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Tribune Reports 2004 Fourth Quarter
and Full Year Results
CHICAGO, January 28, 2005 --
Tribune Company (NYSE: TRB) today reported
fourth quarter 2004 diluted earnings per share of $.67 compared
with $1.00 in the fourth quarter of 2003. For the full year
2004, Tribune reported diluted earnings per share of $1.67
compared with $2.61 in 2003.
Fourth quarter results included the following:
- A charge of $.05 per diluted share
in the 2004 quarter for the elimination of approximately
230 positions in publishing.
- A net non-operating gain
of $.06 per diluted share in the 2004 quarter, compared
with a net non-operating gain of $.34 per diluted share
in the 2003 quarter.
- A charge of $.05 per diluted
share in the 2004 quarter for the cumulative effect of
a change in accounting principle related to intangible
assets.
Full year results included the following:
- A charge of $.07 per diluted share in
2004 for the elimination of approximately 600 positions
during 2004 in publishing.
- A charge of $.17 per
diluted share in 2004 related to the anticipated settlement
with advertisers regarding misstated circulation at Newsday
and Hoy, New York, for the periods September 2001 through
March 2004.
- A net non-operating loss of $.28 per
diluted share in 2004, compared with a net non-operating
gain of $.52 per diluted share in 2003.
- A charge
of $.05 per diluted share in 2004 for the cumulative effect
of a change in accounting principle related to intangible
assets.
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.
"The year just ended was a challenging one for our
company, and our financial results reflect the uneven advertising
environment as well as the impact of circulation misstatements
at Newsday and Hoy in New York," said Dennis FitzSimons,
Tribune chairman, president and chief executive officer. "We
moved swiftly to address these issues, and we also repurchased
over 15 million shares of common stock. Our actions have
positioned Tribune for better results in 2005."
FOURTH QUARTER 2004 RESULTS
CONSOLIDATED
Tribune’s 2004 fourth quarter operating revenues increased
1 percent to $1.48 billion from $1.47 billion in the 2003
fourth quarter. Consolidated cash operating expenses increased
$45 million, or 4 percent, in the fourth quarter of 2004;
2 percentage points, or $24 million, of the increase is attributable
to the position eliminations charge in publishing discussed
below. Operating cash flow was down 7 percent to $427 million
compared with the fourth quarter of 2003. Tribune’s
operating profit decreased 8 percent to $369 million, compared
with $400 million in 2003.
PUBLISHING
Publishing’s fourth quarter operating revenues were
$1.1 billion, up 1 percent from last year’s fourth
quarter. Publishing cash operating expenses rose by 5 percent;
3 percentage points, or $24 million, of the increase is attributable
to the charge discussed below. Publishing operating cash
flow was $279 million, an 8 percent decrease from $304 million
in the fourth quarter of 2003. Publishing operating profit
decreased 10 percent to
$234 million, from $260 million in 2003.
Publishing operating profit in the 2004 fourth quarter included
a charge of $24 million for the elimination of approximately
230 positions. These position eliminations will result in
compensation expense savings of approximately $16 million
for the full year 2005.
Management Discussion
- Retail advertising revenues rose
5 percent for the quarter. Increases in food and drug,
furniture/home furnishing, auto supply, general merchandise
and health care were partially offset by a decline in department
stores. Preprint revenues increased 8 percent, led by a
17 percent increase in Los Angeles and a 9 percent increase
in Chicago.
- National advertising was down 1 percent
for the quarter with increases in the telecom, financial
and package goods categories, offset by decreases in movies/entertainment
and transportation.
- Classified advertising was up
5 percent for the quarter. Help wanted revenues were up
12 percent: Chicago rose 16 percent, Los Angeles was up
7 percent and New York declined 4 percent. Real estate
revenues increased 14 percent for the quarter while auto
revenues were down 5 percent.
- Circulation revenues
were down 6 percent in the fourth quarter of 2004 primarily
due to declines in Los Angeles and New York.
- Interactive
revenues, which are included in the above categories, were
$33 million, up 27 percent, due to strength in classified
and banner/sponsorship advertising.
