Governor Olli Rehn: Dialling back monetary restraint
tribune earnings_q4_07_tables
1. TRIBUNE COMPANY
FOURTH QUARTER RESULTS OF OPERATIONS (Unaudited)
(In thousands)
FOURTH QUARTER (A)
%
2007 2006 Change
OPERATING REVENUES $ 1,268,695 $ 1,448,214 (12.4)
OPERATING EXPENSES (B) 1,241,953 1,123,497 10.5
OPERATING PROFIT (C) 26,742 324,717 (91.8)
Net Income on Equity Investments 32,266 29,465 9.5
Interest and Dividend Income 9,919 4,815 106.0
Interest Expense (195,715) (93,527) 109.3
Non-Operating Items (D) 66,703 59,865 11.4
Income (Loss) from Continuing Operations Before Income Taxes (60,085) 325,335 (118.5)
Income Taxes (D) (17,527) (91,957) (80.9)
Income (Loss) from Continuing Operations (77,612) 233,378 (133.3)
Income (Loss) from Discontinued Operations, net of tax (E) (1,189) 5,679 (120.9)
NET INCOME (LOSS) $ (78,801) $ 239,057 (133.0)
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2. (A) 2007 fourth quarter: Oct 1, 2007 to Dec. 30, 2007. (13 weeks)
2006 fourth quarter: Sept. 25, 2006 to Dec. 31, 2006. (14 weeks)
(B) Operating expenses for the fourth quarter of 2007 included a $130 million non-cash impairment charge to write-down the Company's masthead
intangible assets to fair value, a $64 million charge for accelerated stock-based compensation expense and certain one-time compensation
payments resulting from the completion of the Company's going-private transaction in December 2007, severance and related charges of
$23 million for the elimination of approximately 700 positions, a $16 million charge related to the Company's new management equity incentive plan,
a $6 million charge for the write-down of Tribune Entertainment program assets, and a $3 million charge to increase the accrual for anticipated
advertiser claims at Newsday.
Operating expenses for the fourth quarter of 2006 included a severance charge of $6 million for the elimination of approximately 350 positions, a charge
of $4 million for the disposition of a press at the Los Angeles Times San Fernando Valley printing facility, and a $7 million gain related to
the sale of the corporate airplane.
(C) Operating profit excludes interest and dividend income, interest expense, equity income and losses, non-operating items
and income taxes.
(D) The fourth quarter of 2007 included the following non-operating items:
Pretax After-tax
Gain (Loss) Gain (Loss)
Gain on derivatives and related investments (1) $ 85,338 $ 52,056
Strategic transaction expenses (2) (46,574) (44,747)
Gain on investment transactions, net (3) 31,062 5,150
Other, net (3,123) (1,905)
Total non-operating items $ 66,703 $ 10,554
The fourth quarter of 2006 included the following non-operating items:
Pretax After-tax
Gain (Loss) Gain (Loss)
Gain on derivatives and related investments (1) $ 45,272 $ 27,616
Strategic transaction expenses (2) (3,466) (2,520)
Gain on investment transactions, net (3) 16,091 9,816
Other, net 1,968 1,132
Income tax adjustments (4) - 33,338
Total non-operating items $ 59,865 $ 69,382
(1) Gain on derivatives and related investments represents primarily the net change in fair values of the derivative component of the Company's
PHONES and the related Time Warner shares.
(2) Includes expenses related to the Company's strategic review and going-private transaction completed in December 2007.
(3) Approximately $28 million of the 2007 net pretax gain resulted from the restructuring of certain investments established in 1998 when
Times Mirror disposed of its Matthew Bender and Mosby subsidiaries. As a result of the restructuring, the Company will not realize $25 million
of deferred income tax assets relating to the tax credits generated by its low income housing investments. Accordingly, the Company increased
its fourth quarter 2007 consolidated income tax expense by $25 million to write-off these deferred income tax assets. The write-off reduced the
gain to $3 million after taxes. The 2006 gain consists primarily of the gain on the sale of the Company's investment in BrassRing.
