Tribune Media Company Reports Third Quarter 2014 Results

NEW YORK, Nov. 11, 2014 /PRNewswire/ -- Tribune Media Company (the "Company"; OTC:TRBAA) today reported its results for the three and nine months ended September 2014.  The consolidated financial statements along with management's discussion and analysis of financial condition and results of operations are available on the Company's corporate website, www.tribunemedia.com, and on the Company's investor relations mobile app.

Q3 Highlights

• Consolidated operating revenues grew 69% to $474.9 million compared to the third quarter of 2013.
• Consolidated operating profit grew 21% to $55.3 million compared to the third quarter of 2013.
• Consolidated Adjusted EBITDA grew 52% to $146.1 million compared to the third quarter of 2013.
• On August 4, 2014, completed the spin-off of the Company's publishing operations into an independent publicly-traded company, Tribune Publishing Company.
• Repaid $275 million of our outstanding term loan debt.
• Announced the sale of our equity interest in Classified Ventures, LLC. The transaction closed on October 1, 2014.
• Strong progress on content ownership strategy; Manhattan premiered to widespread critical acclaim.
• Recently completed three strategic acquisitions within our Digital and Data segment – What's ON, Baseline and HWW.

"We are pleased to see many of the long-term initiatives we have put in place since early 2013 begin to take shape," said Peter Liguori, Tribune Media's President and Chief Executive Officer. "Our recently achieved scale has put us in a competitive position to drive affiliate fees, expand our capabilities to maximize political advertising revenues and fortify our relationships with our network partners.  The strong cash flows generated by our business have enabled us to develop a general entertainment cable network, pursue a content ownership strategy and invest in building our data business. I am confident that the combination of our media assets and strong operational focus will keep us on the path for continued success."

Discontinued Operations and Changes in Presentation

As a result of the spin-off of the Company's publishing operations (the "Publishing Spin-off") and the changes to our reportable segments, as further described below, certain previously reported amounts have been reclassified to conform to the current presentation as well as to reflect the reclassification of the historical results of operations for the businesses included in the Publishing Spin-Off to discontinued operations for all periods presented.

Following the Publishing Spin-Off, we conduct our operations through two reportable segments: Television and Entertainment andDigital and Data. In addition, we report and include under Corporate and Other, certain administrative activities associated with operating the corporate office functions and managing our frozen company-sponsored defined benefit pension plans, as well as the management of certain real estate assets, including revenues from leasing our owned office and production facilities.

Consolidated Results

Consolidated operating revenues for the third quarter of 2014 were $474.9 million compared to $280.6 million in the third quarter of 2013, representing an increase of $194.3 million, or 69%.  Consolidated revenues for the nine months ended September 2014 were$1,395.9 million compared to $847.7 million in the nine months ended September 2013, representing an increase of $548.2 million, or 65%. 

Consolidated operating profit for the third quarter of 2014 was $55.3 million compared to $45.8 million in the third quarter of 2013, representing an increase of $9.5 million, or 21%. For the nine months ended September 2014, consolidated operating profit was$137.7 million, a decrease of $17.9 million, or 11%, as compared to $155.6 million in the nine months ended September 2013.

Basic and diluted earnings per common share from continuing operations for the third quarter of 2014 were $0.53 compared to $0.39for the third quarter of 2013. Basic and diluted earnings per common share from continuing operations for the nine months ended September 2014 was $1.48 and $1.47, respectively, compared to $1.30 for the nine months ended September 2013.

Consolidated Adjusted EBITDA increased to $146.1 million in the third quarter of 2014 from $96.4 million in the third quarter of 2013. Consolidated Adjusted EBITDA increased to $570.2 million in the nine months ended September 2014 from $393.9 million in the nine months ended September 2013. 

Cash distributions from equity investments, which are included in Consolidated Adjusted EBITDA, in the third quarter of 2014 were$17.7 million compared to $16.2 million in the third quarter of 2013. Cash distributions from equity investments in the nine months ended September 2014 were $173.4 million compared to $140.3 million in the nine months ended September 2013. In addition to these quarterly cash distributions, 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, which was not included in Consolidated Adjusted EBITDA as it is not part of the recurring dividends that we have historically received. 

Free Cash Flow increased to $30.0 million in the third quarter of 2014 from $18.3 million in the third quarter of 2013.  Free Cash Flow increased to $239.2 million in the nine months ended September 2014 from $197.9 million in the nine months ended September 2013. 

Television and Entertainment

Television and Entertainment segment revenues were $417.2 million in the third quarter of 2014, an increase of $169.0 million, or 68%, as compared to $248.2 million in the third quarter of 2013.  For the nine months ended September 2014, Television and Entertainment segment revenues were $1,241.4 million, an increase of $493.5 million, or 66%, compared with $747.9 million in the nine months ended September 2013.

Television and Entertainment segment Adjusted EBITDA was $132.6 million in third quarter of 2014, compared to $77.8 million in the third quarter of 2013, an increase of $54.8 million, or 70%.  For the nine months ended September 2014, Television and Entertainment segment Adjusted EBITDA was $412.2 million compared with $242.5 million in the nine months ended September 2013, an increase of $169.7 million, or 70%.

