News Release

TEGNA Inc. Reports Record 2016 Fourth Quarter and Full Year Results

Highlights for the fourth quarter include the following:

  • GAAP earnings per diluted share from continuing operations of $0.61. Non-GAAP earnings per diluted share from continuing operations of $0.74, a 40 percent increase compared to the fourth quarter of 2015
  • Total company revenues were 10 percent higher driven by strong Media Segment results
  • Media Segment revenues were 14 percent higher and reached a record $529 million; adjusted for three fewer days in the fourth quarter this year, grew 17 percent year-over-year, reflecting substantial increases in political advertising and retransmission revenues
  • Net income from continuing operations was $133 million; Adjusted EBITDA totaled $350 million, a 15 percent increase year-over-year
  • Net cash flow from operating activities totaled $229 million; free cash flow was $202 million

Highlights for the full year include the following:

  • GAAP earnings per diluted share from continuing operations of $2.02 compared to $1.56 per diluted share last year. Non-GAAP earnings per diluted share from continuing operations of $2.33, an increase of 62 percent year-over-year
  • Total company revenues were up 10 percent driven by record Media Segment results
  • Media Segment revenues of $1.9 billion were 15 percent higher reflecting strong political advertising and advertising related to the Summer Olympics as well as a substantial increase in retransmission revenue
  • Net income from continuing operations was $444 million; Adjusted EBITDA totaled $1.2 billion, a 17 percent increase year-over-year
  • Net cash flow from operating activities totaled $683 million; free cash flow was $589 million
  • Announced the intention to spin-off Cars.com, which is anticipated to occur in the first half of 2017, and commenced a strategic review of CareerBuilder

MCLEAN, Va.--(BUSINESS WIRE)--Feb. 27, 2017-- TEGNA Inc. (NYSE:TGNA) today reported GAAP earnings per diluted share from continuing operations of $0.61 for the fourth quarter of 2016. Non-GAAP earnings per diluted share were $0.74, a 39.6 percent increase compared to the fourth quarter of 2015.

Gracia Martore, president and chief executive officer, said, “2016 was a record year for TEGNA, capped by a strong fourth quarter despite a highly unusual presidential election season. Non-GAAP earnings per share were 40 percent higher than the fourth quarter of 2015 and increased 62 percent year-over-year. Total company revenues for both the quarter and the year were up 10 percent, boosted by record results across TEGNA Media. Higher retransmission revenues and political spending helped Media revenues grow 14 percent in the fourth quarter and reach a record level. While political spending on the presidential race was lower than predicted, TEGNA Media’s strong geographic footprint and increased non-presidential spending enabled the company to capture a large share of the overall broadcast political spend. Across TEGNA Digital, total revenues at Cars.com increased nearly five percent in the quarter thanks to the acquisition of DealerRater and an increase in display advertising revenues. CareerBuilder's revenue growth in the quarter were the best results of the year as the company continued its integration of two recent acquisitions, Aurico and Workterra. CareerBuilder also saw positive results in its resume database, employer services products and human capital software solutions.”

Martore continued, “We continue to make progress toward our planned spin-off of Cars.com and strategic review of CareerBuilder as we move ahead on evaluating strategic alternatives for the businesses. In every decision we make, we are driving the company forward and maximizing return for our investors. Our businesses remain strong and are well positioned for growth in 2017.”

FOURTH QUARTER
CONTINUING OPERATIONS

The following table summarizes the year-over-year changes in continuing operations for both GAAP and non-GAAP measures (in thousands).

                 
GAAP Non-GAAP

Fourth
Quarter Ended
Dec. 31, 2016

Fourth
Quarter Ended
Dec. 31, 2015

Fourth
Quarter Ended
Dec. 31, 2016

Fourth
Quarter Ended
Dec. 31, 2015

 
Operating revenue $ 887,416 $ 805,264 $ 887,416 $ 805,264
Operating expense 607,627   478,369   588,928   549,260
Operating income $ 279,789   $ 326,895   $ 298,488   $ 256,004
 

Net income from continuing operations attributable to TEGNA

$ 133,119 $ 155,942 $ 160,394 $ 119,334
 
See Table 3 for reconciliations between non-GAAP measures and the most directly comparable GAAP reported numbers.
 

Total company revenues increased 10.2 percent in the fourth quarter of 2016 compared to the fourth quarter of 2015 driven by revenue growth in both the Media Segment and Digital Segment.

On a non-GAAP basis, operating expenses were up 7.2 percent primarily due to higher Media Segment expenses. Corporate expenses in the fourth quarter of 2016 totaled $15.9 million. Excluding special items, corporate expenses were $14.3 million (see Table 4).

