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| 8-K - 8-K - TEGNA INC | tgnaq42015earningsrelease8.htm |
FOR IMMEDIATE RELEASE | Tuesday, February 16, 2016 |
TEGNA Inc. Reports 2015 Fourth Quarter and Full Year Results
Highlights for the full year include the following:
• | Overall company revenue totaled $3.05 billion, growth of 2 percent on a pro forma, constant currency basis despite the absence of a record $200 million of Olympic and political spending in 2014 |
• | Adjusted EBITDA totaled $1.06 billion, an increase of 16 percent |
• | Adjusted EBITDA margin of 35 percent, unchanged from 2014 despite the absence of substantial Olympic and political spending |
• | Successfully completed long-term affiliation agreements with CBS and NBC and several significant retransmission agreements |
Highlights for the fourth quarter include the following:
• | GAAP earnings from continuing operations of $0.69 per diluted share. Non-GAAP earnings from continuing operations of $0.53 per diluted share, an 8 percent year-over-year increase |
• | Overall company revenue decline of 3 percent on a pro forma, constant currency basis reflecting primarily the absence of record political spending of $92.4 million in the same quarter last year |
• | Media Segment revenues up 12 percent excluding incremental political advertising |
• | Digital Segment revenues over 2 percent higher on a pro forma, constant currency basis |
• | Adjusted EBITDA totaled $305.8 million resulting in an Adjusted EBITDA margin of 38 percent |
• | Free cash flow and proceeds from headquarter building sale totaled $358 million |
• | Building sale proceeds used to add $75 million to $750 million share repurchase authorization and redeem $180 million of fixed-rate debt |
McLEAN, VA - TEGNA Inc. (NYSE: TGNA) today reported non-GAAP earnings per diluted share from continuing operations of $0.53 for the fourth quarter of 2015, an increase of 8.2 percent compared to $0.49 for the fourth quarter of 2014.
Gracia Martore, president and chief executive officer, said, “We are very pleased with our tremendous progress in our first six months operating as a highly-focused media and digital company. During that time, TEGNA Media successfully negotiated long-term network affiliation agreements and several carriage agreements, providing us with certain revenue streams for years to come. In TEGNA Digital, Cars.com achieved solid organic revenue growth driven by the success of several new products and CareerBuilder’s ongoing shift toward Software as a Service solutions helped fuel double-digit revenue growth for its SaaS products.”
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Martore continued, “We have accomplished a great deal over the last six months and we are well on our way to achieving the objectives we set forth at our Investor Day in June. We are more certain than ever that we have built a strong foundation for long-term growth and success. This, coupled with tail winds associated with the upcoming elections and 2016 Olympic Games, are expected to result in a banner year for TEGNA.”
In our ongoing effort to focus and streamline our operations, during the quarter we divested substantially all of the businesses in the Other Segment, primarily Clipper Magazine. As a result, the Other Segment is now reflected as Discontinued Operations in our Statements of Income for all periods presented. In addition, the sale of PointRoll was completed on November 12, 2015. PointRoll's results are included in the Digital Segment.
Beginning with 2016, we converted to a calendar fiscal year from a 52-week fiscal year to better reflect our media and digital peer group. In order to effectuate the change, the fourth quarter in 2015 was extended four days to December 31, 2015. Operating results in our Media Segment were impacted by the extra days.
On October 2, 2015, we announced the completion of the sale of our corporate headquarters for $270 million. We will continue to occupy a portion of the building rent-free for 18 months. During the fourth quarter, we renewed retransmission agreements with DISH and DirecTV and AT&T U-verse. We also executed long-term affiliation agreements with CBS and NBC. The outcome of all these significant negotiations was well within the parameters of the long-term plan we presented at our Investor Day in June of 2015.
The results for the fourth quarter of 2015 and the year-to-date period include results for Cars.com, which we fully acquired on October 1, 2014. The prior year year-to-date period does not include results for Cars.com for the first nine months, impacting the year-over-year comparisons for the year-to-date periods.
Unless otherwise noted, financial figures discussed below are on a Non-GAAP basis.
FOURTH QUARTER
CONTINUING OPERATIONS
The following table summarizes the year-over-year changes in select financial categories for both GAAP and Non-GAAP measures.
GAAP | Non-GAAP | ||||||||||||||
Fourth Quarter 2015 | Fourth Quarter 2014 | Fourth Quarter 2015 | Fourth Quarter 2014 | ||||||||||||
Operating revenue | $ | 805,264 | $ | 842,046 | $ | 805,264 | $ | 842,046 | |||||||
Operating expense | 478,369 | 614,706 | 549,260 | 574,899 | |||||||||||
Operating income | $ | 326,895 | $ | 227,340 | $ | 256,004 | $ | 267,147 | |||||||
Income from continuing operations | $ | 155,942 | $ | 483,431 | $ | 119,334 | $ | 112,623 | |||||||
See Table 3 for reconciliations between the GAAP reported numbers to the Non-GAAP measure. | |||||||||||||||
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In 2014's fourth quarter we achieved political revenue of $92.4 million. Despite the almost complete absence of that spending in 2015, consolidated fourth quarter operating revenues were only $36.8 million lower. Excluding incremental political advertising, Media Segment revenues would have been 11.9 percent higher. Digital Segment revenues were up 2.2 percent on a pro forma, constant currency basis.
