Tribune Company (NYSE: TRB) today reported second quarter 2007 diluted earnings per share from continuing operations of $.17 compared with $.53 in the second quarter of 2006.
Second quarter 2007 results from continuing operations included the following:
- A charge of $.08 per diluted share for the elimination of approximately 450 positions at publishing and corporate.
- A charge of $.07 per diluted share for the write-off of Los Angeles Times plant equipment related to the previously closed San Fernando Valley facility.
- A net non-operating loss of $.15 per diluted share.
Second quarter 2006 results from continuing operations included the following:
- A gain of $.01 per diluted share related to the Company’s share of a one-time favorable income tax adjustment recorded at CareerBuilder.
- A net non-operating loss of $.03 per diluted share.
Tribune presents earnings per share amounts on a generally accepted accounting principles (“GAAP”) basis only. This differs from the pro forma earnings per share amounts supplied by broker analysts to databases such as First Call.
“Our second quarter results reflect the difficult advertising environment, although strong cost controls partially offset revenue declines,” said Dennis FitzSimons, Tribune chairman, president and chief executive officer. “Publishing was impacted by soft print advertising and comparisons to record real estate spending, particularly in Florida, in 2006. However,
second quarter interactive revenues increased 17 percent over the same period last year. In television, the telecom and entertainment categories showed growth. Demand was soft across other categories and there was little political spending versus last year. As we look to Tribune’s second half, year-over-year comparisons will ease and new revenue initiatives are expected to contribute to publishing results. The launch of new CW and syndicated shows will positively impact our television group.”
“Our going-private transaction is on track and the financing for it is fully committed,” FitzSimons added. “We anticipate closing the transaction in the fourth quarter, following FCC approval, and expect to be in full compliance with our credit agreements.”
SECOND QUARTER 2007 RESULTS FROM CONTINUING OPERATIONS1
(Compared to Second Quarter 2006)
Tribune’s 2007 second quarter operating revenues decreased 7 percent, or $95 million, to $1.3 billion. Consolidated cash operating expenses were up 1 percent, or $9 million, in the second quarter of 2007 due to a charge of $28 million for the elimination of approximately 450 positions at publishing and corporate and a charge of $24 million for the write-off of Los Angeles Times plant equipment related to the previously closed San Fernando Valley facility. All other cash operating expenses were down 4 percent, or $43 million.
Operating cash flow was down 29 percent to $254 million from $359 million, while operating profit declined 36 percent to $196 million from $304 million.
Publishing’s second quarter operating revenues were $920 million, down 9 percent, or $95 million. Publishing cash operating expenses increased $7 million, or 1 percent, to $773 million. In the second quarter of 2007, publishing cash operating expenses included a charge of $25 million for the elimination of approximately 440 positions and a charge of $24 million for the write-off of Los Angeles Times plant equipment related to the previously closed San Fernando Valley facility. Publishing operating cash flow was $147 million, a 41 percent decline from $250 million in 2006. Publishing operating profit decreased 51 percent to $102 million, from $208 million in 2006.
- Advertising revenues decreased 11 percent, or $91 million, for the quarter.
- Retail advertising revenues were down 5 percent for the quarter, with the largest decreases at Los Angeles, Newsday and South Florida. Preprint revenues decreased 4 percent for the quarter.
- National advertising revenues were down 11 percent for the quarter, with declines across most categories.
- Classified advertising revenues declined 18 percent for the quarter, with the largest declines at Los Angeles, South Florida and Orlando: real estate revenues fell by 24 percent, help wanted revenues declined 16 percent and auto revenues were down 12 percent.
- Interactive revenues, which are included in the above categories, were up 17 percent to $66 million, mainly due to strength in the classified auto and real estate categories.
- Circulation revenues were down 6 percent for the quarter.
- Individually paid circulation (home delivery plus single copy) for Tribune’s 9 metro newspapers averaged 2.6 million copies daily (Mon-Fri), down 1.4 percent from the prior year’s second quarter, and 3.9 million copies Sunday, down 3.6 percent from the same reporting period in 2006.
