Tribune Company (NYSE:TRB) today reported first quarter 2006 diluted earnings per share of $.33 compared with $.44 in the first quarter of 2005.
First quarter 2006 results included the following:
- Stock-based compensation expense of $.04 per diluted share as a result of the adoption of the new accounting standard for stock-based compensation.
- A charge of $.04 per diluted share for severance and other payments associated with the new union contracts at Newsday.
- A gain of $.01 per diluted share related to property sales in publishing.
- A net non-operating loss of $.02 per diluted share.
First quarter 2005 results included the following:
- A net non-operating gain 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.
“Newspaper ad revenues were flat for the quarter. Strength in classified, with interactive revenues up nearly 30 percent, was offset by declines in national and retail advertising. Television group revenues trended better, and while down 2 percent, our New York, Washington, D. C., and six Fox stations delivered good growth,” said Dennis FitzSimons, Tribune chairman, president and chief executive officer. “Tight cost controls remain in effect,” he added, “and our actions in 2005 resulted in a 5 percent year-over-year staff reduction, or approximately 1,200 positions across the company, and lower compensation expense. Looking ahead, our new labor agreements at Newsday will result in significant expense savings, while in TV we expect our affiliation with the CW Network to have a positive impact on revenues later this year.”
FIRST QUARTER 2006 RESULTS1
(Compared to First Quarter 2005)
Tribune’s 2006 first quarter operating revenues decreased 1 percent, or $17 million,
to $1.30 billion. Consolidated cash operating expenses were up 1 percent, or $15 million. In the first quarter of 2006, cash operating expenses included $18 million of stock-based compensation expense and a charge of $19 million associated with the new union contracts at Newsday, partially offset by a $7 million gain on property sales. All other cash operating expenses were down 2 percent, or $16 million, for the quarter. Operating cash flow was down 10 percent to $279 million from $310 million, while operating profit declined 12 percent to $223 million from $252 million.
Publishing’s first quarter operating revenues were $997 million, down 1 percent, or
$9 million. Publishing cash operating expenses were up 2 percent, or $17 million, as 2006 included a charge of $19 million associated with the new union contracts at Newsday and $7 million of stock-based compensation expense, partially offset by a $7 million gain on property sales. Publishing operating cash flow was $217 million, an 11 percent decrease from $243 million in 2005. Publishing operating profit was down 12 percent to
$174 million, from $199 million in 2005.
- Advertising revenues were flat for the quarter. Excluding Newsday, advertising revenues increased 1 percent. Revenues were favorably impacted by the timing of the Easter holiday.
- Retail advertising revenues were down 2 percent for the quarter. Decreases in the food & drug stores, department stores, and electronics categories were partially offset by an increase in the hardware/home improvement stores category. Preprint revenues declined 2 percent; excluding Newsday, preprint revenues were up
- National advertising was down 8 percent for the quarter, primarily due to a decline in the movie category at Los Angeles. Autos and technology were also down, partially offset by an increase in the telecom/wireless category.
- Classified advertising was up 8 percent for the quarter: help wanted revenues were up 7 percent; real estate revenues rose 35 percent; and auto revenues were down
- Interactive advertising revenues, which are included in the above categories, were up 30 percent to $51 million, mainly due to strength in classified help wanted revenues.
- Circulation revenues were down 4 percent for the quarter.
- Individually paid circulation (home delivery plus single copy) for Tribune’s 11 metro newspapers averaged 2.8 million copies daily (Mon-Fri) in the first quarter, up 1 percent from the prior year, and 4.2 million copies Sunday, down approximately 1 percent from the same reporting period in 2005.
- Total net paid circulation averaged 3.0 million copies daily (Mon-Fri) and 4.3 million copies Sunday in the first quarter, representing a decline of
3 percent, for both daily and Sunday, from the prior year’s quarter as the company continued to manage down “other paid” circulation.
- Cash operating expenses increased 2 percent, or $17 million, due to the previously discussed $19 million charge related to the Newsday union contracts and $7 million of stock-based compensation expense, partially offset by $7 million of gains on property sales. All other cash expenses were down slightly as higher newsprint and total market coverage postage expenses were offset by lower compensation and benefits, primarily due to a 5 percent (1,000 positions) reduction in staffing.
