (542,665) (46,174)
Settlement
of
contingent
consideration - (750)
Common
stock
repurchases - (66,548)
Tax
withholdings
related
to
net
share
settlements
of
share-
based
awards (7,351) (4,377)
Proceeds
from
stock
option
exercises 10,013 -
Contributions
from
noncontrolling
interest 1,003 113
----- ---
Net
cash
used
in
financing
activities (927,656) (132,440)
-------- --------
Net
(Decrease)
Increase
in
Cash
and
Cash
Equivalents (209,842) 103,996
Cash
and
cash
equivalents,
beginning
of
period
(1) 590,409 262,644
Cash
and
cash
equivalents,
end
of
period $380,567 $366,640
======== ========
Supplemental Schedule
of Cash Flow
Information
Cash paid during the
period for:
Interest $76,264 $81,989
Income
taxes,
net $68,685 $15,868
(1) Cash and cash equivalents at the
beginning of the six months ended
June 30, 2017 of $590 million are
comprised of $578 million of cash
and cash equivalents from
continuing operations as
reflected in the Company's
unaudited Condensed Consolidated
Balance Sheets and $13 million of
cash and cash equivalents
reflected in current assets of
discontinued operations.
TRIBUNE MEDIA COMPANY - CONSOLIDATED
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(in thousands of dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Revenue $469,517 $479,796 $909,427 $948,268
Net Loss $(30,402) $(161,563) $(115,996) $(150,470)
(Loss) income from
discontinued
operations, net of
taxes (579) (8,935) 15,039 (12,944)
---- ------ ------ -------
Loss from Continuing
Operations $(29,823) $(152,628) $(131,035) $(137,526)
Income tax (benefit)
expense (9,905) 214,856 (61,519) 230,051
Reorganization items,
net 449 366 699 800
Other non-operating
(gain) loss, net (71) 75 (45) (421)
Write-downs of
investment 58,800 - 180,800 -
Gain on investment
transaction - - (4,950) -
Loss on extinguishment
and modification of
debt - - 19,052 -
Interest expense 40,185 38,071 78,943 76,212
Interest and dividend
income (548) (228) (1,053) (360)
Income on equity
investments, net (40,761) (44,306) (77,798) (82,558)
------- ------- ------- -------
Operating Profit $18,326 $56,206 $3,094 $86,198
Depreciation 13,927 14,467 27,498 28,909
Amortization 41,664 41,670 83,323 83,335
Stock-based
compensation 7,130 8,511 20,101 16,015
Severance and related
charges 4,117 770 10,794 770
Transaction-related
costs 16,035 2,335 19,027 4,118
Loss (gain) on sales of
real estate, net 17 449 (300) 449
Real estate impairments
and other (351) 6,745 425 14,306
Pension credit (5,475) (6,062) (11,024) (12,055)
Adjusted EBITDA $95,390 $125,091 $152,938 $222,045
======= ======== ======== ========
TRIBUNE MEDIA COMPANY - TELEVISION AND ENTERTAINMENT
RECONCILIATION OF OPERATING PROFIT TO ADJUSTED EBITDA AND BROADCAST CASH FLOW
(in thousands of dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Advertising $312,864 $338,220 $604,571 $659,682
Retransmission revenues 104,999 83,278 199,213 166,805
Carriage fees 31,867 30,396 65,477 61,410
Barter/trade 9,481 9,230 18,493 19,306
Other 6,850 7,010 14,340 16,806
----- ----- ------ ------
Total Revenues (1) $466,061 $468,134 $902,094 $924,009
Operating Profit (1) $50,219 $83,346 $70,232 $141,951
Depreciation 10,530 11,108 20,569 22,125
Amortization 41,664 41,670 83,323 83,335
Stock-based compensation 5,242 3,846 9,237 7,498
Severance and related
charges 4,125 21 4,335 21
Transaction-related costs 423 - 423 -
Gain on sale of real
estate - - (317) -
Real estate impairments
and other (513) 1,682 (923) 2,761
Adjusted EBITDA (1) $111,690 $141,673 $186,879 $257,691
-------- -------- -------- --------
Broadcast rights -
Amortization $137,298 $107,747 $263,609 $213,207
Broadcast rights -Cash
Payments (121,659) (105,366) (258,576) (240,823)
Broadcast Cash Flow $127,329 $144,054 $191,912 $230,075
======== ======== ======== ========
(1) Beginning in the fourth quarter of
2016, the Company moved its Covers
Media Group from the Digital and Data
reportable segment to the Television
and Entertainment reportable segment.
