Tribune Company News
Tribune Reports 2007 Fourth Quarter and Full Year Results
"Despite the continued difficult operating environment and weakness in print revenue, we see significant opportunity within Tribune Company," said
The declines in both the fourth quarter and full year 2007 operating results were largely due to lower revenues, higher interest expense and the net effect of the items described below.
Fourth quarter 2007 and 2006 results from continuing operations included the following:
— A pretax non-cash impairment charge of $130 million ($79 million after taxes) in the 2007 quarter to write-down the Company's masthead intangible assets to fair value. — A pretax charge of $64 million ($42 million after taxes) in the 2007 quarter for accelerated stock-based compensation expense and certain one-time compensation payments resulting from the completion of the Company's going-private transaction. — A pretax charge of $23 million ($16 million after taxes) for severance and related charges in the 2007 quarter compared with a pretax charge of $6 million ($4 million after taxes) in the 2006 quarter. — A pretax charge of $16 million ($10 million after taxes) in the 2007 quarter related to the Company's new management equity incentive plan. — A pretax charge of $6 million ($4 million after taxes) in the 2007 quarter for the write-down of Tribune Entertainment program assets. — A pretax charge of $3 million ($2 million after taxes) in the 2007 quarter to increase the accrual for anticipated advertiser claims at Newsday. — A pretax charge of $4 million ($2 million after taxes) in the 2006 quarter for the disposition of a press related to the shutdown of the Los Angeles Times San Fernando Valley printing facility. — A pretax gain of $7 million ($4 million after taxes) in the 2006 quarter related to the sale of the corporate airplane. — An after-tax non-operating gain of $11 million in 2007 compared with an after-tax non-operating gain of $69 million in 2006.
Full year 2007 and 2006 results from continuing operations included the following:
— A pretax non-cash impairment charge of $130 million ($79 million after taxes) in 2007 to write-down the Company's masthead intangible assets to fair value. — A pretax charge of $64 million ($42 million after taxes) in 2007 for accelerated stock-based compensation expense and certain one-time compensation payments resulting from the completion of the Company's going-private transaction. — A pretax charge of $55 million ($36 million after taxes) for severance and related charges in 2007 compared with a pretax charge of $8 million ($6 million after taxes) in 2006. — A pretax charge of $24 million ($15 million after taxes) in 2007 to write-off equipment at the previously closed Los Angeles Times San Fernando Valley printing facility, compared to $4 million ($2 million after taxes) in 2006 for the disposition of a press at the same facility. — A pretax charge of $16 million ($10 million after taxes) in 2007 related to the Company's new management equity incentive plan. — A pretax charge of $6 million ($4 million after taxes) in 2007 for the write-down of Tribune Entertainment program assets. — A pretax charge of $3 million ($2 million after taxes) in 2007 to increase the accrual for anticipated advertiser claims at Newsday. — A pretax charge of $20 million ($11 million after taxes) in 2006 for severance and other payments associated with the new union contracts at Newsday. — A pretax gain of $7 million ($4 million after taxes) in 2006 related to the sale of the corporate airplane. — A pretax gain of $3 million ($2 million after taxes) in 2006 related to a real property sale in publishing. — A pretax gain of $6 million ($4 million after taxes) included in equity income in 2006 related to the Company's share of a one-time favorable income tax adjustment recorded at CareerBuilder. — An after-tax non-operating loss of $34 million in 2007 compared with an after-tax non-operating gain of $110 million in 2006. FOURTH QUARTER 2007 RESULTS FROM CONTINUING OPERATIONS(1) (Compared to Fourth Quarter 2006) (13 weeks in 2007 vs. 14 weeks in 2006)
CONSOLIDATED
Tribune's 2007 fourth quarter operating revenues decreased 12 percent, or
Tribune's fourth quarter included 13 weeks in 2007 compared to 14 weeks in 2006. Without the additional week in 2006, fourth quarter 2007 operating revenues decreased 7 percent, cash operating expenses increased 5 percent, operating cash flow decreased 41 percent, and operating profit decreased 91 percent.
