UNITED STATES
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6961
TEGNA INC.
(Exact name of registrant as specified in its charter)
Delaware | 16-0442930 | |||||||||||||||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||||||
8350 Broad Street, Suite 2000, Tysons, Virginia | 22102-5151 | |||||||||||||||||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||||||||||||||
(703)873-6600 |
(Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock | TGNA | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
INDEX TO TEGNA INC.
March 31,2024 FORM 10-Q
Item No. | Page | |||||||
PART I. FINANCIAL INFORMATION | ||||||||
1. | Financial Statements | |||||||
2. | ||||||||
3. | ||||||||
4. | ||||||||
PART II. OTHER INFORMATION | ||||||||
1. | ||||||||
1A. | ||||||||
2. | ||||||||
3. | ||||||||
4. | ||||||||
5. | ||||||||
6. | ||||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEGNA Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars (Unaudited)
Sept. 30, 2023 | Dec. 31, 2022 | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 553,030 | $ | 551,681 | |||||||
Accounts receivable, net of allowances of $4,492 and $3,697, respectively | 607,316 | 658,318 | |||||||||
Other receivables | 8,196 | 13,493 | |||||||||
Syndicated programming rights | 41,534 | 44,064 | |||||||||
Prepaid expenses and other current assets | 32,320 | 36,152 | |||||||||
Total current assets | 1,242,396 | 1,303,708 | |||||||||
Property and equipment | |||||||||||
Cost | 1,057,629 | 1,067,191 | |||||||||
Less accumulated depreciation | (616,178) | (610,138) | |||||||||
Net property and equipment | 441,451 | 457,053 | |||||||||
Intangible and other assets | |||||||||||
Goodwill | 2,981,587 | 2,981,587 | |||||||||
Indefinite-lived and amortizable intangible assets, less accumulated amortization of $276,780 and $348,087, respectively | 2,342,265 | 2,381,606 | |||||||||
Right-of-use assets for operating leases | 73,131 | 78,448 | |||||||||
Investments and other assets | 114,219 | 126,494 | |||||||||
Total intangible and other assets | 5,511,202 | 5,568,135 | |||||||||
Total assets | $ | 7,195,049 | $ | 7,328,896 |
| Mar. 31, 2024 |
|
| Dec. 31, 2023 |
| ||
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and cash equivalents | $ | 430,764 |
|
| $ | 361,036 |
|
Accounts receivable, net of allowances of $2,535 and $2,845, respectively |
| 604,537 |
|
|
| 624,445 |
|
Other receivables |
| 11,023 |
|
|
| 9,299 |
|
Syndicated programming rights |
| 21,281 |
|
|
| 31,530 |
|
Prepaid expenses and other current assets |
| 28,386 |
|
|
| 24,008 |
|
Total current assets |
| 1,095,991 |
|
|
| 1,050,318 |
|
Property and equipment |
|
|
|
|
| ||
Cost |
| 1,082,848 |
|
|
| 1,078,209 |
|
Less accumulated depreciation |
| (640,149 | ) |
|
| (626,029 | ) |
Net property and equipment |
| 442,699 |
|
|
| 452,180 |
|
Intangible and other assets |
|
|
|
|
| ||
Goodwill |
| 3,015,973 |
|
|
| 2,981,587 |
|
Indefinite-lived and amortizable intangible assets, less accumulated amortization of $257,433 and $289,949, respectively |
| 2,349,712 |
|
|
| 2,328,972 |
|
Right-of-use assets for operating leases |
| 70,897 |
|
|
| 73,479 |
|
Investments and other assets |
| 129,388 |
|
|
| 113,521 |
|
Total intangible and other assets |
| 5,565,970 |
|
|
| 5,497,559 |
|
Total assets | $ | 7,104,660 |
|
| $ | 7,000,057 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
TEGNA Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands of dollars, except par value and share amounts (Unaudited)
Sept. 30, 2023 | Dec. 31, 2022 | ||||||||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 85,902 | $ | 76,212 | |||||||
Accrued liabilities | |||||||||||
Compensation | 57,923 | 50,339 | |||||||||
