Tribune Publishing Company Reports 2014 Second Quarter Results

CHICAGO--()--Tribune Publishing Company (NYSE:TPUB):

Recent Company Highlights

  • Completed spin-off from Tribune Media Company on August 4, 2014
  • Began New York Stock Exchange trading with 25.4 million shares outstanding
  • Announced five-year modified affiliation agreement with Cars.com, which will be executed upon completion of the pending sale
  • Completed acquisitions of two daily newspapers, The Capital and the Carroll County Times

Tribune Publishing Company (NYSE:TPUB) today announced its financial results for the second quarter ended June 29, 2014. The Company reported total second quarter 2014 net income of $15.2 million compared to net income of $21.9 million in the second quarter of 2013, primarily due to a 3.8% decline in revenues and a 0.7% decline in expenses. Total operating expenses in 2014 included intercompany rent that was not recorded in the same periods in 2013, corporate management fees paid to Tribune Media Company, and incremental compensation and other costs related to staffing corporate functions to support the post-spin operation.

Adjusted EBITDA for the second quarter of 2014 totaled $54.5 million, down from $60.2 million in the comparable quarter of the prior year. Adjusted EBITDA, as reported, allows for comparability of historical pre-spin financial results for the three- and six-month periods ended June 29, 2014, however was not adjusted for incremental costs referenced above or post-spin cost estimates.

Total revenues were $429.9 million in the second quarter of 2014 compared to $446.9 million in the prior year period, a decline of 3.8%. Total advertising revenues for the second quarter were down 7.1%, circulation revenues were up 2.3%, and other revenues were down 1.3%, in each case, compared to the second quarter of 2013.

“The core business performed in-line with our expectations for the first half of 2014,” said John Bode, Tribune Publishing Chief Financial Officer. “Our 2014 third quarter results are projected to be positively impacted by our recently announced acquisitions in the Baltimore marketplace. Additionally, the recent announcement of the Cars.com modified affiliation agreement is expected to strengthen our future digital automotive classified product offering and represents an excellent outcome for stakeholders. We will continue to operate under the existing affiliate agreement with Classified Ventures until the sale of Cars.com closes.”

Tribune Publishing intends to host a third quarter 2014 earnings conference call later this year, which will discuss the Company’s first post-spin financial results.

Non-GAAP Financial Measures

To provide investors with additional information regarding Tribune Publishing’s financial results, this press release includes references to Adjusted EBITDA. Adjusted EBITDA is not a measure presented in accordance with generally accepted accounting principles in the United States (US GAAP), and Tribune Publishing’s use of the term Adjusted EBITDA may vary from that of others in the company’s industry. Adjusted EBITDA should not be considered as an alternative to net income (loss), operating profit, revenues or any other performance measures derived in accordance with US GAAP as measures of operating performance or liquidity. Further information regarding Tribune Publishing’s presentation of Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, is included below in this press release.

Cautionary Statements Regarding Forward-looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding expectations and trends in our revenues, our expected agreement with the owners of Cars.com and the anticipated timing of the Company’s first conference call. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "will," "projections," "continue," "business outlook," "estimate," "outlook," or similar expressions constitute forward-looking statements. Differences in Tribune Publishing's actual results from those described in these forward-looking statements may result from actions taken by Tribune Publishing as well as from risks and uncertainties beyond Tribune Publishing’s control. These risks and uncertainties include the parties’ ability to satisfy the closing conditions related to Cars.com sale transaction, including regulatory approval; changes in the business and competitive environment in which the Company operates, the impact of national and local conditions and developments in technology, each of which could influence the levels (rates and volume) of the Company’s circulation and advertising, changes in newsprint prices; changes in accounting standards; adverse results from litigation, governmental investigations or tax-related proceedings or audits; the growth of its digital businesses and the implementation of its strategic growth initiatives. Also, the risks and uncertainties include realizing the anticipated benefits of the spin-off transaction, retaining key personnel, changing market conditions and disruption to business operations as a result of the spin-off transaction, our reliance on third-party vendors for various service, our ability to adapt to technological change, and other events beyond our control that may result in unexpected adverse operating results. The Company’s actual results could also be impacted by the other risks detailed from time to time in its publicly filed documents, including its Registration Statement on Form 10, as amended, effective July 21, 2014, filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

