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TEGNA Inc. Reports 2017 Second Quarter Results

MCLEAN, Va.--(BUSINESS WIRE)--Aug. 1, 2017-- TEGNA Inc. (NYSE:TGNA) today announced strong financial results for the 2017 second quarter subsequent to the now completed spin-off of Cars.com and sale of CareerBuilder.

Highlights for the second quarter include the following:

  • Total company revenue growth from continuing operations of 3 percent; Media revenue growth of 5 percent primarily driven by new initiatives and a substantial increase in subscription revenue
  • GAAP earnings per diluted share from continuing operations of $0.23; non-GAAP earnings per diluted share from continuing operations of $0.29
  • Net income from continuing operations was $49 million; Adjusted EBITDA excluding corporate totaled $186 million
  • Completed successful spin-off of Cars.com in the second quarter; received tax-free distribution of $650 million, most of which was used to reduce debt in the second quarter
  • Completed sale of CareerBuilder for gross proceeds of $250 million in cash and retained 12 percent ownership stake and two board seats
  • Finalized OTT distribution deals with all of the company’s major network partners and multiple OTT streaming services at per-subscriber economic terms equal to or better than per-subscriber economics of traditional MVPDs
  • OTT ad network Premion surged to 1,965 campaigns, 372 advertisers across 190 markets, from a base of zero since launching less than 9 months ago

Dave Lougee, president and chief executive officer, said, “For its first quarter reporting as a pure play media company, TEGNA delivered solid operating results. Comparable revenue was up five percent, at the high-end of guidance, and Adjusted EBITDA margin, excluding corporate, was 38 percent. We are successfully executing our strategy of being a best-in-class operator, transforming our content, sales and marketing offerings through innovation and data-driven decision making. Leveraging our scale derived from our industry-leading local stations in large markets across a third of the country, we are reaching new audiences and advertising clients, and expanding the markets we’re targeting with new products and businesses.”

Lougee continued, “Looking ahead, we believe industry consolidation in a changing regulatory environment presents a compelling opportunity for TEGNA. Our track record in broadcast operations, along with our scale and financial firepower, uniquely positions us to play an active role in vertical and horizontal consolidation, and we will evaluate and pursue accretive opportunities to enhance our organic growth strategy, all within our usual financial discipline. Our capital allocation strategy has provided us with a strong balance sheet that gives us the flexibility to act opportunistically, and our success in achieving synergy targets demonstrates our ability to execute. In addition, our strategic and innovative initiatives in content, programming and sales give us the ability to create additional shareholder value through M&A, whether vertical or horizontal, beyond traditional revenue and cost synergies.”

Lougee concluded, “Reflecting our ongoing investment in content-related initiatives, we made great progress across a number of innovations. Notably, we launched VERIFY news fact-checking segments across all our platforms, as well as HeartThreads, a new national digital content vertical. We announced the host line-up and September 11 premiere date for our TEGNA-owned daily, live syndicated program “Daily Blast LIVE,” which will air live in 36 TEGNA markets and nationally on Facebook and YouTube. We announced a new live, daily talk show, “Sister Circle,” produced out of WATL in Atlanta, which will premiere on September 11 in 12 TEGNA markets and nationally live on TV One, reaching 60 percent of U.S. television households. TEGNA and KXTV in Sacramento partnered with the Cheddar OTT network to launch “Cheddar Local,” which will provide KXTV with local business and technology segments relevant to the Sacramento community.”

On May 31, 2017, TEGNA completed the spin-off of Cars.com and received a tax-free distribution of $650 million in cash. On July 31, 2017, TEGNA, together with the other owners of CareerBuilder, completed the sale of a controlling interest in this non-core business. Results for Cars.com and CareerBuilder are now reflected as Discontinued Operations in TEGNA’s Statements of Income for all periods presented.

