Tribune Media Company Reports Second Quarter 2015 Results

13 Aug Tribune Media Company Reports Second Quarter 2015 Results

Posted at 11:15h in Corporate, Featured, Financial, Investors, Peter Liguori, Press Release by
3 Likes

Continued Progress Against Strategic Objectives

Tribune Media Company (the “Company”) (NYSE:TRCO) today reported its results for the three months and six months ended June 30, 2015.

Second Quarter Financial Highlights (each as compared to the three months ended June 29, 2014)

  • Consolidated operating revenue grew 6% to $501.5 million.
  • Television and Entertainment segment revenue grew 4%, driven by higher advertising revenues and increased carriage and retransmission fees.
  • Consolidated operating profit decreased 39% to $19.8 million.
  • Consolidated Adjusted EBITDA decreased 29%, in large part driven by three factors:
    • Previously announced change in the timing of the amortization of programming expense for original programming at WGN America,
    • Planned production funding for co-owned original programming for WGN America, and
    • Implementation costs for improved technology applications and the establishment of new shared services operations.
  • Basic and diluted loss per share from continuing operations of $(0.04), which includes a pre-tax charge of $37 million for loss on the extinguishment of debt related to the Company’s refinancing of its Term Loan Facility and issuance of $1.1 billion of 5.875% Senior Notes due in 2022.

Strategic Highlights

  • WGN America
    • Conversion of WGN America from a superstation to a basic cable network is ahead of schedule, with an expectation of at least 75% of subscribers converted by the end of 2015.
    • 48% increase in carriage fees resulting, in part, from improved off-network and original programming.
  • Broadcast Stations
    • Achieved higher rates for local TV station retransmission, driving 23% increase in fees.
  • Digital and Data
  • Acquisitions of Infostrada Statistics B.V. (“Infostrada Sports”), SportsDirect Inc. (“SportsDirect”) and Covers Media Group (“Covers”) combined to create Gracenote Sports, a leading provider of sports metadata.

“We are making noticeable progress against our strategy to build Tribune Media for sustainable, long-term, profitable growth. Our strategy is gaining momentum and accelerating top-line growth. Today’s results reinforce our confidence that our strategy is the right one to drive long-term value for our shareholders,” said Peter Liguori, Tribune Media’s President and Chief Executive Officer.

“Our Television and Entertainment segment experienced revenue growth in all key areas and the outlook remains positive. We continue to post gains in our local station business due to its unique ability to deliver content to our loyal local viewers. Our decision to focus on local news and live sports, especially in major markets, is already paying dividends as we continue to grow advertising market share and generate higher retransmission fees. We are also encouraged that WGN America’s conversion to a cable network is ahead of schedule and our investment in high quality original and syndicated content is creating value for our MVPD partners, advertisers and audience. Our Digital and Data segment is demonstrating its ability to develop new revenue-generating solutions and services for its expanding client base. With four strategic acquisitions in the quarter, the Digital and Data business is furthering its position as a major player in the evolving sports and entertainment data arena.”

Second Quarter and Year-to-Date 2015 Results

Consolidated

Consolidated operating revenues for the second quarter of 2015 were $501.5 million compared to $475.0 million in the second quarter of 2014, representing an increase of $26.5 million, or 5.6%. Revenue increase driven by:

  • higher core advertising revenues (local and national advertising revenues, excluding political revenues),
  • retransmission consent revenues and carriage fees in the Television and Entertainment segment, and
  • the favorable impact of 2014 and 2015 acquisitions in the Digital and Data segment.

For the six months ended June 30, 2015, consolidated operating revenues were $974.3 million compared to $921.1 million in the six months ended June 29, 2014, representing an increase of $53.2 million, or 5.8%.

Consolidated operating profit for the second quarter of 2015 decreased by $12.4 million to $19.8 million, from $32.2 million in the second quarter of 2014. For the six months ended June 30, 2015, consolidated operating profit decreased $1.8 million to $80.7 million from $82.5 million in the six months ended June 29, 2014.