- Total net paid circulation averaged 2.7 million copies daily (Mon-Fri), off 2.9 percent from the prior year’s second quarter, and 4.0 million copies Sunday, representing a decline of 4.0 percent from the prior year as the Company continued to reduce “other paid” circulation.
- Cash operating expenses increased $7 million as the 2007 second quarter included a charge of $25 million for the elimination of approximately 440 positions and a charge of $24 million for the write-off of Los Angeles Times plant equipment related to the previously closed San Fernando Valley facility. All other cash expenses were down 6 percent, or $42 million, primarily due to lower compensation and newsprint expenses.
BROADCASTING AND ENTERTAINMENT
Broadcasting and entertainment’s second quarter operating revenues were flat at $393 million. Group cash operating expenses increased 1 percent, or $2 million, to $273 million. Operating cash flow was $120 million, down 2 percent from $123 million, and operating profit decreased 2 percent to $108 million from $110 million in 2006.
Television’s second quarter operating revenues decreased 7 percent to $287 million in 2007. Television cash operating expenses were down 4 percent, or $8 million, from last year. Television operating cash flow was $100 million, down 12 percent from $115 million in 2006. Television operating profit declined 14 percent to $89 million, down from $104 million.
- Station revenues in Los Angeles and Chicago were down for the quarter and revenues in St. Louis were lower because KPLR no longer carries Cardinals baseball. New York showed improvement. On a group basis, declines in the auto, restaurant, financial and retail categories, as well as the absence of political advertising, were partially offset by gains in the telecom, media and
- Television’s cash operating expenses were down 4 percent, or $8 million, primarily due to a decrease in broadcast rights.
- Radio/Entertainment revenues and operating cash flow reflect more home games for the Chicago Cubs compared to last year’s second quarter.
Net equity income was $29 million in the second quarter of 2007, compared with $26 million in the second quarter of 2006. The increase reflects improvements at TV Food Network, Classified Ventures and Comcast SportsNet Chicago. Net equity income in 2006 included the Company’s $6 million share of a one-time favorable income tax adjustment at CareerBuilder.
In the 2007 second quarter, Tribune recorded a pretax non-operating loss of $42 million. The major components included a $27 million loss from marking-to-market the derivative component of the Company’s PHONES and the related Time Warner investment and $21 million of expenses related to the leveraged ESOP and going-private transactions approved by the Company’s board of directors on April 1, 2007. In the aggregate, non-operating items in the 2007 second quarter resulted in an after-tax loss of $30 million, or $.15 per share.
In the 2006 second quarter, Tribune recorded a pretax non-operating loss of $7 million, primarily from marking-to-market the derivative component of the Company’s PHONES and the related Time Warner investment. In addition, the Company recorded income tax adjustments of $4 million as an increase in income tax expense. In the aggregate, nonoperating items in the 2006 second quarter resulted in an after-tax loss of $8 million, or $.03 per share.
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2007 second quarter were $14 million, down 1 percent from the second quarter of 2006, and included a $3 million charge for severance.
Diluted weighted average shares outstanding declined by 32 percent from the second quarter of 2006 due to stock repurchases in 2006 and 2007. The Company repurchased 126 million shares in June 2007 in connection with the Company’s tender offer which expired on May 24, 2007.
Interest expense for the 2007 second quarter increased to $116 million, up 145 percent from $47 million in the second quarter of 2006. The increase in interest expense was due to higher debt levels and interest rates. Debt, excluding the PHONES, was $8.6 billion at the end of the 2007 second quarter and $2.6 billion at the end of the 2006 second quarter.
The increase was primarily due to financing the stock repurchases in the second quarter of 2007 and second half of 2006.
Capital expenditures were $31 million in the second quarter of 2007.