Fourth quarter operating expenses declined 4.5 percent reflecting lower Digital Segment and corporate expenses and the absence of publishing-related unallocated costs. Corporate expenses were $16.6 million compared to $17.8 million in the fourth quarter a year ago. The decrease was driven by continuing efforts to create efficiencies. Corporate expenses include $1.7 million of non-cash rent expense.
Reported operating income increased 43.8 percent from the fourth quarter in 2014, due primarily to the gain on the sale of our corporate headquarters. Operating income was $256.0 million, reflecting primarily the absence of the aforementioned politically related advertising in the Media Segment.
Adjusted EBITDA (a non-GAAP term detailed in Table 4) totaled $305.8 million. The Adjusted EBITDA margin in the fourth quarter was 38.0 percent, relatively unchanged from the fourth quarter a year ago despite the absence of substantial political advertising.
Special items in the fourth quarter of 2015 resulted in a GAAP benefit of $0.16 per share and included primarily the gain on the sale of the corporate headquarters offset, in part, by workforce restructuring, facility consolidation and impairment charges. (Refer to Table 3 for a reconciliation of results on a GAAP and non-GAAP basis).
FOURTH QUARTER
TEGNA MEDIA
In the fourth quarter, the Media Segment achieved double-digit increases in retransmission fees and online revenues, as well as an increase in core advertising. However, overall Media Segment revenues were down due to the previously mentioned political advertising achieved in 2014. The four extra days in the quarter contributed approximately $11 million to Media Segment revenues.
The following table summarizes the year-over-year changes in select Media Segment revenue categories.
Media Segment Revenue Detail (Dollars in thousands) | ||||||
Fourth Quarter 2015 | Percentage change from Fourth Quarter 2014 | |||||
Core (Local & National) | $ | 296,325 | 7 | % | ||
Political | 10,525 | (89 | %) | |||
Retransmission (a) | 119,944 | 27 | % | |||
Online | 31,080 | 15 | % | |||
Other | 4,359 | (16 | %) | |||
Total | $ | 462,233 | (7 | %) | ||
(a) Reverse compensation to networks is included as part of programming costs. | ||||||
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Media Segment operating expenses totaled $254.9 million compared to $246.2 million in the fourth quarter a year ago. The 3.5 percent increase was due, in part, to higher programming fees. Operating income totaled $207.3 million while Adjusted EBITDA was $224.5 million.
Based on current trends, we expect the growth in Media Segment revenues for the first quarter of 2016 compared to the first quarter of 2015 to be in the range of 10 percent to 12 percent driven by increases in political advertising, retransmission revenue and digital revenue. The Super Bowl aired on 6 fewer of our stations in 2016 compared to 2015, moving from NBC to CBS in 2016. Excluding the impact of the Super Bowl, the percentage growth in core advertising is expected to be up in the low-single digits.
FOURTH QUARTER
TEGNA DIGITAL
The following table reconciles Digital Segment revenues reported on a GAAP basis to revenues presented on a pro forma, constant currency basis (a non-GAAP measure).
Fourth Quarter | |||||||||
2015 | 2014 | Percentage Change | |||||||
Digital Segment Revenue | |||||||||
Reported (GAAP Measure) | $ | 343,031 | $ | 347,215 | (1.2)% | ||||
Adjust for business sold | (3,736 | ) | (13,275 | ) | *** | ||||
Constant currency impact | — | (1,939 | ) | *** | |||||
Total adjusted pro-forma revenue | $ | 339,295 | $ | 332,001 | 2.2% | ||||
Digital Segment operating revenues in the quarter reflected continued revenue growth at Cars.com offset by revenue declines at CareerBuilder and the impact from the sale of our PointRoll business. Digital Segment revenues were 2.2 percent higher on a pro forma, constant currency basis.
Revenue growth of 5.7 percent at Cars.com reflects higher retail revenues by Cars.com direct sales channel and national sales offset by the absence of wholesale price increases which will occur in the first quarter of 2016. Direct sales rose 10.1 percent reflecting increases in unit volumes and revenue per dealer driven by new product sales. National revenue, primarily display advertising sold to auto manufacturers, was up 11.7 percent due, in part, to heavier traffic to mobile properties.
CareerBuilder revenue in the fourth quarter continues to be impacted by the transition to a greater concentration of SaaS products in conjunction with the strategic decision to reduce sales of certain lower margin advertising and services products as well as unfavorable exchange rates. As a result, revenue from Human Capital Software Solutions was up 16.5 percent in the quarter. CareerBuilder revenue was 4.2 percent lower on a constant currency basis.
Digital Segment operating income totaled $65.3 million and was flat compared to the fourth quarter of 2014. Adjusted EBITDA totaled $96.2 million resulting in an Adjusted EBITDA margin of 28.0 percent.
