TEGNA : Gannett Co., Inc. Report Consolidated 2015 Second Quarter Non-GAAP Earnings per Share of $0.65 and 10 percent Increase in Adjusted EBITDA

TEGNA Inc. (NYSE:TGNA), formerly Gannett Co., Inc., today reported non-GAAP earnings per diluted share of $0.65 for the second quarter of 2015 compared to $0.67 for the second quarter of 2014. Strong results in the Digital Segment, reflecting primarily the acquisition of and strong organic growth at Cars.com, and the Broadcasting Segment, despite the absence of $14 million in political spending that benefited the second quarter last year, were partially offset by lower results in our Publishing Segment.

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Gracia Martore, president and chief executive officer, said, “We are thrilled to have capped off such a strong quarter with the very successful completion of our separation into two more sharply focused public companies. This milestone is the result of three and a half years of unflagging dedication and diligence on the part of employees across all of our businesses, and it marks the beginning of an exciting new chapter for TEGNA. TEGNA is a leader in its respective industries with impressive scale, deep local connections, and experienced leadership teams. We are incredibly excited about the new opportunities that lie ahead in the second half of 2015 and beyond as a result of the increased financial and regulatory flexibility and greater strategic focus afforded by the separation.”

On the first day of our fiscal third quarter, we completed the spin-off of our publishing businesses. The publishing company has retained the name Gannett Co., Inc. and now trades on the New York Stock Exchange under the symbol GCI. TEGNA Inc. trades on the New York Stock Exchange under the symbol TGNA. Second quarter and year-to-date results presented in this release, and the accompanying tables, are for the former consolidated Gannett Co., Inc. TEGNA will report publishing as a discontinued operation beginning in the third quarter of 2015. The new Gannett management team will be hosting a call on July 29th to review results for new Gannett.

On June 1, 2015, the publishing company completed the acquisition of the remaining 59.4 percent interest in the Texas-New Mexico Newspapers Partnership that it did not own through the assignment of its 19.5 percent interest in the California Newspapers Partnership and additional cash consideration. As a result, they acquired 100 percent of the Texas-New Mexico Newspapers Partnership and no longer have any ownership interest in California Newspapers Partnership. On October 1, 2014, we completed the acquisition of the 73 percent interest we did not already own in Classified Ventures LLC, which owns Cars.com. On December 29, 2014, we announced that we sold Gannett Healthcare Group. We also ceased operations of USA Weekend during the fourth quarter of 2014. Results for the thirteen weeks and twenty-six weeks ended June 28, 2015 include the impact of all of these transactions.

Total operating revenues were 4.2 percent higher in the second quarter compared to the second quarter in 2014 and totaled $1.5 billion. The increase was driven by revenue growth in the Digital and Broadcasting Segments of 74 percent and approximately 5 percent, respectively. The strong Digital Segment revenue growth reflects the acquisition of and organic growth at Cars.com. Broadcasting Segment revenues were higher as growth in retransmission revenue and digital revenue more than offset the absence of political spending that benefited the second quarter in 2014.

Net income attributable to Parent on a non-GAAP basis was $150.2 million in the quarter. Operating income on the same basis was $306.1 million, an increase of 4.1 percent compared to the second quarter in 2014. The increase was driven by substantially higher profitability in the Digital Segment. Adjusted EBITDA (a non-GAAP term detailed in Table 5) was 9.9 percent higher in the quarter and totaled $388.4 million. The Adjusted EBITDA margin in the second quarter was 25.5 percent, an increase of 130 basis points compared to the second quarter last year.

Special items in the second quarter of 2015 resulted in a pre-tax charge of $44.3 million ($0.15 per share). Special items impacting operating income include non-cash asset impairments of $4.5 million ($0.01 per share), workforce restructuring costs of $17.0 million ($0.05 per share) and other transformation items of $16.3 million ($0.04 per share). Special items impacting non-operating income relate primarily to the gain associated with the newspaper partnerships exchange offset by spin-related costs that resulted in a pre-tax charge of $6.5 million ($0.02 per share). Charges associated with items related to taxes totaled $6.9 million ($0.03 per share). Special items in the second quarter of 2014 included: operating charges of $51.7 million ($0.16 per share) representing primarily workforce restructuring, other transformation costs and asset impairments; non-operating income of $143.5 million ($0.39 per share) reflecting principally the pre-tax gain from the sale of Apartments.com.

The table below details second quarter results on a GAAP and non-GAAP basis.

Operating expenses, including special charges noted above, totaled $1.25 billion in the quarter compared to $1.22 billion in the second quarter a year ago, an increase of 2.9 percent reflecting primarily the acquisition of Cars.com. Pro forma non-GAAP operating expenses were down 3.9 percent compared to the second quarter in 2014 due primarily to lower Publishing Segment expenses.