Reported operating income declined 14.4 percent compared to the fourth quarter in 2015 while on a non-GAAP basis, operating income was 16.6 percent higher. Net income from continuing operations attributable to TEGNA was 14.6 percent lower compared to the fourth quarter of 2015. On a non-GAAP basis, net income from continuing operations attributable to TEGNA was up 34.4 percent. Adjusted EBITDA (a non-GAAP measure detailed in Table 4) totaled $349.8 million, an increase of 15.0 percent compared to the fourth quarter in 2015. The Adjusted EBITDA margin in the quarter equaled 39.4 percent, 1.6 percentage points higher than the same quarter last year.

Special items in the fourth quarter of 2016 unfavorably impacted GAAP results by $0.13 per share due primarily to non-cash impairments, facility consolidation, severance and other expenses primarily related to the potential spin-off of Cars.com and strategic review of CareerBuilder (refer to Table 3 for a reconciliation of results on a GAAP and non-GAAP basis).

FOURTH QUARTER
TEGNA MEDIA

In the fourth quarter of 2015, we changed our financial reporting cycle to a calendar year-end, which resulted in our fourth quarter of 2016 having three fewer days than the same quarter in 2015. The extra days in the fourth quarter of 2015 contributed approximately $11 million to Media Segment revenues.

The following table summarizes the year-over-year changes in select Media Segment revenue categories (in thousands).

             
Fourth Quarter Ended
Dec. 31, 2016 Dec. 31, 2015 Percentage Change
Core (Local & National) (a) $ 254,088 $ 296,325 (14.3 %)
Political (a) 90,758 10,525 ****
Retransmission (b) 145,441 119,944 21.3 %
Online (a) 33,298 31,080 7.1 %
Other 5,532   4,359   26.9 %
Total $ 529,117   $ 462,233   14.5 %
 
(a) Amounts in 2015 have not been reduced for the three fewer days in 2016.
(b) Reverse compensation to networks is included as part of programming costs.
 

Media Segment revenues reached a record $529.1 million in the quarter, a 14.5 percent increase compared to the fourth quarter in 2015. Excluding the extra days in the fourth quarter last year, Media Segment revenues would have been up 17.3 percent. The growth was driven by an $80.2 million increase in political advertising and a $25.5 million increase in retransmission revenues. These increases were partially offset by a decline in core advertising due to the displacement effect of political advertising in the quarter. Excluding the extra days in the fourth quarter last year, core advertising revenues would have been approximately 11.0 percent lower reflecting, in part, political displacement.

Media Segment operating expenses were $292.6 million compared to $261.6 million in the fourth quarter of 2015. The increase was due primarily to higher programming fees and continued investment in growth initiatives. Operating income was $236.5 million, an increase of 17.9 percent compared to $200.7 million in the fourth quarter in 2015. On a non-GAAP basis, operating income in the quarter was 17.6 percent higher and totaled $243.7 million. Adjusted EBITDA was $261.2 million, an increase of 16.4 percent resulting in an Adjusted EBITDA margin of 49.4 percent in the quarter.

Based on current trends, we expect Media Segment revenue in the first quarter of 2017 to be flat to slightly above the first quarter of 2016. The year-over-year comparison will be unfavorably impacted by substantially lower political advertising revenue ($16 million in the first quarter of 2016) and the move of the Super Bowl to our 3 small FOX stations in 2017 from our 11 CBS stations in 2016. Excluding the unfavorable impact of the Super Bowl shift (approximately $9 million) and lower politically-related advertising, the percentage increase in Media Segment revenues is expected to be up in the mid-single digits in the first quarter of 2017 compared to the first quarter of 2016.

FOURTH QUARTER
TEGNA DIGITAL

Digital Segment revenues rose 4.5 percent in the fourth quarter reflecting $7.4 million in revenue growth at Cars.com and a $10.1 million revenue increase at CareerBuilder offset, in part, by the impact of the sale of the PointRoll business in November 2015.

Total revenues at Cars.com were 4.8 percent higher in the fourth quarter. Cars.com revenues sold directly by the company were up 7.5 percent driven by the acquisition of DealerRater and an increase in display advertising revenues and higher lead spending by auto manufacturers. Wholesale revenues (fees paid by newspaper affiliates) were 2.5 percent lower in the quarter compared to the fourth quarter in 2015.

CareerBuilder revenues grew 5.9 percent (6.9 percent on a constant currency basis) in the fourth quarter, a significant sequential improvement from the growth rate in the third quarter and the best quarterly revenue growth of the year. CareerBuilder results reflect continued growth in its resume database and employer services products and human capital software solutions as well as the acquisitions of Aurico and Workterra. Partially offsetting these increases was a decline in job site advertising.

Digital Segment operating expenses totaled $299.1 million, an increase of 3.5 percent. The increase reflects primarily the acquisitions of Aurico and Workterra and higher cost of sales in support of revenue growth at CareerBuilder, partially offset by the impact of the disposition of PointRoll. Digital Segment operating expenses on a non-GAAP basis were 4.2 percent higher compared to the fourth quarter in 2015.