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FOURTH QUARTER
NON-OPERATING AND CASH FLOW ITEMS
Interest expense totaled $66.8 million in the quarter, a decline of $6.6 million from $73.4 million in the fourth quarter of 2014 due to lower average debt outstanding. During the quarter, we redeemed $180 million of our 7.125 percent senior notes due in 2018. The redemption will result in interest cost savings of approximately $30 million over the remaining life of that debt.
The substantial decline in reported other non-operating items reflects the $476.7 million write up of our investment in Classified Ventures in the fourth quarter of 2014. Other non-operating items in the fourth quarter totaled $2.6 million of income compared to $0.1 million in the fourth quarter of 2014.
The Non-GAAP fourth quarter 2015 effective tax rate decreased by 3.4 percentage points due to a reduction in the deferred tax liability recorded on our balance sheet as of year end. When these deferred tax items are reported on our state tax returns in the future, they will be subject to a lower tax rate than had been recorded previously, which creates a deferred tax benefit in 2015, reducing our effective tax rate.
Cash flow from operating activities for the fourth quarter was $133.9 million. Free cash flow (a non-GAAP measure) totaled $90.0 million for the quarter. Long-term debt outstanding was $4.2 billion and total cash was $129.2 million at year end. During the fourth quarter, we repurchased approximately 2.6 million shares of our outstanding stock for $70.5 million and paid dividends of $31.3 million, returning over $100 million to our shareholders.
FULL YEAR 2015
CONTINUING OPERATIONS
Total operating revenues for the full year totaled $3.05 billion, an increase of 16.2 percent compared to 2014. The increase reflects substantially higher Digital Segment revenues and slightly lower Media Segment revenues. Digital Segment revenues were 46.5 percent higher due to the acquisition of and organic growth at Cars.com. Media Segment revenue growth was negatively impacted by the absence of $200 million of political and Olympic revenue. Double digit growth in retransmission and online revenues as well as higher core advertising partially offset the absence of political and Olympic revenue.
Operating expenses were $2.20 billion, an increase of 18.2 percent compared to 2014, reflecting primarily the acquisition of Cars.com. Operating income totaled $849.2 million compared to $763.8 million in 2014, an increase of 11.2 percent while net income from continuing operations attributable to TEGNA was 16.3 percent higher.
Adjusted EBITDA was $1.06 billion in 2015 compared to $911.1 million in 2014, an increase of 15.9 percent. The Adjusted EBITDA margin in 2015 was 34.6 percent, unchanged from 2014 as Digital Segment margins improved 4.7 percent while Media Segment margins were negatively impacted by the absence of Olympic and political spending.
* * * *
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 web site, investors.TEGNA.com, or listen-only conference lines. U.S. callers should dial 1-800-768-6570 and international callers should dial 1-785-830-1942 at least 10 minutes prior to the scheduled start of the
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call. The confirmation code for the conference call is 1416348. To access the replay, dial 1-888-203-1112 in the U.S. International callers should use the number 1-719-457-0820. The confirmation code for the replay is 1416348. Materials related to the call will be available through the Investor Relations section of the company's web site Tuesday morning.
About TEGNA
TEGNA Inc. (NYSE: TGNA), formerly Gannett Co., Inc., is comprised of a dynamic portfolio of media and digital businesses that provide content that matters and brands that deliver. TEGNA reaches more than 90 million Americans and delivers highly relevant, useful and smart content, when and how people need it, to make the best decisions possible. TEGNA Media includes 46 television stations 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, the leading online destination for automotive consumers, CareerBuilder, a global leader in human capital solutions, and other powerful brands such as G/O Digital and Cofactor. 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.
# # #
For investor inquiries, contact: | For media inquiries, contact: | |
Jeffrey Heinz | Jeremy Gaines | |
Vice President, Investor Relations | Vice President, Corporate Communications | |
703-854-6917 | 703-854-6049 | |
jheinz@TEGNA.com | jmgaines@TEGNA.com | |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME TEGNA Inc. Unaudited, in thousands (except per share amounts) | |||||||||||
Table No. 1 | |||||||||||
Fourth Quarter 2015 | Fourth Quarter 2014 | % Increase (Decrease) | |||||||||
