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TRIBUNE
COMPANY PRESS RELEASE
October 13, 2005
Tribune Reports
2005 Third Quarter Results
CHICAGO, October
13, 2005 -- Tribune Company (NYSE:TRB) today reported third quarter
2005 diluted earnings per share of $.07 compared with $.37 in
the third quarter of 2004. The 2005 third quarter results included
a net non-operating loss of $.43 per diluted share related primarily
to an adverse tax ruling discussed in the following paragraph.
The 2004 third quarter results included a net non-operating loss
of $.04 per diluted share and a charge of $.10 per diluted share
related to the anticipated settlement with advertisers regarding
misstated circulation at Newsday and Hoy, New York.
On Sept. 27,
2005, the United States Tax Court issued an opinion disallowing
the 1998 tax-free reorganization of Matthew Bender, a former subsidiary
of The Times Mirror Company. Tribune acquired Times Mirror in
June 2000, and inherited the preexisting tax dispute at that time.
As announced by the Company on Sept. 27, 2005, the Company intends
to appeal the Tax Court ruling to the U.S. Court of Appeals for
the Seventh Circuit. Taxes and related interest for both the Matthew
Bender transaction and a similar transaction completed by Times
Mirror for its Mosby subsidiary in the same year total approximately
$1 billion. Over time, deductions for state taxes and interest
will reduce the net cash outlay to approximately $840 million.
As a result of the Tax Court ruling, the Company recorded additional
income tax expense of $150 million, or $.48 per diluted share,
and additional goodwill of approximately $460 million in the third
quarter of 2005.
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.
“Newspaper
circulation trends showed meaningful improvement in the third
quarter as we moved closer to stabilizing circulation levels,”
said Dennis FitzSimons, Tribune chairman, president and chief
executive officer. “With the current soft advertising environment,
we will continue to focus on our cost structure in both publishing
and broadcasting.”
THIRD QUARTER
2005 RESULTS
(Compared to Third Quarter 2004)
CONSOLIDATED
Tribune’s
2005 third quarter operating revenues decreased 1 percent to $1.40
billion from $1.41 billion in the 2004 third quarter. Consolidated
cash operating expenses were down 4 percent, or $40 million. Operating
cash flow was up 9 percent to $343 million, while operating profit
increased 12 percent to $287 million.
PUBLISHING
Publishing’s
third quarter operating revenues were $980 million, essentially
flat compared with last year’s third quarter. Publishing
cash operating expenses were down 5 percent, or $39 million, as
2004 included a $55 million charge related to the anticipated
settlement with advertisers regarding misstated circulation at
Newsday and Hoy, New York. Publishing operating cash flow was
$212 million, a 22 percent increase from $174 million in 2004.
Publishing operating profit increased 29 percent to $170 million,
up from $132 million in 2004.
Management
Discussion
- Advertising revenues increased 2 percent for the quarter. Excluding
Newsday, advertising revenues increased 3 percent. In September
2004, Newsday implemented lower ad rates as a result of the significant
reduction in reported circulation.
- Retail advertising revenues were up 1 percent for the quarter.
An increase in hardware/home improvement stores was partially
offset by decreases in the food & drug, electronics and department
stores categories. Preprint revenues increased 1 percent; excluding
Newsday, preprint revenue grew 4 percent.
- National advertising was down 3 percent for the quarter, with
decreases in wireless, movies, technology and transportation,
partially offset by an increase in the financial category.
- Classified advertising was up 7 percent for the quarter: help
wanted revenues were up 17 percent; real estate revenues rose
16 percent; and auto revenues were down 4 percent for the quarter.
- Circulation revenues were down 7 percent for the quarter.
- Total net paid circulation for Tribune’s 11 metro newspapers
averaged 3.0 million copies daily (Mon-Sat) and 4.3 million copies
Sunday for the 2005 third quarter, a decline of 2.3 percent and
3.0 percent, respectively, from the prior year.
- Individually paid circulation (home delivery plus single copy)
averaged 2.8 million copies daily and 4.1 million copies Sunday,
a decline of 1.3 percent and 2.8 percent, respectively.
- Interactive revenues, which are included in the above categories,
were up 46 percent to $47 million mainly due to strength in classified
help wanted revenues.
- Cash operating expenses decreased 5 percent, or $39 million,
due to the absence of the previously discussed 2004 charge of
$55 million related to Newsday and Hoy, New York. All other cash
operating expenses were up $16 million, primarily due to a 1 percent
increase in compensation expense and a 5 percent rise in newsprint
and ink expense due to higher market prices, partially offset
by lower consumption.