Digital Segment operating income was $59.2 million. Excluding special items, non-GAAP operating income was $69.0 million, an increase of 5.6 percent compared to the fourth quarter in 2015. Adjusted EBITDA totaled $102.7 million resulting in an Adjusted EBITDA margin of 28.7 percent.

FOURTH QUARTER
NON-OPERATING AND CASH FLOW ITEMS

Interest expense totaled $56.6 million in the quarter, a decline of $10.2 million from $66.8 million in the fourth quarter of 2015, due to lower average debt outstanding and a lower average interest rate. On November 1, 2016, we opportunistically redeemed at par the remaining $70 million of 7.125 percent notes outstanding that were to mature in September 2018 generating a total net reduction of interest expense of approximately $5 million through the original maturity.

Other non-operating expense was $9.2 million, an increase of $3.0 million from the fourth quarter of 2015 reflecting primarily expenses associated with the anticipated spin-off of Cars.com and strategic review of CareerBuilder. Other non-operating income on a non-GAAP basis in the fourth quarter of 2016 was $1.9 million compared to $2.6 million in the fourth quarter of 2015.

Cash flow from operating activities for the fourth quarter of 2016 was $228.7 million. Free cash flow (a non-GAAP measure - Refer to Table 5) totaled $202.4 million for the quarter. Long-term debt outstanding was $4.0 billion and total cash was $76.9 million at the end of the quarter. During the quarter, we repurchased 497,621 shares of our outstanding stock for $11.0 million. Dividends paid in the quarter totaled $30.0 million. The effective tax rate in the quarter was 34.2 percent on a GAAP basis. On a non-GAAP basis, the effective tax rate was 30.7 percent reflecting the benefit of various tax planning initiatives and the tax benefit of restricted stock units which vested in the quarter.

FULL YEAR 2016
CONTINUING OPERATIONS

Total operating revenues for the full year were $3.34 billion, an increase of 9.5 percent compared to 2015 reflecting revenue increases in the Media Segment and the Digital Segment. Media Segment revenues increased 14.9 percent compared to 2015 to a record $1.9 billion driven by a $133.4 million increase in political spending, advertising related to the Summer Olympics of $55.9 million and a 29.7 percent increase in retransmission revenue. Adjusting for the change to a calendar fiscal year, Media Segment revenues were up approximately 16 percent. Digital Segment revenues were 2.8 percent higher reflecting revenue growth of 6.1 percent at Cars.com and 2.3 percent at CareerBuilder.

Operating expenses totaled $2.37 billion, an increase of 10.8 percent compared to 2015, reflecting higher expenses in the Media Segment and the Digital Segment and the gain on sale of the corporate headquarters in 2015 and offset partially by the absence of unallocated costs that impacted results in 2015. On a non-GAAP basis, operating expenses were up 5.0 percent to $2.31 billion primarily due to higher programming fees, expenses associated with revenue growth in the year and continued investment in growth initiatives at our Media Segment. Operating income totaled $972.1 million compared to $913.2 million in 2015. On a non-GAAP basis, operating income was 21.3 percent higher and totaled $1.03 billion while net income from continuing operations attributable to TEGNA was 54.7 percent higher.

Adjusted EBITDA was $1.23 billion in 2016 compared to $1.05 billion in 2015, an increase of 17.1 percent. The Adjusted EBITDA margin in 2016 was 36.9 percent, an increase of 2.3 percentage points from 34.6 percent in 2015.

As previously announced, the company will hold an earnings conference call at 10:00 a.m. E.T. today. The call can be accessed via a live webcast through the company's Investors website, investors.TEGNA.com, or listen-only conference lines. U.S. callers should dial 1-888-282-4591 and international callers should dial 1-719-325-2455 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 1551080. A replay of the conference call will be available under “Investor Relations” at www.TEGNA.com from Monday, February 27 at 2 p.m. (ET) to Monday, March 13 at 2 p.m. (ET). To access the replay, dial 888-203-1112 or 719-457-0820. The confirmation code for the replay is 1551080. Materials related to the call will be available through the Investor Relations section of the company's website Monday morning.

TEGNA Inc. (NYSE:TGNA) is comprised of a dynamic portfolio of media and digital businesses that provide content that matters and brands that deliver. TEGNA offers highly relevant, useful and smart content, when and how people need it, to make the best decisions possible. TEGNA Media includes 46 television stations (including those serviced by TEGNA) and is the largest independent station group of major network affiliates in the top 25 markets, reaching approximately one-third of all television households nationwide. TEGNA Digital is comprised of Cars.com, a leading online destination for automotive consumers, CareerBuilder, a global leader in human capital solutions, and G/O Digital, a customized local digital marketing company. For more information, visit www.tegna.com.