(4) In the fourth quarter of 2006, the Company recorded a favorable $33 million income tax expense adjustment, most of which related to the Company's
PHONES as a result of reaching an agreement with the Internal Revenue Service appeals office pertaining to the deduction of interest expense on
the PHONES.
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3. (E) During the third quarter of 2007, the Company entered into negotiations to sell the stock of one of its subsidiaries, EZ Buy and EZ Sell Recycler
Corporation (quot;Recyclerquot;). Recycler publishes a collection of free classified newspapers in Southern California. The sale of Recycler closed on
Oct. 17, 2007. In February 2007, the Company announced an agreement to sell the New York edition of Hoy , the Company's Spanish-language daily
newspaper (quot;Hoy, New Yorkquot;). The sale of Hoy , New York closed in May, 2007. In March 2007, the Company announced its intentions to
sell its Southern Connecticut Newspapers—The Advocate (Stamford) and Greenwich Time (collectively quot;SCNIquot;). The sale of SCNI closed on
November 1, 2007. In June 2006, the Company announced agreements to sell its Atlanta and Albany television stations. The sale of Atlanta
closed in August 2006. In September 2006, the Company announced an agreement to sell its Boston television station. The sales of Albany and
Boston closed in December 2006. Operating results for these business units are reported as discontinued operations. Income (loss) from
discontinued operations in the fourth quarter included the following:
Fourth Quarter
2007 2006
Income (loss) from operations, net of tax (1) $ (714) $ (3,582)
Gain (loss) on sales, net of tax (2) (475) 9,261
Total $ (1,189) $ 5,679
(1) The fourth quarter of 2006 included a charge of approximately $3 million, net of tax, for severance and related expenses.
(2) In the fourth quarter of 2006, the Company recorded a pretax gain on the sale of the Boston station of $41 million which resulted in an after-tax gain
of $9 million. The pretax gain included $45 million of allocated television group goodwill, most of which is not deductible for income tax purposes.
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4. TRIBUNE COMPANY
FULL YEAR RESULTS OF OPERATIONS
(In thousands)
FULL YEAR (A)
%
2007 2006 Change
OPERATING REVENUES $ 5,062,984 $ 5,443,564 (7.0)
OPERATING EXPENSES (B) 4,429,067 4,358,803 1.6
OPERATING PROFIT (C) 633,917 1,084,761 (41.6)
Net Income on Equity Investments (D) 100,219 80,773 24.1
Interest and Dividend Income 21,827 14,145 54.3
Interest Expense (581,640) (273,902) 112.4
Non-Operating Items (E) (137,219) 102,969 NM
Income from Continuing Operations Before Income Taxes 37,104 1,008,746 (96.3)
Income Taxes (E) 18,234 (347,573) NM
Income from Continuing Operations 55,338 661,173 (91.6)
Income (Loss) from Discontinued Operations, net of tax (F) 31,607 (67,178) NM
NET INCOME $ 86,945 $ 593,995 (85.4)
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5. (A) 2007 full year: Jan. 1, 2007 to Dec. 30, 2007. (52 weeks)
2006 full year: Dec. 26, 2005 to Dec. 31, 2006. (53 weeks)
(B) Operating expenses for 2007 included a $130 million non-cash impairment charge to write-down the Company's masthead intangible assets
to fair value, a $64 million charge for accelerated stock-based compensation expense and certain one-time compensation payments
resulting from the completion of the Company's going-private transaction in December 2007, severance and related charges of $55 million for
the elimination of approximately 700 positions, a $24 million charge to write-off equipment at the previously closed Los Angeles Times
San Fernando Valley facility, a $16 million charge related to the Company's new management equity incentive plan, a $6 million charge for the
write-down of Tribune Entertainment program assets, and a $3 million charge to increase the accrual for anticipated advertiser claims at Newsday.
Operating expenses for 2006 included a charge of $20 million for severance and other payments associated with the new union contracts at
Newsday , a charge of $8 million for the elimination of approximately 350 positions, a charge of $4 million for the disposition of a press at the
Los Angeles Times San Fernando Valley printing facility, a gain of $7 million from the sale of the corporate airplane, and a gain of $3 million
from a real property sale at Publishing.