Interest | 12,407 | 45,480 | |||||||||
Contracts payable for programming rights | 124,950 | 117,743 | |||||||||
Other | 74,518 | 78,265 | |||||||||
Income taxes payable | 1,936 | 22,985 | |||||||||
Total current liabilities | 357,636 | 391,024 | |||||||||
Noncurrent liabilities | |||||||||||
Deferred income tax liability | 576,976 | 556,131 | |||||||||
Long-term debt | 3,071,899 | 3,069,316 | |||||||||
Pension liabilities | 73,228 | 73,684 | |||||||||
Operating lease liabilities | 72,849 | 79,503 | |||||||||
Other noncurrent liabilities | 63,462 | 70,098 | |||||||||
Total noncurrent liabilities | 3,858,414 | 3,848,732 | |||||||||
Total liabilities | 4,216,050 | 4,239,756 | |||||||||
Commitments and contingent liabilities (see Note 10) | |||||||||||
Redeemable noncontrolling interest (see Note 1) | 18,459 | 17,418 | |||||||||
Shareholders’ equity | |||||||||||
Common stock of $1 par value per share, 800,000,000 shares authorized, 324,418,632 shares issued | 324,419 | 324,419 | |||||||||
Additional paid-in capital | 72,456 | 27,941 | |||||||||
Retained earnings | 8,062,624 | 7,898,055 | |||||||||
Accumulated other comprehensive loss | (122,435) | (125,533) | |||||||||
Less treasury stock at cost, 127,544,108 shares and 100,970,426 shares, respectively | (5,376,524) | (5,053,160) | |||||||||
Total equity | 2,960,540 | 3,071,722 | |||||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 7,195,049 | $ | 7,328,896 |
| Mar. 31, 2024 |
|
| Dec. 31, 2023 |
| ||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable | $ | 80,001 |
|
| $ | 114,950 |
|
Accrued liabilities |
|
|
|
|
| ||
Compensation |
| 48,271 |
|
|
| 54,929 |
|
Interest |
| 11,891 |
|
|
| 45,144 |
|
Contracts payable for programming rights |
| 130,298 |
|
|
| 119,562 |
|
Other |
| 97,064 |
|
|
| 82,782 |
|
Income taxes payable |
| 66,453 |
|
|
| 6,005 |
|
Total current liabilities |
| 433,978 |
|
|
| 423,372 |
|
|
|
|
|
|
| ||
Noncurrent liabilities |
|
|
|
|
| ||
Deferred income tax liability |
| 578,244 |
|
|
| 578,219 |
|
Long-term debt |
| 3,073,692 |
|
|
| 3,072,801 |
|
Pension liabilities |
| 69,706 |
|
|
| 70,483 |
|
Operating lease liabilities |
| 70,937 |
|
|
| 73,733 |
|
Other noncurrent liabilities |
| 61,040 |
|
|
| 57,765 |
|
Total noncurrent liabilities |
| 3,853,619 |
|
|
| 3,853,001 |
|
Total liabilities | $ | 4,287,597 |
|
| $ | 4,276,373 |
|
|
|
|
|
|
| ||
Commitments and contingent liabilities (see Note 10) |
|
|
|
|
| ||
|
|
|
|
|
| ||
Redeemable noncontrolling interest (see Note 1) | $ | 19,174 |
|
| $ | 18,812 |
|
|
|
|
|
|
| ||
Shareholders' equity |
|
|
|
|
| ||
Common stock of $1 per value per share, 800,000,000 shares authorized, 324,418,632 shares issued |
| 324,419 |
|
|
| 324,419 |
|
Additional paid-in capital |
| 27,941 |
|
|
| 27,941 |
|
Retained earnings |
| 8,248,066 |
|
|
| 8,091,245 |
|
Accumulated other comprehensive loss |
| (118,499 | ) |
|
| (119,610 | ) |
Less treasury stock at cost, 153,095,072 shares and 144,502,338 shares, respectively |
| (5,684,038 | ) |
|
| (5,619,123 | ) |
Total equity |
| 2,797,889 |
|
|
| 2,704,872 |
|
Total liabilities, redeemable noncontrolling interest and equity | $ | 7,104,660 |
|
| $ | 7,000,057 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
TEGNA Inc.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited, in thousands of dollars, except per share amounts
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenues | $ | 713,243 | $ | 803,111 | $ | 2,185,076 | $ | 2,362,115 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Cost of revenues1 | 438,260 | 428,891 | 1,295,720 | 1,260,576 | |||||||||||||||||||
Business units - Selling, general and administrative expenses | 98,394 | 98,582 | 294,734 | 300,136 | |||||||||||||||||||