Certain statements in this press release may be forward looking in nature or “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The forward looking statements contained in this press release are subject to a number of risks, trends and uncertainties that could cause actual performance to differ materially from these forward looking statements. A number of those risks, trends and uncertainties are discussed in the company's SEC reports, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward looking statements in this press release should be evaluated in light of these important risk factors.

TEGNA is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this press release by wire services, Internet service providers or other media.

             
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Continuing Operations

TEGNA Inc.

Unaudited, in thousands (except per share amounts)

 
Table No. 1
Fourth
Quarter Ended
Dec. 31, 2016
Fourth
Quarter Ended
Dec. 31, 2015

% Increase
(Decrease)

 
Operating revenues:
Media $ 529,117 $ 462,233 14.5
Digital 358,299   343,031   4.5  
Total 887,416   805,264   10.2  
 
Operating expenses:
Cost of revenues and operating expenses, exclusive of depreciation 273,874 232,555 17.8
Selling, general and administrative expenses, exclusive of depreciation 269,276 273,571 (1.6 )
Depreciation 22,037 20,051 9.9
Amortization of intangible assets 29,256 28,128 4.0
Asset impairment and facility consolidation charges (gains) 13,184   (75,936 ) ****  
Total 607,627   478,369   27.0  
Operating income 279,789   326,895   (14.4 )
 
Non-operating expense:
Equity loss in unconsolidated investments, net (640 ) (941 ) (32.0 )
Interest expense (56,552 ) (66,758 ) (15.3 )
Other non-operating expense, net (9,219 ) (6,183 ) 49.1  
Total (66,411 ) (73,882 ) (10.1 )
 
Income before income taxes 213,378 253,013 (15.7 )
Provision for income taxes 69,135   81,608   (15.3 )
Income from continuing operations 144,243 171,405 (15.8 )
Net income attributable to noncontrolling interests (11,124 ) (15,463 ) (28.1 )
Net income from continuing operations attributable to TEGNA Inc. $ 133,119   $ 155,942   (14.6 )
 
Earnings from continuing operations per share:
Basic $ 0.62 $ 0.71 (12.7 )
Diluted $ 0.61 $ 0.69 (11.6 )
 
Weighted average number of common shares outstanding:
Basic 214,847 220,768 (2.7 )
Diluted 217,200 225,129 (3.5 )
 
Dividends declared per share $ 0.14 $ 0.14
 
             
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Continuing Operations

TEGNA Inc.

Unaudited, in thousands (except per share amounts)

 
Table No. 1 (continued)

Year Ended
Dec. 31, 2016

Year Ended
Dec. 31, 2015

% Increase
(Decrease)
 
Operating revenues:
Media $ 1,933,579

$

1,682,144 14.9
Digital 1,407,619   1,368,801   2.8  
Total 3,341,198   3,050,945   9.5  
 
Operating expenses:
Cost of revenues and operating expenses, exclusive of depreciation 1,038,667 923,336 12.5
Selling, general and administrative expenses, exclusive of depreciation 1,093,837 1,068,221 2.4
Depreciation 89,531 90,803 (1.4 )
Amortization of intangible assets 114,959 114,284 0.6
Asset impairment and facility consolidation charges (gains) 32,130   (58,857 ) ****  
Total 2,369,124   2,137,787   10.8  
Operating income 972,074   913,158   6.5  
 
Non-operating expense:
Equity loss in unconsolidated investments, net (7,170 ) (5,064 ) 41.6
Interest expense (232,013 ) (273,629 ) (15.2 )
Other non-operating expense, net (20,439 ) (11,529 ) 77.3  
Total (259,622 ) (290,222 ) (10.5 )
 
Income before income taxes 712,452 622,936 14.4
Provision for income taxes 216,979   202,314   7.2  
Income from continuing operations 495,473 420,622 17.8
Net income attributable to noncontrolling interests (51,302 ) (63,164 ) (18.8 )
Net income from continuing operations attributable to TEGNA Inc. $ 444,171   $ 357,458   24.3  
 
Earnings from continuing operations per share:
Basic $ 2.05 $ 1.59 28.9
Diluted $ 2.02 $ 1.56 29.5
 
Weighted average number of common shares outstanding:
Basic 216,358 224,688 (3.7 )
Diluted 219,681 229,721 (4.4 )
 
Dividends declared per share $ 0.56 $ 0.68 (17.6 )
 
 
BUSINESS SEGMENT INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

         
Table No. 2
Fourth
Quarter Ended
Dec. 31, 2016
Fourth
Quarter Ended
Dec. 31, 2015
% Increase

(Decrease)

 
Operating revenues:
Media $ 529,117 $ 462,233 14.5
Digital 358,299   343,031   4.5  
Total $ 887,416   $ 805,264   10.2  
 
Operating income (net of depreciation, amortization, asset impairment and facility consolidation charges):
Media $ 236,523 $ 200,680 17.9
Digital 59,182 53,924 9.8
Corporate (15,916 ) (17,601 ) (9.6 )
Net gain on sale of corporate headquarters building   89,892   (100.0 )
Total $ 279,789   $ 326,895   (14.4 )
 
