10 May Tribune Media Company Reports First Quarter 2018 Results
NEW YORK, May 10, 2018 — Tribune Media Company (the “Company”) (NYSE: TRCO) today reported its results for the three months ended March 31, 2018.
FIRST QUARTER 2018 FINANCIAL HIGHLIGHTS (compared to first quarter 2017)
- Consolidated operating revenues increased 1% to $443.6 million
- Consolidated operating profit was $187.3 million, including a $133 million net pretax gain on the sales of spectrum, compared to an operating loss of $21.0 million for the first quarter of 2017
- Consolidated Adjusted EBITDA increased 108% to $119.9 million
- Television and Entertainment net advertising revenues fell 7% to $270.4 million
- Net core advertising revenues (which exclude political and digital revenues) decreased 10% to $245.0 million
- Retransmission revenues increased 25% to $118.1 million
- Carriage fee revenues increased 24% to $41.7 million
- Programming expenses decreased 29% to $100.7 million, primarily due to the shift in strategy at WGN America
- Cash distributions from TV Food Network were $115.1 million
“Tribune Media is off to a strong start in 2018 with first quarter revenues up one percent and consolidated Adjusted EBITDA more than doubling year-over-year,” said Peter Kern, Tribune Media’s Chief Executive Officer. “Our new strategy at WGN America, our sustained focus on overall expense management, and our very strong growth in retransmission and carriage fee revenues, are driving meaningful improvements in profitability across the company. These improvements more than offset the anticipated headwinds to core advertising due to the soft overall advertising environment and our limited exposure to Olympics and Super Bowl advertising. When adjusted for the substantial impact of core advertising dollars shifting into the Olympics and a challenging Super Bowl comparison to last year, we estimate that first quarter core advertising revenues were down in the low single digit percentage range year-over-year.
“As we continue to move toward closing our previously announced merger with Sinclair, the company maintains an aggressive focus on profitability. At WGN America, our new programming strategy has produced solid audience growth and made the network a significant contributor to consolidated Adjusted EBITDA. Additionally, corporate expenses were down double-digits year-over-year. Finally, while we expect to generate the majority of our political advertising revenue in the second half of the year, the momentum of political spending we saw in the first quarter is very encouraging. As we move deeper into 2018, we are well positioned to execute on our strategy and remain committed to delivering value for our shareholders, advertisers and the communities we serve.”
FIRST QUARTER RESULTS
Consolidated operating revenues for the first quarter of 2018 were $443.6 million compared to $439.9 million in the first quarter of 2017, representing an increase of $3.7 million, or 1%. The increase was primarily driven by higher retransmission revenues and carriage fee revenues and higher political advertising revenues, partially offset by lower core advertising revenues and barter/trade revenues. Barter/trade revenues declined as barter revenues and related expenses are no longer recognized under the new revenue guidance the Company adopted in the first quarter of 2018. Excluding barter revenues in 2017, consolidated operating revenues increased by 2%.
Consolidated operating profit was $187.3 million for the first quarter of 2018 compared to an operating loss of $21.0 million for the first quarter of 2017, representing an increase of $208.3 million. The increase was primarily attributable to higher operating profit at Television and Entertainment, largely as a result of a $133 million net pretax gain related to licenses sold in the FCC spectrum auction for which the spectrum was surrendered in January 2018, lower programming expenses, as described below, and a lower operating loss at Corporate and Other driven primarily by a decline in compensation expense.
Consolidated income from continuing operations was $141.2 million in the first quarter of 2018 compared to a consolidated loss from continuing operations of $101.2 million in the first quarter of 2017. Diluted earnings per common share from continuing operations for the first quarter of 2018 was $1.60 compared to a diluted loss per common share from continuing operations of $1.17 for the first quarter of 2017. Adjusted diluted earnings per share (“Adjusted EPS”) for the first quarter of 2018 was $0.51 compared to adjusted diluted loss per share of $0.07 for the first quarter of 2017. Both diluted earnings per common share from continuing operations and Adjusted EPS from continuing operations include an income tax charge of $2 million, or $0.03 per share, in the first quarter of 2018 and an income tax charge of $1 million, or $0.01 per share, in the first quarter of 2017 related to certain tax adjustments.