(recast) | |||||||||||
Net operating revenues: | |||||||||||
Media | $ | 462,233 | $ | 494,831 | (6.6 | ) | |||||
Digital | 343,031 | 347,215 | (1.2 | ) | |||||||
Total | 805,264 | 842,046 | (4.4 | ) | |||||||
Operating expenses: | |||||||||||
Cost of sales and operating expenses, exclusive of depreciation | 232,555 | 254,898 | (8.8 | ) | |||||||
Selling, general and administrative expenses, exclusive of depreciation | 273,571 | 269,680 | 1.4 | ||||||||
Depreciation | 20,051 | 25,470 | (21.3 | ) | |||||||
Amortization of intangible assets | 28,128 | 29,312 | (4.0 | ) | |||||||
Facility consolidation and asset impairment charges | (75,936 | ) | 35,346 | (314.8 | ) | ||||||
Total | 478,369 | 614,706 | (22.2 | ) | |||||||
Operating income | 326,895 | 227,340 | 43.8 | ||||||||
Non-operating (expense) income: | |||||||||||
Equity loss in unconsolidated investees, net | (941 | ) | (5,330 | ) | (82.3 | ) | |||||
Interest expense | (66,758 | ) | (73,384 | ) | (9.0 | ) | |||||
Other non-operating items | (6,182 | ) | 444,165 | (101.4 | ) | ||||||
Total | (73,881 | ) | 365,451 | (120.2 | ) | ||||||
Income before income taxes | 253,014 | 592,791 | (57.3 | ) | |||||||
Provision for income taxes | 81,609 | 90,422 | (9.7 | ) | |||||||
Income from continuing operations | 171,405 | 502,369 | (65.9 | ) | |||||||
Net income attributable to noncontrolling interests | (15,463 | ) | (18,938 | ) | (18.3 | ) | |||||
Net income from continuing operations attributable to TEGNA Inc. | $ | 155,942 | $ | 483,431 | (67.7 | ) | |||||
Earnings from continuing operations per share: | |||||||||||
Basic | $ | 0.71 | $ | 2.14 | (66.8 | ) | |||||
Diluted | $ | 0.69 | $ | 2.09 | (67.0 | ) | |||||
Weighted average number of common shares outstanding: | |||||||||||
Basic | 220,768 | 226,046 | (2.3 | ) | |||||||
Diluted | 225,129 | 231,157 | (2.6 | ) | |||||||
Dividends declared per share | $ | 0.14 | $ | 0.20 | (30.0 | ) | |||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME TEGNA Inc. Unaudited, in thousands (except per share amounts) | |||||||||||
Table No. 1 (continued) | |||||||||||
Year Ended 2015 | Year Ended 2014 | % Increase (Decrease) | |||||||||
(recast) | |||||||||||
Net operating revenues: | |||||||||||
Media | $ | 1,682,144 | $ | 1,691,866 | (0.6 | ) | |||||
Digital | 1,368,801 | 934,275 | 46.5 | ||||||||
Total | 3,050,945 | 2,626,141 | 16.2 | ||||||||
Operating expenses: | |||||||||||
Cost of sales and operating expenses, exclusive of depreciation | 923,336 | 954,990 | (3.3 | ) | |||||||
Selling, general and administrative expenses, exclusive of depreciation | 1,068,221 | 766,854 | 39.3 | ||||||||
Depreciation | 90,803 | 85,866 | 5.7 | ||||||||
Amortization of intangible assets | 114,284 | 65,971 | 73.2 | ||||||||
Facility consolidation and asset impairment charges | (58,857 | ) | 44,961 | (230.9 | ) | ||||||
Total | 2,137,787 | 1,918,642 | 11.4 | ||||||||
Operating income | 913,158 | 707,499 | 29.1 | ||||||||
Non-operating (expense) income: | |||||||||||
Equity income (loss) in unconsolidated investees, net | (5,064 | ) | 151,462 | (103.3 | ) | ||||||
Interest expense | (273,629 | ) | (272,668 | ) | 0.4 | ||||||
Other non-operating items | (11,529 | ) | 404,403 | (102.9 | ) | ||||||
Total | (290,222 | ) | 283,197 | (202.5 | ) | ||||||
Income before income taxes | 622,936 | 990,696 | (37.1 | ) | |||||||
Provision for income taxes | 202,314 | 234,471 | (13.7 | ) | |||||||
Income from continuing operations | 420,622 | 756,225 | (44.4 | ) | |||||||
Net income attributable to noncontrolling interests | (63,164 | ) | (68,289 | ) | (7.5 | ) | |||||
Net income from continuing operations attributable to TEGNA Inc. | $ | 357,458 | $ | 687,936 | (48.0 | ) | |||||
Earnings from continuing operations per share: | |||||||||||
Basic | $ | 1.59 | $ | 3.04 | (47.7 | ) | |||||
Diluted | $ | 1.56 | $ | 2.97 | (47.5 | ) | |||||
Weighted average number of common shares outstanding: | |||||||||||
Basic | 224,688 | 226,292 | (0.7 | ) | |||||||
Diluted | 229,721 | 231,907 | (0.9 | ) | |||||||
Dividends declared per share | $ | 0.68 | $ | 0.80 | (15.0 | ) | |||||
BUSINESS SEGMENT INFORMATION TEGNA Inc. Unaudited, in thousands of dollars | |||||||||||
Table No. 2 | |||||||||||
Fourth Quarter 2015 | Fourth Quarter 2014 | % Increase (Decrease) | |||||||||
(recast) | |||||||||||
Net operating revenues: | |||||||||||
Media | $ | 462,233 | $ | 494,831 | (6.6 | ) | |||||
Digital | 343,031 | 347,215 | (1.2 | ) | |||||||
Total | $ | 805,264 | $ | 842,046 | (4.4 | ) | |||||
Operating income (net of depreciation, amortization and facility consolidation and asset impairment charges): | |||||||||||
Media | $ | 200,680 | $ | 243,179 | (17.5 | ) | |||||
Digital | 53,924 | 30,905 | 74.5 | ||||||||
Corporate | (17,601 | ) | (17,801 | ) | (1.1 | ) | |||||