Certain previously reported amounts
have been reclassified to conform to
the current presentation; the impact
of this reclassification was
immaterial.
TRIBUNE MEDIA COMPANY - CORPORATE AND OTHER
RECONCILIATION OF OPERATING LOSS TO ADJUSTED EBITDA
(in thousands of dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Total Revenues $3,456 $11,662 $7,333 $24,259
Operating Loss (1) $(31,893) $(27,140) $(67,138) $(55,753)
Depreciation 3,397 3,359 6,929 6,784
Stock-based
compensation 1,888 4,665 10,864 8,517
Severance and related
charges (8) 749 6,459 749
Transaction-related
costs 15,612 2,335 18,604 4,118
Loss on sales of real
estate 17 449 17 449
Real estate
impairments and
other 162 5,063 1,348 11,545
Pension credit (5,475) (6,062) (11,024) (12,055)
Adjusted EBITDA (1) $(16,300) $(16,582) $(33,941) $(35,646)
======== ======== ======== ========
(1) Interest expense and transaction-
related costs that historically
have been recorded in Corporate
and Other but are directly
attributable to the businesses
included in the Gracenote Sale
have been reclassified to
discontinued operations. As a
result, the historical results
of Corporate and Other have been
adjusted.
TRIBUNE MEDIA COMPANY - CONSOLIDATED
RECONCILIATION OF DILUTED EPS TO ADJUSTED EPS
(in thousands of dollars, except per share data)
(Unaudited)
Three Months Ended
June 30, 2017 June 30, 2016
Pre-Tax After-Tax Diluted EPS Pre-Tax After-Tax Diluted EPS
------- --------- ----------- ------- --------- -----------
Diluted EPS $(0.35) $(1.76)
Loss from discontinued operations 0.01 0.10
Newsday income tax
charges $ - $ - - $ - $193,231 2.11
Reorganization items,
net 449 449 0.01 366 366 0.00
Other non-operating
(gain) loss, net (71) (47) (0.00) 75 45 0.00
Write-down of
investment 58,800 44,519 0.51 - - -
Severance and related
charges 4,117 2,503 0.03 770 467 0.01
Transaction-related
costs 16,035 14,330 0.16 2,335 1,448 0.02
Loss on sales of real
estate 17 11 0.00 449 273 0.00
Real estate impairments
and other (351) (187) (0.00) 6,745 4,101 0.04
Adjusted EPS (1) $0.36 $0.52
===== =====
Six Months Ended
June 30, 2017 June 30, 2016
Pre-Tax After-Tax Diluted EPS Pre-Tax After-Tax Diluted EPS
------- --------- ----------- ------- --------- -----------
Diluted EPS $(1.34) $(1.64)
(Income) loss from discontinued
operations (0.17) 0.14
Newsday income tax
charges $ - $ - - $ - $193,231 2.10
Reorganization items,
net 699 699 0.01 800 800 0.01
Other non-operating
gain, net (45) (31) (0.00) (421) (256) (0.00)
Write-downs of
investment 180,800 124,516 1.43 - - -
Gain on investment
transaction (4,950) (3,010) (0.03) - - -
Loss on extinguishment
and modification of
debt 19,052 11,584 0.13 - - -
Severance and related
charges 10,794 6,563 0.08 770 467 0.01
Transaction-related
costs 19,027 16,293 0.19 4,118 2,568 0.03
(Gain) loss on sales of
real estate, net (300) (182) (0.00) 449 273 0.00
Real estate impairments
and other 425 305 0.00 14,306 8,699 0.09
Adjusted EPS (1) $0.30 $0.74
===== =====
(1) Adjusted EPS totals may not foot due to rounding.
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SOURCE Tribune Media Company