Net income attributable to Tribune Media Company was $141.2 million in the first quarter of 2018 compared to a net loss attributable to Tribune Media Company of $85.6 million in the first quarter of 2017.
Consolidated Adjusted EBITDA increased to $119.9 million in the first quarter of 2018 from $57.5 million in the first quarter of 2017, representing an increase of $62.4 million, or 108%. The increase in consolidated Adjusted EBITDA was primarily attributable to higher retransmission revenues and carriage fee revenues and lower programming and promotion expenses at Television and Entertainment.
Cash distributions from TV Food Network in the first quarter of 2018 were $115.1 million compared to $111.5 million in the first quarter of 2017.
Television and Entertainment
Revenues were $440.7 million in the first quarter of 2018 compared to $436.0 million in the first quarter of 2017, an increase of $4.7 million. The increase was driven by an increase in retransmission revenues of $23.9 million, or 25%, an increase in carriage fee revenues of $8.1 million, or 24%, and an increase in net political advertising revenue of
$7.7 million, partially offset by a $28.7 million, or 10%, decrease in net core advertising revenues, and a $7.1 million decrease due to the Company no longer recognizing barter revenues, as noted above. The decrease in net core advertising revenue was primarily due to a decline in market revenue along with a decrease in revenues associated with airing the Super Bowl on 2 NBC-affiliated stations in 2018 compared to 14 FOX-affiliated stations in 2017 and the 2018 Winter Olympics, which negatively impacted advertising revenues for stations other than NBC affiliates.
Television and Entertainment operating profit was $211.9 million for the first quarter of 2018 compared to $20.0 million for the first quarter of 2017, an increase of $191.8 million. The increase was primarily due to a $133 million net pretax gain related to licenses sold in the FCC spectrum auction for which the spectrum of these stations was surrendered in January 2018, lower programming expense of $40.5 million, primarily due to lower amortization of license fees at WGN America, and lower compensation and other expenses.
Television and Entertainment Adjusted EBITDA was $135.2 million for the first quarter of 2018 compared to $75.2 million in the first quarter of 2017, an increase of $60.0 million, or 80%, primarily due to higher retransmission revenues and carriage fee revenues and lower programming and promotion expense, partially offset by lower net core advertising revenues and barter/trade revenues, as described above.
Television and Entertainment Broadcast Cash Flow was $116.5 million for the first quarter of 2018 compared to $64.6 million in the first quarter of 2017, an increase of $52.0 million, or 80%.
Corporate and Other
Real estate revenues for the first quarter of 2018 were $2.9 million compared to $3.9 million for the first quarter of 2017, representing a decrease of $0.9 million, or 24%. The decrease was driven by lower revenues due to the sale of real estate properties in 2017.
Corporate and Other operating loss for the first quarter of 2018 was $24.6 million compared to $41.0 million for the first quarter of 2017. The reduction of the loss was primarily due to lower compensation expense, largely due to the absence of severance expense and accelerated equity compensation expense related to the resignation of our CEO in the first quarter of 2017. Corporate and Other Adjusted EBITDA for the first quarter of 2018 represented a loss of
$15.2 million compared to a loss of $17.6 million for the first quarter of 2017.
On January 31, 2017, the Company completed the sale of substantially all of the Digital and Data business operations (the “Gracenote Sale”) and received gross proceeds of $584 million, including a purchase price adjustment of $3 million. The historical results of operations for the businesses included in the Gracenote Sale are reported as discontinued operations for all periods presented herein. Accordingly, all references made to financial data in this release are to Tribune Media Company’s continuing operations.
RETURN OF CAPITAL TO SHAREHOLDERS
On May 8, 2018, the Board of Directors (the “Board”) declared a quarterly cash dividend on the Company’s common stock of $0.25 per share to be paid on June 5, 2018 to holders of record of the Company’s common stock and warrants as of May 21, 2018. Future dividends will be subject to the discretion of the Board and the terms of the agreement and plan of merger between the Company and Sinclair Broadcast Group, Inc. (“Sinclair”), dated May 8, 2017 (the “Merger Agreement”), which limits the Company’s ability to pay dividends, except for the payment of quarterly cash dividends not to exceed $0.25 per share and consistent with record and payment dates in 2016.