Basic and diluted earnings (loss) per common share from continuing operations for the second quarter of 2015 were $(0.04) compared to $0.67 for the second quarter of 2014. The 2015 results include a pre-tax charge of $37 million in the second quarter of 2015 for loss on the extinguishment of debt related to the company’s refinancing of its Term Loan Facility and issuance of $1.1 billion of 5.875% Senior Notes due in 2022.

Consolidated Adjusted EBITDA decreased to $92.3 million from $130.3 million in the second quarter of 2014, representing a decrease of $38.0 million, or 29%. The decline is primarily attributable to three factors:

  • Amortization of license fees increased by $24 million for our first-run original programs, “Salem” and “Manhattan” at WGN America; $13 million of the increase relates to the change in timing of this amortization from 2016 into 2015, which we previously disclosed in our guidance in the first quarter.
  • Production costs increased $11 million at Tribune Studios for our co-owned shows, “Manhattan” (second season), “Outsiders” and “Underground” as a result of production commencing on these three shows in the second quarter of this year.
  • We continued to incur implementation costs for improved technology applications and the establishment of new shared services operations, which efforts are expected to yield savings beginning in 2016.

For the six months ended June 30, 2015, consolidated Adjusted EBITDA decreased $47.0 million, or 18%, to $221.3 million as compared to $268.3 million in the six months ended June 29, 2014.

Cash distributions from equity investments in the second quarter of 2015 were $34.2 million compared to $35.5 million in the second quarter of 2014. Cash distributions for the six months ended June 30, 2015 were $129.1 million compared to $155.7 million for the six months ended June 29, 2014. Cash distributions were lower in the first half of 2015 due to a $12.4 million non-recurring cash payment from Television Food Network, G.P. (“TV Food Network”) received in the first quarter of 2014, as well as the impact of working capital changes at TV Food Network which reduced cash available for distribution. In addition, the Company also received a cash distribution in the second quarter of 2014 of $159.6 million from Classified Ventures, LLC in connection with the sale of its Apartments.com business.

Television and Entertainment Segment

Television and Entertainment segment revenues were $445.6 million in the second quarter of 2015, compared to $427.0 million in the second quarter of 2014, an increase of $18.6 million, or 4.4%, and were comprised of:

  • Advertising revenues of $334.6 million as compared with $329.9 million in the second quarter of 2014, representing an increase of $4.7 million, or 1.4%. Core advertising (comprised of local and national advertising revenues, excluding political revenues) increased by $7.1 million, or 2.3%. Partially offsetting the increase in core advertising was a decrease in political advertising of $5.9 million due to 2015 being an off-cycle political year.
  • Local station retransmission consent fees of $70.1 million in the second quarter of 2015, compared to $57.1 million in the second quarter of 2014, an increase of $13.0 million, or 23%, as a result of contract renewals with distribution partners at higher rates that became effective in late 2014.
  • Carriage fees of $21.6 million in the second quarter of 2015 compared to $14.6 million in the second quarter of 2014, an increase of $7.0 million, or 48%, as a result of obtaining higher rates for WGN America distribution.

Television and Entertainment segment revenues for the six months ended June 30, 2015 were $855.9 million, compared to $827.2 million for the six months ended June 29, 2014. Specifically:

  • Advertising revenues were $634.3 million for the first half of 2015, a decrease of $1.4 million, or 0.2%, as compared to advertising revenues of $635.7 million in the first half of 2014.
  • Local station retransmission consent fees were $138.9 million, as compared to $112.7 million in the first half of 2014, an increase of $26.2 million, or 23%.
  • Carriage fees were $43.1 million, as compared to $28.7 million, an increase of $14.4 million, or 50%.

Television and Entertainment Adjusted EBITDA for the second quarter of 2015 was $104.3 million, compared to $140.6 million in the second quarter of 2014. Television and Entertainment Adjusted EBITDA was unfavorably impacted primarily by higher amortization of programming expenses and production costs associated with planned production funding for our co-owned original programming.

Consistent with the previously stated strategy, Tribune Studios made planned investments in co-owned original programming, including “Manhattan,” “Underground” and “Outsiders”. These investments in scripted original programming give the Company upside revenue potential through increased carriage fees and participation in the sale of domestic and international rights for these shows, including rights to stream the shows via video services.