BROADCASTING
AND ENTERTAINMENT
Broadcasting
and entertainment’s third quarter operating revenues decreased
2 percent to $422 million, down from $432 million in 2004. Group
cash operating expenses were down 1 percent compared with the
2004 third quarter, despite additional costs related to Hurricane
Katrina at our two New Orleans television stations. Operating
cash flow was $144 million, down 5 percent from $151 million,
and operating profit decreased 6 percent to $131 million from
$138 million.
Television’s
third quarter revenues decreased 6 percent to $307 million, down
from $327 million in 2004. Television cash operating expenses
were up 4 percent from last year. Television operating cash flow
was $105 million, a 21 percent decrease from $133 million. Television
operating profit declined 23 percent to $94 million, down from
$121 million.
Management
Discussion
- Television revenues were affected by a continuing uneven advertising
environment, particularly in major markets, as well as softness
in the movie, telecom and automobile categories. Station revenues
in New York, Los Angeles, Chicago and Boston continue to be impacted
by ratings issues.
- Radio/entertainment revenues and cash flow reflect improvements
at the Chicago Cubs, due mainly to more home games and higher
broadcast and marketing revenues. This was partially offset by
a decline at Tribune Entertainment due primarily to fewer programs
in
production.
EQUITY RESULTS
Net equity
income was $8 million in the third quarter of 2005, compared with
a loss of $1.6 million in the third quarter of 2004. The increase
reflects improvements at TV Food Network and Comcast SportsNet
Chicago. In addition, the Company is no longer recording losses
for The WB Network as the Company’s book investment has
been reduced to zero.
NON-OPERATING
ITEMS
In the 2005
third quarter, Tribune recorded a pretax non-operating gain of
$27 million ($17 million after-tax), 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. 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.
In the 2004
third quarter, the Company recorded a pretax non-operating loss
of $20 million ($12 million after-tax, or $.04 per diluted share)
primarily from marking-to-market the derivative component of the
Company’s PHONES and the related Time Warner investment.
ADDITIONAL
FINANCIAL DETAILS
Interest expense
for the 2005 third quarter increased to $39 million, up 10 percent
from $35 million in the third quarter of 2004, primarily due to
the new bond issuances in August, which were used to repay lower
interest rate commercial paper borrowings. Debt, excluding the
PHONES, was $2.0 billion at the end of the 2005 third quarter,
and increased to $2.9 billion shortly thereafter as a result of
issuing commercial paper to pay the federal portion of the Matthew
Bender and Mosby tax liabilities.
Diluted weighted
average shares outstanding declined by 3 percent primarily due
to stock repurchases. The Company repurchased 3.6 million shares
in the third quarter and 9.0 million shares in the first three
quarters of 2005.
Capital expenditures
were $43 million in the third quarter of 2005.
2005 FINANCIAL
ASSUMPTIONS
Consolidated
revenues will continue to be impacted by many factors, including
changes in national and local economic conditions, job creation,
circulation and audience share levels. Investors are encouraged
to review the Company’s monthly revenue releases for current
trends.
For the full
year 2005, consolidated operating expenses are expected to decline
due to the absence of the $90 million advertising settlement charge
and the $41 million of position elimination costs recorded in
2004. All other consolidated operating expenses are expected to
be flat to up slightly for 2005 due to higher expenses for retirement
plans and newsprint, along with a slight increase in broadcast
rights expense. Net equity income is projected to be higher than
2004. Interest expense is expected to be up from 2004 due to the
payment of the Matthew Bender and Mosby tax liabilities and higher
interest rates. Capital expenditures are projected to be flat
to up slightly over 2004.
The Company
is required to adopt Financial Accounting Standard No. 123R, which
requires the expensing of stock options, in the first quarter
of 2006.
WEBCAST OF
CONFERENCE CALL
Today at 8
a.m. (CDT), a live webcast of the 2005 third quarter conference
call will be accessible through www.tribune.com and www.ccbn.com.
An archive of the webcast will be available on these sites from
October 13 through October 20. 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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CONTACTS:
» Media
Contacts:
Gary Weitman
gweitman@tribune.com
312/222-3394
» Investor
Contacts:
Ruthellyn Musil
rmusil@tribune.com
312/222-3787 |
