Tribune Publishing Company Reports 2015 Second Quarter Results

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CHICAGO--(BUSINESS WIRE)--

Tribune Publishing Company TPUB today reported financial results for its second quarter ended June 28, 2015. Management uses non-GAAP measures to enhance comparability of operating results.

Tribune Publishing's Chief Executive Officer Jack Griffin said, "We continued to make progress on our five-point transformation plan in the second quarter of 2015. Our Adjusted EBITDA results for the period reflect significant cost-management initiatives, which we plan to continue in the second half of the year, and strong revenue diversification efforts, with meaningful growth in our Digital Marketing Services and Content Syndication businesses.

"Additionally, we completed the accretive acquisition of The San Diego Union-Tribune and its nine community weeklies, establishing the California News Group, which includes the Los Angeles Times. In support of our digital monetization efforts, we appointed Denise Warren as President of Digital and CEO of East Coast Publishing. While there is still much work to be done, our entire Company is committed to our transformation plan to create shareholder value and to help us further develop engaging experiences for consumers and our marketing partners."

                         

Results Summary

     
In millions, except per share amounts
LTM means last twelve months ended June 28, 2015
      2Q 2015   2Q 2014   YTD 2015   YTD 2014   LTM Q2'15
GAAP Measures:  
Revenues $ 410 $ 430 $ 807 $ 846 $ 1,668
Net Income

$

3

$

15

$

6

$

27

$

21
Diluted Earnings per Share $ 0.13 $ 0.60 $ 0.23 $ 1.06 n/a
Operating Cash Flow (OCF)(1) $ 18 $ 19 $ 39 $ 77 $ 92
                         
 
Non-GAAP Measures:
Pro Forma Adjusted EBITDA(2) $ 38 $ 36 $ 60 $ 65 $ 155
Adjusted Net Income $ 11 $ 25 $ 16 $ 46 n/a
Adjusted Diluted Earning per Share $ 0.42 $ 0.99 $ 0.63 $ 1.81 n/a
 
(1) Operating Cash Flow represents Net cash provided by operating activities.
(2) In the first quarter of 2015, the Company included a gain of $8 million related to post-retirement benefits in the determination of Pro Forma Adjusted EBITDA that has now been excluded as it is expected to be a non-recurring item. Accordingly, the 2015 year to date period for Pro Forma Adjusted EBITDA, as presented, does not include this adjustment for the non-recurring gain from the termination of certain post-retirement benefits.

See "Use of Non-GAAP Financial Measures" below and reconciliations of non-GAAP measures to most comparable GAAP measure.

   
 

Chief Financial Officer Sandra Martin said, "We are revising our 2015 full-year guidance modestly upward for Total Revenues and Adjusted EBITDA. This guidance reflects print advertising softness in the second half, offset by the addition of seven months of results for The San Diego Union-Tribune."

2015 Full Year Guidance Update, including San Diego acquisition:

  • Total Revenues: $1.67 billion to $1.70 billion
  • Adjusted EBITDA: $165 million to $175 million
    • Adjusted EBITDA guidance of $165 million to $175 million excludes first quarter $8 million gain, fully described in Note 2 of table above
  • Capital Expenditures, including 2014 Carryover: $40 million

2015 SECOND QUARTER RESULTS

Total Revenues in the second quarter of 2015 were $410 million compared to $430 million in the second quarter of 2014, a decline of 4.5%. Advertising revenues were $226 million in the second quarter of 2015, down 6.9% from the prior year. Second quarter advertising revenues, excluding 5.5 weeks of advertising revenues from The San Diego Union-Tribune, declined 10.5%. Circulation revenues of $115 million were up 5.5% in the quarter compared to prior year and essentially flat from last year excluding revenues from San Diego. Second quarter 2015 Commercial Print and Delivery revenues of $33 million were down from $45 million in the prior year quarter due to changes in contracts, primarily in Chicago and Los Angeles. All other revenues, including Direct Mail, Digital Marketing Services and Content Syndication, were $37 million, an increase of 7.9%, compared to the second quarter of 2014. Revenues from acquired properties in the second quarter of 2015 totaled $32 million.