As a result, TEGNA will report one segment going forward which will include Media and a small remaining digital marketing services contract that was previously reported in the Digital Segment. However, the historical financial results include the impact of a transition services agreement with Gannett, which concluded in June 2017, as well as Cofactor, which was sold in December 2016. Neither the transition services agreement or Cofactor were included in the former Media Segment. In addition, the company repositioned digital marketing services in the past year and shut down its direct sales business late last year, also adversely impacting revenue comparisons to last year. These unfavorable comparisons will continue through the second quarter of 2018.

SECOND QUARTER

CONTINUING OPERATIONS

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

         
GAAP Non-GAAP
Q2 2017   Q2 2016 Q2 2017   Q2 2016
 
Operating revenue $ 489,369 $ 476,978 $ 489,369 $ 476,978
Operating expense 339,289   317,242   336,585   306,664
Operating income $ 150,080   $ 159,736   $ 152,784   $ 170,314

 

See Table 2 for reconciliations between non-GAAP measures and the most directly comparable GAAP reported numbers.

Total company revenues were 3 percent higher year-over-year driven by 5 percent growth in Media from new initiatives and a substantial increase in subscription revenue. This growth was partially offset by the changes to the Digital Segment described above.

The company now reports a new revenue line, Advertising and Marketing Services, to better reflect its strategy to focus on marketing all products across platforms as well as new initiatives. This category includes all of the company’s traditional and digital revenues including Premion, Hatch, G/O Digital and other digital advertising and marketing revenues across our platforms.

The “Retransmission” revenue category has been renamed “Subscription” to better reflect the future changes in that revenue stream, including the distribution of TEGNA stations on OTT streaming services.

Revenue growth was driven by a $34.5 million increase in subscription revenue as well as revenue contributions from new initiatives including OTT ad network Premion and Hatch, the company's centralized marketing resource. Revenue growth was partially offset by a decline in advertising and marketing services revenue and lower politically-related advertising.

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

 
  Q2 2017   Q2 2016   Percentage Change
Advertising & Marketing Services (a) 296,346 314,044 (5.6

%)(b)

 

Political 7,446 10,246 (27.3 %)
Subscription (c) 180,343 145,804 23.7 %
Other 5,234 4,174 25.4 %
Cofactor

-

  2,710   (100.0 %)
Total $ 489,369   $ 476,978   2.6 %
 

(a) Includes traditional advertising, digital advertising as well as revenue from the company's digital marketing services businesses.

(b) This change includes the impact of the conclusion of a transition services agreement with Gannett for several digital marketing services previously reported in the Digital Segment. Adjusting for the impact of this, Advertising and Marketing Services was down 3%.

(c) Reverse compensation to networks is included as part of programming costs.

Reported operating expenses were up 7 percent in the quarter. On a non-GAAP basis, operating expenses increased 10 percent primarily due to substantially higher programming fees and continued investment in growth initiatives offset partially by the absence of expenses associated with Cofactor. Corporate expenses in the second quarter of 2017 were $14.2 million.

Reported operating income declined 6 percent compared to the second quarter in 2016. On a non-GAAP basis, operating income was 10 percent lower as several factors impacted revenue growth comparisons and substantially higher programming fees drove the increase in operating expenses.

Adjusted EBITDA (a non-GAAP measure detailed in Table 3) was $171.5 million in the quarter and the Adjusted EBITDA margin equaled 35 percent. Adjusted EBITDA excluding corporate expenses totaled $185.6 million which resulted in a margin of 38 percent.

Net income from continuing operations totaled $49.3 million. On a non-GAAP basis, net income from continuing operations was $63.1 million, a decline of 18 percent.

Special items in the second quarter of 2017 unfavorably impacted GAAP results by $0.06 per share due to non-cash asset impairments, severance, other expenses primarily related to the spin-off of Cars.com and deferred tax adjustments (refer to Table 2 for a reconciliation of results on a GAAP and non-GAAP basis).

