Tribune Company (NYSE: TRB) today reported first quarter 2005 diluted earnings per share (EPS) of $.44 compared with $.35 in the first quarter of 2004. The 2005 first quarter results included a net non-operating gain of $.03 per diluted share, while the 2004 first quarter results included a net non-operating loss of $.05 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 results in the first quarter were in line with our expectations,” said Dennis FitzSimons, Tribune chairman, president and chief executive officer. “Newspaper advertising revenue growth was solid in January and February, although March was negatively impacted by the timing of the Easter holiday. In television, our results reflected overall industry softness and the impact of Local People Meters in our major markets.”
FIRST QUARTER 2005 RESULTS1
(Compared to First Quarter 2004)
Tribune’s 2005 first quarter operating revenues decreased 1 percent to $1.32 billion from $1.33 billion in the 2004 first quarter. Consolidated cash operating expenses increased $5 million, or 0.5 percent. Operating cash flow was down 7 percent to $310 million, while operating profit decreased 8 percent to $252 million.
Publishing’s first quarter operating revenues were $1 billion, flat compared with last year’s first quarter. However, excluding Newsday, first quarter operating revenues were up 2 percent. Newsday implemented lower ad rates as a result of the significant reduction in reported circulation in September 2004. Publishing cash operating expenses were down
1 percent. Publishing operating cash flow was $243 million, a 4 percent increase from $235 million. Publishing operating profit increased 5 percent to $199 million, up from $190 million in 2004.
- Advertising revenues increased 2 percent for the quarter. Excluding Newsday, advertising revenues increased 3 percent.
- Retail advertising revenues rose 2 percent for the quarter. Increases in auto supply, food and drug, hardware/home improvement and health care categories were partially offset by declines in education and apparel/fashion. Preprint revenues increased 8 percent, led by a 14 percent increase in Los Angeles, a 9 percent increase in Chicago and a 10 percent increase in South Florida; Newsday was up
- National advertising was down 1 percent for the quarter with decreases in the transportation, technology, resorts and movie categories, partially offset by increases in financial and auto.
- Classified advertising was up 3 percent for the quarter. Help wanted revenues for the group were up 11 percent; Los Angeles was up 7 percent; Chicago rose
11 percent; and Newsday was down 15 percent. Real estate revenues rose
4 percent and auto revenues were down 5 percent for the quarter.
- Circulation revenues were down 9 percent primarily due to volume declines at each of the Company’s newspapers, as well as selectively higher discounting. The largest revenue declines were at Los Angeles and Newsday. Excluding these two newspapers, circulation revenues were down 4 percent.
- Interactive revenues, which are included in the above categories, were up
39 percent to $40 million due to strength in classified and banner/sponsorship advertising.
- Cash operating expenses decreased 1 percent due primarily to lower compensation expense, partially offset by higher newsprint prices. Newsprint and ink expense was 2 percent higher as newsprint cost per ton was up 12 percent while consumption decreased 9 percent.
BROADCASTING AND ENTERTAINMENT
Broadcasting and Entertainment’s first quarter operating revenues decreased 6 percent to $310 million, down from $329 million in 2004. Group cash operating expenses were up
5 percent, or $11 million. The increase was due to $13.5 million of additional compensation expense recorded by the Chicago Cubs related to the Sammy Sosa trade. Operating cash flow was $80 million, down 27 percent from $110 million, and operating profit decreased 31 percent to $67 million from $97 million.
Television’s first quarter revenues decreased 5 percent to $290 million, down from
$306 million in 2004. Television cash operating expenses were down 1 percent from last year. Television operating cash flow was $99 million, a 13 percent decrease from
$114 million. Television operating profit declined 15 percent to $87 million, down from $102 million.
- Television advertising declines were primarily driven by weakness in the automotive, movie and telecom categories. Television revenues in New York, Los Angeles, Chicago and Boston continue to be impacted by Local People Meters.
- Television cash operating expenses were down 1 percent primarily due to lower sales commissions and cost reduction initiatives.
- Radio/entertainment results reflect the impact of the Cubs trade noted above.
Net equity income was $0.5 million in the first quarter of 2005, compared with a net loss of $4 million in the first quarter of 2004. The increase reflects improvements at Comcast SportsNet Chicago and TV Food Network.
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.
In the 2004 first quarter, the Company recorded a pretax non-operating loss of $27 million ($16 million after-tax, or $.05 per diluted share). Non-operating items in the first quarter of 2004 included a loss from marking-to-market the Company’s PHONES derivatives and related Time Warner investment and a gain from the sale of the Company’s ownership interest in La Opinión.
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2005 first quarter increased to $13.4 million from $12.9 million in the first quarter of 2004 primarily due to higher retirement plan expense.
Net interest expense for the 2005 first quarter decreased to $34 million, down 25 percent from $45 million in the first quarter of 2004. The decrease was primarily due to the retirement of higher interest rate debt, which was replaced with commercial paper in the second quarter of 2004. Debt, excluding the PHONES, was $1.8 billion at the end of the 2005 first quarter compared with $2.0 billion at the end of the first quarter of 2004.
The effective tax rate in the 2005 first quarter was 33.5 percent, compared with 38.7 percent in the 2004 first quarter. In the first quarter of 2005, the Company reduced its income tax expense and liabilities by $12 million as a result of favorably resolving certain federal income tax issues.
Diluted average shares outstanding declined by 5 percent primarily due to significant stock repurchases in 2004.
Capital expenditures were about $37 million in the first quarter of 2005.
2005 FINANCIAL ASSUMPTIONS
Consolidated revenues will continue to be impacted by many factors, including changes in national and local economic conditions, job creation, circulation levels and audience shares. As a result of this limited visibility, the Company is currently not providing revenue guidance for 2005; investors are encouraged to review the Company’s monthly revenue releases for current trends.
Consolidated operating expenses are expected to decline in 2005 due to the absence of the $90 million advertising settlement charge and the $41 million of position elimination costs recorded in 2004. Other consolidated operating expenses are expected to be up about 2 percent for 2005 due to higher expenses for retirement and medical plans and newsprint, along with a slight increase in broadcast rights expense. Net equity income is projected to be somewhat higher than 2004. Interest expense is expected to be somewhat below 2004 due to the full year impact of the debt refinancing in the second quarter of 2004. The effective income tax rate for 2005 is expected to be approximately 38 percent. Capital expenditures are projected to increase slightly over 2004. The Company expects to adopt Financial Accounting Standard No. 123R, which requires the expensing of stock options, in the first quarter of 2006.
WEBCAST OF CONFERENCE CALL
Today at 8 a.m. (CDT), a live webcast of the 2005 first quarter conference call will be accessible through www.tribune.com and www.ccbn.com. An archive of the webcast will be available on these sites from April 15 through April 22. 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 income and 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.