Total Operating Expenses, including depreciation and amortization, for the second quarter of 2015 were $399 million, down $6 million or 1.5% from the second quarter of 2014. Second quarter acquired property expenses totaled $27 million in 2015. Total operating expenses, adjusted by management to isolate in-year reductions in cash operating expenses as defined below, resulted in $27 million of second quarter adjusted cash operating expense savings in 2015 compared to 2014 and over $40 million of savings in the first half of 2015. A component of the adjusted cash operating expense savings is adjusted cash compensation, as defined below. Of the $27 million of adjusted cash operating expense savings in the second quarter, $15 million represented adjusted cash compensation savings in 2015 versus 2014. The Company defines adjusted cash operating expenses as total operating expenses excluding: circulation distribution; newsprint/ink expenses; affiliate fees; acquired properties expenses; and the impact of items listed in the Non-GAAP reconciliations below. The Company defines adjusted cash compensation as total compensation expenses excluding acquired properties compensation, which was a net reduction of $9 million in the quarter, as compared with second quarter 2014; and compensation-related items listed in the Non-GAAP reconciliations including restructuring, stock-based compensation, and pension credits, which is an aggregate net reduction of $6 million in the quarter, as compared with second quarter 2014; and, with respect to 2014, including 60% of the corporate allocation expenses related to Shared service centers and Other corporate allocations, which represents compensation-related expenses included in corporate allocations from Tribune Media Company prior to the spin-off.

Income from operations for the second quarter of 2015 was $12 million compared to $25 million in the prior year pre-spin quarter, primarily due to revenue and expense variances described above, as well as higher depreciation and amortization expenses of $9 million related to the spin-off transaction.

Interest expense, net for the second quarter of 2015 was $6 million. Debt increased by $70 million in the quarter due to the completion of the Term Loan B expansion with the net proceeds used in the acquisition of The San Diego Union-Tribune.

Net income for the second quarter of 2015 was $3 million compared to $15 million in the pre-spin second quarter of 2014 and variances are described above.

Net Cash Provided by Operating Activities for the second quarter of 2015 was $18 million. Capital Expenditures for the second quarter were $7 million.

Pro Forma Adjusted EBITDA for the second quarter of 2015 was $38 million, up $2 million from the second quarter of 2014. Cash from restructuring, acquisition and remediation costs for the second quarter totaled $13 million.

Adjusted Net Income and Adjusted Diluted EPS for the second quarter of 2015 were $11 million and $0.42 per share, respectively.

Conference Call Webcast

The Company's earnings conference call will be held at 10 a.m. CT today, August 11, and will be accessible live to the public via webcast and on dial-in conference lines. To access the live webcast and view materials related to the earnings announcement, please visit investor.tribpub.com. Participants can pre-register for the call using the following link: http://dpregister.com/10068823. Participants who pre-register will be given a unique PIN to gain immediate access to the call, bypassing the live operator. Participants may pre-register at any time, including up to and after the call start time. For those who do not pre-register, please dial 1-866-777-2509 in the U.S. or 1-412-317-5413 internationally at least 10 minutes prior to the scheduled start. The conference call will be "listen only" for participants other than Tribune Publishing management and financial analysts. The conference call will be available on-demand via the Investor Relations section of the Company's website, approximately one hour after conclusion of the call. The audio also will be available for one year on the Company's website, and the replay via telephone will be available until August 18, 2015. To access the replay via telephone, dial 1-877-344-7529 in the U.S. or 1-412-317-0088 internationally, code 10068823.

Use of Non-GAAP Financial Measures

To provide investors with additional information regarding Tribune Publishing's financial results, this press release includes references to Adjusted EBITDA, Pro Forma Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS. These are not measures presented in accordance with generally accepted accounting principles in the United States (US GAAP) and Tribune Publishing's use of the terms Adjusted EBITDA, Pro Forma Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS may vary from that of others in the Company's industry. Adjusted EBITDA, Pro Forma Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS should not be considered as an alternative to net income (loss), income from operations, net income (loss) per diluted share, revenues or any other performance measures derived in accordance with US GAAP as measures of operating performance or liquidity. Further information regarding Tribune Publishing's presentation of these measures, including a reconciliation of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS to the most directly comparable US GAAP financial measure, is included below in this press release.