THIRD QUARTER

GUIDANCE

Total company revenue comparisons will be unfavorably impacted by the absence of record Olympic revenue in 2016 and substantially lower political advertising than a year ago, as well as the conclusion of a transition services agreement for several digital marketing services and the absence of revenue from the sale of Cofactor last year.

As a result, total company revenue is expected to decline in the high-single digits to low-double digits in the third quarter of 2017 compared to the year-ago quarter. However, on a comparable basis, excluding the impact of the Olympics, political spending, the conclusion of a transition services agreement for several digital marketing services previously reported in the Digital Segment and Cofactor, total company revenue is expected to increase in the mid-single digits year-over-year.

SECOND QUARTER

NON-OPERATING AND CASH FLOW ITEMS

Interest expense in the quarter was $54.8 million compared to $56.1 million in the second quarter of 2016. The decline was due primarily to lower average debt outstanding partially offset by a higher average interest rate.

Other non-operating expense was $21.1 million in the quarter compared to an expense of $4.6 million in the second quarter of 2016. The $16.5 million increase primarily reflects expenses associated with the spin-off of Cars.com and non-cash asset impairment charges. On a non-GAAP basis, other non-operating activity resulted in a net expense of $1.4 million in the second quarter of 2017, relatively unchanged from the second quarter of 2016.

Cash flow from operating activities for the second quarter of 2017 was $98.4 million. Free cash flow (a non-GAAP measure - Refer to Table 4) totaled $66.7 million for the quarter. Second quarter 2017 cash flow from operating activities and free cash flow were lower both year-over-year and sequentially due to the payment of NBC network reverse compensation on 11 TV stations for the first time in 2017. New tax legislation that changed the timing of cash tax payments from the first quarter to the second quarter in 2017 also contributed to the sequential decline.

Subsequent to the quarter end, TEGNA completed the sale of CareerBuilder for gross proceeds of $250 million. The company estimates that, net of taxes and other adjustments, cash proceeds will be approximately $220 million, which TEGNA intends to use to retire existing debt and for other general corporate purposes. Under the terms of the agreement, TEGNA will remain an ongoing partner in CareerBuilder, reducing its previous 53 percent controlling interest to 12 percent on a fully-diluted basis and retaining two seats on CareerBuilder’s Board of Directors.

Long-term debt outstanding was $3.3 billion and total cash was $65.7 million at the end of the quarter. Dividends paid in the quarter totaled $30.1 million. The effective tax rate in the quarter was 32.7 percent on a GAAP basis. On a non-GAAP basis, the effective tax rate was 34.0 percent.

SECOND QUARTER

DISCONTINUED OPERATIONS

Results for Cars.com and CareerBuilder are now reflected as Discontinued Operations in the company's Statements of Income. As previously disclosed, the company will record a non-cash impairment charge in the second quarter in connection with the planned disposition of CareerBuilder. The non-cash charge attributable to TEGNA is expected to be approximately $275 million. As a result, net loss attributable to TEGNA including Discontinued Operations is expected to be approximately $130 million for the second quarter of 2017. Final results will be published when the company files its quarterly report on Form 10-Q, which is expected to occur before August 9, 2017.

* * * *

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 1-888-352-6809 and international callers should dial 1-323-794-2093 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 1006933. A replay of the conference call will be available under “Investor Relations” at www.TEGNA.com from Tuesday, August 1 at 2 p.m. (ET) to Tuesday, August 15 at 2 p.m. (ET). To access the replay, dial 888-203-1112 or 719-457-0820. The confirmation code for the replay is 1006933. Materials related to the call will be available through the Investor Relations section of the company's website Tuesday morning.

