01 Mar Tribune Media Company Reports Fourth Quarter and Full-Year 2017 Results
NEW YORK, March 1, 2018 — Tribune Media Company (the “Company”) (NYSE: TRCO) today reported its results for the three months and year ended December 31, 2017.
FOURTH QUARTER AND FULL-YEAR 2017 FINANCIAL HIGHLIGHTS (compared to the prior year period)
- Consolidated operating revenues decreased 8% to $489.0 million for the fourth quarter and decreased 5% to $1,849.0 million for the full year; excluding political advertising and real estate revenues, consolidated operating revenues increased 6% and 2% for the fourth quarter and the full year, respectively
- Television and Entertainment net advertising revenues decreased 15% to $326.2 million for the fourth quarter and decreased 11% to $1,225.9 million for the full year
- Net core advertising revenues (which exclude political and digital revenues) increased 3% to $297.4 million for the fourth quarter and decreased 3% to $1,135.3 million for the full year
- Retransmission revenues increased 22% to $108.5 million for the fourth quarter and increased 23% to $412.3 million for the full year
- Carriage fee revenue increased 3% to $31.5 million for the fourth quarter and increased 6% to $127.9 million for the full year
- Cash distributions from TV Food Network were $19.3 million for the fourth quarter and $186.1 million for the full year
- FCC spectrum auction proceeds of $5 million were received by the Company in the fourth quarter and $191 million for the full year
- Closed on the sales of the Costa Mesa, CA and Ft. Lauderdale, FL properties in the fourth quarter for net pretax proceeds of $62 million and $21 million, respectively; for the full year 2017, net pretax proceeds from real estate sales totaled $144 million
“2017 was a transformational year for Tribune Media, in which we focused aggressively on streamlining our cost structure, selling non-core assets, returning capital to our stockholders, and most importantly, on the completion of our previously announced merger with Sinclair,” said Peter Kern, Tribune Media’s Chief Executive Officer. “During the year we sold real estate and other non-core businesses and assets for total pretax proceeds of over $1 billion and returned approximately $590 million to stockholders. While advertising was down for the year due to the off-year political cycle and a weaker overall advertising market, in the fourth quarter, we saw growth in core advertising and continued growth in retransmission revenues. We were also pleased that for the full year, despite increases in network affiliate fees, consolidated cash expenses were down compared to 2016, as we continued disciplined cost management across the company.”
Kern continued, “Looking ahead to 2018, while we are keenly focused on the completion of our pending merger, we also see growth opportunities in the core business, with the shift in our programming strategy at WGN America expected to turn that business into a significant EBITDA contributor, and the highly contested midterm elections expected to drive a resurgence of political advertising revenue across our diverse footprint of stations. In addition, we expect to realize significant tax savings from the recent changes in the tax code on both our core business operations as well as on any potential gains from continued asset sales.”
FOURTH QUARTER AND FULL-YEAR 2017 RESULTS
Consolidated
Consolidated operating revenues for the fourth quarter of 2017 were $489.0 million compared to $529.6 million in the fourth quarter of 2016, representing a decrease of $40.6 million, or 8%. The decrease was primarily driven by lower political advertising revenue, partially offset by increases in core advertising and retransmission revenues.
For the full year 2017, consolidated operating revenues were $1,849.0 million compared to $1,947.9 million for the full year 2016, representing a decrease of $99.0 million, or 5%.
Consolidated operating profit was $129.1 million for the fourth quarter of 2017 compared to $113.2 million for the fourth quarter of 2016, representing an increase of $15.9 million. The increase was primarily attributable to higher gains on the sales of real estate and lower operating expenses, partially offset by the decline in operating revenues.
For the full year 2017, consolidated operating profit was $108.5 million compared to $433.6 million in the full year 2016, representing a decrease of $325.1 million, primarily due to lower gains on the sales of real estate in 2017 as compared to 2016, lower Television and Entertainment operating profit primarily as a result of lower advertising revenues and higher programming expenses, and higher transaction-related expenses. The Company recorded gains on the sale of real estate of $28.5 million in 2017 compared to $213.1 million in 2016. Programming expenses in 2017 included an $80 million impairment charge for the syndicated programs Elementary and Person of Interest at WGN America compared to a $37 million impairment charge in 2016 for the syndicated program Elementary at WGN America.
Consolidated income from continuing operations was $332.8 million in the fourth quarter of 2017 compared to $70.7 million in the fourth quarter of 2016. In the fourth quarter of 2017, the Company recorded a tax benefit of $256 million, or $2.90 per common share, related to the re-measurement of deferred tax assets and liabilities resulting from the new tax legislation that lowered the corporate U.S. Federal income tax rate from 35% to 21%. Diluted earnings per common share from continuing operations for the fourth quarter of 2017 was $3.73 compared to $0.81 for the fourth quarter of 2016. Adjusted diluted earnings per share (“Adjusted EPS”) from continuing operations for the fourth quarter of 2017 was $0.81 compared to $0.85 for the fourth quarter of 2016. Both diluted earnings per common share from continuing operations and Adjusted EPS from continuing operations include an income tax benefit of $6 million, or $0.07 per common share, in the fourth quarter of 2017 and an income tax benefit of $2 million, or $0.02 per common share, in the fourth quarter of 2016 related to certain tax adjustments.
