Publisher of LA Times, Chicago Tribune reports ad revenue down 10.9% in Q3 earnings report
Tronc records a net loss of $10 million in Q3 earnings report, released the same day that Gannett formally backed away from any acquisition deal for the newspaper publisher
Earlier today tronc put a press release where the company said it was “unfortunate that Gannett’s lenders made their decision to terminate their role in the transaction without the benefit of tronc’s third quarter financials or any future projections.” Looking at the third quarter financials I would say Gannett was lucky to have terminated the agreement before the financials were released.
Despite now owning the San Diego Union Tribune, the newspaper company that was formerly known as Tribune Publishing, continues to see revenues fall, down 6.8 percent in Q3. Advertising revenue fell 10.9 percent.
For the third quarter, tronc reported a net loss of $10 million, though adjusted net income when you take out charges, was $8 million. That was probably better than some expected.
It is hard to imagine what the bottom line of a company like this would have looked like a decade or so ago. The company owns the two most important daily newspapers in Southern California, and is in such a dominate position there that the Justice Department prevented it from acquiring the Orange County Register. That paper ended up in the hands of MediaNews Group, and I won’t say how I feel about that.
So, the Gannett deal is dead, at least for now. Gannett’s earnings were nothing to crow about, and neither are tronc’s. It is hard to see how all this turns out well in the end, because I seriously doubt Apple is thinking about getting into the newspaper business, and Warren Buffett has already admitted defeat.
One of the things that is really hurting newspapers is political advertising – it just doesn’t add much to the P&L these days. I remember budgeting against an election year and when I budgeted a small increase I was told I could take it down if I wanted due to the next year being not an election year. No mention of election year advertising can be seen in any of the recent earnings reports, it is just not that important for newspaper anymore.
Here is tronc’s third quarter earnings statement. I will update if anything exciting comes out of the conference call.
Notes from conference call: First off, tronc stock sunk 12.4% today after Gannett’s announcement, but the stock is up 4% in after hours trading. Gannett stock pretty much at its 52 week low (well done guys).
The conference call with a not so subtle shot at the reporting of… unnamed… media reporters who were of so sure of a deal and reported that tronc “got greedy.” The company continues to say they had a deal with Gannett, but the publisher of USA Today could not come up with the financing. Not said is what the terms really would have been and whether it was about the amount cash, financing or stock involved. These deals can get complicated, after all.
Company reaffirmed guidance. Not many questions except why is performance so bad, beyond the idea that the Gannett acquisition was a distraction.
CHICAGO, Ill. – November 01, 2016 — tronc, Inc. today reported financial results for its third quarter ended September 25, 2016.
“Notwithstanding the distractions our Company has faced over the past several months and the fact that our Board and management team have been engaged in substantive discussions and due diligence with Gannett, our third quarter results reflect the important progress we have made in our efforts to transform our business,” said CEO Justin Dearborn. “While we are still in the early stages of executing our strategy, we remain confident in the strength of our core brands and assets and committed to our go-forward plans.”
Dearborn continued, “We are disappointed, that in the face of challenges surrounding its financing, Gannett’s Board unilaterally determined it could not complete the transaction that it began. The parties agreed to a purchase price in mid-September and subsequently finalized all material transaction terms. Given the market’s reaction to Gannett’s third quarter financial report, which showed a significant year-over-year decline in Adjusted EBITDA, we are not surprised that their board has decided to refocus their attention to operating the assets they currently own. We have repeatedly acknowledged that we must all undertake significant change to our business to address the challenging environment facing our industry. We believe we must all remain united in support of the publishing industry, and to that end we will continue to be a good partner to Gannett across our many existing business relationships.”
2016 THIRD QUARTER RESULTS
Total Revenues in the third quarter of 2016 were $378 million, down 6.8% compared to $406 million in the third quarter of 2015. This is the initial quarter which is comparable to the prior year as a full quarter of revenue from The San Diego Union-Tribune is included in both years. Advertising revenue was down 10.9% from the prior-year period as we experienced declines in print advertising in line with industry trends.
Total Operating Expenses, including depreciation and amortization, for the third quarter of 2016 were $377 million, down $36 million or 8.7% compared to $413 million in the third quarter of 2015. Compensation was down by $17 million or 10.8% and outside services was down over $9 million or 7.4% from prior year. Total operating expenses for the nine months ended September 25, 2016, adjusted to exclude expenses relating to The San Diego Union-Tribune and other restructuring and related costs, resulted in a total savings of $95 million from the prior-year period (as set forth in the Non-GAAP reconciliations below).
Net Loss for the third quarter of 2016 was $10 million, which included a $7 million non-cash charge to tax expense for the pass-through of tax basis adjustments from Tribune Media related to its settlement with the IRS and $17 million of pre-tax restructuring and transaction costs (including $8.5 million related to office space vacated at the Chicago Tribune and Los Angeles Timesbuildings in the third quarter of 2016). Adjusted net income for the third quarter was $8 million or an increase of $10 million from the third quarter of 2015.
Net Loss per share for the 2016 third quarter, on a fully diluted basis, was $0.29 compared to a net loss per share of $0.33 for the third quarter of 2015. The net loss per share was impacted by the previously mentioned restructuring and transaction costs. Before the impact of these charges, Adjusted Diluted earnings per share (or EPS) increased to $0.22 for the quarter.
Adjusted EBITDA for the third quarter of 2016 was $37 million, or an increase of $8 million from the third quarter of 2015 primarily due to the cost reductions discussed above.
Beginning in the second quarter of 2016, the Company was realigned under its new management team into two distinct segments: troncM, which is comprised of the Company’s media groups excluding their digital revenues and related expenses, and troncX, which includes all the digital revenues and related expenses of the Company including Tribune Content Agency (“TCA”) and Forsalebyowner.com (“FSBO”).
ncluded in tables below is segment reporting for troncM and troncX for the three and nine months ended September 25, 2016 and September 27, 2015. Corresponding information for earlier periods has been restated to reflect the change in reportable segments.
Total Revenues for troncM for the quarter were $323 million or a decrease of 7.6% compared to the third quarter of 2015. Advertising revenue declines were the main contributor to the decrease experienced from the prior-year quarter. Operating expenses declined by $40 million or 11.4% compared to the prior-year quarter due primarily to decreases in compensation expense. Income from operations for troncM was $16 million or $13 million more than third quarter of 2015 due to the decrease in operating expenses discussed above. Adjusted EBITDA for troncM for the third quarter of 2016 was $31 million or $7 million more than the third quarter of 2015.
Total Revenues for troncX for the third quarter of 2016 were $57 million or a decrease of 2.3% from the prior-year quarter. Advertising revenues for troncX declined by 2.2% while content revenues declined by 2.8%. Income from operations for troncX was $5 million or a decline of $5 million from prior-year period while Adjusted EBITDA for the third quarter of 2016 declined by $2 million compared to third quarter of 2015.
Total third quarter 2016 average monthly unique visitors were 60 million, up 32% from prior-year quarter while Digital only subscribers grew to 136,000, up 69% from the prior year and up 18% sequentially.
Net Cash Provided by Operating Activities for the third quarter of 2016 was $12 million and capital expenditures for the third quarter were $6 million. Debt was reduced by $5 millionduring the third quarter of 2016 and pension/OPEB liabilities were reduced by $2 million. Cash balance as of September 25, 2016 totaled $187 million.
2016 Full Year Guidance for Total Revenues remains at a range of $1.610 to $1.630 billion and Adjusted EBITDA increased to a range of $172 to $177 million.