Corporate - General and administrative expenses | 13,552 | 13,367 | 52,158 | 48,299 | |||||||||||||||||||
Depreciation | 15,083 | 15,219 | 45,119 | 46,058 | |||||||||||||||||||
Amortization of intangible assets | 13,297 | 14,953 | 40,175 | 44,952 | |||||||||||||||||||
Asset impairment and other | — | (159) | 3,359 | (322) | |||||||||||||||||||
Merger termination fee | — | — | (136,000) | — | |||||||||||||||||||
Total | 578,586 | 570,853 | 1,595,265 | 1,699,699 | |||||||||||||||||||
Operating income | 134,657 | 232,258 | 589,811 | 662,416 | |||||||||||||||||||
Non-operating (expense) income: | |||||||||||||||||||||||
Equity loss in unconsolidated investments, net | (256) | (178) | (776) | (4,225) | |||||||||||||||||||
Interest expense | (43,418) | (43,406) | (129,121) | (129,976) | |||||||||||||||||||
Other non-operating items, net | 33,072 | 1,310 | 44,264 | 16,764 | |||||||||||||||||||
Total | (10,602) | (42,274) | (85,633) | (117,437) | |||||||||||||||||||
Income before income taxes | 124,055 | 189,984 | 504,178 | 544,979 | |||||||||||||||||||
Provision for income taxes | 27,801 | 43,827 | 103,827 | 132,595 | |||||||||||||||||||
Net Income | 96,254 | 146,157 | 400,351 | 412,384 | |||||||||||||||||||
Net (income) loss attributable to redeemable noncontrolling interest | (71) | (92) | 240 | (516) | |||||||||||||||||||
Net income attributable to TEGNA Inc. | $ | 96,183 | $ | 146,065 | $ | 400,591 | $ | 411,868 | |||||||||||||||
Earnings per share: | |||||||||||||||||||||||
Basic | $ | 0.48 | $ | 0.65 | $ | 1.86 | $ | 1.84 | |||||||||||||||
Diluted | $ | 0.48 | $ | 0.65 | $ | 1.86 | $ | 1.83 | |||||||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||||||||||
Basic shares | 200,779 | 223,968 | 214,297 | 223,456 | |||||||||||||||||||
Diluted shares | 201,218 | 224,921 | 214,591 | 224,221 | |||||||||||||||||||
1 Cost of revenues exclude charges for depreciation and amortization expense, which are shown separately. |
| Quarter ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Revenues | $ | 714,252 |
|
| $ | 740,327 |
|
|
|
|
|
| |||
Operating expenses: |
|
|
|
|
| ||
Cost of revenues1 |
| 430,567 |
|
|
| 426,932 |
|
Business units - Selling, general and administrative expenses |
| 102,260 |
|
|
| 99,109 |
|
Corporate - General and administrative expenses |
| 14,798 |
|
|
| 12,100 |
|
Depreciation |
| 14,310 |
|
|
| 15,049 |
|
Amortization of intangible assets |
| 13,660 |
|
|
| 13,582 |
|
Asset impairment and other |
| 1,097 |
|
|
| — |
|
Total |
| 576,692 |
|
|
| 566,772 |
|
Operating income |
| 137,560 |
|
|
| 173,555 |
|
|
|
|
|
| |||
Non-operating (expense) income: |
|
|
|
|
| ||
Interest expense |
| (42,368 | ) |
|
| (42,906 | ) |
Interest income |
| 5,573 |
|
|
| 7,573 |
|
Other non-operating items, net |
| 149,758 |
|
|
| (2,399 | ) |
Total |
| 112,963 |
|
|
| (37,732 | ) |
|
|
|
|
| |||
Income before income taxes |
| 250,523 |
|
|
| 135,823 |
|
Provision for income taxes |
| 61,261 |
|
|
| 31,819 |
|
Net income |
| 189,262 |
|
|
| 104,004 |
|
Net loss attributable to redeemable noncontrolling interest |
| 298 |
|
|
| 299 |
|
Net income attributable to TEGNA Inc. | $ | 189,560 |
|
| $ | 104,303 |
|
|
|
|
|
| |||
Earnings per share: |
|
|
|
|
| ||
Basic | $ | 1.06 |
|
| $ | 0.46 |
|
Diluted | $ | 1.06 |
|
| $ | 0.46 |
|
|
|
|
|
| |||
Weighted average number of common shares outstanding: |
|
|
|
|
| ||
Basic shares |
| 177,823 |
|
|
| 224,544 |
|
Diluted shares |
| 178,437 |
|
|
| 224,839 |
|
1 Cost of revenues exclude charges for depreciation and amortization expense, which are shown separately.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