Depreciation, amortization, asset impairment and facility consolidation charges (gains):
Media $ 24,262 $ 20,173 20.3
Digital 39,654 40,857 (2.9 )
Corporate 561   (88,787 ) ****  
Total $ 64,477   $ (27,757 ) ****  
 
Adjusted EBITDA (a):
Media $ 261,242 $ 224,474 16.4
Digital 102,729 96,205 6.8
Corporate (14,190 ) (16,496 ) (14.0 )
Total $ 349,781   $ 304,183   15.0  
 
(a)   "Adjusted EBITDA" is a non-GAAP measure used by management to measure, analyze and compare the performance of its business segment operations at a more detailed level and in a meaningful and consistent manner. The definition of "Adjusted EBITDA" is provided in the section "Use of Non-GAAP Information" and Table No. 4 provides reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income.
 
             
BUSINESS SEGMENT INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

 
Table No. 2 (continued)
Year Ended

Dec. 31, 2016

Year Ended

Dec. 31, 2015

% Increase

(Decrease)

 
Operating revenues:
Media $ 1,933,579 $ 1,682,144 14.9
Digital 1,407,619   1,368,801   2.8  
Total $ 3,341,198   $ 3,050,945   9.5  
 
Operating income (net of depreciation, amortization, asset impairment and facility consolidation charges):
Media $ 806,411 $ 714,237 12.9
Digital 230,121 229,386 0.3
Corporate (64,458 ) (68,418 ) (5.8 )
Net gain on sale of corporate headquarters building 89,892 (100.0 )
Unallocated costs (b)   (51,939 )

100.0

 

Total $ 972,074   $ 913,158   6.5  
 
Depreciation, amortization, asset impairment and facility consolidation charges (gains):
Media $ 82,639 $ 81,665 1.2
Digital 150,382 146,907 2.4
Corporate 3,599   (82,342 ) ****  
Total $ 236,620   $ 146,230   61.8  
 
Adjusted EBITDA (a):
Media $ 908,068 $ 787,162 15.4
Digital 384,619 379,889 1.2
Corporate (58,137 ) (60,868 ) (4.5 )
Unallocated costs (b)   (51,939 )

100.0

 

Total $ 1,234,550   $ 1,054,244   17.1  
 
(a)   "Adjusted EBITDA" is a non-GAAP measure used by management to measure, analyze and compare the performance of its business segment operations at a more detailed level and in a meaningful and consistent manner. The definition of "Adjusted EBITDA" is provided in the section "Use of Non-GAAP Information" and Table No. 4 provides reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income.
(b) Unallocated costs in 2015 represent certain expenses that historically were allocated to the former Publishing Segment but that could not be allocated to discontinued operations because they were not clearly and specifically identifiable to the spun-off businesses, the accounting criteria for reclassification to discontinued operations.
 

USE OF NON-GAAP INFORMATION

The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the related GAAP measures, nor should they be considered superior to the related GAAP measures, and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measures may not be comparable to similarly titled measures of other companies.

Management and the company’s Board of Directors use the non-GAAP financial measures for purposes of evaluating business unit and consolidated company performance. Furthermore, the Executive Compensation Committee of our Board of Directors uses non-GAAP measures such as Adjusted EBITDA, non-GAAP net income, non-GAAP EPS and free cash flow to evaluate management’s performance. The company, therefore, believes that each of the non-GAAP measures presented provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on the underlying ongoing operating performance of our business. The company discusses in this report non-GAAP financial performance measures that exclude from its reported GAAP results the impact of “special items” consisting of severance expense, impairment charges on operating assets and equity investments, facility consolidation charges, gains related to building sales, gains/losses related to business disposals, expenses related to business acquisitions, costs associated with the company's spin-off transactions and benefits to our income tax provision. We also adjust net income attributed to noncontrolling interests to the extent any of the above items are related to our CareerBuilder business unit. The company believes that such expenses, charges and gains are not indicative of normal, ongoing operations. Such items vary from period to period and are significantly impacted by the timing and nature of these events. Therefore, while the company may incur or recognize these types of expenses, charges and gains in the future, management believes that removing these items for purposes of calculating the non-GAAP financial measures provides investors with a more focused presentation of the company's ongoing operating performance.

The company also discusses Adjusted EBITDA, a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. The company defines Adjusted EBITDA as net income from continuing operations attributable to TEGNA before (1) net income attributable to noncontrolling interests, (2) interest expense, (3) income taxes, (4) equity income (losses) in unconsolidated investees, net, (5) other non-operating items such as spin-off transaction expenses, investment income and currency gains and losses, (6) severance expense, (7) facility consolidation charges, (8) impairment charges, (9) depreciation and (10) amortization. When Adjusted EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure is Net income from continuing operations attributable to TEGNA. Management does not analyze non-operating items such as interest expense and income taxes on a segment level; therefore, the most directly comparable GAAP financial measure to Adjusted EBITDA when performance is discussed on a segment level is Operating income. Users should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of free cash flow available for management’s discretionary expenditures, as this measure does not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments and other debt service requirements.