PUBLISHING
Publishing operating revenues for the fourth quarter of 2007 were
Without the additional week in 2006, publishing fourth quarter 2007 operating revenues decreased 7 percent, cash operating expenses were flat, operating cash flow decreased 30 percent, and operating profit decreased 99 percent.
Publishing operating profit in the 2007 fourth quarter included a non-cash impairment charge of
Publishing operating profit in the 2006 fourth quarter included
Management Discussion — Advertising revenues decreased 15 percent, or $132 million, for the quarter. Without the additional week in 2006, advertising revenues were down approximately 9 percent. — Retail advertising revenues decreased 10 percent for the quarter primarily due to decreases in the department stores, electronics, hardware/home improvement, amusement, and furniture/home improvement categories. Preprint revenues also decreased 8 percent. — National advertising revenues decreased 11 percent for the quarter primarily due to decreases in the transportation, telecom/wireless, technology and health care categories, partially offset by an increase in the financial category. — Classified advertising revenues decreased 25 percent in the quarter due to decreases in real estate, help wanted and automotive of 34 percent, 28 percent and 13 percent, respectively. — Interactive revenues, which are included in the above categories, increased 6 percent to $63 million. — Circulation revenues decreased 12 percent, or $17 million, for the quarter. Excluding the additional week in 2006, circulation revenues were down approximately 5 percent. — Individually paid circulation (home delivery plus single copy) for Tribune's 9 metro newspapers averaged 2.6 million copies daily (Mon-Fri) and 3.9 million copies Sunday, down approximately 2 percent and 5 percent, respectively, from the fourth quarter of 2006. — Total net paid circulation averaged 2.7 million copies daily (Mon-Fri) and 3.9 million copies Sunday, down approximately 2 percent and 5 percent, respectively, from the fourth quarter of 2006. — Cash operating expenses decreased 6 percent, or $46 million. For the fourth quarter of 2007, cash operating expenses included $33 million of accelerated stock-based compensation expense and certain one-time compensation payments resulting from the completion of the Company's going-private transaction, a charge of $10 million for severance and related expenses, a charge of $7 million related to the Company's new management equity incentive plan, and a $3 million charge to increase the accrual for anticipated advertiser claims at Newsday. For the fourth quarter of 2006, cash operating expenses included $6 million of severance charges and a $4 million charge for the disposition of a press from the Los Angeles Times San Fernando Valley printing facility. The 2007 charges were more than offset by a decrease in newsprint and ink expense, lower compensation expense primarily due to the impact of position eliminations in 2007 and 2006, and lower other cash expenses.
BROADCASTING AND ENTERTAINMENT
Broadcasting and entertainment operating revenues for the 2007 fourth quarter decreased 11 percent to
Without the additional week in 2006, broadcasting and entertainment fourth quarter 2007 operating revenues decreased 7 percent, cash operating expenses increased 4 percent, operating cash flow decreased 27 percent, and operating profit decreased 30 percent.
Broadcasting and entertainment operating profit in the 2007 fourth quarter included
For the fourth quarter of 2007, television revenues decreased 9 percent to
Management Discussion — Station revenues in New York increased but were offset by declines in most other markets. On a group basis, advertising revenues decreased due to a significant decline in political advertising, as well as decreases in the movies and retail categories, partially offset by increases in the telecom, food and financial categories. — Television cash operating expenses remained flat at $206 million. For the fourth quarter of 2007, cash operating expenses included $11 million of accelerated stock-based compensation expense and certain one-time compensation payments resulting from the completion of the Company's going-private transaction and a charge of $3 million related to the Company's new management equity incentive plan. These expenses were offset by lower programming and other cash expenses. — Radio/entertainment revenues primarily reflect lower revenues for the Chicago Cubs due to fewer home games in the quarter.