On February 12, 2007, the Company announced an agreement to sell the New York edition of Hoy, the Company’s Spanish-language daily newspaper. The Company completed the sale of the New York edition of Hoy on May 15, 2007. In March 2007, the Company announced its intention to sell its Southern Connecticut Newspapers — The Advocate (Stamford) and Greenwich Time (collectively “SCNI”). The Company expects to sell SCNI during the second half of 2007. The results of operations for both the New York edition of Hoy and SCNI are reported as discontinued operations.
In June 2006, the Company announced the sales of its Atlanta and Albany television stations. The sale of the Atlanta station closed in August 2006. In September 2006, the Company announced an agreement to sell its Boston station. The sales of the Albany and Boston stations closed in December 2006. The results of operations for these stations in 2006 are reported as discontinued operations.
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1 “Operating profit” for each segment excludes interest and dividend income, interest expense, equity income and losses, non-operating items and income taxes. “Operating cash flow” is defined as operating profit before depreciation and amortization. “Cash operating expenses” are defined as operating expenses before depreciation and amortization. Tables accompanying this release include a reconciliation of operating profit to operating cash flow and operating expenses to cash operating expenses. References to individual daily newspapers include their related businesses.
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Important Additional Information Regarding the Merger has been filed with the SEC
In connection with our proposed merger between a wholly-owned subsidiary of the Tribune Employee Stock Ownership Trust and Tribune Company, Tribune filed a definitive proxy statement with the Securities and Exchange Commission (the “SEC”) on July 13, 2007. BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED MERGER TRANSACTION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of the definitive proxy statement and other documents filed by Tribune with the SEC at the SEC’s website at http://www.sec.gov. The definitive proxy statement and other relevant documents may also be obtained free of charge on Tribune’s website at www.tribune.com or by directing a request to Tribune Company, 435 North Michigan Avenue, Chicago, IL 60611, Attention: Investor Relations. You may also read and copy any reports, statements and other information filed by Tribune with the SEC at the SEC public reference room at 450 Fifth Street, N.W. Room 1200, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room.
The Company and its directors and executive officers may be deemed to be “participants” in the solicitation of proxies from the shareholders of the Company in connection with the proposed merger. Information about Tribune and its directors and executive officers and their ownership of Tribune common stock is set forth in the proxy statement for Tribune’s Annual Meeting of Shareholders, which Tribune filed with the SEC on April 6, 2007. Shareholders and investors may obtain additional information regarding the interests of the Company and its directors and executive officers in the merger, which may be different than those of Tribune’s shareholders generally, by reading the definitive proxy statement and other relevant documents regarding the merger, which have been filed with the SEC.
This press release contains certain comments or forward-looking statements that are based largely on the Company’s current expectations and are subject to certain risks, trends and uncertainties. You can identify these and other forward-looking statements by the use of such words as “will,” “expect,” “plans,” “believes,” “estimates,” “intend,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Actual results could differ materially from the expectations expressed in these statements. Factors that could cause actual results to differ include risks related to the transactions being consummated; the risk that required regulatory approvals or financing might not be obtained in a timely manner, without conditions, or at all; the impact of the substantial indebtedness incurred to finance the consummation of the tender offer and the merger; the ability to satisfy all closing conditions in the definitive agreements; difficulties in retaining employees as a result of the merger agreement; risks of unforeseen material adverse changes to our business or operations; risks that the proposed transaction disrupts current plans, operations, and business growth initiatives; the risk associated with the outcome of any legal proceedings that may be instituted against Tribune and others following announcement of the merger agreement; and other factors described in Tribune’s publicly available reports filed with the SEC, including the most current annual 10-K report and 10-Q report, which contain a discussion of various factors that may affect Tribune’s business or financial results. These factors, including also the ability to complete the merger, could cause actual future performance to differ materially from current expectations. Tribune is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet service providers. This press release is being furnished to the SEC through a Form 8-K. Tribune’s next quarterly 10-Q report to be filed with the SEC may contain updates to the information included in this release.