This earnings release also discusses free cash flow, a non-GAAP liquidity measure. Free cash flow is defined as “net cash flow from operating activities” as reported on the statement of cash flows reduced by “purchase of property and equipment”. The company believes that free cash flow is a useful measure for management and investors to evaluate the level of cash generated by operations and the ability of its operations to fund investments in new and existing businesses, return cash to shareholders under the company’s capital program, repay indebtedness, add to the company’s cash balance, or use in other discretionary activities. Management uses free cash flow to monitor cash available for repayment of indebtedness and in its discussions with the investment community. Like Adjusted EBITDA, free cash flow is not intended to be a measure of cash flow available for management’s discretionary use.

Tabular reconciliations for all of the non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the following tables.

                             
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars (except per share amounts)

 
Table No. 3
 
Reconciliations of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income follow:
 

GAAP
Measure

Special Items

Non-GAAP
Measure

Fourth
Quarter
Ended
Dec. 31,
2016

Severance
expense

Asset
impairment
and facility
consolidation
charges

Other non-
operating
items

Impact of
special
items
attributable
to NCI

Special
tax
benefit

Fourth
Quarter
Ended
Dec. 31,
2016

 
Cost of revenues and operating expenses, exclusive of depreciation $ 273,874 $ (1,429 ) $ $ $ $ $ 272,445
Selling general and administrative expenses, exclusive of depreciation 269,276 (4,086 ) 265,190
Asset impairment and facility consolidation charges 13,184 (13,184 )
Operating expenses 607,627 (5,515 ) (13,184 ) 588,928
Operating income 279,789 5,515 13,184 298,488
Equity loss in unconsolidated investments, net (640 ) (640 )
Other non-operating (expense) income (9,219 ) 11,124 1,905
Total non-operating expense (66,411 ) 11,124 (55,287 )
Income before income taxes 213,378 5,515 13,184 11,124 243,201
Provision for income taxes 69,135 1,911 5,061 (8,208 ) (283 ) 3,339 70,955
Net income attributable to noncontrolling interests (11,124 ) (728 ) (11,852 )
Net income from continuing operations attributable to TEGNA 133,119 3,604 8,123 19,332 (445 ) (3,339 ) 160,394
Net income from continuing operations per share-diluted $ 0.61 $ 0.02 $ 0.04 $ 0.09 $ $ (0.02 ) $ 0.74
 
 

GAAP
Measure

Special Items

Non-GAAP
Measure

Fourth
Quarter
Ended
Dec. 31,
2015

Severance
expense

Asset
impairment
and facility
consolidation
charges

Gain on sale
of Corporate
HQ building,
net

Other non-
operating
items

Special
tax
benefit

Fourth
Quarter
Ended
Dec. 31,
2015

 
Cost of revenues and operating expenses, exclusive of depreciation $ 232,555 $ (4,288 ) $ $ $ $ $ 228,267
Selling general and administrative expenses, exclusive of depreciation 273,571 (757 ) 272,814
Asset impairment and facility consolidation charges (gains) (75,936 ) (13,956 ) 89,892
Operating expenses 478,369 (5,045 ) (13,956 ) 89,892 549,260
Operating income 326,895 5,045 13,956 (89,892 ) 256,004
Other non-operating (expense) income (6,183 ) 8,829 2,646
Total non-operating expense (73,882 ) 8,829 (65,053 )
Income before income taxes 253,013 5,045 13,956 (89,892 ) 8,829 190,951
Provision for income taxes 81,608 1,961 2,828 (34,968 ) 3,442 1,283 56,154
Net income from continuing operations attributable to TEGNA 155,942 3,084 11,128 (54,924 ) 5,387 (1,283 ) 119,334
Net income from continuing operations per share - diluted (a) $ 0.69 $ 0.01 $ 0.05 $ (0.24 ) $ 0.02 $ (0.01 ) $ 0.53
 

(a) - Per share amounts do not foot due to rounding

                             
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars (except per share amounts)

 
Table No. 3 (continued)
 
Reconciliations of certain line items impacted by special items to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income follow:
 