BROADCASTING

Broadcasting Segment revenues were $417.4 million, up 4.8 percent compared to $398.3 million in the second quarter of 2014 driven primarily by a substantial increase in retransmission revenue and digital revenue, offset in part, by the absence of $14 million in politically related advertising.

The following table summarizes the year-over-year changes in select Broadcasting Segment revenue categories.

Retransmission revenues were up 23.4 percent compared to the second quarter in 2014 and totaled $109.4 million while digital revenues in the Broadcasting Segment were 23.3 percent higher reflecting continued growth in digital marketing services revenue.

Broadcasting Segment operating expenses on a non-GAAP basis were $238.2 million, an increase of 7.5 percent compared to the second quarter of 2014 due, in part, to higher reverse network compensation. Non-GAAP operating income totaled $179.2 million, up 1.4 percent from $176.7 million in the second quarter of 2014. Adjusted EBITDA was 2.1 percent higher for the second quarter and totaled $198.3 million compared to $194.2 million for the same quarter last year.

Based on current trends and reflecting that the third quarter of 2014 benefited from $40 million of politically related advertising, we expect the percentage decrease in total television revenues for the third quarter of 2015 to be in the low to mid-single digits due to that challenging year-over-year comparison.

DIGITAL

Digital Segment operating revenues grew substantially in the quarter to $338.1 million, an increase of 74.0 percent compared to the second quarter of 2014. The growth was driven by the acquisition of and strong organic growth at Cars.com. On a pro forma basis, Digital Segment revenues increased 5.8 percent reflecting primarily mid-twenties percentage revenue growth at Cars.com offset in part by a low-single percentage decline in revenue at CareerBuilder. Revenue growth at Cars.com reflects primarily higher wholesale rates that Cars.com charges its affiliates, an increase in average revenue per dealer and unit growth in Cars.com direct markets. The revenue decline at CareerBuilder reflects year-over-year declines in foreign exchange rates as well as the previously discussed strategic decision to accelerate the reduction of transactional advertising and focus on more lucrative long-term recurring software deals. Digital Segment revenue on a pro forma, constant currency basis was up almost 7 percent.

Non-GAAP pro forma operating expenses were 3.6 percent lower in the quarter and totaled $266.3 million. As a result, pro forma Digital Segment operating income was up significantly, 65 percent, to $71.8 million. Adjusted EBITDA on the same basis totaled $102.8 million, an increase of 40.1 percent compared to the second quarter of 2014.

NON-OPERATING ITEMS

The company's equity earnings included its share of operating results from unconsolidated investees including the California Newspapers Partnership and Texas-New Mexico Newspapers Partnership through June 1, 2015, the Tucson newspaper partnership and other online/digital businesses including Classified Ventures prior to its acquisition on October 1, 2014. Equity income in unconsolidated investees was $2.6 million in the second quarter compared to $156.5 million in the second quarter of 2014. The decline reflects the gain on the sale of Apartments.com in the second quarter of 2014. On a non-GAAP basis, equity income in the second quarter of 2014 was $8.5 million and the year-over-year decline would have been 69.1 percent due primarily to the absence of equity income from Classified Ventures.

Interest expense totaled $69.3 million in the quarter compared to $64.1 million in the second quarter of 2014 and reflects higher average debt outstanding partially offset by a lower average interest rate.

Other non-operating income on a non-GAAP basis in the quarter totaled $2.7 million compared to $1.5 million in the second quarter of 2014.

Net cash flow from operating activities was $149.9 million in the quarter. Free cash flow (a non-GAAP measure) totaled $156.2 million. Long-term debt outstanding was $4.45 billion and total cash was $219.1 million at quarter end. During the second quarter, we repurchased approximately 1.0 million shares of our outstanding stock for $37.6 million.

As previously announced, the company will hold an earnings conference call at 10:00 a.m. ET today. The call can be accessed via a live webcast through the company's Investors website, www.investors.TEGNA.com, or listen-only conference lines. U.S. callers should dial 1-800-533-9703 and international callers should dial 1-785-830-1926 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 2277799. 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 2277799. Materials related to the call will be available through the Investor Relations section of the company's website 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 (including those serviced by TEGNA) 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, Clipper and Sightline Media Group. 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.

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 non-operating categories and charges to its 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 attributable to Parent before (1) net income attributable to noncontrolling interests, (2) income taxes, (3) interest expense, (4) equity income, (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 attributable to Parent. 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” as well as “payments for investments” and increased by “proceeds from investments” and 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 the company’s 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 the company’s 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 4 through 8 attached to this news release.