TEGNA Inc. (NYSE: TGNA) is an innovative media company that serves the greater good of our communities. With 46 television stations in 38 markets, TEGNA delivers relevant content and information to consumers across platforms. It is the largest owner of top 4 affiliates in the top 25 markets, reaching approximately one-third of all television households nationwide. Each month, TEGNA reaches 50 million adults on-air and 32 million across its digital platforms. TEGNA has been consistently honored with the industry’s top awards, including Edward R. Murrow, George Polk, Alfred I. DuPont and Emmy Awards. TEGNA delivers results for advertisers through unparalleled and innovative solutions including OTT local advertising network Premion, centralized marketing resource Hatch, and digital marketing services business (formerly G/O Digital), a one-stop shop for local businesses to connect with consumers through digital marketing. Across platforms, TEGNA tells empowering stories, conducts impactful investigations and delivers innovative marketing solutions. 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 of dollars (except per share amounts)

     
Table No. 1
Three Months Ended June 30,    
% Increase
2017 2016 (Decrease)  
 
 
Revenues $ 489,369 $ 476,978 2.6
 
Operating expenses:
Cost of revenues and operating expenses, exclusive of depreciation 229,683 196,935 16.6
Business units - Selling, general and administrative expenses, exclusive of depreciation 75,302 81,975 (8.1 )
Corporate - General and administrative expenses, exclusive of depreciation 14,248 14,351 (0.7 )
Depreciation 13,318 14,478 (8.0 )
Amortization of intangible assets 5,388 5,775 (6.7 )
Asset impairment and facility consolidation charges 1,350   3,728   (63.8 )
Total 339,289   317,242   6.9  
Operating income (a) 150,080   159,736   (6.0 )
 
Non-operating expense:
Equity loss in unconsolidated investments, net (946 ) (4,996 ) (81.1 )
Interest expense (54,843 ) (56,143 ) (2.3 )
Other non-operating items (a) (21,108 ) (4,562 ) ****  
Total (76,897 ) (65,701 ) 17.0  
 
Income before income taxes 73,183 94,035 (22.2 )
Provision for income taxes 23,913   27,037   (11.6 )
Income from continuing operations $ 49,270   $ 66,998   (26.5 )
 
Earnings from continuing operations per share:
Basic $ 0.23 $ 0.31 (25.8 )
Diluted $ 0.23 $ 0.30 (23.3 )
 
Weighted average number of common shares outstanding:
Basic 215,501 216,518 (0.5 )
Diluted 217,812 220,204 (1.1 )
 
Dividends declared per share $ 0.07 $ 0.14 (50.0 )

 

(a) In the first quarter of 2017, the company adopted new accounting guidance that changed the classification of certain components of net periodic pension and other post-retirement benefit expense (post-retirement benefit expense). The service cost component of the post-retirement benefit expense will continue to be presented as an operating expense while all other components of post-retirement benefit expense will be presented as non-operating expense. The prior year period was adjusted to reflect the effects of applying the new guidance. This resulted in an increase to operating income in second quarter of 2017 and 2016 of $1.9 million and $2.6 million, respectively. Net income, earnings per share, and retained earnings was not impacted by the new standard.

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Continuing Operations

TEGNA Inc.

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

     
Table No. 1 (continued)
Six Months Ended June 30,    
% Increase
2017 2016 (Decrease)  
 
 
Revenues $ 948,439 $ 937,616 1.2
 
Operating expenses:
Cost of revenues and operating expenses, exclusive of depreciation 461,091 389,563 18.4
Business units - Selling, general and administrative expenses, exclusive of depreciation 143,731 163,241 (12.0 )
Corporate - General and administrative expenses, exclusive of depreciation 29,581 27,838 6.3
Depreciation 26,535 29,441 (9.9 )
Amortization of intangible assets 10,777 11,767 (8.4 )
Asset impairment and facility consolidation charges 3,533   3,728   (5.2 )
Total 675,248   625,578   7.9  
Operating income (a) 273,191   312,038   (12.4 )
 
Non-operating expense:
Equity loss in unconsolidated investments, net (2,415 ) (1,565 ) 54.3
Interest expense (110,258 ) (117,843 ) (6.4 )
Other non-operating items (a) (23,182 ) (4,155 ) ****  
Total (135,855 ) (123,563 ) 9.9  
 