TEGNA Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited, in thousands of dollars
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net income | $ | 96,254 | $ | 146,157 | $ | 400,351 | $ | 412,384 | |||||||||||||||
Other comprehensive income, before tax: | |||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | 142 | |||||||||||||||||||
Recognition of previously deferred post-retirement benefit plan costs | 1,388 | 1,031 | 4,165 | 3,092 | |||||||||||||||||||
Realized gain on available-for-sale investment during the period | — | — | — | (20,800) | |||||||||||||||||||
Other comprehensive income (loss), before tax | 1,388 | 1,031 | 4,165 | (17,566) | |||||||||||||||||||
Income tax effect related to components of other comprehensive income | (356) | (265) | (1,067) | 4,520 | |||||||||||||||||||
Other comprehensive income (loss), net of tax | 1,032 | 766 | 3,098 | (13,046) | |||||||||||||||||||
Comprehensive income | 97,286 | 146,923 | 403,449 | 399,338 | |||||||||||||||||||
Comprehensive (income) loss attributable to redeemable noncontrolling interest | (71) | (92) | 240 | (516) | |||||||||||||||||||
Comprehensive income attributable to TEGNA Inc. | $ | 97,215 | $ | 146,831 | $ | 403,689 | $ | 398,822 |
| Quarter ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Net Income | $ | 189,262 |
|
| $ | 104,004 |
|
Recognition of previously deferred post-retirement benefit plan costs |
| 1,500 |
|
|
| 1,450 |
|
Income tax effect related to components of other comprehensive income |
| (389 | ) |
|
| (372 | ) |
Other comprehensive income, net of tax |
| 1,111 |
|
|
| 1,078 |
|
Comprehensive income |
| 190,373 |
|
|
| 105,082 |
|
Comprehensive loss attributable to redeemable noncontrolling interest |
| 298 |
|
|
| 299 |
|
Comprehensive income attributable to TEGNA Inc. | $ | 190,671 |
|
| $ | 105,381 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
TEGNA Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited, in thousands of dollars
| Three months ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income | $ | 189,262 |
|
| $ | 104,004 |
|
Adjustments to reconcile net income to net cash flow from operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 27,970 |
|
|
| 28,631 |
|
Employee stock-based compensation awards |
| 11,132 |
|
|
| 3,688 |
|
Company stock 401(k) match contributions |
| 5,429 |
|
|
| 5,564 |
|
Gain on investment sale |
| (152,867 | ) |
|
| — |
|
Equity loss in unconsolidated investments, net |
| 234 |
|
|
| 237 |
|
Pension expense, net of employer contributions |
| 742 |
|
|
| 1,416 |
|
Change in operating assets and liabilities, net of acquisitions: |
|
|
|
|
| ||
Decrease in trade receivables |
| 22,153 |
|
|
| 20,615 |
|
(Decrease) increase in accounts payable |
| (34,950 | ) |
|
| 12,100 |
|
Increase (decrease) in interest and taxes payable |
| 26,958 |
|
|
| (1,627 | ) |
(Decrease) increase in deferred revenue |
| (533 | ) |
|
| 1,797 |
|
Changes in other assets and liabilities, net |
| 4,850 |
|
|
| (6,038 | ) |
Net cash flow from operating activities |
| 100,380 |
|
|
| 170,387 |
|
Cash flows from investing activities: |
|
|
|
|
| ||
Purchase of property and equipment |
| (4,911 | ) |
|
| (2,845 | ) |
Payments for acquisitions of businesses and assets, net of cash acquired |
| (52,799 | ) |
|
| (1,150 | ) |
Payments for investments |
| (8,985 | ) |
|
| (163 | ) |
Proceeds from investments |
| 152,867 |
|
|
| 23 |
|
Proceeds from sale of assets |
| 52 |
|
|
| 13 |
|
Net cash flow provided by (used for) investing activities |
| 86,224 |
|
|
| (4,122 | ) |
Cash flows from financing activities: |
|
|
|
|
| ||
Repurchase of common stock |
| (82,394 | ) |
|
| — |
|
Dividends paid |
| (19,898 | ) |
|
| (21,360 | ) |
