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Tribune
Reports 2007 Third Quarter Results
CHICAGO,
October 24, 2007 -- Tribune Company (NYSE: TRB) today
reported third quarter 2007 diluted earnings per share from
continuing operations of $.69 compared with $.65 in the third
quarter of 2006.
Third quarter 2007 results from continuing operations included
the following:
- A severance charge of $.02 per diluted share,
primarily at publishing.
- A net non-operating gain of $.33
per diluted share, which included a favorable income
tax expense adjustment of $.72 per diluted share related
to the settlement of the Company’s Matthew Bender tax appeal, partially offset
by a net loss of $.39 per diluted share primarily related
to marking-to-market the derivative component of the Company’s
PHONES and the related Time Warner investment.
Third quarter 2006 results from continuing operations included
the following:
- A net non-operating gain of $.22
per diluted share, which included a gain of $.19 per
diluted share related to the restructuring in September
2006 of TMCT, LLC and TMCT II, LLC, two limited liability
companies that Tribune inherited in its acquisition of
Times Mirror.
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 third quarter results reflect a
combination of better revenue trends, strong expense controls
and an increase in equity income," said Dennis FitzSimons,
Tribune chairman, president and chief executive officer.
"Publishing revenue trends improved slightly in the third
quarter despite the impact of the housing slump on our Florida
and California newspapers. We are also encouraged by positive
national advertising trends, led by improved Tribune Media
Net sales."
"In television, ad revenue improved as
the quarter progressed. New York finished the quarter strong
on higher ratings from new syndicated programming and the
CW network’s
fall launch. Chicago also had a good September, thanks in
part to Chicago Cubs telecasts."
"The closing of our going-private transaction
is still expected in the fourth quarter, following FCC approval
of our waiver requests and receipt of a solvency opinion,"
FitzSimons added.
THIRD QUARTER 2007 RESULTS FROM CONTINUING OPERATIONS 1
(Compared to Third Quarter 2006)
CONSOLIDATED
Tribune’s 2007 third quarter operating
revenues decreased 4 percent, or $55 million, to $1.28
billion. Consolidated cash operating expenses were down
4 percent, or $46 million, in the third quarter of 2007
primarily due to a $25 million decrease in newsprint and
ink expense and a $21 million decrease in compensation.
Cash operating expenses in the third quarters of 2007 and
2006 included severance charges of $3.2 million and $2.2
million, respectively. Operating cash flow was down 3 percent
to $285 million from $295 million, while operating profit
declined 4 percent to $229 million from $238 million.
PUBLISHING
Publishing’s third quarter operating
revenues were $871 million, down 7 percent, or $69 million.
Publishing cash operating expenses decreased $48 million,
or 6 percent, to $705 million. Publishing operating cash
flow was $166 million, an 11 percent decline from $187 million
in 2006. Publishing operating profit decreased 15 percent
to $123 million, from $144 million in 2006.
Management Discussion
- Advertising revenues decreased 9 percent,
or $67 million, for the quarter.
- Retail advertising
revenues were down 6 percent for the quarter, with the
largest decreases at Newsday, Los Angeles and South Florida.
Preprint revenues decreased 1 percent for the quarter.
- National
advertising revenues increased 2 percent for the quarter,
with increases in the movies and financial categories,
partially offset by a decrease in the automotive category.
- Classified
advertising revenues declined 18 percent for the quarter,
with the largest declines at Los Angeles, Chicago, Orlando
and South Florida: real estate revenues fell by 26 percent,
help wanted revenues declined 19 percent and auto revenues
were down 10 percent.
- Interactive revenues, which
are included in the above categories, were up
9 percent to $65 million, mainly due to strength in classified
auto, along with retail and national.
- Circulation
revenues were down 5 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 2.9 percent from the prior year’s
third quarter, and 3.9 million copies Sunday, down
3.7 percent from the same reporting period in 2006.
- Total net paid
circulation averaged 2.7 million copies daily (Mon-Fri),
off
2.8 percent from the prior year’s third quarter,
and 3.9 million copies Sunday, representing a decline
of 3.8 percent from the prior year’s third quarter.
- Cash operating expenses decreased $48
million, or 6 percent, to $705 million, and included severance
charges of $3.5 million and $2.2 million, in the third
quarters of 2007 and 2006, respectively. Newsprint and
ink expense decreased 20 percent, or $25 million, and compensation
expense declined 6 percent, or $20 million. All other cash
expenses were down 1 percent, or $3 million.
BROADCASTING AND ENTERTAINMENT
Broadcasting and entertainment’s
third quarter operating revenues increased 3 percent, or
$13 million, to $406 million. Group cash operating expenses
increased 2 percent, or $4 million, to $276 million. Operating
cash flow was $130 million, up 8 percent from $121 million,
and operating profit increased 9 percent to $118 million
from $108 million in 2006.
Television’s third quarter operating
revenues increased 4 percent to $288 million in 2007, primarily
due to higher cable copyright royalties. Television cash
operating expenses were down 1 percent, or $1 million,
to $190 million. Television operating cash flow was $98
million, up 14 percent from $86 million in 2006, while
operating profit increased 18 percent to $87 million, up
from $74 million.