Income before income taxes 137,336 188,475 (27.1 )
Provision for income taxes 43,408   53,597   (19.0 )
Income from continuing operations $ 93,928   $ 134,878   (30.4 )
 
Earnings from continuing operations per share:
Basic $ 0.44 $ 0.62 (29.0 )
Diluted $ 0.43 $ 0.61 (29.5 )
 
Weighted average number of common shares outstanding:
Basic 215,404 217,902 (1.1 )
Diluted 217,691 221,729 (1.8 )
 
Dividends declared per share $ 0.21 $ 0.28 (25.0 )
 

(a) In the first quarter of 2017, the company adopted new accounting guidance that changed the classification of certain components of net periodic pension and other post-retirement benefit expense (post-retirement benefit expense). The service cost component of the post-retirement benefit expense will continue to be presented as an operating expense while all other components of post-retirement benefit expense will be presented as non-operating expense. The prior year period was adjusted to reflect the effects of applying the new guidance. This resulted in an increase to operating income in the six months ended June 30, 2017 and 2016 of $3.3 million and $4.0 million, respectively. Net income, earnings per share, and retained earnings was not impacted by the new standard.

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, media revenue, 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, charges related to asset impairment and facility consolidations, costs associated with the Cars.com spin-off transaction, and certain tax benefit associated with Cars.com spin-off and sale of CareerBuilder. 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 (with and without corporate), a non-GAAP financial performance measures that it believes offer a useful view of the overall operation of its businesses. The company defines Adjusted EBITDA as net income from continuing operations before (1) interest expense, (2) income taxes, (3) equity income (losses) in unconsolidated investments, net, (4) other non-operating items such as spin-off transaction expenses and investment income, (5) severance expense, (6) facility consolidation charges, (7) impairment charges, (8) depreciation and (9) amortization. The most directly comparable GAAP financial measure to Adjusted EBITDA is Net income from continuing operations. 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. 2
 

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 Non-GAAP
Measure Special Items Measure
Operating asset
Three Months impairment and Other non- Three Months
Ended June 30, Severance facility operating Special tax Ended June 30,
2017 expense consolidation items benefit 2017
 
Cost of revenues and operating expenses, exclusive of depreciation $ 229,683 $ (138 ) $

-

$

-

$

-

$ 229,545
Business units - Selling, general and administrative expenses, exclusive of depreciation 75,302 (1,079 )

-

-

-

74,223
Corporate - General and administrative expenses, exclusive of depreciation 14,248 (137 )

-

-

-

14,111
Asset impairment and facility consolidation charges 1,350

-

(1,350 )

-

-

-

Operating expenses 339,289 (1,354 ) (1,350 )

-

-

336,585
Operating income 150,080 1,354 1,350

-

-

152,784
Other non-operating items (21,108 )

-

-

19,754

-

(1,354 )
Total non-operating expense (76,897 )

-

-

19,754

-

(57,143 )
Income before income taxes 73,183 1,354 1,350 19,754

-

95,641
Provision for income taxes 23,913 523 522 3,942 3,637 32,537
Net income from continuing operations 49,270 831 828 15,812 (3,637 ) 63,104
Net income from continuing operations per share-diluted (a) $ 0.23 $

-

$

-

$ 0.07 $ (0.02 ) $ 0.29
(a) - Per share amounts do not sum due to rounding.
 