Cautionary Statements Regarding Forward-looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties, including, without limitation, statements regarding Tribune Publishing's expectations regarding its cost-management initiatives, print advertising softness in the second half, and 2015 guidance. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "will," "projections," "continue," "business outlook," "estimate," "outlook," or similar expressions constitute forward-looking statements. Differences in Tribune Publishing's actual results from those described in these forward-looking statements may result from actions taken by Tribune Publishing as well as from risks and uncertainties beyond Tribune Publishing's control. These risks and uncertainties include competition and other economic conditions including fragmentation of the media landscape and competition from other media alternatives; changes in advertising demand, circulation levels and audience shares; the Company's ability to develop and grow its online businesses; the Company's reliance on revenue from printing and distributing third-party publications; changes in newsprint prices; macroeconomic trends and conditions; the Company's reliance on third-party suppliers for various services; the Company's ability to adapt to technological changes; adverse results from litigation, governmental investigations or tax-related proceedings or audits; the Company's ability to realize benefits or synergies from acquisitions or divestitures or to operate its businesses effectively following acquisitions or divestitures; the Company's ability to attract and retain employees; the Company's ability to satisfy pension and other postretirement employee benefit obligations; changes in accounting standards; the effect of labor strikes, lockouts and labor negotiations; regulatory and judicial rulings; the Company's ability to satisfy future capital and liquidity requirements; the Company's ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms, and other events beyond the Company's control that may result in unexpected adverse operating results. The Company's actual results could also be impacted by the other risks detailed from time to time in its publicly filed documents, including in Item 1A (Risk Factors) of its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

ABOUT TRIBUNE PUBLISHING

Tribune Publishing Company TPUB is a diversified media and marketing-solutions company that delivers innovative experiences for audiences and advertisers across all platforms. The Company's diverse portfolio of iconic news and information brands includes 11 award-winning major daily titles, more than 60 digital properties and more than 180 verticals in markets, including Los Angeles; San Diego; Chicago; South Florida; Orlando; Baltimore; Carroll County and Annapolis, Md.; Hartford, Conn.; Allentown, Pa., and Newport News, Va. Tribune Publishing also offers an array of customized marketing solutions, and operates a number of niche products, including Hoy, El Sentinel and VidaLatina making Tribune Publishing the country's largest Spanish-language publisher. Tribune Publishing is headquartered in Chicago. For more information, please visit www.tribpub.com.

Exhibits:
Condensed Consolidated and Combined Statements of Income
Notes to Condensed Consolidated and Combined Statements of Income
Condensed Consolidated and Combined Balance Sheets
Non-GAAP Reconciliations - Net Income to Adjusted EBITDA
Non-GAAP Reconciliations - Adjusted EBITDA to Pro Forma Adjusted EBITDA
Non-GAAP Reconciliations – Net Income to Adjusted Net Income and Adjusted Diluted EPS

(TPUB-F)

       

 

TRIBUNE PUBLISHING COMPANY

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

Preliminary

 
Three months ended Six months ended
June 28,
2015
    June 29,
2014
June 28,
2015
    June 29,
2014
Operating revenues: (1)
Advertising $ 225,541 $ 242,131 $ 445,370 $ 475,166
Circulation 115,026 109,010 224,309 216,317
Other 69,862   78,782   136,982   154,962  
Total operating revenues 410,429   429,923   806,661   846,445  
 
Operating expenses (2) 398,812   404,912   784,148   800,663  
 
Income from operations 11,617 25,011 22,513 45,782
 
Gain (loss) on equity investments, net 50 (294 ) (7 ) (629 )
Gain on investment transaction 1,484 1,484
Interest expense, net (6,331 ) (53 ) (12,198 ) (55 )
Reorganization items, net (252 )   (853 ) (9 )
Income before income taxes 5,084 26,148 9,455 46,573
Income tax expense 1,686   10,945   3,542   19,598  
Net income $ 3,398   $ 15,203   $ 5,913   $ 26,975  
 