On May 8, 2017, the Company entered into the Merger Agreement with Sinclair, providing for the acquisition by Sinclair of all of the outstanding shares of the Company’s Class A common stock and Class B common stock by means of a merger of Samson Merger Sub Inc., a wholly owned subsidiary of Sinclair, with and into Tribune Media Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Sinclair.
The applications seeking FCC approval of the transactions contemplated by the Merger Agreement (the “Applications”) were filed on June 26, 2017, and the FCC issued a public notice of the filing of the Applications and established a comment cycle on July 6, 2017. Several petitions to deny the Applications, and numerous other comments, both opposing and supporting the transaction, were filed in response to the public notice. Sinclair and the Company jointly filed an opposition to the petitions to deny on August 22, 2017 (the “Joint Opposition”).
Petitioners and others filed replies to the Joint Opposition on August 29, 2017. On September 14, 2017, the FCC’s Media Bureau issued a Request for Information (“RFI”) seeking additional information regarding certain matters discussed in the Applications. Sinclair submitted a response to the RFI on October 5, 2017. On October 18, 2017,
the FCC’s Media Bureau issued a public notice pausing the FCC’s 180-day transaction review “shot-clock” for 15 days to afford interested parties an opportunity to comment on the response to the RFI. On January 11, 2018, the FCC’s Media Bureau issued a public notice pausing the FCC’s shot-clock as of January 4, 2018 until Sinclair has filed amendments to the Applications along with divestiture applications and the FCC staff has had an opportunity to review any such submissions. On February 20, 2018, the parties filed an amendment to the Applications (the “February 20 Amendment”) that, among other things, (1) requested authority under the FCC’s “Local Television Multiple Ownership Rule” (the “Duopoly Rule”) for Sinclair to own two top four rated stations in each of three television markets (the “Top-4 Requests”) and (2) identified stations (the “Divestiture Stations”) in 11 television markets that Sinclair proposes to divest in order for the Merger to comply with the Duopoly Rule and the National Television Multiple Ownership Rule. Concurrently, Sinclair filed applications (the “Divestiture Trust Application”) proposing to place certain of the Divestiture Stations in an FCC-approved divestiture trust, if and as necessary, in order to facilitate the orderly divestiture of those stations following the consummation of the Merger. On February 27, 2018, in furtherance of certain undertakings made in the Applications and the February 20 Amendment, the parties filed separate applications seeking FCC approval of the sale of Tribune’s stations WPIX-TV, New York, New York, and WGN-TV, Chicago, Illinois, to third-party purchasers. On March 6, 2018, the parties filed an amendment to the Applications that, among other things, eliminated one of the Top-4 Requests and modified the remaining two Top-4 Requests. Also on March 6, 2018, the parties modified certain of the Divestiture Trust Applications. On April 24, 2018, the parties jointly filed (1) an amendment to the Applications (the “April 24 Amendment”) that superseded all prior amendments and, among other things, updated the pending Top-4 Requests and provided additional information regarding station divestitures proposed to be made by Sinclair in 15 television markets in order to comply with the Duopoly Rule or the National Television Multiple Ownership Rule, (2) a letter withdrawing the Divestiture Trust Applications and (3) a letter withdrawing the application for approval of the sale of WPIX-TV to a third-party purchaser. In order to facilitate certain of the compliance divestitures described in the April 24 Amendment, between April 24, 2018 and April 30, 2018, Sinclair filed applications seeking FCC consent to the assignment of license or transfer of control of certain stations in 11 television markets.