BROADCASTING AND ENTERTAINMENT
Broadcasting and entertainment’s first quarter operating revenues decreased 2 percent to $303 million, down from $310 million in 2005. Group cash operating expenses were down 4 percent, or $10 million, compared with the 2005 first quarter. The first quarter of 2005 included $13.5 million of additional compensation expense recorded by the Chicago Cubs related to a player trade. Operating cash flow was $82 million, up 3 percent from $80 million, and operating profit increased 3 percent to $69 million from $67 million.
Television’s first quarter revenues decreased 2 percent to $284 million, down from
$290 million in 2005. Television cash operating expenses were up 4 percent, or
$8 million, from last year. Television operating cash flow was $86 million, a 13 percent decrease from $99 million in 2005. Television operating profit declined 15 percent to
$74 million, down from $87 million.
- Television revenue showed less of a decline than in any quarter last year. Station revenues in New York were up for the quarter, while Los Angeles and Chicago lagged. Softness continued in the auto and retail categories, while movies showed growth for the second consecutive quarter. The restaurants, education, and telecom advertising categories were also up.
- Television cash operating expenses were up 4 percent due to an $8 million increase in broadcasting rights and $2 million of stock-based compensation expense, partially offset by staff reductions and other savings.
Net equity income was $6.5 million in the first quarter of 2006, compared with
$0.5 million in the first quarter of 2005. The increase reflects improvements at TV Food Network and Comcast SportsNet Chicago. In addition, the Company is no longer recording losses for The WB Network as the Company’s recorded investment has been reduced to zero.
In the 2006 first quarter, Tribune recorded a pretax non-operating loss of $14 million
($8 million after-tax), primarily from marking-to-market the derivative component of the Company’s PHONES and the related Time Warner investment.
In the 2005 first quarter, Tribune recorded a pretax non-operating loss of $4 million. In addition, the Company recorded favorable income tax settlement adjustments of
$12 million as a reduction in income tax expense. In the aggregate, non-operating items in the first quarter of 2005 resulted in an after-tax gain of $9 million, or $.03 per diluted share.
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2006 first quarter increased to $20 million from $13 million in the first quarter of 2005. The increase was due to $8 million of stock-based compensation expense recorded in the first quarter of 2006, partially offset by $1 million of savings primarily from staff reductions in 2005.
As of the beginning of 2006, Tribune adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment. The statement requires the Company to expense stock-based compensation in the income statement. Previously, the expense was disclosed in the footnotes to the Company’s consolidated financial statements. The Company recorded $18 million, or $.04 per diluted share, of stock-based compensation expense in the first quarter of 2006. The Company plans to record $32 million, or $.07 per diluted share, of stock-based compensation expense for the full year of 2006. The Company issues substantially all of its stock-based awards in February of each year. Stock-based awards granted to retirement eligible employees are required to be expensed immediately. As a result, the 2006 first quarter stock-based expense includes over half of the expected full year expense.
Interest expense for the 2006 first quarter increased to $49 million, up 39 percent from
$35 million in the first quarter of 2005, primarily due to higher interest rates and debt levels. Debt, excluding the PHONES, was $2.8 billion at the end of the 2006 first quarter and $1.8 billion at the end of the 2005 first quarter.
Diluted weighted average shares outstanding declined by 5 percent primarily due to stock repurchases. The Company repurchased 4.6 million shares in the first quarter of 2006.
On January 8, 2006, Newsday’s six collective bargaining units voted to accept four-year contracts that include work-rule flexibility and more efficient staffing, as well as modified retirement and health care plans. Expected savings are approximately $7 million in 2006 and more than $10 million annually thereafter. The Company recorded a charge of
$19 million in the first quarter of 2006 for severance and other payments associated with the contracts.
On January 24, 2006, the Company announced that it had reached a 10-year agreement to affiliate 16 of its television stations (including those in New York, Los Angeles and Chicago) with The CW, a new broadcast network, being launched in fall 2006 by Warner Bros. Entertainment and CBS Corporation.
DETAILS OF CONFERENCE CALL
Today at 8 a.m. CT, management will host a conference call to discuss first quarter 2006 results. To access the call, dial 800/901-5218 (domestic) or 617/786-4511 (international) at least 10 minutes prior to the scheduled 8 a.m. start. The participant access code is 11607847. Replays of the conference call will be available April 13 through April 20. To hear the replay, dial 888/286-8010 (domestic) or 617/801-6888 (international) and use access code 89538262. A live webcast will be accessible through www.tribune.com and www.earnings.com. An archive of the webcast will be available April 13 through April 27.
More information about Tribune is available at www.tribune.com or by calling 800/757-1694.
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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.