(C) Operating profit excludes interest and dividend income, interest expense, equity income and losses, non-operating items and income taxes.
(D) Net income on equity investments for the full year 2006 included the Company's $5.9 million share of a one-time favorable income tax adjustment at
CareerBuilder.
(E) The full year 2007 included the following non-operating items:
Pretax After-tax
Gain (Loss) Gain (Loss)
Loss on derivatives and related investments (1) $ (96,806) $ (59,051)
Strategic transaction expenses (2) (85,131) (77,184)
Gain on TMCT transactions (3) 8,003 4,882
Gain on other investment transactions (4) 31,578 5,465
Other, net 5,137 1,183
Income tax adjustments (5) - 90,704
Total non-operating items $ (137,219) $ (34,001)
The full year 2006 included the following non-operating items:
Pretax After-tax
Gain (Loss) Gain (Loss)
Gain on derivatives and related investments (1) $ 11,088 $ 6,764
Strategic transaction expenses (2) (3,466) (2,520)
Gain on TMCT transactions, net (3) 59,596 47,988
Gain on other investment transactions, net (6) 36,732 22,339
Other, net (981) 1,476
Income tax adjustments (7) - 33,563
Total non-operating items $ 102,969 $ 109,610
(1) Gain (loss) on derivatives and related investments represents primarily the net change in fair values of the derivative component of the Company's
PHONES and the related Time Warner shares.
(2) Includes expenses related to the Company's strategic review and going-private transaction completed in December 2007.
(3) The 2007 gain relates to the redemption of the Company's remaining interest in TMCT, LLC and TMCT II, LLC in September 2007. The 2006
gain relates to the restructuring of TMCT, LLC and TMCT II, LLC in September 2006.
(4) Approximately $28 million of the 2007 net pretax gain resulted from the restructuring of certain investments established in 1998 when
Times Mirror disposed of its Matthew Bender and Mosby subsidiaries. As a result of the restructuring, the Company will not realize $25 million
of deferred income tax assets relating to the tax credits generated by its low income housing investments. Accordingly, the Company increased
its fourth quarter 2007 consolidated income tax expense by $25 million to write-off these deferred income tax assets. The write-off reduced the
gain to $3 million after taxes.
(5) On Oct. 1, 2007, the Company announced that it had finalized the settlement of its appeal of the 2005 Tax Court decision disallowing the
tax-free reorganizations of Matthew Bender and Mosby, former subsidiaries of Times Mirror. As a result of the settlement, the Company received
refunds of federal income taxes and interest of $4 million on Sept. 26, 2007 and $340 million on Oct. 1, 2007. After consideration of income taxes
on the interest received, the net cash proceeds totaled approximately $286 million. These refunds, together with related state income tax benefits
of $29 million, were accounted for as a $91 million reduction in third quarter income tax expense and a $224 million reduction in goodwill recorded
on the Company's balance sheet.
(6) The 2006 gain on other investment transactions consisted primarily of the gain on sale of 2.8 million shares of Time Warner stock unrelated to
the PHONES and a gain on the sale of the Company's investment in BrassRing.
(7) In 2006, the Company recorded a favorable $34 million income tax expense adjustment, most of which related to the Company's PHONES
as a result of reaching an agreement with the Internal Revenue Service appeals office pertaining to the deduction of interest expense on
the PHONES.