GAAP Non-GAAP
Measure Special Items Measure
Operating asset
Three Months impairment and Equity Other non- Three Months
Ended June 30, Severance facility investment operating Ended June 30,
2016 expense consolidation impairment items 2016
 
Cost of revenues and operating expenses, exclusive of depreciation $ 196,935 $ (5,480 ) $

-

$

-

$

-

$ 191,455
Business units - Selling, general and administrative expenses, exclusive of depreciation 81,975 (1,370 )

-

-

-

80,605
Corporate - General and administrative expenses, exclusive of depreciation 14,351

-

-

-

-

14,351
Asset impairment and facility consolidation charges 3,728

-

(3,728 )

-

-

-

Operating expenses 317,242 (6,850 ) (3,728 )

-

-

306,664
Operating income 159,736 6,850 3,728

-

-

170,314
Equity loss in unconsolidated investments, net (4,996 )

-

-

1,869

-

(3,127 )
Other non-operating items (4,562 )

-

-

-

3,163 (1,399 )
Total non-operating expense (65,701 )

-

-

1,869 3,163 (60,669 )
Income before income taxes 94,035 6,850 3,728 1,869 3,163 109,645
Provision for income taxes 27,037 2,656 1,445 725 1,068 32,931
Net income from continuing operations 66,998 4,194 2,283 1,144 2,095 76,714
Net income from continuing operations per share - diluted $ 0.30 $ 0.02 $ 0.01 $ 0.01 $ 0.01 $ 0.35
 
 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

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

           
Table No. 2 (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 Non-GAAP
Measure Special Items Measure
Six Months Other non- Six Months
Ended Severance Operating asset operating Special tax Ended
June 30, 2017 expense impairment items benefit June 30, 2017
 
Cost of revenues and operating expenses, exclusive of depreciation $ 461,091 $ (522 ) $

-

$

-

$

-

$ 460,569
Business units - Selling, general and administrative expenses, exclusive of depreciation 143,731 (2,394 )

-

-

-

141,337
Corporate - General and administrative expenses, exclusive of depreciation 29,581 (137 )

-

-

-

29,444
Asset impairment and facility consolidation charges 3,533

-

(3,533 )

-

-

-

Operating expenses 675,248 (3,053 ) (3,533 )

-

-

668,662
Operating income 273,191 3,053 3,533

-

-

279,777
Other non-operating items (23,182 )

-

-

29,303

-

6,121
Total non-operating expense (135,855 )

-

-

29,303

-

(106,552 )
Income before income taxes 137,336 3,053 3,533 29,303

-

173,225
Provision for income taxes 43,408 1,174 1,325 6,292 3,637 55,836
Net income from continuing operations 93,928 1,879 2,208 23,011 (3,637 ) 117,389
Net income from continuing operations per share-diluted $ 0.43 $ 0.01 $ 0.01 $ 0.11 $ (0.02 ) $ 0.54
 
 
GAAP Non-GAAP
Measure Special Items Measure
Six Months Equity Other non- Six Months
Ended Severance Operating asset investment operating Ended
June 30, 2016 expense impairment impairment items June 30, 2016
 
Cost of revenues and operating expenses, exclusive of depreciation $ 389,563 $ (11,515 ) $

-

$

-

$

-

$ 378,048
Business units - Selling, general and administrative expenses, exclusive of depreciation 163,241 (5,733 )

-

-

-

157,508
Corporate - General and administrative expenses, exclusive of depreciation 27,838

-

-

-

-

27,838
Asset impairment and facility consolidation charges 3,728

-

(3,728 )

-

-

-

Operating expenses 625,578 (17,248 ) (3,728 )

-

-

604,602
Operating income 312,038 17,248 3,728

-

-

333,014
Equity (loss) income in unconsolidated investments, net (1,565 )

-

-

1,869

-

304
Other non-operating items (4,155 )

-

-

-

3,163 (992 )
Total non-operating expense (123,563 )

-

-

1,869 3,163 (118,531 )
Income before income taxes 188,475 17,248 3,728 1,869 3,163 214,483
Provision for income taxes 53,597 6,687 1,445 725 1,068 63,522
Net income from continuing operations 134,878 10,561 2,283 1,144 2,095 150,961
Net income from continuing operations per share-diluted (a) $ 0.61 $ 0.05 $ 0.01 $ 0.01 $ 0.01 $ 0.68
(a) - Per share amounts do not sum due to rounding.
 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