Net gain on sale of corporate headquarters building | 89,892 | — | *** | ||||||||
Unallocated costs (c) | — | (28,943 | ) | (100.0 | ) | ||||||
Total | $ | 326,895 | $ | 227,340 | 43.8 | ||||||
Depreciation, amortization and facility consolidation and asset impairment charges: | |||||||||||
Media | $ | 20,173 | $ | 26,007 | (22.4 | ) | |||||
Digital | 40,857 | 62,098 | (34.2 | ) | |||||||
Corporate | (88,787 | ) | 2,023 | *** | |||||||
Total | $ | (27,757 | ) | $ | 90,128 | (130.8 | ) | ||||
Adjusted EBITDA (a): | |||||||||||
Media | $ | 224,474 | $ | 270,536 | (17.0 | ) | |||||
Digital | 96,205 | 96,114 | 0.1 | ||||||||
Corporate (b) | (14,846 | ) | (15,778 | ) | (5.9 | ) | |||||
Unallocated costs (c) | — | (28,943 | ) | (100.0 | ) | ||||||
Total | $ | 305,833 | $ | 321,929 | (5.0 | ) | |||||
(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. | |||||||||||
(b) Includes non cash rent of $1.7 million as a result of the sale of the company's McLean, VA headquarters. | |||||||||||
(c) Unallocated expenses 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. | |||||||||||
BUSINESS SEGMENT INFORMATION TEGNA Inc. Unaudited, in thousands of dollars | |||||||||||
Table No. 2 (continued) | |||||||||||
Year Ended 2015 | Year Ended 2014 | % Increase (Decrease) | |||||||||
(recast) | |||||||||||
Net operating revenues: | |||||||||||
Media | $ | 1,682,144 | $ | 1,691,866 | (0.6 | ) | |||||
Digital | 1,368,801 | 934,275 | 46.5 | ||||||||
Total | $ | 3,050,945 | $ | 2,626,141 | 16.2 | ||||||
Operating income (net of depreciation, amortization and facility consolidation and asset impairment charges): | |||||||||||
Media | $ | 714,237 | $ | 747,020 | (4.4 | ) | |||||
Digital | 229,386 | 119,908 | 91.3 | ||||||||
Corporate | (68,418 | ) | (71,256 | ) | (4.0 | ) | |||||
Net gain on sale of corporate headquarters building | 89,892 | — | *** | ||||||||
Unallocated costs (c) | (51,939 | ) | (88,173 | ) | (41.1 | ) | |||||
Total | $ | 913,158 | $ | 707,499 | 29.1 | ||||||
Depreciation, amortization and facility consolidation and asset impairment charges: | |||||||||||
Media | $ | 81,665 | $ | 94,129 | (13.2 | ) | |||||
Digital | 146,907 | 91,967 | 59.7 | ||||||||
Corporate | (82,342 | ) | 10,702 | (869.4 | ) | ||||||
Total | $ | 146,230 | $ | 196,798 | (25.7 | ) | |||||
Adjusted EBITDA (a): | |||||||||||
Media | $ | 787,162 | $ | 844,880 | (6.8 | ) | |||||
Digital | 379,889 | 214,986 | 76.7 | ||||||||
Corporate (b) | (59,218 | ) | (60,554 | ) | (2.2 | ) | |||||
Unallocated costs (c) | (51,939 | ) | (88,173 | ) | (41.1 | ) | |||||
Total | $ | 1,055,894 | $ | 911,139 | 15.9 | ||||||
(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) Includes non cash rent of $1.7 million as a result of the sale of the company's McLean, VA headquarters. | |||||||||||
(c) Unallocated expenses 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, and should be read together with financial information presented on a GAAP basis.
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 workforce restructuring charges, transformation items, non-cash asset impairment charges, certain gains and expenses recognized in operating and non-operating categories and charges/(credits) to our income tax provision. The company believes that such expenses, charges and gains are not indicative of normal, ongoing operations and their inclusion in results makes for more difficult comparisons between years and with peer group companies.
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. Adjusted EBITDA is defined as net income from continuing operations attributable to TEGNA before (1) net income attributable to noncontrolling interests, (2) income taxes, (3) interest expense, (4) equity income (losses), (5) other non-operating items, (6) workforce restructuring, (7) other transformation items, (8) asset 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. This earnings report 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, plant and equipment” and increased by voluntary pension contributions, net of related tax benefit. 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.
Management uses non-GAAP financial performance measures for purposes of evaluating business unit and consolidated company performance. The company therefore believes that each of the non-GAAP measures presented provides useful information to investors by allowing them to view our businesses through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods and providing a focus on the underlying ongoing operating performance of its businesses. In addition, many of our peer group companies present similar non-GAAP measures so the presentation of such measures facilitates industry comparisons. Tabular reconciliations for the non-GAAP financial measures are contained in Tables 3 through 6 attached to this news release.