Consolidated income from continuing operations was $183.1 million for the full year 2017 compared to $87.0 million for the full year 2016. For the full year 2017, diluted earnings per common share from continuing operations was $2.04 compared to $0.96 for the full year 2016. Adjusted EPS from continuing operations for the full year 2017 was $1.41 compared to $2.13 for the full year 2016. Both diluted earnings per common share from continuing operations and Adjusted EPS from continuing operations include an income tax benefit of $6 million, or $0.07 per common share, for the full year 2017 and an income tax benefit of $11 million, or $0.13 per common share, for the full year 2016 related to certain tax adjustments.
Net income attributable to Tribune Media Company was $328.8 million in the fourth quarter of 2017 compared to $19.0 million in the fourth quarter of 2016. Net income attributable to Tribune Media Company was $194.1 million for the full year 2017 compared to $14.2 million in 2016.
Consolidated Adjusted EBITDA decreased 7% to $169.1 million in the fourth quarter of 2017 from $181.5 million in the fourth quarter of 2016. The decrease was primarily attributable to lower political advertising, partially offset by higher core advertising and retransmission revenues as well as lower programming, compensation and other expenses. For the full year 2017, consolidated Adjusted EBITDA decreased $89.2 million, or 17%, to $441.9 million as compared to $531.1 million in the full year 2016.
Cash distributions from the Company’s equity investments in the fourth quarter of 2017 were $19.3 million compared to $27.0 million in the fourth quarter of 2016. Cash distributions for the full year 2017 were $201.9 million, which includes an excess cash distribution of $15.8 million from CareerBuilder related to the sale, as discussed below, compared to $170.5 million for the full year 2016.
Television and Entertainment
Revenues were $486.0 million in the fourth quarter of 2017 compared to $525.7 million in the fourth quarter of 2016, a decrease of $39.7 million, or 8%. This was driven by a $66.0 million decrease in net political advertising revenue, partially offset by an increase in net core advertising revenue (comprised of local and national advertising, excluding political and digital) of $8.3 million, or 3%, an increase in retransmission revenues of $19.3 million, or 22%, and an increase in carriage fee revenue of $0.9 million, or 3%.
Television and Entertainment segment revenues for the full year 2017 were $1,835.4 million compared to $1,909.9 million for the full year 2016, a decrease of $74.5 million, or 4%. The decrease was driven by a $114.8 million decrease in net political advertising revenue and a $35.7 million, or 3%, decrease in net core advertising, partially offset by an increase in retransmission revenues of $77.6 million, or 23%, and an increase in carriage fee revenue of $6.9 million, or 6%.
Television and Entertainment operating profit for the fourth quarter of 2017 was $127.2 million compared to $136.9 million in the fourth quarter of 2016, a decrease of $9.6 million, or 7%, primarily due to lower revenues, partially offset by lower programming and other expenses. Television and Entertainment Adjusted EBITDA for the fourth quarter of 2017 was $183.2 million compared to $199.5 million in the fourth quarter of 2016, a decrease of $16.3 million, or 8%. Television and Entertainment Broadcast Cash Flow for the fourth quarter of 2017 was $162.9 million as compared to $207.1 million for the fourth quarter of 2016, a decrease of $44.2 million, or 21%.
For the full year 2017, Television and Entertainment operating profit was $196.1 million as compared to $324.8 million for the full year 2016. The decrease was primarily due to lower operating revenues, as described above, and higher programming expenses primarily due to the $43 million increase in impairment charges at WGN America and $19 million of additional charges related to the shift in programming strategy at WGN America, as well as higher network affiliate fees and higher amortization of license fees. Television and Entertainment Adjusted EBITDA for the full year 2017 was $505.2 million as compared to $604.0 million for the full year 2016, a decrease of $98.8 million, or 16%. Television and Entertainment Broadcast Cash Flow for the full year 2017 was $484.6 million as compared to $557.5 million for the full year 2016, a decrease of $73.0 million, or 13%.
Corporate and Other
Real estate revenues for the fourth quarter of 2017 were $3.0 million compared to $3.9 million for the fourth quarter of 2016, representing a decrease of $0.9 million, or 24%. Real estate revenues for the full year 2017 were $13.5 million, compared to $38.0 million for the full year 2016, representing a decrease of $24.5 million, or 64%. The decrease was primarily driven by lower revenues due to the sale of real estate properties in 2016 and 2017.
Corporate and Other operating profit for the fourth quarter of 2017 was $1.9 million compared to an operating loss of $23.7 million in the fourth quarter of 2016. The reduction of the loss was primarily attributable to gains on the sale of certain real estate properties, partially offset by a decline in real estate revenues. Corporate and Other Adjusted EBITDA for the fourth quarter of 2017 represented a loss of $14.1 million compared to a loss of $18.0 million in the fourth quarter of 2016.
