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Tribune Reports 2006 Third Quarter Results
CHICAGO, October
19, 2006 -- Tribune Company (NYSE: TRB) today reported
third quarter 2006 diluted earnings per share from continuing
operations of $.65 compared with $.06 in the third quarter
of 2005.
Third quarter 2006 results from continuing operations included
the following:
- A net non-operating gain of $.22 per diluted
share, $.19 of which relates to the restructuring in September
of TMCT, LLC and TMCT II, LLC, two partnerships that Tribune
inherited in its acquisition of Times Mirror. Tribune recorded
a one-time gain of $48 million, net of tax, as a result
of this transaction.
Third quarter 2005 results from continuing operations included
the following:
- A net non-operating loss of $.43 per diluted
share related primarily to an adverse tax ruling disallowing
the 1998 tax-free reorganization of Matthew Bender, a former
subsidiary of Times Mirror. Tribune inherited the preexisting
tax dispute 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 financial results
reflect the continued soft advertising environment," said
Dennis FitzSimons, Tribune chairman, president and chief
executive officer. "However,
growth in our interactive business is solid and the newly-launched
CW Network will drive improved prime time ratings and revenues
at our television stations. We continue to make progress
with our overall performance improvement plan as we focus
on maximizing value for Tribune shareholders."
On Sept. 21, 2006, the company announced
that its board of directors had established an independent
special committee to oversee management’s exploration
of strategic alternatives for creating additional value
for shareholders.
As part of its performance improvement plan,
the company announced the sales of its Atlanta and Albany
television stations in June 2006 and its Boston television
station in September. The results of operations of these
stations are now reported as discontinued operations. Tribune
closed the sale of its Atlanta television station during
the third quarter. The Boston and Albany sales will close
upon regulatory approval.
THIRD QUARTER 2006 RESULTS FROM CONTINUING OPERATIONS
(Compared to Third Quarter 2005)1
CONSOLIDATED
Tribune’s 2006 third quarter operating
revenues decreased 3 percent, or $35 million, to $1.35
billion. Consolidated cash operating expenses were up 1
percent, or $11 million, which included $4 million of stock-based
compensation expense. Operating cash flow was down 14 percent
to $293 million from $338 million, while operating profit
declined 17 percent to $235 million from $283 million.
PUBLISHING
Publishing’s third quarter operating
revenues were $956 million, down 2 percent, or
$24 million. Publishing cash operating expenses increased
$3 million to $772 million. Publishing operating cash flow
was $185 million, a 13 percent decrease from $212 million
in 2005. Publishing operating profit decreased 17 percent
to $141 million, down from $170 million in 2005.
Management Discussion
- Advertising revenues decreased 2 percent,
or $17 million, for the quarter. Excluding Newsday, advertising
revenues declined 1 percent, or $6 million.
- Retail advertising revenues were flat
for the quarter. Increases at South Florida, Orlando, Chicago
and Newport News were offset by decreases at Newsday and
Hartford. Preprint revenues decreased 1 percent; excluding
Newsday, preprint revenues were up 1 percent.
- National advertising revenues were down
8 percent for the quarter, with declines across most categories.
- Classified advertising revenues declined
1 percent for the quarter: real estate revenues rose 24
percent, auto revenues fell by 15 percent and help wanted
revenues declined 10 percent.
- Interactive revenues, which are included
in the above categories, were up
28 percent to $61 million, mainly due to strength across
all classified categories.
- Circulation
revenues were down 6 percent, or $9 million, 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) and
4.0 million copies Sunday, down about 0.8 percent and
2.5 percent respectively, from the same reporting period
in 2005.
- Total net paid circulation averaged
2.8 million copies daily (Mon-Fri), off
3.8 percent from the prior year’s third quarter,
and 4.1 million copies Sunday, representing a decline of
4.6 percent from the prior year as the company continued
to reduce "other
paid" circulation.
- Cash operating expenses increased $3 million
primarily due to $2 million of stock-based compensation
expense and a $2 million severance charge related to outsourcing
circulation call centers. All other cash expenses were
down slightly as increases in mailed preprint advertising
postage, outside services and newsprint expense were more
than offset by lower compensation expense resulting from
a 5 percent reduction in full time equivalent employees.
BROADCASTING AND ENTERTAINMENT
Broadcasting and entertainment’s
third quarter operating revenues decreased 3 percent to
$393 million, down from $403 million in 2005. Group cash
operating expenses increased 3 percent, or $7 million,
to $271 million. Operating cash flow was $121 million,
down
13 percent from $139 million, and operating profit decreased
15 percent to $108 million from $127 million in 2005.