ABOUT TRIBUNE PUBLISHING: Tribune Publishing Company (NYSE:TPUB) is a diversified media and marketing solutions company that delivers innovative experiences for audiences and advertisers across all platforms. The company’s diverse portfolio of iconic news and information brands includes 10 award-winning daily titles, more than 60 digital properties and more than 150 verticals in markets, including Los Angeles; Chicago; South Florida; Orlando; Baltimore; Carroll County and Annapolis, Md.; Hartford, Conn.; Allentown, Pa., and Newport News, Va. Tribune Publishing also offers an array of customized marketing solutions, and operates a number of niche products, including Hoy and El Sentinel, making Tribune Publishing the country’s largest Spanish-language publisher. Tribune Publishing is headquartered in Chicago. For more information, please visit www.tribpub.com.

Exhibits:

Condensed Combined Statements of Operations
Notes to Condensed Combined Statement of Operations
Condensed Combined Balance Sheets
Non-GAAP Reconciliation of Net Income to Adjusted EBITDA

       
TRIBUNE PUBLISHING COMPANY
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
 
 
Three months ended Six months ended
Jun. 29, 2014 Jun. 30, 2013 Jun. 29, 2014 Jun. 30, 2013
Operating revenue (1)
Advertising $ 242,131 $ 260,538 $ 475,166 $ 512,517
Circulation 109,010 106,518 216,317 213,632
Other   78,782     79,804     154,962     161,224  
Total operating revenues   429,923     446,860     846,445     887,373  
 
Operating expenses (2)
Cost of sales 246,281 253,628 493,804 513,576
Selling, general and administrative 154,116 146,823 297,998 282,775
Depreciation and amortization   4,515     7,310     8,861     14,270  
Total operating expenses   404,912     407,761     800,663     810,621  
 
Income from operations 25,011 39,099 45,782 76,752
Loss on equity investments, net (294 ) (297 ) (629 ) (648 )
Gain on investment transaction 1,484 1,484
Interest (expense) income, net (53 ) (1 ) (55 ) 12
Reorganization items, net       (261 )   (9 )   (203 )
Income Before Taxes 26,148 38,540 46,573 75,913
Income tax expense   10,945     16,614     19,598     32,794  
Net Income $ 15,203   $ 21,926   $ 26,975   $ 43,119  
 

See accompanying page for notes.

 

           
TRIBUNE PUBLISHING COMPANY
NOTES TO CONDENSED COMBINED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
 
Note (1) - Operating Revenues for the three and six months ended Jun. 29, 2014 and Jun. 30, 2013.
 
Three Months Ended Six Months Ended
Jun. 29, 2014 Jun. 30, 2013 % Change Jun. 29, 2014 Jun. 30, 2013 % Change
Advertising
Retail $ 125,895 $ 136,470 (7.7 %) $ 239,236 $ 265,963 (10.0 %)
National 44,873 52,614 (14.7 %) 95,876 106,390 (9.9 %)
Classified   71,363     71,454   (0.1 %)   140,054     140,164   (0.1 %)
Total advertising 242,131 260,538 (7.1 %) 475,166 512,517 (7.3 %)
Circulation 109,010 106,518 2.3 % 216,317 213,632 1.3 %
Other revenue
Commercial print and delivery 44,266 48,434 (8.6 %) 89,841 97,823 (8.2 %)
Direct mail and marketing 17,729 18,563 (4.5 %) 35,528 38,771 (8.4 %)
Other   16,787     12,807   31.1 %   29,593     24,630   20.2 %
Total other revenues   78,782     79,804   (1.3 %)   154,962     161,224   (3.9 %)
Total operating revenues $ 429,923   $ 446,860   (3.8 %) $ 846,445   $ 887,373   (4.6 %)
 
           

Note (2) - Operating Expenses for the three and six months ended Jun. 29, 2014 and Jun. 30, 2013.