GAAP
Measure

Special Items

Non-GAAP
Measure

Year Ended
Dec. 31, 2016

Severance
expense

Asset
impairment
and facility
consolidation
charges

Other non-
operating
items and
equity
investment
impairments

Impact of
special
items
attributable
to NCI

Special tax
benefit

Year Ended
Dec. 31, 2016

 
Cost of revenues and operating expenses, exclusive of depreciation $ 1,038,667 $ (14,030 ) $ $ $ $ $ 1,024,637
Selling general and administrative expenses, exclusive of depreciation 1,093,837 (11,826 ) 1,082,011
Asset impairment and facility consolidation charges 32,130 (32,130 )
Operating expenses 2,369,124 (25,856 ) (32,130 ) 2,311,138
Operating income 972,074 25,856 32,130 1,030,060
Equity loss in unconsolidated investments, net (7,170 ) 3,899 (3,271 )
Other non-operating (expense) income (20,439 ) 29,118 8,679
Total non-operating expense (259,622 ) 33,017 (226,605 )
Income before income taxes 712,452 25,856 32,130 33,017 803,455
Provision for income taxes 216,979 9,787 12,473 (1,755 ) (283 ) 3,339 240,540
Net income attributable to noncontrolling interests (51,302 ) (728 ) (52,030 )
Net income from continuing operations attributable to TEGNA 444,171 16,069 19,657 34,772 (445 ) (3,339 ) 510,885
Net income from continuing operations per share - diluted (a) $ 2.02 $ 0.07 $ 0.09 $ 0.16 $ $ (0.02 ) $ 2.33
(a) - Per share amounts do not foot due to rounding
 

GAAP
Measure

Special Items

Non-GAAP
Measure

Year Ended
Dec. 31, 2015

Severance
expense

Asset
impairment
and facility
consolidation
charges

Gain on sale
of Corporate
HQ building,
net and other
building sale
gain

Other non-
operating
items

Special tax
benefit

Year Ended
Dec. 31, 2015

 
 
Cost of revenues and operating expenses, exclusive of depreciation $ 923,336 $ (6,430 ) $ $ 12,709 $ $ $ 929,615
Selling general and administrative expenses, exclusive of depreciation 1,068,221 (1,135 ) 1,067,086
Asset impairment and facility consolidation charges (gains) (58,857 ) (31,035 ) 89,892
Operating expenses 2,137,787 (7,565 ) (31,035 ) 102,601 2,201,788
Operating income 913,158 7,565 31,035 (102,601 ) 849,157
Other non-operating expense (11,529 ) 10,282 (1,247 )
Total non-operating expense (290,222 ) 10,282 (279,940 )
Income before income taxes 622,936 7,565 31,035 (102,601 ) 10,282 569,217
Provision for income taxes 202,314 2,899 9,180 (39,694 ) (2,295 ) 3,305 175,709
Net income from continuing operations attributable to TEGNA 357,458 4,666 21,855 (62,907 ) 12,577 (3,305 ) 330,344
Net income from continuing operations per share - diluted (a) $ 1.56 $ 0.02 $ 0.10 $ (0.27 ) $ 0.05 $ (0.01 ) $ 1.44
 

(a) - Per share amounts do not foot due to rounding

               
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

 
Table No. 4
 
 
Reconciliations of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income follow:
 
Fourth Quarter Ended Dec. 31, 2016:
Media Digital Corporate

Consolidated
Total

 
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) $ 133,119
Net income attributable to noncontrolling interests 11,124
Provision for income taxes 69,135
Interest expense 56,552
Equity loss in unconsolidated investments, net 640
Other non-operating expense 9,219  
Operating income (GAAP basis) $ 236,523 $ 59,182 $ (15,916 ) $ 279,789
Severance expense 457 3,893 1,165 5,515
Asset impairment and facility consolidation charges 6,769   5,915   500   13,184  
Adjusted operating income (non-GAAP basis) 243,749 68,990 (14,251 ) 298,488
Depreciation 12,047 9,929 61 22,037
Amortization 5,446   23,810     29,256  
Adjusted EBITDA (non-GAAP basis) $ 261,242   $ 102,729   $ (14,190 ) $ 349,781  
 

Fourth Quarter Ended Dec. 31, 2015:

Media Digital Corporate

Consolidated
Total

 
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) $ 155,942
Net income attributable to noncontrolling interests 15,463
Provision for income taxes 81,608
Interest expense 66,758
Equity loss in unconsolidated investments, net 941
Other non-operating expense 6,183  
Operating income (GAAP basis) $ 200,680 $ 53,924 $ 72,291 $ 326,895
Severance expense 3,621 1,424 5,045
Asset impairment and facility consolidation charges 3,006 9,988 962 13,956
Gain on sale of Corporate HQ building, net     (89,892 ) (89,892 )
Adjusted operating income (non-GAAP basis) 207,307 65,336 (16,639 ) 256,004
Depreciation 11,676 8,232 143 20,051
Amortization 5,491   22,637     28,128  
Adjusted EBITDA (non-GAAP basis) $ 224,474   $ 96,205   $ (16,496 ) $ 304,183  
 
                     
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

 
Table No. 4 (continued)
 
 
Reconciliations of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income follow:
 