On May 8, 2018, the Company, Sinclair Television Group, Inc. (“Sinclair Television”) and Fox Television Stations, LLC (“Fox”) entered into an asset purchase agreement (the “Fox Purchase Agreement”) to sell the assets of seven network affiliates of Tribune for $910.0 million in cash, subject to post-closing adjustments. The network affiliates subject to the Fox Purchase Agreement are: KCPQ (Tacoma, WA); KDVR (Denver, CO); KSTU (Salt Lake City, UT); KSWB-TV (San Diego, CA); KTXL (Sacramento, CA); WJW (Cleveland, OH); and WSFL-TV (Miami, FL). The Fox Purchase Agreement contains representations, warranties, covenants and indemnification provisions of the Company and Sinclair Television. The closing of the sale pursuant to the Fox Purchase Agreement (the “Closing”) is subject to approval of the FCC and clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), as well as the satisfaction or waiver of all conditions of the consummation of the Merger, which is scheduled to occur immediately following the Closing. Pursuant to the terms of the Fox Purchase Agreement, the requisite applications and other necessary instruments or documents requesting the FCC’s consent to the assignment of the FCC licenses relating to the network affiliates subject to the Fox Purchase Agreement shall be filed within five business days following the date of the Fox Purchase Agreement.
On August 2, 2017, the Company received a request for additional information and documentary material, often referred to as a “second request”, from the United States Department of Justice (the “DOJ”) in connection with the Merger Agreement. The second request was issued under the HSR Act. Sinclair received a substantively identical request for additional information and documentary material from the DOJ in connection with the transactions contemplated by the Merger Agreement. Issuance of the second request extends the waiting period under the HSR Act until 30 days after Sinclair and the Company have substantially complied with the second request, unless the waiting period is terminated earlier by the DOJ or the parties voluntarily extend the time for closing.
The parties entered into an agreement with the DOJ on September 15, 2017 (the “DOJ Timing Agreement”), by which they agreed not to consummate the Merger Agreement before December 31, 2017, or 60 days following the date on which both parties have certified compliance with the second request, whichever is later. In addition, the parties agreed to provide the DOJ with 10 calendar days’ notice prior to consummating the Merger Agreement. The DOJ Timing Agreement has been amended twice, on October 30, 2017, to extend the date before which the parties may not consummate the Merger Agreement to January 30, 2018, and on January 27, 2018, to extend that date to
February 11, 2018. The DOJ Timing Agreement thus currently provides that the parties will not consummate the Merger Agreement before February 11, 2018, or 60 days following the date on which both parties have certified compliance with the second request. The parties certified compliance on November 30, 2017 and are required under the DOJ Timing Agreement to provide the DOJ with 10 days’ notice before consummating the Merger Agreement.
On October 19, 2017, holders of a majority of the outstanding shares of the Company’s Class A common stock and Class B common stock, voting as a single class, voted on and approved the Merger Agreement and the transactions contemplated by the Merger Agreement at a duly called special meeting of Tribune Media Company shareholders.
FCC Spectrum Auction
On April 13, 2017, the FCC announced the conclusion of the incentive auction, the results of the reverse and forward auction and the repacking of broadcast television spectrum. The Company participated in the auction and has received approximately $191 million in pretax proceeds (including $26 million of proceeds received by Dreamcatcher Broadcasting LLC (“Dreamcatcher”)) as of December 31, 2017. FCC licenses that were part of the FCC spectrum auction with a carrying value of $39 million have been included in assets held for sale as of December 31, 2017. In 2017, the Company received $172 million in gross pretax proceeds for these licenses as part of the spectrum auction and in the first quarter of 2018 recognized a net pretax gain of $133 million related to the surrender of the spectrum of these television stations in January 2018.
In light of the Company’s previously announced transaction with Sinclair, Tribune Media is not providing financial guidance for the full year 2018 in this release, nor is the Company conducting a conference call regarding its first quarter 2018 financial results.
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For a copy of this press release, complete with tables, please visit Investor Relations.
Tribune Media Company (NYSE: TRCO) is home to a diverse portfolio of television and digital properties driven by quality news, entertainment and sports programming. Tribune Media is comprised of Tribune Broadcasting’s 42 owned or operated local television stations reaching approximately 50 million households, national entertainment cable network WGN America, whose reach is more than 77 million households, and a variety of digital applications and websites commanding 54 million monthly unique visitors online. Tribune Media also includes Chicago’s WGN-AM and the national multicast networks Antenna TV and THIS TV. Additionally, the Company owns and manages a significant number of real estate properties across the U.S. and holds a variety of investments, including a 31% interest in Television Food Network, G.P., which operates Food Network and Cooking Channel. For more information please visit www.tribunemedia.com.