- In addition to
the impact of the previously discussed $24 million charge,
higher newsprint prices and new publications also contributed
to the increase in cash operating expenses. Newsprint and
ink expense was 5 percent higher than 2003 as average newsprint
cost per ton was up 15 percent while consumption decreased
by 8 percent.
BROADCASTING AND ENTERTAINMENT
Broadcasting and entertainment’s
fourth quarter operating revenues remained essentially
flat at $385 million versus $386 million in 2003. Cash
operating expenses were up
3 percent in the fourth quarter of 2004. Operating cash flow
was $162 million, down
5 percent from $170 million in 2003. Operating profit declined
4 percent to $149 million from $156 million last year.
Television’s fourth quarter revenues
were $352 million compared with $353 million in the fourth
quarter of 2003. Television cash operating expenses were
up 1 percent from last year. Television operating cash
flow was $158 million, a 2 percent decrease from
$161 million in the fourth quarter of 2003. Television operating
profit in the fourth quarter of 2004 was down 1 percent to
$147 million compared with $148 million last year.
Management Discussion
- Television advertising was driven
by gains in the telecom, education and fast food/restaurant
categories, offset by softness in movies, retail and automobiles.
- Television
cash operating expenses were up 1 percent compared with
last year primarily due to higher benefits expense, partially
offset by lower broadcast rights amortization.
- Radio/Entertainment
results reflect the impact of fewer programs at Tribune
Entertainment.
EQUITY RESULTS
Net equity income was $20 million in the fourth quarter
of 2004, compared with net equity income of $12 million in
the fourth quarter of 2003. The increase was primarily due
to additional equity income from TV Food Network and the
recognition of equity income from Comcast Sports Network.
NON-OPERATING ITEMS
In the 2004 fourth quarter, Tribune recorded a net after-tax
non-operating gain of
$18 million, or $.06 per diluted share, primarily from marking-to-market
the Company’s PHONES derivatives and related Time Warner
investment. In the 2003 fourth quarter, Tribune recorded
a net after-tax non-operating gain of $114 million, or $.34
per diluted share. Non-operating items in the fourth quarter
of 2003 included gains from the sale of the Company’s
ownership interest in The Golf Channel, marking-to-market
the Company’s PHONES derivatives and related Time Warner
investment, and insurance recoveries related to the Sept.
11, 2001 damage sustained by WPIX-TV in New York.
IMPACT OF ACCOUNTING CHANGE
In the fourth quarter of 2004, Tribune
elected to early adopt the provisions of the Financial
Accounting Standards Board’s Emerging Issues Task
Force Topic No. D-108, which requires the use of a direct
valuation method for valuing intangible assets such as
Federal Communication Commission ("FCC") licenses
and reviewing them for impairment. Historically, Tribune
had been using a residual valuation method to review its
FCC licenses each year for impairment. The effect of this
change was a one-time pretax charge of $29 million ($18
million after-tax, or $.05 per diluted share). The charge
was recorded in the fourth quarter of 2004 as a cumulative
effect of a change in accounting principle in the consolidated
income statement.
FULL YEAR RESULTS
CONSOLIDATED
For the full year 2004, operating revenues increased 2 percent
to $5.7 billion, up from
$5.6 billion in 2003. Consolidated cash operating expenses
were up 7 percent;
3 percentage points, or $131 million, of the increase is
attributable to the position eliminations and estimated advertiser
settlement charges in publishing discussed below. Operating
cash flow was $1.45 billion, a 9 percent decrease compared
with the
$1.59 billion reported in 2003. Operating profit was down
11 percent to $1.2 billion, from $1.4 billion last year.
PUBLISHING
For the full year 2004, operating revenues for publishing
increased 2 percent to
$4.1 billion, up from $4.0 billion in 2003. Cash operating
expenses increased 8 percent in 2004; 4 percentage points,
or $131 million, of the increase is attributable to the charges
discussed below. Operating cash flow declined 15 percent
to $905 million, from
$1.1 billion in 2003. Operating profit decreased 18 percent
to $726 million from
$885 million in 2003.