Net income per common share:
Basic $ 0.13   $ 0.60   $ 0.23   $ 1.06  
Diluted $ 0.13   $ 0.60   $ 0.23   $ 1.06  
 
Weighted average shares outstanding:
Basic 25,910   25,424   25,702   25,424  
Diluted 26,034   25,424   25,912   25,424  
 
Dividends declared per common share: $ 0.175   $   $ 0.35   $  
 

See accompanying pages for notes.  Results for 2014 represent earnings as a division of Tribune Media Company prior to the spin-off.

 

     
 
TRIBUNE PUBLISHING COMPANY
NOTES TO CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(In thousands)
(Unaudited)

Preliminary

 

Note (1) - Operating Revenues for the three and six months ended June 28, 2015 and June 29, 2014

 
Three months ended Six months ended
June 28,
2015
  June 29,
2014
  % Change June 28,
2015
  June 29,
2014
% Change
Advertising (1a)
Retail $ 117,572 $ 125,895 (6.6 %) $ 226,867 $ 239,236 (5.2 %)
National 40,166 44,873 (10.5 %) 85,074 95,876 (11.3 %)
Classified 67,803   71,363   (5.0 %) 133,429   140,054   (4.7 %)
Total advertising 225,541 242,131 (6.9 %) 445,370 475,166 (6.3 %)
Circulation 115,026 109,010 5.5 % 224,309 216,317 3.7 %
Other revenue
Commercial print and delivery 32,933 44,566 (26.1 %) 66,209 89,841 (26.3 %)
Direct mail and marketing 16,196 17,730 (8.7 %) 32,524 35,528 (8.5 %)
Digital marketing services 7,317 6,373 14.8 % 13,718 10,950 25.3 %
Content syndication and other 13,416   10,113   32.7 % 24,531   18,643   31.6 %
Total other revenues 69,862   78,782   (11.3 %) 136,982   154,962   (11.6 %)
Total operating revenues $ 410,429   $ 429,923   (4.5 %) $ 806,661   $ 846,445   (4.7 %)
 
Note (1a) Three months ended Six months ended
June 28,
2015
June 29,
2014
  % Change June 28,
2015
June 29,
2014
    % Change
ROP (Run of Press) $ 111,266 $ 115,212 (3.4 %) $ 219,950 $ 228,489 (3.7 %)
Preprint 71,550 79,622 (10.1 %) 141,765 152,837 (7.2 %)
Digital 42,725   47,297   (9.7 %) 83,655   93,840   (10.9 %)
Total advertising $ 225,541   $ 242,131   (6.9 %) $ 445,370   $ 475,166   (6.3 %)

       
TRIBUNE PUBLISHING COMPANY
NOTES TO CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (cont.)
(In thousands)
(Unaudited)

Preliminary

 
Note (2) - Operating Expenses for the three and six months ended June 28, 2015 and June 29, 2014
 
Three months ended Six months ended
June 28,
2015
    June 29,
2014
    % Change June 28,
2015
    June 29,
2014
    % Change
Compensation $ 156,384 $ 140,939 11.0 % $ 305,615 $ 284,651 7.4 %
Circulation distribution 68,443 73,392 (6.7 %) 135,348 146,932 (7.9 %)
Newsprint and ink 31,444 35,499 (11.4 %) 62,739 70,997 (11.6 %)
Outside services 39,916 29,229 36.6 % 79,271 55,149 43.7 %
Corporate allocations (2a) 39,456 * 74,615 *
Occupancy 16,036 15,609 2.7 % 31,096 30,930 0.5 %
Promotion and marketing 15,616 14,504 7.7 % 28,251 24,566 15.0 %
Outside printing and production 12,196 11,845 3.0 % 24,380 22,421 8.7 %
Affiliate fees 14,053 9,170 53.2 % 28,480 18,475 54.2 %
Other general and administrative 31,575 30,754 2.7 % 63,110 63,066 0.1 %
Depreciation and amortization 13,149   4,515   * 25,858   8,861   *
Total operating expenses $ 398,812   $ 404,912   (1.5 %) $ 784,148   $ 800,663   (2.1 %)
       