Year Ended Dec. 31, 2016:
Media Digital Corporate

Consolidated
Total

 
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) $ 444,171
Net income attributable to noncontrolling interests 51,302
Provision for income taxes 216,979
Interest expense 232,013
Equity loss in unconsolidated investments, net 7,170
Other non-operating expense 20,439  
Operating income (GAAP basis) $ 806,411 $ 230,121 $ (64,458 ) $ 972,074
Severance expense 19,018 4,116 2,722 25,856
Asset impairment and facility consolidation charges 8,633   21,133   2,364   32,130  
Adjusted operating income (non-GAAP basis) 834,062 255,370 (59,372 ) 1,030,060
Depreciation 51,973 36,323 1,235 89,531
Amortization 22,033   92,926     114,959  
Adjusted EBITDA (non-GAAP basis) $ 908,068   $ 384,619   $ (58,137 ) $ 1,234,550  
 
Year Ended Dec. 31, 2015:
Media Digital Corporate

Unallocated
Costs

Consolidated
Total

 
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) $ 357,458
Net income attributable to noncontrolling interests 63,164
Provision for income taxes 202,314
Interest expense 273,629
Equity loss in unconsolidated investments, net 5,064
Other non-operating expense 11,529  
Operating income (GAAP basis) $ 714,237 $ 229,386 $ 21,474 $ (51,939 ) $ 913,158
Severance expense 3,969 3,596 7,565
Asset impairment and facility consolidation charges 8,078 21,995 962 31,035
Gain on sale of Corporate HQ building, net and other building sale gain (12,709 )   (89,892 )   (102,601 )
Adjusted operating income (non-GAAP basis) 713,575 254,977 (67,456 ) (51,939 ) 849,157
Depreciation 51,131 33,084 6,588 90,803
Amortization 22,456   91,828       114,284  
Adjusted EBITDA (non-GAAP basis) $ 787,162   $ 379,889   $ (60,868 ) $ (51,939 ) $ 1,054,244  
 

Note: Starting in second quarter of 2016, the company revised the method for computing Adjusted EBITDA to no longer treat non-cash rent as a reconciling item. The first quarter 2016 number was updated to conform to this new method that resulted in a $1.6 million reduction to our previously reported first quarter 2016 Adjusted EBITDA. This change also reduced Adjusted EBITDA for the twelve months ended December 31, 2015 by $1.6 million.

         
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

 
Table No. 5
 
"Free cash flow" is a non-GAAP liquidity measure used in addition to and in conjunction with results presented in accordance with GAAP. Free cash flow should not be relied upon to the exclusion of similar GAAP financial measures.
 
 

Fourth Quarter
Ended
Dec. 31, 2016

Year Ended
Dec. 31, 2016

 
Net cash flow from operating activities $ 228,666 $ 683,429
Purchase of property, plant and equipment (26,219 ) (94,796 )
Free cash flow $ 202,447   $ 588,633  
 
                 
TAX RATE CALCULATION

TEGNA Inc.

Unaudited, in thousands of dollars

 
Table No. 6
 
The calculations of the company's effective tax rate on a GAAP and non-GAAP basis are below:
 
GAAP Non-GAAP
Fourth
Quarter Ended
Dec. 31, 2016
Fourth
Quarter Ended
Dec. 31, 2015
Fourth
Quarter Ended
Dec. 31, 2016
Fourth
Quarter Ended
Dec. 31, 2015
 
 
Income before taxes (per Table 3) $ 213,378 $ 253,013 $ 243,201 $ 190,951
Noncontrolling interests (per Tables 1 and 3) (11,124 ) (15,463 ) (11,852 ) (15,463 )
Income before taxes attributable to TEGNA $ 202,254   $ 237,550   $ 231,349   $ 175,488  
 
Provision for income taxes (per Table 3) $ 69,135 $ 81,608 $ 70,955 $ 56,154
 
Effective tax rate 34.2 % 34.4 % 30.7 % 32.0 %
 
 
 
GAAP Non-GAAP
Year Ended
Dec. 31, 2016
Year Ended
Dec. 31, 2015
Year Ended
Dec. 31, 2016
Year Ended
Dec. 31, 2015
 
 
Income before taxes (per Table 3) $ 712,452 $ 622,936 $ 803,455 $ 569,217
Noncontrolling interests (per Tables 1 and 3) (51,302 ) (63,164 ) (52,030 ) (63,164 )
Income before taxes attributable to TEGNA $ 661,150   $ 559,772   $ 751,425   $ 506,053  
 
Provision for income taxes (per Table 3) $ 216,979 $ 202,314 $ 240,540 $ 175,709
 
Effective tax rate 32.8 % 36.1 % 32.0 % 34.7 %
 

Source: TEGNA Inc.

TEGNA Inc.
For investor inquiries:
Jeffrey Heinz, 703-873-6917
Vice President, Investor Relations
jheinz@TEGNA.com
or
For media inquiries:
Steve Kidera, 703-873-6434
Corporate Communications
skidera@TEGNA.com