Management Discussion
- Station revenues at Chicago and WGN Cable were
up primarily due to the higher cable copyright royalties.
New York was also up for the quarter, while Los Angeles
was down. On a group basis, advertising revenue declines
in the movies and automotive categories, as well as the
absence of political advertising, were partially offset
by gains in the telecom, health care and food/packaged
goods categories.
- Television’s cash operating
expenses were down 1 percent, or $1 million, primarily
due to lower broadcast rights.
- Radio/Entertainment operating cash
flow decreased $3 million primarily due to higher player
costs and three fewer home games at the Chicago Cubs
compared to last year’s
third quarter.
EQUITY RESULTS
Net equity income was $27 million in the third
quarter of 2007, compared with
$19 million in the third quarter of 2006. The increase primarily
reflects higher equity income for Comcast SportsNet Chicago
and CareerBuilder.
NON-OPERATING ITEMS
In the 2007 third quarter, Tribune recorded
a pretax non-operating loss of $78 million. The primary
components included an $85 million pretax loss from marking-to-market
the derivative component of the Company’s PHONES and the related Time
Warner investment, partially offset by an $8 million pretax
gain related to the redemption of the Company’s remaining
interests in TMCT, LLC and TMCT II, LLC. The Company also
recorded a favorable $91 million income tax expense adjustment
as a result of settling its appeal of the 2005 Tax Court
decision that disallowed the tax-free reorganizations of
Matthew Bender and Mosby, former subsidiaries of Times Mirror.
In the aggregate, non-operating items in the 2007 third quarter
resulted in an after-tax gain of $42 million, or $.33 per
diluted share.
As a result of the settlement of the
Company’s appeal
of the Matthew Bender/Mosby Tax Court decision, the Company
received refunds of federal income taxes and interest of
$4 million on Sept. 26, 2007, and $340 million on Oct. 1,
2007. After consideration of income taxes on the interest
received, the net cash proceeds totaled approximately $286
million. These refunds, together with related state income
tax benefits of $29 million, were accounted for as a $91
million reduction in third quarter income tax expense and
a $224 million reduction in the goodwill recorded on the
Company’s balance sheet.
In the 2006 third quarter, Tribune recorded a pretax non-operating
gain of $64 million primarily as a result of the restructuring
of TMCT, LLC and TMCT II, LLC. In addition, the Company recorded
a favorable $4 million income tax expense adjustment as a
result of resolving certain state income tax issues. In the
aggregate, non-operating items in the third quarter of 2006
resulted in an after-tax gain of $56 million, or $.22 per
diluted share.
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2007 third quarter were $11 million,
down 17 percent from the third quarter of 2006 primarily
due to lower compensation expense.
Diluted weighted average shares outstanding
declined by 50 percent from the third quarter of 2006 due
to stock repurchases in 2007 and 2006. The Company repurchased
126 million shares in June 2007 in connection with the
Company’s tender
offer.
Interest expense for the 2007 third quarter increased to
$187 million, up 121 percent from $84 million in the third
quarter of 2006. The increase was due to higher debt levels
and interest rates. Debt, excluding the PHONES, was $8.7
billion at the end of the 2007 third quarter and $4.7 billion
at the end of the 2006 third quarter. The increase was primarily
due to financing the stock repurchases in the second quarter
of 2007.
Capital expenditures were $33 million in the third quarter
of 2007.
DISCONTINUED OPERATIONS
During the third quarter of 2007, the
Company entered into negotiations to sell the stock of
one of its subsidiaries, EZ Buy and EZ Sell Recycler Corporation
("Recycler").
Recycler publishes a collection of free classified newspapers
in Southern California. The sale of Recycler closed on Oct.
17, 2007. The Company recorded a pretax loss on the sale
of Recycler of $1 million in the third quarter. Due to the
Company’s high tax basis in the Recycler stock, the
sale will generate a significantly higher capital loss for
income tax purposes. As a result, the Company recorded a
$65 million income tax benefit in the third quarter of 2007,
resulting in an after-tax gain of $64 million. On Feb. 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 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 recorded a favorable $3 million after-tax adjustment
to the expected loss on the sale of SCNI in the third quarter
of 2007. The results of operations of Recycler, 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 television 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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Forward-Looking Statements
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 proposed merger 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 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 in connection
with the merger agreement; and other factors described in
Tribune’s publicly available reports filed with the
SEC, including the most current annual 10-K and quarterly
10-Q reports, 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.
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TRIBUNE (NYSE:TRB) is one of the country’s
top media companies, operating businesses in publishing,
interactive and broadcasting. It reaches more than 80 percent
of U.S. households and is the only media organization with
newspapers, television stations and websites in the nation’s
top three markets. In publishing, Tribune’s leading
daily newspapers include the Los Angeles Times, Chicago Tribune,
Newsday (Long Island, N.Y.), The Sun (Baltimore), South Florida
Sun-Sentinel, Orlando Sentinel and Hartford Courant. The
company’s broadcasting group operates 23 television
stations, Superstation WGN on national cable, Chicago’s
WGN-AM and the Chicago Cubs baseball team. Popular news and
information websites complement Tribune’s print and
broadcast properties and extend the company’s nationwide
audience.
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