For the six months ended June 30, 2015, Television and Entertainment Adjusted EBITDA was $239.2 million, as compared to $280.3 million for the six months ended June 29, 2014, a decrease of $41.1 million.

Digital and Data Segment

Digital and Data segment revenues in the second quarter of 2015 were $43.6 million, compared to $33.8 million in the second quarter of 2014, an increase of $9.8 million, or 29%. This increase included the favorable impact of the acquisitions of HWW, Baseline and What’s ON, which were consummated in the second half of 2014, as well as the acquisitions of Infostrada Sports, SportsDirect, Covers and Enswers Inc., all of which were acquired in the second quarter of 2015. For the six months ended June 30, 2015, Digital and Data segment revenues were $93.8 million, an increase of $28.5 million, as compared to $65.3 million for the six months ended June 29, 2014.

Digital and Data Adjusted EBITDA was $6.6 million in the second quarter of 2015, compared to a loss of $1.0 million in the second quarter of 2014, an increase of $7.6 million. This increase included the favorable impact of the acquisitions noted above. For the six months ended June 30, 2015, Digital and Data Adjusted EBITDA was $19.1 million compared to $4.1 million in the six months ended June 29, 2014.

Corporate and Other

Real estate revenues for the second quarter of 2015 were $12.3 million compared to $14.2 million in the second quarter of 2014, representing a decrease of $1.9 million, or 14%, due primarily to a reduction in space leased by Tribune Publishing Company at several properties and the sale of the production facility and land in Baltimore, MD in December 2014. Real estate revenues for the six months ended June 30, 2015 were $24.5 million, compared to $28.6 million for the six months ended June 29, 2014, representing a decrease of $4.1 million, or 14%.

Corporate and Other Adjusted EBITDA for the second quarter of 2015 represented a loss of $18.6 million, compared to a loss of $9.3 million in the second quarter of 2014. The increase in losses was primarily a result of increased corporate costs driven by the implementation of improved technology applications, as well as the establishment of new shared services operations following the separation from Tribune Publishing systems in connection with the Company’s spin-off of its principal publishing operations in August 2014. For the six months ended June 30, 2015, Corporate and Other Adjusted EBITDA represented a loss of $37.1 million, compared to a loss of $16.1 million for the six months ended June 29, 2014.

Stock Repurchase Program

In October 2014, the Company announced a $400 million stock repurchase program, of which $233 million had been repurchased, as of March 29, 2015. During the second quarter of 2015, the Company repurchased approximately 0.4 million shares of the Company’s Class A common stock in open market transactions for $20 million. From the period of March 30, 2015 through August 12, 2015, the Company repurchased approximately 1.9 million shares of the Company’s Class A common stock for an aggregate purchase price of $100 million. Since the inception of the stock repurchase program through August 12, 2015, the Company has repurchased an aggregate 5.8 million shares of the Company’s Class A common stock, for an aggregate purchase price of approximately $333 million. As of August 12, 2015, the remaining authorized amount under the program totaled approximately $67 million.

Sale of Partnership Interest

On August 1, 2015, the Company agreed to sell all of its interest in Newsday Holdings LLC (“NHLLC”) to CSC Holdings LLC, the current majority owner of NHLLC. Upon the consummation of such sale, $103 million of deferred tax liability on the Company’s balance sheet will become payable and the Company expects to make this tax payment prior to the end of 2015.

Financial Guidance

The following represents the Company’s financial guidance for the full year 2015. The following statements, by their nature, are forward-looking and are subject to substantial risks and uncertainties, which are discussed below under “Cautionary Statement Regarding Forward-Looking Statements”, and may differ materially from our actual results.

As a result of various company activities, certain components of 2015 full year guidance have been updated. Programming expense guidance for WGN America / Tribune Studios has been revised to include production expenses of co-owned series which were previously planned to be expensed in 2016 and are now being expensed in the second and third quarters of 2015. Cash taxes and cash interest have been updated primarily to reflect the impact of the Company’s refinancing of its Term Loan Facility and issuance of $1.1 billion of 5.875% Senior Notes in June 2015. The revised cash tax guidance excludes the one-time payment of $103 million of cash taxes resulting from the sale of NHLLC as described above.