 
Three Months Ended Six Months Ended
Jun. 29, 2014 Jun. 30, 2013 % Change Jun. 29, 2014 Jun. 30, 2013 % Change
Compensation $ 140,939

$

147,114

(4.2

%)

$ 284,651 $ 298,560 (4.7 %)
Newsprint and ink 35,499 42,217 (15.9

%)

70,997 85,126 (16.6 %)
Circulation distribution 73,392 77,593 (5.4

%)

146,932 156,296 (6.0 %)
Promotion and marketing 14,503 13,649 6.3 % 24,566 25,058 (2.0 %)
Affiliate fees 9,170 7,752 18.3 % 18,475 15,044 22.8 %
Other (outside services, occupancy costs) 87,438 78,741 11.0 % 171,566 150,818 13.8 %
Corporate allocations (2a) 39,456 33,385 18.2 % 74,615 65,449 14.0 %
Depreciation and amortization   4,515     7,310   (38.2

%)

  8,861     14,270   (37.9 %)
Total operating expenses $ 404,912   $ 407,761   (0.7

%)

$ 800,663   $ 810,621   (1.2 %)
 
           

Note (2a)

 

 

Three Months Ended Six Months Ended
Jun. 29, 2014 Jun. 30, 2013 % Change

Jun. 29, 2014

Jun. 30, 2013

% Change
Corporate management fee $ 8,960 $ 6,656 34.6 % $ 18,020 $ 12,383 45.5 %
Allocated depreciation 5,195 4,266 21.8 % 9,976 7,646 30.5 %

Shared service centers

23,099 20,765 11.2 % 43,384 42,135 3.0 %
Other   2,202     1,698   29.7 %   3,235     3,285   (1.5

%)

Total corporate allocations $ 39,456   $ 33,385   18.2 % $ 74,615   $ 65,449   14.0 %
 

   
TRIBUNE PUBLISHING COMPANY
CONDENSED COMBINED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
Jun. 29, 2014 Dec. 29, 2013
Assets
Current Assets:
Cash $ 12,538 $ 9,694
Accounts receivable (net of allowances of $11,865 and $12,856) 210,210 251,636
Inventories 16,074 14,222
Deferred income taxes 33,800 37,371
Prepaid expenses and other   13,927   13,570
Total current assets 286,549 326,493
Net Properties 66,324 67,928
Other Assets
Goodwill 35,444 15,331
Intangible assets, net 74,264 60,482
Deferred income taxes 33,698 39,587
Investments and other assets   6,249   4,545
Total other assets   149,655   119,945
Total assets $ 502,528 $ 514,366
 
Liabilities and Equity
Current Liabilities
Accounts payable $ 46,126 $ 36,329
Employee compensation and benefits 89,716 103,351
Deferred revenue 78,025 67,934
Other   19,926   20,866
Total current liabilities   233,793   228,480
Non-Current Liabilities
Deferred revenue 6,139 7,015
Postretirement medical, life and other benefits 39,973 45,373
Other obligations   11,480   8,673
Total non-current liabilities 57,592 61,061
 
Total Equity   211,143   224,825
Total liabilities and equity $ 502,528 $ 514,366
 

           
TRIBUNE PUBLISHING COMPANY
NON-GAAP RECONCILIATION OF
NET INCOME TO ADJUSTED EBITDA
(In thousands)
(Unaudited)
 
 
Three Months Ended Six Months Ended
Jun. 29, 2014 Jun. 30, 2013 % Change Jun. 29, 2014 Jun. 30, 2013 % Change
Net Income $ 15,203 $ 21,926 (30.7 %) $ 26,975 $ 43,119 (37.4

%)

 
Income tax expense 10,945 16,614 (34.1 %) 19,598 32,794 (40.2 %)
Loss on equity investments, net 294 297 (1.0 %) 629 648 (2.9 %)
Gain on investment transaction (1,484 ) * (1,484 ) *
Interest expense (income), net 53 1 * 55 (12 ) *
Reorganization items, net       261   (100.0 %)   9     203   (95.6 %)
 
Income from operations 25,011 39,099 (36.0

%)

45,782 76,752 (40.4

%)

 
Depreciation and amortization 4,515 7,310 (38.2

%)

8,861 14,270 (37.9

%)

Allocated depreciation (1) 5,195 4,266 21.8 % 9,976 7,646 30.5 %
Allocated corporate management fee 8,960 6,656 34.6 % 18,020 12,383 45.5 %
Spin-related and restructuring costs (2) 7,619 8,449 (9.8

