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tronc, Inc. Reports Second Quarter 2018 Results

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CHICAGO, Aug. 09, 2018 (GLOBE NEWSWIRE) -- tronc, Inc. (NASDAQ:TRNC) today announced financial results for the second quarter ended July 1, 2018. 

Second Quarter 2018 and Year-to-Date Highlights:

  • Second quarter 2018 total revenues were up 3.9% compared to second quarter 2017
  • Digital-only subscribers increased 89% to 212,000 at the end of the second quarter 2018, up from 112,000 at the end of the second quarter 2017
  • Closed the sale of the Los Angeles Times and San Diego Union-Tribune and other California based media businesses (the "California transaction") 
    • Transaction significantly reduced pension liabilities
    • Existing term loan principal of $342 million retired in full
  • Acquired The Virginian-Pilot Media Companies (VPMC)
  • Increased full year revenue and adjusted EBITDA guidance

"The company accomplished a great deal during the second quarter 2018, all of which provides a solid foundation to drive future growth.  After closing the California transaction, we now have one of the strongest balance sheets in the industry," said tronc Chairman and CEO Justin Dearborn.  "Moreover, during the quarter we added The Virginian-Pilot Media Companies to our portfolio and we saw ongoing advancement in our digital subscription business as well as overall strong representation of consumer-related revenue versus advertising revenue."

Mr. Dearborn also stated, "We have been overwhelmed by the support of the Annapolis and greater Maryland community as well as from colleagues in newsrooms across the country following the senseless tragedy at The Capital Gazette.  We are humbled and honored by the manner in which our entire organization has mobilized to fully support our Maryland co-workers and the journalism community has come together to respect and honor their lives.  This show of solidarity reinvigorates the dialogue on the importance of strong journalism. We are proud of the way our staff at The Capital Gazette continues to produce every day since the tragedy occurred, and to the thousands of people who contributed to the Capital Gazette Families Fund and the Scholarship Fund."
                                                                                                                                 
Second Quarter 2018 Results
Unless otherwise noted, amounts and disclosures throughout this earnings report relate to continuing operations and exclude all discontinued operations consisting of the California properties and forsalebyowner.com.

Second quarter 2018 total revenues were $253.0 million, up 3.9% compared to $243.4 million for second quarter 2017.  Revenue for the second quarter 2018 includes $42.8 million attributable to New York Daily News or NYDN (acquired in September 2017), BestReviews.com (acquired in February 2018) and VPMC (acquired in May 2018), and an $8.2 million downward impact associated with the agreement to convert tronc's eight affiliate markets into Cars.com's direct retail channel, which went into effect on February 1, 2018.

Second quarter 2018 total advertising revenue and digital advertising revenue were $111.8 million and $24.0 million, respectively, which includes the impact from the Cars.com agreement.  Excluding this impact, on a year-over-year basis, total advertising revenue would have been down 3.9%, and digital advertising revenue and would have been up 1.9%.

Total operating expenses, including depreciation and amortization, for second quarter 2018 were $254.3 million, up 6.4%, compared to $239.0 million for second quarter of 2017.  The increase was mainly due to the impact of including NYDN, BestReviews and VPMC, partially offset by our ongoing strong cost management and reduced expenses related to the Cars.com transition. 

Net loss from continuing operations for second quarter 2018 was $15.1 million, or $0.44 per share, compared to a net loss of $1.9 million, or $0.06 per share, for second quarter of 2017. Adjusted EPS for second quarter 2018 was a loss of $0.12.

Adjusted EBITDA for second quarter 2018 was $22.2 million, versus $27.6 million in the second quarter 2017, the decline is primarily due to anticipated loss at the NYDN and higher newsprint pricing.

For the six months ended July 1, 2018, net cash provided by operating activities was $41.7 million, and capital expenditures totaled $30.4 million.  During the second quarter 2018, the California transaction enabled the repayment of the term loan and the buyer's assumption of pension liabilities decreased our pension liabilities by $83 million compared to first quarter 2018 leaving only $21 million of liabilities.  Cash balance was $214.5 million, which includes the proceeds from the California transaction not used to retire debt or acquire VPMC, and does not include $42.6 million of restricted cash reflected in long-term assets.

Segment Results
The Company operates in two segments: troncM, which is comprised of the Company's media groups excluding their digital revenues and related expenses, except digital subscription revenues when bundled with a print subscription, and troncX, which includes all digital revenues and related expenses of the Company from local tronc websites, third party websites, mobile
applications, digital-only subscriptions, Tribune Content Agency and BestReviews.

Included in the tables below is segment reporting for troncM and troncX for the second quarters of 2018 and 2017. 
   
      troncM
Second quarter 2018 troncM total revenues were $212.3 million, up 3.6% compared to second quarter 2017.  Circulation revenue for second quarter 2018 increased 19.8% on a year-over-year basis, primarily due to NYDN, which was partially offset by a decrease of 5.9% in advertising revenues.

Second quarter 2018 operating expenses for troncM increased 6.6% compared to the prior-year quarter, driven primarily by the inclusion of the NYDN and VPMC. 

Second quarter 2018 income from operations for troncM was $7.9 million or a 39.7% decline from the prior-year quarter.  This decline was down primarily due to anticipated losses at the NYDN and higher newsprint pricing.  We have made expense reductions to address the NYDN profitability.

     troncX
Total revenues for troncX for the second quarter of 2018 were $40.1 million, up 1.7%, primarily driven by the impact of the inclusion of NYDN and BestReviews.com, partially offset by the Cars.com impact.  Second quarter 2018 advertising revenues for troncX decreased 24.0% compared to the same period of the prior year, however, were up 1.9% excluding the impact from Cars.com.  Content revenues in the second quarter 2018, which includes digital-only subscriptions and content syndication, increased by 104.4% year-over-year.  Second quarter 2018 income from operations for troncX was $3.4 million, an increase of 12.1% from the prior-year period.