Note (2a) Three months ended Six months ended
June 28,
2015
    June 29,
2014
    % Change June 28,
2015
    June 29,
2014
    % Change
Corporate management fee $ $ 8,960 * $ $ 18,020 *
Allocated depreciation 5,195 * 9,976 *
Shared service centers 23,099 * 43,384 *
Other   2,202   *   3,235   *
Total corporate allocations $   $ 39,456   * $   $ 74,615   *

* Represents positive or negative change in excess of 100%

 

       
 
TRIBUNE PUBLISHING COMPANY
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands)
(Unaudited)

Preliminary

 
June 28,
2015
December 28,
2014
Assets
Current Assets:
Cash $ 41,726 $ 36,675
Accounts receivable 213,854 234,812
Inventories 15,952 16,651
Deferred income taxes 34,251 38,207
Prepaid expenses and other 16,838   26,593
Total current assets 322,621 352,938
Net Properties, Plant and Equipment 153,510 162,345
Other Assets
Goodwill 127,038 41,669
Intangible assets, net 152,126 87,272
Investments and other assets 95,179   42,291
Total other assets 374,343   171,232
Total assets $ 850,474   $ 686,515
 
Liabilities and Equity
Current Liabilities
Current portion of long-term debt $ 22,067 $ 17,911
Accounts payable 75,576 81,567
Other 192,373   206,510
Total current liabilities 290,016   305,988
Non-Current Liabilities
Long-term debt 386,077 329,613
Other non-current liabilities 159,831   44,745
Total non-current liabilities 545,908 374,358
 
Equity
Total stockholders' equity 14,550   6,169
Total liabilities and equity $ 850,474   $ 686,515

       
TRIBUNE PUBLISHING COMPANY
NON-GAAP RECONCILIATIONS
(In thousands)
(Unaudited)

Preliminary

 
Reconciliation of Net Income to Adjusted EBITDA:
 
Three months ended Six months ended
June 28,
2015
    June 29,
2014
    % Change June 28,
2015
    June 29,
2014
    % Change
Net income $ 3,398 $ 15,203 (77.6 %) $ 5,913 $ 26,975 (78.1 %)
 
Income tax expense 1,686 10,945 (84.6 %) 3,542 19,598 (81.9 %)
(Gain) loss on equity investments, net (50 ) 294 * 7 629 (98.9 %)
Gain on investment fair value adjustment (1,484 ) * (1,484 ) *
Interest expense, net 6,331 53 * 12,198 55 *
Reorganization items, net 252     * 853   9   *
 
Income from operations 11,617 25,011 (53.6 %) 22,513 45,782 (50.8 %)
 
Depreciation and amortization 13,149 4,515 * 25,858 8,861 *
Allocated depreciation (1) 5,195 * 9,976 *
Allocated corporate management fee 8,960 * 18,020 *
Restructuring, acquisition and remediation costs (2) 12,654 7,619 66.1 % 17,436 14,345 21.5 %
Litigation settlement (3) (867 ) * (867 ) *
Stock-based compensation (4) 1,471 622 * 3,001 1,319 *
Pension credits (5) (4,968 ) * (10,440 ) *
Gain from termination of post-retirement benefits (6) (650 )   * (8,449 )   *
 
Adjusted EBITDA(6)(7) $ 38,241   $ 46,087   (17.0 %) $ 60,359   $ 86,996   (30.6 %)
 