     
Table No. 3
 
 
Three Months Ended
June 30,    
% Increase
2017 2016 (Decrease)  
Net income from continuing operations (GAAP basis) $ 49,270 $ 66,998 (26.5 )
Provision for income taxes 23,913 27,037 (11.6 )
Interest expense 54,843 56,143 (2.3 )
Equity loss in unconsolidated investments, net 946 4,996 (81.1 )
Other non-operating expense 21,108   4,562   ****  
Operating income (GAAP basis) 150,080 159,736 (6.0 )
Severance expense 1,354 6,850 (80.2 )
Asset impairment and facility consolidation charges 1,350   3,728   (63.8 )
Adjusted operating income (non-GAAP basis) 152,784 170,314 (10.3 )
Depreciation 13,318 14,478 (8.0 )
Amortization 5,388   5,775   (6.7 )
Adjusted EBITDA (non-GAAP basis) $ 171,490   $ 190,567   (10.0 )
Corporate - General and administrative expense, exclusive of depreciation (non-GAAP basis) 14,111   14,351   (1.7 )
Adjusted EBITDA, excluding Corporate (non-GAAP basis) $ 185,601   $ 204,918   (9.4 )
 
Six Months Ended
June 30,    
% Increase
2017 2016 (Decrease)  
Net income from continuing operations (GAAP basis) $ 93,928 $ 134,878 (30.4 )
Provision for income taxes 43,408 53,597 (19.0 )
Interest expense 110,258 117,843 (6.4 )
Equity loss in unconsolidated investments, net 2,415 1,565 54.3
Other non-operating expense 23,182   4,155   ****  
Operating income (GAAP basis) 273,191 312,038 (12.4 )
Severance expense 3,053 17,248 (82.3 )
Asset impairment and facility consolidation charges 3,533   3,728   (5.2 )
Adjusted operating income (non-GAAP basis) 279,777 333,014 (16.0 )
Depreciation 26,535 29,441 (9.9 )
Amortization 10,777   11,767   (8.4 )
Adjusted EBITDA (non-GAAP basis) $ 317,089   $ 374,222   (15.3 )
Corporate - General and administrative expense, exclusive of depreciation (non-GAAP basis) 29,444   27,838   5.8  
Adjusted EBITDA, excluding Corporate (non-GAAP basis) $ 346,533   $ 402,060   (13.8 )
 
 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

       
Table No. 4
 
“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.
 
Three Months ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
 
Net cash flow from operating activities $ 98,417 $ 102,186 $ 239,305 $ 229,244
Purchase of property and equipment (31,744 ) (23,601 ) (49,703 ) (40,050 )
Free cash flow $ 66,673   $ 78,585   $ 189,602   $ 189,194  
 
 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

     
Table No. 5
 

As a result of the spin-off of Cars.com and entering into a definitive agreement to sell the majority ownership in CareerBuilder, the company has reclassified the historical financial results of the Digital Segment to discontinued operations. In addition, in the second quarter the company's Digital Marketing Solutions business (known as G/O Digital) was realigned and is now reported together with the media business. The historical income statement information presented below has been restated to reflect these changes. The tables below reconcile the company’s continuing operations on a GAAP basis to the non-GAAP presentation.

 
TEGNA GAAP TEGNA
Cont Ops

Special Items (1)

Non- GAAP
 
Three Months ended Mar. 31, 2016
Revenues $ 460,638 $

-

$ 460,638
Operating expenses excluding corporate 294,128 (10,398 ) 283,730
Corporate 14,208  

-

  14,208
Operating expense 308,336   (10,398 ) 297,938
Operating income 152,302   10,398   162,700
Depreciation 14,963