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 2015 | Workforce restructuring | Facility consolidation and asset impairment | Non-operating items | Special tax credit | Fourth Quarter 2015 | ||||||||||||||||||
Cost of goods sold, exclusive of depreciation | $ | 232,555 | $ | (4,288 | ) | $ | — | $ | — | $ | — | $ | 228,267 | ||||||||||
Selling general and administrative expenses, exclusive of depreciation | 273,571 | (757 | ) | — | — | — | 272,814 | ||||||||||||||||
Facility consolidation and asset impairment | (75,936 | ) | — | 75,936 | — | — | — | ||||||||||||||||
Operating expenses | 478,369 | (5,045 | ) | 75,936 | — | — | 549,260 | ||||||||||||||||
Operating income | 326,895 | 5,045 | (75,936 | ) | — | — | 256,004 | ||||||||||||||||
Other non-operating items | (6,182 | ) | — | — | 8,829 | — | 2,647 | ||||||||||||||||
Total non-op (expense) income | (73,881 | ) | — | — | 8,829 | — | (65,052 | ) | |||||||||||||||
Income before income taxes | 253,014 | 5,045 | (75,936 | ) | 8,829 | — | 190,952 | ||||||||||||||||
Provision for income taxes | 81,609 | 1,961 | (32,140 | ) | 3,442 | 1,283 | 56,155 | ||||||||||||||||
Net income from continuing operations attributable to TEGNA | 155,942 | 3,084 | (43,796 | ) | 5,387 | (1,283 | ) | 119,334 | |||||||||||||||
Net income from continuing operations per share-diluted (a) | $ | 0.69 | $ | 0.01 | $ | (0.19 | ) | $ | 0.02 | $ | (0.01 | ) | $ | 0.53 | |||||||||
(a) total per share does not sum due to rounding | |||||||||||||||||||||||
GAAP Measure | Special Items | Non-GAAP Measure | |||||||||||||||||||||
Fourth Quarter 2014 | Workforce restructuring | Facility consolidation and asset impairment | Non-operating items | Special tax credit | Fourth Quarter 2014 | ||||||||||||||||||
(recast) | (recast) | ||||||||||||||||||||||
Cost of goods sold, exclusive of depreciation | $ | 254,898 | $ | (3,792 | ) | $ | — | $ | — | $ | — | $ | 251,106 | ||||||||||
Selling general and administrative expenses, exclusive of depreciation | 269,680 | (669 | ) | — | — | — | 269,011 | ||||||||||||||||
Facility consolidation and asset impairment | 35,346 | — | (35,346 | ) | — | — | — | ||||||||||||||||
Operating expenses | 614,706 | (4,461 | ) | (35,346 | ) | — | — | 574,899 | |||||||||||||||
Operating income | 227,340 | 4,461 | 35,346 | — | — | 267,147 | |||||||||||||||||
Equity income (loss) in unconsolidated investees, net | (5,330 | ) | — | — | 4,805 | — | (525 | ) | |||||||||||||||
Other non-operating items | 444,165 | — | — | (444,045 | ) | — | 120 | ||||||||||||||||
Total non-op (expense) income | 365,451 | — | — | (439,240 | ) | — | (73,789 | ) | |||||||||||||||
Income before income taxes | 592,791 | 4,461 | 35,346 | (439,240 | ) | — | 193,358 | ||||||||||||||||
Provision for income taxes | 90,422 | 1,660 | 3,928 | (163,342 | ) | 129,129 | 61,797 | ||||||||||||||||
Net income from continuing operations attributable to TEGNA | 483,431 | 2,801 | 31,418 | (275,898 | ) | (129,129 | ) | 112,623 | |||||||||||||||
Net income from continuing operations per share - diluted | $ | 2.09 | $ | 0.01 | $ | 0.14 | $ | (1.19 | ) | $ | (0.56 | ) | $ | 0.49 | |||||||||
NON-GAAP FINANCIAL INFORMATION TEGNA Inc. Unaudited, in thousands of dollars (except per share amounts) | |||||||||||||||||||||||
Table No. 3 (continued) | |||||||||||||||||||||||
GAAP Measure | Special Items | Non-GAAP Measure | |||||||||||||||||||||
Year Ended 2015 | Workforce restructuring | Facility consolidation and asset impairment | Non-operating items | Special tax credit | Year Ended 2015 | ||||||||||||||||||
Cost of goods sold, 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 | ||||||||||||||||
Facility consolidation and asset impairment | (58,857 | ) | — | 58,857 | — | — | — | ||||||||||||||||
Operating expenses | 2,137,787 | (7,565 | ) | 71,566 | — | — | 2,201,788 | ||||||||||||||||
Operating income | 913,158 | 7,565 | (71,566 | ) | — | — | 849,157 | ||||||||||||||||
Other non-operating items | (11,529 | ) | — | — | 10,282 | — | (1,247 | ) | |||||||||||||||
Total non-op (expense) income | (290,222 | ) | — | — | 10,282 | — | (279,940 | ) | |||||||||||||||
Income before income taxes | 622,936 | 7,565 | (71,566 | ) | 10,282 | — | 569,217 | ||||||||||||||||
