SEC Filings

10-Q
TEGNA INC filed this Form 10-Q on 11/08/2018
Entire Document
 



Depreciation Expense

Depreciation expense decreased less than $1.0 million in both the third quarter and first nine months 2018 compared to the same periods in 2017. The decreases were primarily due to assets becoming fully depreciated, partially offset by incremental depreciation expense related to our acquisition of KFMB.

Amortization Expense

Amortization expense increased $2.7 million, or 49%, in the third quarter of 2018 and $6.6 million or 41% in the first nine months of 2018 compared to the same periods in 2017. The increases were primarily due to incremental amortization expense resulting from our acquisition of KFMB.

Asset Impairment and Other (Gains) Charges

We had $3.0 million of net asset impairment and other gains in the third quarter of 2018 compared to charges of $7.6 million in the third quarter of 2017. The 2018 net gains primarily consist of $3.0 million of gains due to reimbursements received from the Federal Communications Commission (FCC) for required spectrum repacking. The 2017 charges related to damages to our stations caused by hurricanes Harvey and Irma. In particular, Hurricane Harvey caused significant damage to our Houston television station (KHOU); as a result, we recognized $10.2 million in non-cash charges, writing off destroyed equipment and recording an impairment to the value of the building. In addition, we incurred $8.4 million in cash expenses related to repairing the studio and office and providing for additional staffing and operational needs to keep the stations operating during and immediately following these weather emergencies. Partially offsetting these expenses, we received initial insurance proceeds of $11.0 million ($5.0 million was received in September 2017 and $6.0 million was received in October 2017). 

In the first nine months of 2018, we recognized net gains of $9.3 million, compared to $11.1 million of charges recognized in the same period in 2017. The 2018 net gains primarily consist of a gain recognized on the sale of real estate in Houston and gains due to reimbursements received from the FCC for required spectrum repacking. The 2017 charges primarily consisted of net $7.6 million in expenses related to Hurricane Harvey, $1.4 million related to the consolidation of office space at corporate headquarters and at our DMS business, and $2.2 million of non-cash building-related impairment charge incurred by our broadcast station. 

Operating Income

Our operating income increased $37.4 million, or 32%, in the third quarter of 2018 compared to the same period in 2017. The increase was driven by the changes in revenue and expenses discussed above. Revenue increased by $74.7 million, or 16%, in the third quarter. As a result, our consolidated operating margins improved to 29% in the third quarter of 2018 compared to 25% in the third quarter of 2017.

Our operating income increased $55.4 million, or 14%, in the first nine months of 2018 compared to the same period in 2017. The increase was driven by the changes in revenue (increased 11%) and expenses (increased 9%) discussed above. As a result, our consolidated operating margin remained consistent at 28% for the first nine months of both 2018 and 2017.

Non-Operating Expenses

Non-operating expenses decreased $7.0 million, or 13%, in the third quarter of 2018 compared to the same period in 2017. The decrease was primarily due to a decline in interest expense of $3.6 million in 2018 driven by lower average debt outstanding, partially offset by slightly higher interest rates. The total average outstanding debt was $3.08 billion for the third quarter of 2018, compared to $3.38 billion in the same period of 2017. The weighted average interest rate on total outstanding debt was 5.89% for the third quarter of 2018, compared to 5.75% in the same period of 2017. The decrease was also attributable to a decline in transaction costs of $2.3 million in 2018 as compared to 2017. Pension expense was also $1.6 million lower due to strong investment returns achieved.

In the first nine months of 2018, non-operating expenses decreased $47.5 million or 25% compared to the same period in 2017. The decrease was partially due to a decline in interest expense of $17.1 million in the first nine months of 2018 compared to the same period in 2017 driven by lower average debt outstanding, partially offset by slightly higher interest rates. The total average outstanding debt was $3.13 billion during the first nine months in 2018 compared to $3.75 billion in 2017. The weighted average interest rate on total outstanding debt was 5.87% for the first nine months of 2018 compared to 5.51% for the same period of 2017. The decrease was also partially due to our $16.8 million gain from our investment in CareerBuilder due to the sale of its subsidiary, Economic Modeling, LLC, in the second quarter of 2018 and the absence of impairment charges recognized in 2017 of $9.3 million (related to the write-off of a note receivable from a former equity investment and impairment on our former investment in Gannett stock). Also contributing to the decrease was a decline in transaction expenses of $6.5 million in 2018.


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