Television’s third quarter revenues
decreased 3 percent to $278 million, down from
$288 million in 2005. Television cash operating expenses
were up 3 percent, or $5 million from last year. Television
operating cash flow was $86 million, a 15 percent decrease
from $101 million in 2005. Television operating profit declined
18 percent to
$74 million, down from $90 million.
Management Discussion
- Station revenues in Los Angeles showed improvement
in part due to increased political advertising, while New
York and Chicago were down for the quarter. On a group
basis, declines in the retail, health care, auto and restaurant
categories were partially offset by gains in movies, telecom
and education categories.
- Television’s cash operating
expenses were up 3 percent, or $5 million, due to a $6
million increase in broadcast rights and $1 million of
stock-based compensation expense, partially offset by
current year cost savings and the absence of approximately
$2 million of costs related to Hurricane Katrina at our
two New Orleans stations in 2005.
- Radio/entertainment revenues reflect reduced
syndication revenues at Tribune Entertainment and lower
revenues at WGN Radio, partially offset by higher revenues
for the Chicago Cubs.
EQUITY RESULTS
Net equity income was $19 million in the third quarter of
2006, compared with $8 million in the third quarter of 2005.
The increase reflects operating improvements at TV Food Network
and CareerBuilder, as well as the absence of losses from
The WB Network.
NON-OPERATING ITEMS
In the 2006 third quarter, Tribune recorded
a pre-tax non-operating gain of $64 million primarily as
a result of the restructuring of TMCT, LLC and TMCT II,
LLC. Other non-operating items included a gain on the sale
of 2.8 million shares of Time Warner stock unrelated to
the PHONES and a loss from marking-to-market the derivative
component of the company’s PHONES and
the related Time Warner investment. 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.
In the 2005 third quarter, Tribune recorded
a pre-tax non-operating gain of $27 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 $150 million of additional income
tax expense as a result of the Matthew Bender Tax Court
ruling. The company has appealed the Tax Court ruling to
the United States Court of Appeals for the Seventh Circuit.
Tribune does not expect a ruling before the second half
of 2007. The company cannot predict with certainty the
outcome of this appeal. In the aggregate, non-operating
items in the third quarter of 2005 resulted in an after-tax
loss of $134 million, or $.43 per diluted share.
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2006 third quarter
increased to $14 million from
$13 million in the third quarter of 2005, primarily due to
$1 million of stock-based compensation expense.
In conjunction with the leveraged recapitalization initiated
in May, the company acquired 45 million shares of its common
stock at a price of $32.50 per share on July 5, 2006. The
company also acquired 10 million shares of its common stock
from the McCormick Tribune Foundation and the Cantigny Foundation
at a price of $32.50 per share on July 12. In addition, Tribune
repurchased 11 million shares in the third quarter of 2006
in the open market. Diluted weighted average shares outstanding
declined by 19 percent from the third quarter of 2005 due
to the stock repurchases.
Interest expense for the 2006 third quarter increased to
$84 million, up 118 percent from $39 million in the third
quarter of 2005. The increase in interest expense was primarily
due to higher debt levels and interest rates. Debt, excluding
the PHONES, was $4.7 billion at the end of the 2006 third
quarter and $2.0 billion at the end of the 2005 third quarter.
The increase was due to financing the stock repurchases and
paying the Matthew Bender and Mosby tax liabilities in the
fourth quarter of 2005.
Capital expenditures were $57 million in the third quarter
of 2006.
DETAILS OF CONFERENCE CALL
Today at 8 a.m, CT, management will host a conference call
to discuss third quarter 2006 results. To access the call,
dial 800/561-2601 (domestic) or 617/614-3518 (international)
at least 10 minutes prior to the scheduled 8 a.m. start.
The participant access code is 72156881. Replays of the conference
call will be available October 19 through October 26. To
hear the replay, dial 888/286-8010 (domestic) or 617/801-6888
(international) and use access code 61413683. A live webcast
will be accessible through www.tribune.com and www.earnings.com.
An archive of the webcast will be available on these sites
from October 19 through November 2.
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.
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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, NY), The Sun (Baltimore), South Florida
Sun-Sentinel, Orlando Sentinel and Hartford Courant. The
company’s broadcasting group operates 25 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.
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. 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. The company's next 10-Q report
to be filed with the SEC may contain updates to the information
included in this release.
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