Pro forma for acquisition of Local TV (see attached quarterly pro forma financial disclosures)

The following discussion includes 2013 amounts that are pro forma for the acquisition of Local TV (which was completed on December 27, 2013) as if the acquisition had occurred as of the beginning of 2013, and are based on Local TV's historical basis of presentation and does not reflect the impact of purchase accounting.

Television and Entertainment segment revenues were $417.2 million in the third quarter of 2014, compared to $390.0 million in the third quarter of 2013.  This represents an increase of $27.2 million, or 7.0%. Retransmission consent fees in third quarter of 2014 were $58.1 million, compared to $34.2 million in the third quarter of 2013, an increase of $23.9 million, or 70%.  Advertising revenues increased to $321.1 million in the third quarter of 2014 as compared with $319.2 million in the third quarter of 2013, representing an increase of $1.9 million, or 0.6%. Increases in political advertising revenues of approximately $17.1 million in the quarter were offset by declines in core advertising of $17.7 million, or 5.9%.  For the nine months ended September 2014, Television and Entertainment segment revenues increased $76.1 million, or 6.5%, to $1,241.4 million compared to $1,165.3 million in the nine months ended September 2013.  Retransmission consent fees in the nine months ended September 2014 increased $75.0 million, or 78%, to $170.8 million, compared to $95.8 million in the nine months ended September 2013.  Advertising revenues decreased to $954.5 million in the nine months ended September 2014 as compared with $956.4 million in the nine months ended September 2013, representing a decrease of $1.9 million. Declines in core advertising of $32.5 million, or 3.6%, were partially offset by increases in political advertising revenues of approximately $25.0 million in the first nine months of 2014.

Television and Entertainment Adjusted EBITDA was $132.6 million in the third quarter of 2014, compared to $138.0 million in the third quarter of 2013.  Adjusted EBITDA in the third quarter of 2014 included $24 million of costs associated with new original programming at WGN America.  For the nine months ended September 2014, Television and Entertainment Adjusted EBITDA was $412.2 million, compared to $417.3 million in the nine months ended September 2013. Adjusted EBITDA in the nine months ended September 2014 included $55 million of costs associated with new original programming at WGN America.

Digital and Data

Digital and Data segment revenues in the third quarter of 2014 were $44.6 million, compared to $18.9 million in the third quarter of 2013, an increase of $25.7 million.  This increase was primarily attributable to the acquisition of Gracenote in January 2014. For the nine months ended September 2014, Digital and Data segment revenues were $112.8 million, compared to $59.9 million in the nine months ended September 2013. The increase of $52.9 million, or 88%, was primarily attributable to the acquisition of Gracenote in January 2014.

Digital and Data segment Adjusted EBITDA was $10.0 million in the third quarter of 2014, compared to $7.3 million in the third quarter of 2013, an increase of $2.7 million, or 37%.  The change was primarily due to the impact of the acquisition of Gracenote.  For the nine months ended September 2014, Digital and Data segment Adjusted EBITDA was $14.8 million, compared to $21.4 million in the nine months ended September 2013, a decrease of $6.6 million, or 31%. The reduction in Adjusted EBITDA for the nine month period was attributable to costs associated with the establishment of the Digital and Data infrastructure, operating costs incurred in connection with Newsbeat, which was shut down during the third quarter of 2014, and costs associated with the integration of acquired businesses.  

Corporate and Other

Corporate and Other operating revenues represent real estate rental revenues earned from third parties, including Tribune Publishing. Real estate revenues for the third quarter of 2014 were $13.1 million compared to $13.5 million in the third quarter of 2013, representing a decrease of $0.4 million, or 3.0%.  Real estate revenues for the nine months ended September 2014 were $41.8 million compared to $39.9 million in the nine months ended September 2013, representing an increase of $1.9 million, or 4.8%.    

Corporate and Other expenses reduced Adjusted EBITDA in the third quarter of 2014 by $14.1 million, compared to $4.9 million in the third quarter of 2013. The $9.2 million increase in expenses was primarily attributable to increased corporate costs due to higher compensation expense, costs associated with the implementation of a new technology application and infrastructure costs associated with the Publishing Spin-off.

For the nine months ended September 2014, Corporate and Other expenses reduced Adjusted EBITDA by $30.1 million compared to$10.3 million in the nine months ended September 2013. The $19.8 million increase in expenses was primarily attributable to higher real estate operating expenses primarily due to higher property management fees and real estate development projects, and higher corporate costs due to increased compensation expense, costs associated with the implementation of a new technology application and costs associated with the Publishing Spin-off.

Conference Call Information

The Company will host a conference call today at 8:00 a.m. ET to discuss its third quarter results and a presentation deck will be posted to the 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 866-952-1906 (domestic) or 785-424-1825 (international). An audio webcast replay will be available for 90 days, beginning approximately two hours after the completion of the call, in the Events and Presentation section of the Tribune Media website. A replay of the call will also be available until November 18, 2014 at 800-374-0934 (domestic) or 402-220-0680 (international).