-

14,963
Amortization 5,992  

-

  5,992
Adjusted EBITDA $ 173,257   $ 10,398   $ 183,655
 
Three Months ended June 30, 2016
Revenues $ 476,978 $

-

$ 476,978
Operating expenses excluding corporate 300,559 (8,714 ) 291,845
Corporate 16,683   (1,864 ) 14,819
Operating expense 317,242   (10,578 ) 306,664
Operating income 159,736   10,578   170,314
Depreciation 14,478

-

14,478
Amortization 5,775  

-

  5,775
Adjusted EBITDA $ 179,989   $ 10,578   $ 190,567
 
Three Months ended Sept. 30, 2016
Revenues $ 519,617 $

-

$ 519,617
Operating expenses excluding corporate 317,682 (16,532 ) 301,150
Corporate 16,084   (1,556 ) 14,528
Operating expense 333,766   (18,088 ) 315,678
Operating income 185,851   18,088   203,939
Depreciation 13,212

-

13,212
Amortization 5,776  

-

  5,776
Adjusted EBITDA $ 204,839   $ 18,088   $ 222,927
 
 
 
 
Table No. 5 (continued)
 
TEGNA GAAP TEGNA
Cont Ops Special Items (1) Non- GAAP
 
Three Months ended Dec. 31, 2016
Revenues $ 546,855 $

-

$ 546,855
Operating expenses excluding corporate 321,168 (15,360 ) 305,808
Corporate 15,424   (1,665 ) 13,759
Operating expense 336,592   (17,025 ) 319,567
Operating income 210,263   17,025   227,288
Depreciation 12,716

-

12,716
Amortization 5,721  

-

  5,721
Adjusted EBITDA $ 228,700   $ 17,025   $ 245,725
 
YTD 2016
Revenues $ 2,004,088 $

-

$ 2,004,088
Operating expenses excluding corporate 1,233,537 (51,004 ) 1,182,533
Corporate 62,399   (5,085 ) 57,314
Operating expense 1,295,936   (56,089 ) 1,239,847
Operating income 708,152   56,089   764,241
Depreciation 55,369

-

55,369
Amortization 23,264  

-

  23,264
Adjusted EBITDA $ 786,785   $ 56,089   $ 842,874
 
 
Three Months ended Mar. 31, 2017
Revenues $ 459,070 $

-

$ 459,070
Operating expenses excluding corporate 320,355 (2,958 ) 317,397
Corporate 15,604   (924 ) 14,680
Operating expense 335,959   (3,882 ) 332,077
Operating income 123,111   3,882   126,993
Depreciation 13,217

-

13,217
Amortization 5,389  

-

  5,389
Adjusted EBITDA $ 141,717   $ 3,882   $ 145,599
 

(1) Special items primarily include workforce restructuring charges, operating asset impairments and facility consolidation charges.

 
NON-GAAP FINANCIAL INFORMATION

TEGNA Inc.

Unaudited, in thousands of dollars

     
Table No. 6
 
“Media revenue” is a non-GAAP financial performance measure used in addition to and in conjunction with results presented in accordance with GAAP.
 
Three Months ended June 30,    
% Increase
2017 2016 (Decrease)  
 
Total company revenues (GAAP basis) $ 489,369 $ 476,978 2.6
Factors unrelated to Media results impacting comparisons:
CoFactor (sold in December 2016)

-

2,710 ****
Discontinued digital marketing services (a) 6,172   13,751   (55.1 )
Media revenues $ 483,197   $ 460,517   4.9  

 

(a) - Primarily includes revenues related to a Gannett transition services agreement which has been discontinued.

Source: TEGNA Inc.

TEGNA Inc.
For investor inquiries:
Jeffrey Heinz, 703-873-6917
Vice President, Investor Relations
jheinz@TEGNA.com
or
For media inquiries:
Anne Bentley, 703-873-6366
Vice President, Corporate Communications
abentley@TEGNA.com

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TEGNA shares are traded on the New York Stock Exchange with the symbol TGNA. The company's transfer agent and registrar is Wells Fargo Bank, N.A. General inquiries and requests for enrollment materials should be directed to:

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