For the full year 2017, Corporate and Other operating loss was $87.6 million compared to operating profit of $108.7 million for the full year 2016. The decline was due to lower gains on real estate sales and higher transaction-related costs. Gains on the sale of real estate totaled $28.2 million in 2017 compared to $213.1 million in 2016. Corporate and Other Adjusted EBITDA represented a loss of $63.3 million for the full year 2017 compared to a loss of $72.9 million for the full year 2016.
RETURN OF CAPITAL TO SHAREHOLDERS
Quarterly Dividend
On February 21, 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 March 26, 2018 to holders of record of the Company’s common stock and warrants as of March 12, 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.
RECENT DEVELOPMENTS
Sinclair Acquisition
On May 8, 2017, the Company entered into a 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 Federal Communications Commission (the “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. Consummation of the transactions contemplated by the Merger Agreement is conditioned on obtaining FCC consent to transfers of control and assignments of licenses in connection with the Merger, among other conditions. 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 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 ranked stations in each of three television markets 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 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 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 Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (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. Consummation of the transactions contemplated by the Merger Agreement is conditioned on expiration of the waiting period applicable under the HSR Act, among other conditions. 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, whichever is later, and that the parties will 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.
Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform”) was signed into law. Under ASC Topic 740, “Income Taxes,” the effects of Tax Reform are recognized in the period of enactment and as such are recorded in the Company’s fourth quarter of 2017. The Company is in the process of analyzing certain provisions of Tax Reform including but not limited to the repeal of the domestic production activities deduction and changes to the deductibility of executive compensation. Consistent with the guidance under ASC Topic 740, and subject to Staff Accounting Bulletin (“SAB”) 118, which provides for a measurement period to complete the accounting for certain elements of Tax Reform, the Company recorded the provisional impact from the enactment of Tax Reform in the fourth quarter of 2017. As a result of Tax Reform, the Company recorded a provisional discrete net tax benefit of $256 million, primarily due to a remeasurement of the net deferred tax liabilities resulting from the decrease in the U.S. federal corporate income tax rate from 35% to 21%. Further impacts of Tax Reform may be reflected in future quarters upon issuance of clarifications to existing law or additional technical guidance from the Department of Treasury and the completion of the Company’s tax return filings. Tax Reform also provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”) through the year ended December 31, 2017. The Company does not have any net accumulated E&P in its foreign subsidiaries and therefore is not subject to tax for the year ended December 31, 2017. Further, the Company has analyzed the effects of new taxes due on certain foreign income, such as global intangible low-taxed income (“GILTI”), base-erosion anti-abuse tax (“BEAT”), foreign-derived intangible income (“FDII”) and limitations on interest expense deductions (if certain conditions apply) that are effective starting in fiscal 2018. The Company has determined that these new provisions are not applicable to the Company.
Real Estate Transactions
In 2017, the Company sold several properties for net pretax proceeds totaling $144 million and recognized a net pretax gain of $28.5 million. On November 15, 2017, the Company sold its Costa Mesa, CA properties for net proceeds of $62 million and recorded a pretax gain of $22 million, of which $3 million is attributable to a noncontrolling interest. On December 19, 2017, the Company sold its Ft. Lauderdale, FL property for net proceeds of $21 million and recorded a pretax gain of $6 million, of which less than $1 million is attributable to a noncontrolling interest. The Company defines net proceeds as pretax cash proceeds on the sale of properties, less associated selling costs.
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 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 approximately $39 million are included in assets held for sale as of December 31, 2017. The Company received approximately $172 million in gross pretax proceeds for these licenses in 2017 and expects to recognize a net pretax gain of $133 million in the first quarter of 2018 related to the surrender of the spectrum of television stations in January 2018. The Company used $102 million of after-tax proceeds to prepay a portion of the Company’s Term Loan Facility in 2017. After-tax proceeds of $12.6 million received by a Dreamcatcher station were used to prepay a substantial portion of the Dreamcatcher Credit Facility in 2017.
CareerBuilder
On June 19, 2017, TEGNA Inc. announced it entered into an agreement, together with the other owners of CareerBuilder, including Tribune Media Company, to sell a majority interest in CareerBuilder to an investor group led by investment funds managed by affiliates of Apollo Global Management, LLC and the Ontario Teachers’ Pension Plan Board. The transaction closed on July 31, 2017 and the Company received cash of $158 million, which included an excess cash distribution of $16 million, and recognized a gain on sale of approximately $4 million in 2017. As a result of the sale, the Company’s ownership in CareerBuilder declined from 32% to approximately 7%, on a fully diluted basis. As of December 31, 2017, the Company’s ownership in CareerBuilder was approximately 6.5%, on a fully diluted basis (including CareerBuilder employees’ unvested equity awards).
In 2017, the Company recorded non-cash pretax impairment charges totaling $181 million to write down its investment in CareerBuilder prior to the transaction close.
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 fourth quarter and full year 2017 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, Tribune Studios, 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.
INVESTOR CONTACT:
James Arestia
Director/Investor Relations
(646) 563-8296
jarestia@tribunemedia.com
MEDIA CONTACT:
Gary Weitman
SVP/Corporate Relations
(312) 222-3394
gweitman@tribunemedia.com