%)

14,345 10,879 31.9 %
Litigation settlement (3) (867 ) * (867 ) *
Stock-based compensation (4) 622 455 36.7 % 1,319 455 *
Pension credits (5) (4,968 ) (5,989 ) (17.0

%)

(10,440 ) (11,883 ) (12.1

%)

Intercompany rent (6)   8,394       *   16,790       *
 
Adjusted EBITDA $ 54,481   $ 60,246   (9.6

%)

$ 103,786   $ 110,502   (6.1

%)

 

* Represents positive or negative change in excess of 100%

 

(1) - Allocated depreciation represents depreciation for primarily technology assets that were used by Tribune Publishing prior to the spin-off. As a result of the spin-off, these technology assets were assigned to Tribune Publishing and the related depreciation will be included in post-spin operating results.

(2) - Spin-related and restructuring costs include costs related to the internal restructuring and the distribution and separation from Tribune Media.

(3) - Adjustment to litigation settlement.

(4) - Stock-based compensation is due to Tribune Media's equity compensation plan and are included for comparative purposes.

(5) - Pension credits are due to allocations from Tribune Media for Tribune Media's defined benefit. As part of the spin-off, Tribune Media retained this plan. No pension allocations will be made subsequent to the spin-off.

(6) - Intercompany rent represents rental expense recorded by Tribune Publishing for facilities owned by Tribune Media and its affiliates pursuant to related party lease agreements. No rent expense for these leases was recorded in the comparable periods in 2013 because although the properties subject to related party leases are legally owned by holding companies controlled by Tribune Media, Tribune Publishing determined that pursuant to the terms of the leases, it maintained forms of continuing involvement with the properties, which, pursuant to ASC Topic 840, “Leases,” precluded Tribune Publishing from derecognizing those properties from its combined financial statements. As a result, Tribune Publishing continued to account for and depreciate the carrying values of the transferred properties subject to related party leases until Dec. 1, 2013, when, due to modifications to certain provisions of the leases, Tribune Publishing derecognized the properties from its financial statements and began accounting for these related party operating leases on Dec. 1, 2013. Because of the difference in accounting for the periods presented, intercompany rent expense is added back to net income for the 2014 periods for better comparability between the periods presented. The Company began making rent payments effective with the spin-off.

Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Adjusted EBITDA is defined as net income before income taxes, interest income, interest expense, depreciation and amortization, income and losses from equity investments, corporate management fee from Tribune Media, pension credits, stock-based compensation, certain unusual and non-recurring items (including spin-related costs) and reorganization items. The Company's management uses Adjusted EBITDA (a) as a measure of operating performance; (b) for planning and forecasting in future periods; and (c) in communications with the Company's Board of Directors concerning the Company's financial performance. Management believes the presentation of Adjusted EBITDA enhances investors’ overall understanding of the financial performance of the Company's business as a stand-alone company. In addition, Adjusted EBITDA, or a similarly calculated measure, is used as the basis for certain financial maintenance covenants that the Company is subject to in connection with certain credit facilities. Since not all companies use identical calculations, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with US GAAP. Instead, management believes Adjusted EBITDA should be used to supplement the Company's financial measures derived in accordance with US GAAP to provide a more complete understanding of the trends affecting the business.

Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with GAAP. Some of the limitations to using non-GAAP measures as an analytical tool are:

  • they do not reflect the Company's interest income and expense, or the requirements necessary to service interest or principal payments on the Company's debt;
  • they do not reflect future requirements for capital expenditures or contractual commitments; and
  • although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP measures do not reflect any cash requirements for such replacements

Source: Tribune Publishing Company (TPUB-FIN)

Contacts

Tribune Publishing Company
Investor Relations:
Sandy Martin, 469-528-9360
VP/Corporate Finance & Investor Relations
smartin@tribune.com
or
Media Relations:
Matt Hutchison, 312-222-3305
SVP/Corporate Communications
mhutchison@tribune.com

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Contacts

Tribune Publishing Company
Investor Relations:
Sandy Martin, 469-528-9360
VP/Corporate Finance & Investor Relations
smartin@tribune.com
or
Media Relations:
Matt Hutchison, 312-222-3305
SVP/Corporate Communications
mhutchison@tribune.com