Provision for income taxes | 202,314 | 2,899 | (30,514 | ) | (2,295 | ) | 3,305 | 175,709 | |||||||||||||||
Net income from continuing operations attributable to TEGNA | 357,458 | 4,666 | (41,052 | ) | 12,577 | (3,305 | ) | 330,344 | |||||||||||||||
Net income from continuing operations per share - diluted (a) | $ | 1.56 | $ | 0.02 | $ | (0.17 | ) | $ | 0.05 | $ | (0.01 | ) | $ | 1.44 | |||||||||
(a) total per share does not sum due to rounding | |||||||||||||||||||||||
GAAP Measure | Special Items | Non-GAAP Measure | |||||||||||||||||||||
Year Ended 2014 | Workforce restructuring | Facility consolidation and asset impairment | Non-operating items | Special tax credit | Year Ended 2014 | ||||||||||||||||||
(recast) | (recast) | ||||||||||||||||||||||
Cost of goods sold, exclusive of depreciation | $ | 954,990 | $ | (5,816 | ) | $ | — | $ | — | $ | — | $ | 949,174 | ||||||||||
Selling and general and administrative expenses, exclusive of depreciation | 766,854 | (1,026 | ) | — | — | — | 765,828 | ||||||||||||||||
Amortization of intangible assets | 65,971 | — | (4,480 | ) | — | — | 61,491 | ||||||||||||||||
Facility consolidation and asset impairment | 44,961 | — | (44,961 | ) | — | — | — | ||||||||||||||||
Operating expenses | 1,918,642 | (6,842 | ) | (49,441 | ) | — | — | 1,862,359 | |||||||||||||||
Operating income | 707,499 | 6,842 | 49,441 | — | — | 763,782 | |||||||||||||||||
Equity income in unconsolidated investees, net | 151,462 | — | — | (137,199 | ) | — | 14,263 | ||||||||||||||||
Other non-operating items | 404,403 | — | — | (404,674 | ) | — | (271 | ) | |||||||||||||||
Total non-op (expense) income | 283,197 | — | — | (541,873 | ) | — | (258,676 | ) | |||||||||||||||
Income before income taxes | 990,696 | 6,842 | 49,441 | (541,873 | ) | — | 505,106 | ||||||||||||||||
Provision for income taxes | 234,471 | 2,545 | 9,059 | (203,234 | ) | 109,933 | 152,774 | ||||||||||||||||
Net income from continuing operations attributable to TEGNA | 687,936 | 4,297 | 40,382 | (338,639 | ) | (109,933 | ) | 284,043 | |||||||||||||||
Net income from continuing operations per share - diluted (a) | $ | 2.97 | $ | 0.02 | $ | 0.17 | $ | (1.46 | ) | $ | (0.47 | ) | $ | 1.22 | |||||||||
(a) total per share does not sum 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 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 | 81,609 | ||||||||||||||||||
Interest expense | 66,758 | ||||||||||||||||||
Equity loss in unconsolidated investees, net | 941 | ||||||||||||||||||
Other non-operating items | 6,182 | ||||||||||||||||||
Operating income (GAAP basis) | $ | 200,680 | $ | 53,924 | $ | 72,291 | $ | 326,895 | |||||||||||
Workforce restructuring | 3,621 | 1,424 | — | 5,045 | |||||||||||||||
Other transformation costs | 3,006 | 1,988 | 962 | 5,956 | |||||||||||||||
Asset impairment charges | — | 8,000 | — | 8,000 | |||||||||||||||
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 | |||||||||||||||
Non-cash rent | — | — | 1,650 | 1,650 | |||||||||||||||
Adjusted EBITDA (non-GAAP basis) | $ | 224,474 | $ | 96,205 | $ | (14,846 | ) | $ | 305,833 | ||||||||||
Fourth Quarter 2014 (recast): | |||||||||||||||||||
Media | Digital | Corporate | Unallocated Costs | Consolidated Total | |||||||||||||||
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) | $ | 483,431 | |||||||||||||||||
Net income attributable to noncontrolling interests | 18,938 | ||||||||||||||||||
Provision for income taxes | 90,422 | ||||||||||||||||||
Interest expense | 73,384 | ||||||||||||||||||
Equity loss in unconsolidated investees, net | 5,330 | ||||||||||||||||||
Other non-operating items | (444,165 | ) | |||||||||||||||||
Operating income (GAAP basis) | $ | 243,179 | $ | 30,905 | $ | (17,801 | ) | $ | (28,943 | ) | $ | 227,340 | |||||||
Workforce restructuring | 1,350 | 3,111 | — | — | 4,461 | ||||||||||||||
Other transformation costs | 4,104 | — | — | — | 4,104 | ||||||||||||||
Asset impairment charges | — | 31,242 | — | — | 31,242 | ||||||||||||||
Adjusted operating income (non-GAAP basis) | 248,633 | 65,258 | (17,801 | ) | (28,943 | ) | 267,147 | ||||||||||||
Depreciation | 15,860 | 7,587 | 2,023 | — | 25,470 | ||||||||||||||
Amortization | 6,043 | 23,269 | — | — | 29,312 | ||||||||||||||