EQUITY RESULTS
Net equity income was
NON-OPERATING ITEMS
In the 2007 fourth quarter, Tribune recorded a pretax non-operating gain of
In the 2006 fourth quarter, Tribune recorded a pretax non-operating gain of
FULL YEAR RESULTS FROM CONTINUING OPERATIONS (Compared to 2006) (52 weeks in 2007 vs. 53 weeks in 2006)
CONSOLIDATED
For 2007, operating revenues decreased 7 percent, or
Tribune's fiscal year was comprised of 52 weeks in 2007 compared to 53 weeks in 2006. Without the additional week in 2006, operating revenues decreased 6 percent, cash operating expenses were flat, operating cash flow decreased 23 percent, and operating profit decreased 40 percent.
PUBLISHING
For 2007, operating revenues for publishing decreased 9 percent, or
Without the additional week in 2006, publishing operating revenues decreased 7 percent, cash operating expenses decreased 2 percent, operating cash flow decreased 25 percent, and operating profit decreased 50 percent.
Publishing operating profit in 2007 included a non-cash impairment charge of
BROADCASTING AND ENTERTAINMENT
For 2007, full year operating revenues for broadcasting and entertainment decreased 2 percent to
Without the additional week in 2006, broadcasting and entertainment operating revenues decreased 1 percent, cash operating expenses increased 2 percent, operating cash flow decreased 7 percent, and operating profit decreased 7 percent.
Broadcasting and entertainment operating profit in 2007 included
For the full year 2007, operating revenues for television decreased 4 percent to
EQUITY RESULTS
Equity income was
NON-OPERATING ITEMS
For the full year 2007, Tribune recorded a pretax non-operating loss of
For the full year 2006, Tribune recorded a pretax non-operating gain of
ADDITIONAL FINANCIAL DETAILS
Corporate expenses for the 2007 fourth quarter increased to
In
Interest expense for the 2007 fourth quarter increased to
Capital expenditures were
DISCONTINUED OPERATIONS
On
— The Advocate (Stamford) and Greenwich Time (collectively "SCNI") to Gannett Co., Inc. On
In
OTHER INFORMATION
During the week of
Forward-Looking Statements
This press release contains certain comments or forward-looking statements that are based largely on the Company's current expectations and are subject to certain risks, trends and uncertainties. You can identify these and other forward-looking statements by the use of such words as "will," "expect," "plans," "believes," "estimates," "intend," "continue," or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Actual results could differ materially from the expectations expressed in these statements. Factors that could cause actual results to differ include risks and other factors described in Tribune's publicly available reports filed with the SEC, which contain a discussion of various factors that may affect Tribune's business or financial results. Such risks, trends and uncertainties, which in some instances are beyond the Company's control, include: our ability to generate sufficient cash to service the significant debt levels and other financial obligations as a result of the Company's going-private transaction; potential impacts to operations and liquidity as a result of restrictive covenants under our senior credit facilities; our dependency on dividends and distributions from our subsidiaries to make payments on our indebtedness; increased interest rate risk due to variable rate indebtedness; our ability to maintain subchapter S corporation status; changes in advertising demand, circulation levels and audience shares; regulatory and judicial rulings; availability and cost of broadcast rights; competition and other economic conditions; changes in newsprint prices; changes in accounting standards; adverse results from litigation, governmental investigations or tax related proceedings or audits; the effect of labor strikes, lock-outs and negotiations; the effect of acquisitions, investments and divestitures; the Company's reliance on third-party vendors for various services; and other events beyond the Company's control that may result in unexpected adverse operating results. These factors could cause actual future performance to differ materially from current expectations. Tribune is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet service providers. This press release is being furnished to the SEC through a Form 8-K. The Company's next 10-K report to be filed with the SEC may contain updates to the information included in this release.