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6. (F) During the third quarter of 2007, the Company entered into negotiations to sell the stock of one of its subsidiaries, EZ Buy and EZ Sell Recycler
Corporation (quot;Recyclerquot;). Recycler publishes a collection of free classified newspapers in Southern California. The sale of Recycler closed on
Oct. 17, 2007. In February 2007, the Company announced an agreement to sell the New York edition of Hoy , the Company's Spanish-language daily
newspaper (quot;Hoy, New Yorkquot;). The sale of Hoy , New York closed in May, 2007. In March 2007. the Company announced its intentions to
sell its Southern Connecticut Newspapers—The Advocate (Stamford) and Greenwich Time (collectively quot;SCNIquot;). The sale of SCNI closed on
November 1, 2007. In June 2006, the Company announced agreements to sell its Atlanta and Albany television stations. The sale of Atlanta
closed in August 2006. In September 2006, the Company announced an agreement to sell its Boston television station. The sales of Albany and
Boston closed in December 2006. Operating results for these business units are reported as discontinued operations. Income (loss) from
discontinued operations for the full year included the following:
Full Year
2007 2006
Income (loss) from operations, net of tax (1) $ (1,676) $ 1,095
Gain (loss) on sales, net of tax (2)(3) 33,283 (68,273)
Total $ 31,607 $ (67,178)
(1) The full year 2006 included a charge of approximately $4 million, net of tax, for severance and related costs.
(2) In the first quarter of 2007, the Company recorded an after-tax loss of $33 million to write down the SCNI net assets to estimated fair value, less
costs to sell. The Company recorded a favorable $3 million after-tax adjustment to the expected SCNI loss in the third quarter of 2007. In the
third quarter of 2007, the Company recorded a $1 million pretax loss on the sale of Recycler. Due to the Company's high tax basis in the stock
of Recycler, the sale generated a significantly higher capital loss for income tax purposes. As a result, the Company recorded a $65 million
tax benefit in the third quarter of 2007, resulting in an after-tax gain of $64 million.
(3) In conjunction with the sales of the Altanta and Albany stations, the Company recorded in the second quarter of 2006 a pretax loss of $90 million
to write down the Atlanta and Albany net assets to estimated fair value, less costs to sell. The Company subsequently reduced the pretax
loss on the sales of the Atlanta and Albany stations during the third quarter of 2006 by $1 million. In the fourth quarter of 2006, the Company
recorded a pretax gain of $41 million for the sale of the Boston station. Income taxes for 2006 included an income tax benefit of only $12 million
related to the $89 million pretax loss on the Atlanta and Albany stations. The pretax loss included $80 million of allocated television group
goodwill, most of which is not tax deductible. Income taxes for 2006 also included a tax expense of $32 million related to the $41 million pretax gain
on the sale of the Boston station. The pretax gain included $45 million of allocated television group goodwill, most of which is not
deductible for income tax purposes.
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8. (A) The Company uses cash operating expenses to evaluate internal performance. The Company has presented cash operating expenses because it is a common
measure used by rating agencies, lenders and financial analysts. Cash operating expense is not a measure of financial performance under generally accepted
accounting principles (quot;GAAPquot;) and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with
GAAP.
Following is a reconciliation of operating expenses to cash operating expenses for the fourth quarter of 2007:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating expenses $ 949,300 $ 245,938 $ 46,715 $ 1,241,953
Less: depreciation and amortization expense 43,941 12,889 252 57,082
Less: write-down of intangible assets 130,000 - - 130,000
Cash operating expenses $ 775,359 $ 233,049 $ 46,463 $ 1,054,871
Following is a reconciliation of operating expenses to cash operating expenses for the fourth quarter of 2006:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating expenses $ 866,169 $ 249,717 $ 7,611 $ 1,123,497
Less: depreciation and amortization expense 45,012 13,457 339 58,808
Cash operating expenses $ 821,157 $ 236,260 $ 7,272 $ 1,064,689
Following is a reconciliation of operating expenses to cash operating expenses for the full year 2007:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating expenses $ 3,296,397 $ 1,041,053 $ 91,617 $ 4,429,067
Less: depreciation and amortization expense 175,915 51,071 1,084 228,070
Less: write-down of intangible assets 130,000 - - 130,000
Cash operating expenses $ 2,990,482 $ 989,982 $ 90,533 $ 4,070,997
Following is a reconciliation of operating expenses to cash operating expenses for the full year 2006:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating expenses $ 3,269,478 $ 1,033,613 $ 55,712 $ 4,358,803
Less: depreciation and amortization expense 171,675 51,370 1,380 224,425
Cash operating expenses $ 3,097,803 $ 982,243 $ 54,332 $ 4,134,378
(B) Cash operating expenses for the fourth quarter and full year 2007 included severance and related charges of $23 million ($13 million at corporate
and $10 million at publishing) and $55 million ($40 million at publishing and $15 million at corporate), respectively. Cash operating expenses for
both the fourth quarter and full year 2007 included a $64 million charge ($33 million at publishing, $19 million at corporate, and $12 million
at broadcasting and entertainment) for accelerated stock-based compensation expense and certain one-time compensation payments resulting
from the completion of the Company's going-private transaction in December 2007, a $16 million charge ($7.3 million at publishing, $5.3 million
at corporate, and $3.0 million at broadcasting and entertainment) related to the Company's new management equity incentive plan,
a $6 million charge for the write-down of program assets at Tribune Entertainment, and a $3 million charge to increase the accrual
for anticipated advertiser claims at Newsda y. Publishing cash operating expenses for the full year 2007 also included a $24 million
charge for the write-off of Los Angeles Times plant equipment related to the previously closed San Fernando Valley facility.