For the full year 2004, publishing operating
profit included a pretax charge of $90 million related to
the anticipated settlement with advertisers regarding misstated
circulation at Newsday and Hoy, New York, for the periods
September 2001 through March 2004. The Company will continue
to evaluate the adequacy of this charge. The full year 2004
also included a pretax charge of $41 million for the elimination
of about 600 positions. These position eliminations will
result in annual compensation expense savings of approximately
$41 million for the full year 2005.
BROADCASTING AND ENTERTAINMENT
For the full year 2004, operating revenues for broadcasting
and entertainment increased
3 percent to $1.60 billion, up from $1.56 billion in 2003.
Cash operating expenses increased 2 percent in 2004. Operating
cash flow rose 3 percent to $597 million from
$579 million. Operating profit increased 3 percent to $544
million, from $529 million.
For the full year 2004, operating revenues
for television increased 2 percent to
$1.35 billion, up from $1.32 billion in 2003. Cash operating
expenses increased 1 percent in 2004. Operating cash flow
grew 4 percent to $573 million from $552 million. Operating
profit increased 4 percent to $526 million, from $507 million
in 2003.
EQUITY RESULTS
Equity income was $18 million for the full year 2004, compared
with $6 million in 2003. The increase was primarily due to
additional equity income from TV Food Network.
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2004 fourth quarter decreased
10 percent to $14 million from $16 million in the fourth
quarter of 2003, primarily due to lower compensation expense.
Corporate expenses for the full year 2004 decreased 2 percent
to $52 million from
$53 million.
Net interest expense for the 2004 fourth quarter decreased
to $35 million, down 26 percent from $47 million in the fourth
quarter of 2003. For the full year 2004, net interest expense
decreased 22 percent to $150 million, down from $192 million
in 2003. The decreases were 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, remained flat at $2.0 billion at the end of 2004
and 2003.
The effective tax rate in the 2004 fourth quarter was 38.7
percent, compared with
33.8 percent in the 2003 fourth quarter. The effective tax
rate for the full year 2004 was 39.1 percent, compared with
a rate of 37.0 percent for the full year 2003. In both the
fourth quarter and full year of 2003, the Company reduced
its income tax expense and liabilities by $25 million as
a result of favorably resolving certain state and federal
income tax issues.
Capital expenditures were about $95 million in the fourth
quarter and $217 million for the full year 2004.
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 share. As a result of this limited
visibility, the Company said in December that it would
not be providing revenue guidance for 2005; investors are
encouraged to review the Company’s
monthly revenue releases for current trends.
Consolidated cash 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. Other consolidated cash 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 39%. Capital expenditures are projected
to increase slightly over 2004.
WEBCAST OF CONFERENCE CALL
Today at 8:00 a.m. (CDT), a live Webcast of the 2004 fourth
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 January 28 through February 4. 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
earnings 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.
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TRIBUNE (NYSE:
TRB) is one of the country’s
premier media companies, operating businesses in publishing
and broadcasting. It reaches more than 80 percent of U.S.
households and is the only media organization with newspapers,
television stations and Web sites in the nation’s top
three markets. In publishing, Tribune operates 11 leading
daily newspapers including the Los Angeles Times, Chicago
Tribune and Newsday, plus a wide range of targeted publications
including Spanish-language Hoy. The Company’s broadcasting
group operates 26 television stations; Superstation WGN on
national cable; WGN-AM in Chicago; and the Chicago Cubs baseball
team. Popular news and information Web sites complement Tribune’s
print and broadcast properties and extend the Company’s
nationwide audience.
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. Such comments and statements should be
understood in the context of Tribune’s publicly available
reports filed with the Securities and Exchange Commission
(“SEC”), including the most current annual 10-K
report and quarterly 10-Q report, which contain a discussion
of various factors that may affect the Company’s business
or financial results. Information relating to the estimated
cost of settlement with Newsday and Hoy, New York, advertisers
is based on facts currently available. Any of these factors
could cause actual future performance to differ materially
from current expectations. Tribune Company 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.
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