TRIBUNE is America's largest employee-owned media company, operating businesses in publishing, interactive and broadcasting. In publishing, Tribune's leading daily newspapers include the Los
(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, amortization and write-down of intangible assets. "Cash operating expenses" are defined as operating expenses before depreciation, amortization and write-down of intangible assets. 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. 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) ========== ========== (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 from 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. (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 ("Recycler"). 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 ("Hoy, New York"). 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 "SCNI"). 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, (475) 9,261 net of tax (2) ————- ————- 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. 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) ========== ========== (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, net (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 investments 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. (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 ("Recycler"). 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 ("Hoy, New York"). 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 "SCNI"). The sale of SCNI closed on Nov. 1, 2007. In June 2006, the 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 Atlanta 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. TRIBUNE COMPANY BUSINESS SEGMENT DATA (Unaudited) (In thousands) FOURTH QUARTER ———————————————— % 2007 2006 Change PUBLISHING ————— ————— ——— Operating Revenues $ 952,319 $ 1,092,611 (12.8) Cash Operating Expenses(A)(B) (775,359) (821,157) (5.6) ————— ————— Operating Cash Flow(C)(D) 176,960 271,454 (34.8) Depreciation and Amortization Expense (43,941) (45,012) (2.4) Write-down of Intangible Assets (E) (130,000) - NM ————— ————— Total Operating Profit(D) $3,019 $ 226,442 (98.7) ========== ========== BROADCASTING AND ENTERTAINMENT Operating Revenues Television $ 296,559 $ 325,182 (8.8) Radio/Entertainment 19,817 30,421 (34.9) ————— ————— Total Operating Revenues 316,376 355,603 (11.0) Cash Operating Expenses(A)(B) Television (206,135) (206,104) 0.0 Radio/Entertainment (26,914) (30,156) (10.8) ————— ————— Total Cash Operating Expenses (233,049) (236,260) (1.4) Operating Cash Flow(C)(D) Television 90,424 119,078 (24.1) Radio/Entertainment (7,097) 265 NM ————— ————— Total Operating Cash Flow 83,327 119,343 (30.2) Depreciation and Amortization Expense Television (11,338) (11,664) (2.8) Radio/Entertainment (1,551) (1,793) (13.5) ————— ————— Total Depreciation and Amortization Expense (12,889) (13,457) (4.2) Operating Profit(D) Television 79,086 107,414 (26.4) Radio/Entertainment (8,648) (1,528) NM ————— ————— Total Operating Profit (D) $ 70,438 $ 105,886 (33.5) ========== ========== CORPORATE EXPENSES Operating Cash Flow(C)(D) $(46,463) $ (7,272) NM Depreciation and Amortization Expense (252) (339) (25.7) ————— ————— Total Operating Loss(D) $(46,715) $(7,611) NM ========== ========== CONSOLIDATED Operating Revenues $1,268,695 $1,448,214 (12.4) Cash Operating Expenses(A)(B) (1,054,871) (1,064,689) (0.9) ————— ————— Operating Cash Flow(C)(D) 213,824 383,525 (44.2) Depreciation and Amortization Expense (57,082) (58,808) (2.9) Write-down of Intangible Assets (E) (130,000) - NM ————— ————— Total Operating Profit(D) $26,742 $324,717 (91.8) ========== ========== (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 ("GAAP") 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: Publishing B&E Corporate Consol. ————— ———— ————— ————- 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: Publishing B&E Corporate Consol. ————— ———— ————— ————- 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 ========== ======== ========== ========= (B) Cash operating expenses for the fourth quarter of 2007 included a $64 million charge ($33 million for publishing, $19 million for corporate and $12 million for broadcasting and entertainment) for accelerated stock-based compensation expense and certain one-time payments resulting from the completion of the Company's going-private transaction in December 2007, severance and related charges of $23 million ($13 million at publishing and $10 million at corporate), 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 Newsday. Publishing cash operating expenses for the fourth quarter of 2006 included severance charges of $6 million and a charge of $4 million for the disposition of a press from the Los Angeles Times San Fernando Valley printing facility. Corporate cash operating expenses for the fourth quarter of 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. (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: Publishing B&E Corporate Consol. ————— ————- ————- ————- Operating profit(loss) $ 3,019 $ 70,438 $ (46,715)$ 26,742
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