Adjusted EBITDA (non-GAAP basis) | $ | 270,536 | $ | 96,114 | $ | (15,778 | ) | $ | (28,943 | ) | $ | 321,929 | |||||||
NON-GAAP FINANCIAL INFORMATION TEGNA Inc. Unaudited, in thousands of dollars | |||||||||||||||||||
Table No. 4 (continued) | |||||||||||||||||||
Year Ended 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 investees, net | 5,064 | ||||||||||||||||||
Other non-operating items | 11,529 | ||||||||||||||||||
Operating income (GAAP basis) | $ | 714,237 | $ | 229,386 | $ | 21,474 | $ | (51,939 | ) | $ | 913,158 | ||||||||
Workforce restructuring | 3,969 | 3,596 | — | — | 7,565 | ||||||||||||||
Other transformation items | (4,631 | ) | 13,095 | 962 | — | 9,426 | |||||||||||||
Asset impairment charges | — | 8,900 | — | — | 8,900 | ||||||||||||||
Gain on sale of Corporate HQ building, net | — | — | (89,892 | ) | — | (89,892 | ) | ||||||||||||
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 | ||||||||||||||
Non-cash rent | — | — | 1,650 | — | 1,650 | ||||||||||||||
Adjusted EBITDA (non-GAAP basis) | $ | 787,162 | $ | 379,889 | $ | (59,218 | ) | $ | (51,939 | ) | $ | 1,055,894 | |||||||
Year Ended 2014 (recast): | |||||||||||||||||||
Media | Digital | Corporate | Unallocated Costs | Consolidated Total | |||||||||||||||
Net income from continuing operations attributable to TEGNA Inc. (GAAP basis) | $ | 687,936 | |||||||||||||||||
Net income attributable to noncontrolling interests | 68,289 | ||||||||||||||||||
Provision for income taxes | 234,471 | ||||||||||||||||||
Interest expense | 272,668 | ||||||||||||||||||
Equity income in unconsolidated investees, net | (151,462 | ) | |||||||||||||||||
Other non-operating items | (404,403 | ) | |||||||||||||||||
Operating income (GAAP basis) | $ | 747,020 | $ | 119,908 | $ | (71,256 | ) | $ | (88,173 | ) | $ | 707,499 | |||||||
Workforce restructuring | 3,731 | 3,111 | — | — | 6,842 | ||||||||||||||
Other transformation costs | 18,199 | — | — | — | 18,199 | ||||||||||||||
Asset impairment charges | — | 31,242 | — | — | 31,242 | ||||||||||||||
Adjusted operating income (non-GAAP basis) | 768,950 | 154,261 | (71,256 | ) | (88,173 | ) | 763,782 | ||||||||||||
Depreciation | 51,813 | 23,351 | 10,702 | — | 85,866 | ||||||||||||||
Adjusted amortization (non-GAAP basis) | 24,117 | 37,374 | — | — | 61,491 | ||||||||||||||
Adjusted EBITDA (non-GAAP basis) | $ | 844,880 | $ | 214,986 | $ | (60,554 | ) | $ | (88,173 | ) | $ | 911,139 | |||||||
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 GAAP financial measures. | ||||||||
Fourth Quarter 2015 | Year Ended 2015 | |||||||
Net cash flow from operating activities | $ | 133,873 | $ | 613,106 | ||||
Purchase of property, plant and equipment | (43,870 | ) | (118,767 | ) | ||||
Voluntary pension employer contribution | — | 100,000 | ||||||
Tax benefit for voluntary pension employer contribution | — | (37,200 | ) | |||||
Free cash flow | $ | 90,003 | $ | 557,139 | ||||
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 2015 | Fourth Quarter 2014 | Fourth Quarter 2015 | Fourth Quarter 2014 | ||||||||||||
(recast) | (recast) | ||||||||||||||
Income before taxes (per Table 3) | $ | 253,014 | $ | 592,791 | $ | 190,952 | $ | 193,358 | |||||||
Noncontrolling interests (per Table 1) | (15,463 | ) | (18,938 | ) | (15,463 | ) | (18,938 | ) | |||||||
Income before taxes attributable to TEGNA | $ | 237,551 | $ | 573,853 | $ | 175,489 | $ | 174,420 | |||||||
Provision for income taxes (per Table 3) | $ | 81,609 | $ | 90,422 | $ | 56,155 | $ | 61,797 | |||||||
Effective tax rate | 34.4 | % | 15.8 | % | 32.0 | % | 35.4 | % | |||||||
GAAP | Non-GAAP | ||||||||||||||
Year Ended 2015 | Year Ended 2014 | Year Ended 2015 | Year Ended 2014 | ||||||||||||
(recast) | (recast) | ||||||||||||||
Income before taxes (per Table 3) | $ | 622,936 | $ | 990,696 | $ | 569,217 | $ | 505,106 | |||||||
Noncontrolling interests (per Table 1) | (63,164 | ) | (68,289 | ) | (63,164 | ) | (68,289 | ) | |||||||
Income before taxes attributable to TEGNA | $ | 559,772 | $ | 922,407 | $ | 506,053 | $ | 436,817 | |||||||
Provision for income taxes (per Table 3) | $ | 202,314 | $ | 234,471 | $ | 175,709 | $ | 152,774 | |||||||
Effective tax rate | 36.1 | % | 25.4 | % | 34.7 | % | 35.0 | % | |||||||