Digital-only subscribers grew to 212,000, up 89% from the prior year and up 9% sequentially.

2018 Outlook
Guidance has been raised to a new 2018 total revenue range of $1.02 to $1.06 billion and 2018 Adjusted EBITDA to a range of $106 to $112 million.

Conference Call Details
tronc will host a conference call to discuss the Company's second quarter 2018 results at 5 p.m. Eastern Time (4 p.m. Central Time) on Thursday, August 9, 2018.  The conference call may be accessed via tronc's Investor Relations website at investor.tronc.com or by dialing 844.494.0195 (508.637.5599 for international callers) and entering conference ID 3978236.  An archived version of the webcast will also be available for one year on the tronc website.  To access the replay via telephone, available until August 16, 2018, dial 855.859.2056 (404.537.3406 for international callers), conference ID 3978236.

Non-GAAP Financial Information
Adjusted EBITDA, Adjusted total operating expenses, 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 tronc's use of the terms Adjusted EBITDA, Adjusted total operating expenses, Adjusted Net Income, and Adjusted Diluted EPS may vary from that of others in the Company's industry.  Adjusted EBITDA, Adjusted total operating expenses, Adjusted Net Income, and Adjusted Diluted EPS should not be considered as an alternative to net income (loss), income from operations, operating expenses, 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 tronc's presentation of these measures, including a reconciliation of Adjusted EBITDA, Adjusted total operating expenses, 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 are based largely on our current expectations and reflect various estimates and assumptions by us.  Forward-looking statements are subject to certain risks, trends, and uncertainties that could cause actual results and achievements to differ materially from those expressed in such forward-looking statements.  Such risks, trends and uncertainties, which in some instances are beyond our control, include: changes in advertising demand, circulation levels and audience shares; competition and other economic conditions; economic and market conditions that could impact the level of our required contributions to the defined benefit pension plans to which we contribute; decisions by trustees under rehabilitation plans (if applicable) or other contributing employers with respect to multiemployer plans to which we contribute which could impact the level of our contributions; our ability to develop and grow our online businesses; changes in newsprint price; our ability to maintain effective internal control over financial reporting; concentration of stock ownership among our principal stockholders whose interests may differ from those of other stockholders; and other events beyond our control that may result in unexpected adverse operating results. For more information about these and other risks see Item 1A (Risk Factors) of the Company's most recent Annual Report on Form 10-Kand in the Company's other reports filed with the Securities and Exchange Commission.

The words "believe," "expect," "anticipate," "estimate," "could," "should," "intend," "may," "will," "plan," "seek" and similar expressions generally identify forward-looking statements.  However, such words are not the exclusive means for identifying forward-looking statements, and their absence does not mean that the statement is not forward-looking.  Whether or not any such forward-looking statements, in fact, occur will depend on future events, some of which are beyond our control.  Readers are cautioned not to place undue reliance on such forward-looking statements, which are being made as of the date of this press release.  Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

About tronc, Inc.
tronc, Inc. (NASDAQ:TRNC) is a media company rooted in award-winning journalism.  Headquartered in Chicago, tronc operates local media businesses in eight markets with titles including the Chicago TribuneNew York Daily NewsThe Baltimore SunOrlando Sentinel, South Florida's Sun-Sentinel, Virginia's Daily Press and The Virginian-Pilot, The Morning Call of Lehigh Valley, Pennsylvania, and the Hartford Courant

tronc also operates Tribune Content Agency and the Daily Meal and is majority owner of BestReviews.

Our brands are committed to informing, inspiring and engaging local communities. We create and distribute content across our media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities.

Investor Relations Contact:
Aaron Miles
tronc Investor Relations
312.222.4345
amiles@tronc.com

Media Contact:
Marisa Kollias
tronc Corporate Communications
312.222.3308
mkollias@tronc.com

Source: tronc, Inc.
               

 

Exhibits:
Condensed Consolidated Statements of Income (Loss)
Segment Income, Expenses, and Non-GAAP Reconciliations
Condensed Consolidated Balance Sheets
Non-GAAP Reconciliations – Net Income (Loss) from Continuing Operations to Adjusted EBITDA
Non-GAAP Reconciliations – Total Operating Expenses to Adjusted Total Operating Expenses
Non-GAAP Reconciliations – Net Income (Loss) Attributable tronc to Adjusted Net Income and Adjusted Diluted EPS

TRONC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

Preliminary

         
    Three Months Ended   Six Months Ended
    July 1, 2018   June 25, 2017   July 1, 2018   June 25, 2017
                 
Operating revenues   $ 253,037     $ 243,435     $ 491,576     $ 483,410  
                 
Operating expenses   254,282     238,973     524,582     478,657  
                 
Income (loss) from operations   (1,245 )   4,462     (33,006 )   4,753  
                 
Interest expense, net   (5,412 )   (6,365 )   (11,976 )   (12,800 )
Loss on early extinguishment of debt   (7,666 )       (7,666 )    
Premium on stock buyback               (6,031 )
Loss on equity investments, net   (665 )   (723 )   (1,394 )   (1,621 )
Other income, net   3,640     284     7,303     567  
Loss from continuing operations before income taxes   (11,348 )   (2,342 )   (46,739 )   (15,132 )
Income tax (benefit) expense   3,753     (402 )   (2,926 )   (2,280 )
Loss from continuing operations   (15,101 )   (1,940 )   (43,813 )   (12,852 )
Income (loss) from discontinued operations, net of taxes   280,545     8,781     294,745     16,704  
Net income   265,444     6,841     250,932     3,852  
Less: Income attributable to non-controlling interests   448
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