 
* Represents positive or negative change in excess of 100%
 
(1) - Allocated depreciation represents depreciation for primarily technology assets that were used by Tribune Publishing prior to the spin-off. As a result of the spin-off, these technology assets were assigned to Tribune Publishing and the related depreciation is included in post-spin operating results.
(2) - Restructuring (including spin-related), acquisition and remediation costs include costs related to Tribune Publishing's internal restructuring, the distribution and separation from Tribune Media Company ("TCO"), acquisitions and material weakness remediation costs.
(3) - Adjustment to litigation settlement reserve.
(4) - Stock-based compensation is due to Tribune Publishing's and TCO's equity compensation plans and is included for comparative purposes.
(5) - Pension credits are due to allocations from TCO for Tribune Publishing employees defined benefit plan. As part of the spin-off, TCO retained this plan.
(6) - In the first quarter of 2015, the Company did not deduct a gain of $7.8 million related to the termination of certain post-retirement benefits in the determination of Adjusted EBITDA. Management reassessed this gain and determined it is expected to be a non-recurring item and should be deducted in the determination of Adjusted EBITDA. Accordingly, the 2015 year-to-date period for Adjusted EBITDA, as presented, includes such adjustment for the non-recurring gain from termination of certain post-retirement benefits.
(7) - The 2014 Adjusted EBITDA has been amended to exclude the adjustment for pre-spin intercompany rent for certain properties. The pre-spin intercompany rent was previously included to improve comparability between the 2013 pre-spin period and the 2014 pre-spin periods as the Company did not have intercompany rent until December 2013 for certain properties.

       
 
 
TRIBUNE PUBLISHING COMPANY
NON-GAAP RECONCILIATIONS
(In thousands)
(Unaudited)

Preliminary

 

Reconciliation of Adjusted EBITDA to Pro Forma Adjusted EBITDA:

 
Three months ended Six months ended
June 28, 2015     June 29, 2014 June 28, 2015     June 29, 2014
   
Adjusted EBITDA $ 38,241 $ 46,087 $ 60,359 $ 86,996
 
Modified affiliate agreement - CareerBuilder (3,000 ) (7,000 )
Modified affiliate agreement - Cars.com (4,000 ) (8,000 )
Public company costs (4,000 ) (10,000 )
Incremental rent (1) (7,000 ) (14,000 )
Intercompany rent (2) (3)   8,394     16,790  
 
Pro Forma Adjusted EBITDA(4) $ 38,241     $ 36,481   $ 60,359     $ 64,786  
 
 

(1) - Incremental rent represents the amount estimated for intercompany rent prior the finalization of the amendments to the lease agreements. Incremental rent was added back to net income for the 2014 periods prior to the spin-off as a pro forma adjusted estimate to provide investors with post-spin economics based on no longer owning the real estate. This amount is included in the calculation of Pro Forma Adjusted EBITDA and offset against the actual amount of intercompany rent for comparability to the Pro Forma Adjusted EBITDA metrics previously disclosed. Intercompany rent represents rental expense recorded by Tribune Publishing for facilities owned by TCO and its affiliates pursuant to related party lease agreements. The Company began making rent payments effective with the spin-off.

(2) - Intercompany rent represents rental expense recorded by Tribune Publishing for facilities owned by TCO and its affiliates pursuant to related party lease agreements prior to the spin-off. Intercompany rent expense is added back to net income for the 2014 periods prior to the spin-off for better comparability between the periods presented. The Company began making rent payments effective with the spin-off.
(3) - Second quarter and year-to-date 2014 Adjusted EBITDA has been amended to exclude the adjustment for pre-spin intercompany rent for certain properties. The pre-spin intercompany rent was previously included to improve comparability between the 2013 pre-spin period and the 2014 pre-spin periods as the Company did not have intercompany rent until December 2013 for certain properties. This adjustment has been included in Pro Forma Adjusted EBITDA for comparability.
(4) - In the first quarter of 2015, the Company did not deduct a gain of $7.8 million related to the termination of certain post-retirement benefits in the determination of Adjusted EBITDA. Management reassessed this gain and determined it is expected to be a non-recurring item and should be deducted in the determination of Adjusted EBITDA. Accordingly, the 2015 year-to-date period for Adjusted EBITDA, as presented, includes such adjustment for the non-recurring gain from termination of certain post-retirement benefits.
 