Publishing cash operating expenses for the fourth quarter and full year 2006 included severance charges of $6 million and $8 million, respectively, and a
$4 million charge for the disposition of a press from the Los Angeles Times San Fernando Valley printing facility. Publishing cash operating expenses
for the full year 2006 also included a charge of $20 million for severance and other payments associated with the new union contracts at Newsday and a
gain of $3 million related to a real property sale. Corporate cash operating expenses for both the fourth quarter and full year 2006 included a gain of
$7 million related to the sale of the corporate airplane.
(C) Operating cash flow is defined as operating profit before depreciation, amortization and write-down of intangible assets. The Company uses operating cash flow
along with operating profit and other measures to evaluate the financial performance of the Company's business segments. The Company has presented operating
cash flow because it is a common alternative measure of financial performance used by rating agencies, lenders and financial analysts. These groups use operating
cash flow along with other measures as a way to estimate the value of a company. The Company's definition of operating cash flow may not be consistent with
that of other companies. Operating cash flow does not represent cash provided by operating activities as reflected in the Company's consolidated statements of
cash flows, is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
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9. (D) Operating profit for each segment excludes interest and dividend income, interest expense, equity income and losses, non-operating items and
income taxes.
Following is a reconciliation of operating profit (loss) to operating cash flow for the fourth quarter of 2007:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating profit (loss) $ 3,019 $ 70,438 $ (46,715) $ 26,742
Add back: depreciation and amortization expense 43,941 12,889 252 57,082
Add back: write-down of intangible assets 130,000 - - 130,000
Operating cash flow $ 176,960 $ 83,327 $ (46,463) $ 213,824
Following is a reconciliation of operating profit (loss) to operating cash flow for the fourth quarter of 2006:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating profit (loss) $ 226,442 $ 105,886 $ (7,611) $ 324,717
Add back: depreciation and amortization expense 45,012 13,457 339 58,808
Operating cash flow $ 271,454 $ 119,343 $ (7,272) $ 383,525
Following is a reconciliation of operating profit (loss) to operating cash flow for the full year 2007:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating profit (loss) $ 368,193 $ 357,341 $ (91,617) $ 633,917
Add back: depreciation and amortization expense 175,915 51,071 1,084 228,070
Add back: write-down of intangible assets 130,000 - - 130,000
Operating cash flow $ 674,108 $ 408,412 $ (90,533) $ 991,987
Following is a reconciliation of operating profit (loss) to operating cash flow for the full year 2006:
Broadcasting and
Publishing Entertainment Corporate Consolidated
Operating profit (loss) $ 748,940 $ 391,533 $ (55,712) $ 1,084,761
Add back: depreciation and amortization expense 171,675 51,370 1,380 224,425
Operating cash flow $ 920,615 $ 442,903 $ (54,332) $ 1,309,186
(E) The $130 million non-cash impairment charge for the fourth quarter and full year 2007 related to a write-down of the Company’s masthead intangible assets
to fair value.
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