Tribune Media Company (OTC:TRBAA) 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 50 million households, national entertainment network WGN America, available in 72 million households, Tribune Studios, and Tribune Digital Ventures, including 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, 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 visitwww.tribunemedia.com.

Non-GAAP Financial Measures

This press release includes a discussion of Adjusted EBITDA for the Company and our operating segments (Television and Entertainment, Digital and Data, and Corporate and Other), Free Cash Flow for the Company and Broadcast Cash Flow for our Television and Entertainment segment. Adjusted EBITDA, Free Cash Flow and Broadcast Cash Flow are financial measures that are not recognized under accounting principles generally accepted in the U.S. ("GAAP"). Adjusted EBITDA for the Company is defined as net income before income (loss) from discontinued operations, net of taxes, income taxes, interest income, interest expense, pension expense (credit), equity income and losses, depreciation and amortization, stock-based compensation, certain special items (including severance), non-operating items and reorganization items plus cash distributions from equity investments. Adjusted EBITDA for the Company's operating segments is calculated as segment operating profit plus depreciation, amortization, pension expense (credit), stock-based compensation and certain special items (including severance). Free Cash Flow for the Company is calculated as Adjusted EBITDA, less cash paid for income taxes and interest, capital expenditures from continuing operations and cash pension contributions. Broadcast Cash Flow for the Television and Entertainment segment is calculated as total segment Adjusted EBITDA plus broadcast rights- amortization expense less broadcast rights- cash payments.  We believe that Adjusted EBITDA, Free Cash Flow and Broadcast Cash Flow are measures commonly used by investors to evaluate our performance with that of our competitors. We also present Adjusted EBITDA because we believe investors, analysts and rating agencies consider it useful in measuring our ability to meet our debt service obligations. We further believe that the disclosure of Adjusted EBITDA, Free Cash Flow and Broadcast Cash Flow is useful to investors, as these non-GAAP measures are used, among other measures, by our management to evaluate our performance. By disclosing Adjusted EBITDA, Free Cash Flow and Broadcast Cash Flow we believe that we create for investors a greater understanding of, and an enhanced level of transparency into, the means by which our management operates our company. Adjusted EBITDA, Free Cash Flow and Broadcast Cash Flow are not measures presented in accordance with GAAP, and our use of these terms may vary from that of others in our industry. Adjusted EBITDA, Free Cash Flow and Broadcast Cash Flow should not be considered as an alternative to net income, operating profit, revenues, net cash provided by operating activities or any other measures derived in accordance with GAAP as measures of operating performance or liquidity.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws.  Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control.  Forward-looking statements may include, but are not limited to, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and product development efforts. Important factors could cause actual results, developments and business decisions to differ materially from forward-looking statements are uncertainties discussed in the "Risk Factors" section in the Company's Registration Statement on Form 10 filed with the U.S. Securities and Exchange Commission on September 19, 2014.  "Forward-looking statements" include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "may," "might," "will," "could" "should," "estimate," "project," "plan," "anticipate," "expect," "intend," "outlook," "seek," "designed," "assume," "implied," "believe" and other similar expressions. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. 

The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements: competition and other economic conditions including fragmentation of the media landscape and competition from other media alternatives; changes in advertising demand and audience shares; changes in the overall market for television advertising, including through regulatory and judicial rulings;  our ability to protect our intellectual property and other proprietary rights; availability and cost of broadcast rights; our ability to adapt to technological changes; our ability to develop and grow our online businesses; availability and cost of quality network, syndicated and sports programming affecting our television ratings; the loss or modification of our network affiliation agreements; our ability to renegotiate retransmission consent agreements; our ability to expand our operations internationally; the incurrence of costs to address contamination issues at sites owned, operated or used by our business; adverse results from litigation, governmental investigations or tax-related proceedings or audits; our ability to settle unresolved claims filed in connection with our and certain of our direct and indirect wholly-owned subsidiaries' Chapter 11 cases and resolve the appeals seeking to overturn the bankruptcy court order confirming the Fourth Amended Joint Plan of Reorganization for Tribune Company and its Subsidiaries; our ability to satisfy pension and other postretirement employee benefit obligations; our ability to attract and retain employees; the effect of labor strikes, lock-outs and labor negotiations; our ability to realize benefits or synergies from acquisitions or divestitures or to operate our businesses effectively following acquisitions or divestitures; our ability to successfully integrate the acquisition of Local TV Holdings, LLC; the financial performance of our equity method investments; the impairment of our existing goodwill and other intangible assets; changes in accounting standards; increased interest rate risk due to our variable rate indebtedness; our indebtedness and ability to comply with covenants applicable to our debt financing and other contractual commitments; our ability to satisfy future capital and liquidity requirements; our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms and other events beyond our control that may result in unexpected adverse operating results.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this press release may not in fact occur. Any forward-looking information presented herein is made only as of the date of this press release and we undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.