Adjusted EBITDA

Adjusted EBITDA is defined as net income before income taxes, interest income, interest expense, depreciation and amortization, income and losses from equity investments, corporate management fee from TCO, pension credits, stock-based compensation, certain unusual and non-recurring items (including spin-related costs) and reorganization items. The Company's management uses Adjusted EBITDA (a) as a measure of operating performance; (b) for planning and forecasting in future periods; and (c) in communications with the Company's Board of Directors concerning the Company's financial performance. Management believes the presentation of Adjusted EBITDA enhances investors' overall understanding of the financial performance of the Company's business as a stand-alone company. In addition, Adjusted EBITDA, or a similarly calculated measure, is used as the basis for certain financial maintenance covenants that the Company is subject to in connection with certain credit facilities. Since not all companies use identical calculations, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with GAAP. Instead, management believes Adjusted EBITDA should be used to supplement the Company's financial measures derived in accordance with GAAP to provide a more complete understanding of the trends affecting the business.

Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with GAAP. Some of the limitations to using non-GAAP measures as an analytical tool are: they do not reflect the Company's interest income and expense, or the requirements necessary to service interest or principal payments on the Company's debt; they do not reflect future requirements for capital expenditures or contractual commitments; and although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP measures do not reflect any cash requirements for such replacements.

Pro forma Adjusted EBITDA

Pro forma Adjusted EBITDA is defined as Adjusted EBITDA after taking into consideration rental expenses and public company costs expected to be incurred post-spin, and reductions for partial economics on reasonable-case modified affiliate agreements for digital products, including CareerBuilder.com and Cars.com. Management believes the presentation of Pro forma Adjusted EBITDA enhances investors' overall understanding of the financial performance of the Company's business as a stand-alone company and includes elements used as the basis for forecasting going forward. Management believes this measure improves the understanding and comparability of future results by providing quantitative estimates for historical periods presented.

     
 
 
TRIBUNE PUBLISHING COMPANY
NON-GAAP RECONCILIATIONS
(In thousands)
(Unaudited)

Preliminary

 
Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted Earnings per Share (EPS):
 
Three months ended
June 28, 2015     June 29, 2014
       
Earnings Diluted EPS Earnings Diluted EPS
 
Net income - GAAP $ 3,398 $ 0.13 $ 15,203 $ 0.60
 
Adjustments to net income, net of 40% tax:
Restructuring, acquisition and remediation costs 7,592 0.29 4,571 0.18
Pre-spin allocated costs from TCO (1)   5,512   0.22
 
Adjusted net income - Non-GAAP $ 10,990   $ 0.42 $ 25,286   $ 0.99
 
 
Six months ended
June 28, 2015 June 29, 2014
 
Earnings Diluted EPS Earnings Diluted EPS
 
Net income - GAAP $ 5,913 $ 0.23 $ 26,975 $ 1.06
 
Adjustments to net income, net of 40% tax:
Restructuring, acquisition and remediation costs 10,462 0.40 8,607 0.34
Pre-spin allocated costs from TCO (1)   10,534   0.41
 
Adjusted net income - Non-GAAP $ 16,375   $ 0.63 $ 46,116   $ 1.81
 

(1) -     Pre-spin allocated costs from TCO includes allocated depreciation, allocated corporate management fee and pension credits recorded prior to the August 4, 2014 spin-off date, each as reflected in the reconciliation of Net Income to Adjusted EBITDA table above.

 

Adjusted Net income and Adjusted Diluted EPS

Adjusted net income is defined as Net income - GAAP excluding the following adjustments: Restructuring, acquisition and remediation costs and Pre-spin allocated costs from TCO, net of the impact of income taxes.

Adjusted Diluted EPS computes Adjusted net income divided by diluted weighted average shares outstanding.

Management believes the presentation of these measures enhances investors' overall understanding of the financial performance of the Company's business as a stand-alone company due to the non-recurring nature of many of the adjustments in the pre-spin and post-spin periods. Management believes Adjusted Net income and Adjusted Diluted EPS are informative to investors as they analyze current results compared to future recurring projections.

Tribune Publishing Company
Investor Contacts:
Kimbre Neidhart, 469-528-9366
kneidhart@tribpub.com
or
Press Contacts:
Matthew Hutchison, 312-222-3305
matt.hutchison@tribpub.com
or
Dana Meyer, 312-222-3308
dmeyer@tribpub.com

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