Notwithstanding these changes in guidance, the Company’s overall revenue achievement and tight management of expenses across its businesses have kept it on track to meet its consolidated 2015 targets. Accordingly, we expect the following financial results as it relates to full-year 2015:

Consolidated

  • Net Revenues: $2.00 billion to $2.03 billion
  • Adjusted EBITDA: $480 million to $495 million

Television and Entertainment Segment

  • Total Net Revenues: $1.75 billion to $1.77 billion
  • Core Advertising (local and national advertising revenues): Low to mid-single digit increases over 2014
  • Retransmission Consent Fees: $275 million to $277 million
  • Cable Network Carriage Fees: $85 million to $87 million
  • WGN America / Tribune Studios Programming Expenses: $(150) million to $(160) million
  • Previous guidance of $(144) million
  • Adjusted EBITDA: $500 million to $515 million

Digital and Data Segment

  • Net Revenues: $200 million to $205 million
  • Adjusted EBITDA: $46 million to $48 million

Corporate and Other

  • Real Estate Revenues: approximately $50 million
  • Real Estate Expenses: approximately $(30) million
  • Corporate Expenses, excluding stock-based comp: $(86) million to $(88) million
  • Adjusted EBITDA: $(66) million to $(68) million

Key Cash Flow Metrics

  • Capital Expenditures: Total of $100 million, including approximately $50 million of non-recurring capital expenditures
  • Cash Taxes(1): $95 million to $100 million
  • Previous guidance of $135 million to $140 million
  • Cash Interest: approximately $130 million
  • Previous guidance of $140 million
  • Depreciation & Amortization: approximately $260 million
  • Stock-based Compensation: approximately $35 million
  1. Guidance excludes a tax payment of approximately $252 million related to the gain on the sale of Classified Ventures in the fourth quarter of 2014, paid in the first quarter of 2015. Also excluded from guidance is a tax payment of approximately $103 million related to the Company’s agreement on August 1, 2015 to sell all of its interest in NHLLC to CSC Holdings LLC. The taxes associated with this transaction were on the balance sheet as of June 30, 2015 as a deferred tax liability and are now expected to be paid prior to the end of 2015.

Long Term Outlook

  • 2016 Consolidated Adjusted EBITDA year-over-year growth of greater than 30%

In addition, the Company currently expects the following for the period of 2016 – 2019:

  • WGN America and Tribune Studios revenue growth to be greater than 20% annually
  • WGN America and Tribune Studios programming expenses approximating 50% of net revenues
  • Digital and Data net revenue growth of 10% to 12% annually
  • Digital and Data Adjusted EBITDA margins growing to low 30% range

Conference Call Information

The Company will host a conference call today at 8:30 a.m. ET to discuss its second quarter results and a presentation deck will be posted to our website in advance of the call. The conference call can be accessed on the Investor Relations homepage of Tribune Media’s website at www.tribunemedia.com, or by dialing (888) 317-6003 (domestic) or (412) 317-6061 (international). The confirmation code is 8454632.

An audio webcast replay will be available in the Events and Presentations section of the Tribune Media website approximately one hour after completion of the call. A replay of the call will also be available until August 21, 2015 at (877) 344-7529 (domestic) or (412) 317-0088 (international). The confirmation code for the replay is 10070360.

# # #

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 more than 50 million households, national entertainment network WGN America, available in approximately 73 million households, Tribune Studios, and Gracenote, one of the world’s leading sources of TV and music metadata powering electronic program guides in televisions, automobiles and mobile devices. 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 other strategic investments in media. For more information please visit www.tribunemedia.com.

INVESTOR CONTACT:
Danielle DeVoe
Director/Corporate Finance, Investor Relations
646/563-8296
ddevoe@tribunemedia.com

MEDIA CONTACT:
Gary Weitman
SVP/Corporate Relations
312/222-3394
gweitman@tribunemedia.com

Tags:
,