Payments for debt issuance costs |
| (6,448 | ) |
|
| — |
|
Other, net |
| (8,136 | ) |
|
| (13,407 | ) |
Net cash flow used for financing activities |
| (116,876 | ) |
|
| (34,767 | ) |
Increase in cash and cash equivalents |
| 69,728 |
|
|
| 131,498 |
|
Balance of cash and cash equivalents at beginning of period |
| 361,036 |
|
|
| 551,681 |
|
Balance of cash and cash equivalents at end of period | $ | 430,764 |
|
| $ | 683,179 |
|
|
|
|
|
|
| ||
Supplemental cash flow information: |
|
|
|
|
| ||
Cash paid for income taxes, net of refunds | $ | 1,044 |
|
| $ | 914 |
|
Cash paid for interest | $ | 74,240 |
|
| $ | 73,862 |
|
Nine months ended Sept. 30, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 400,351 | $ | 412,384 | |||||||
Adjustments to reconcile net income to net cash flow from operating activities: | |||||||||||
Depreciation and amortization | 85,294 | 91,010 | |||||||||
Stock-based compensation | 15,403 | 23,625 | |||||||||
Company stock 401(k) contribution | 14,150 | 14,343 | |||||||||
Gains on assets, net | (25,809) | (18,308) | |||||||||
Equity losses from unconsolidated investments, net | 776 | 4,225 | |||||||||
Merger termination fee | (136,000) | — | |||||||||
Pension expense, net of employer contributions | 3,982 | (1,697) | |||||||||
Change in other assets and liabilities: | |||||||||||
Decrease in trade receivables | 50,207 | 51,986 | |||||||||
Increase in accounts payable | 9,690 | 10,817 | |||||||||
Decrease in interest and taxes payable, net | (29,601) | (23,104) | |||||||||
Increase in deferred revenue | 4,508 | 22,181 | |||||||||
Change in other assets and liabilities, net | 15,888 | 13,243 | |||||||||
Net cash flow from operating activities | 408,839 | 600,705 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchase of property and equipment | (29,301) | (35,527) | |||||||||
Reimbursements from spectrum repacking | — | 322 | |||||||||
Payments for acquisition of assets | (1,150) | — | |||||||||
Purchases of investments | (360) | (4,715) | |||||||||
Proceeds from investments | 27,646 | 3,451 | |||||||||
Proceeds from sale of assets | 70 | 407 | |||||||||
Net cash flow used for investing activities | (3,095) | (36,062) | |||||||||
Cash flows from financing activities: | |||||||||||
Payments under revolving credit facilities, net | — | (166,000) | |||||||||
Dividends paid | (63,078) | (63,533) | |||||||||
Repurchase of common stock | (327,914) | — | |||||||||
Other, net | (13,403) | (15,458) | |||||||||
Net cash flow used for financing activities | (404,395) | (244,991) | |||||||||
Increase in cash and cash equivalents | 1,349 | 319,652 | |||||||||
Balance of cash and cash equivalents, beginning of period | 551,681 | 56,989 | |||||||||
Balance of cash and cash equivalents, end of period | $ | 553,030 | $ | 376,641 | |||||||
Supplemental cash flow information: | |||||||||||
Cash paid for income taxes, net of refunds | $ | 101,201 | $ | 124,206 | |||||||
Cash paid for interest | $ | 156,924 | $ | 158,293 |
7
TEGNA Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Unaudited, in thousands of dollars, except per share data
Quarters ended: | Redeemable noncontrolling interest | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total Equity | ||||||||||||||||||||||
Balance at June 30, 2023 | $ | 18,106 | $ | 324,419 | $ | 27,941 | $ | 7,989,312 | $ | (123,467) | $ | (5,314,047) | $ | 2,904,158 | |||||||||||||||
Net income | 71 | — | — | 96,183 | — | — | 96,183 | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 1,032 | — | 1,032 | ||||||||||||||||||||||
Total comprehensive income | 97,215 | ||||||||||||||||||||||||||||
Dividends declared: $0.11375 per share | — | — | — | (22,589) | — | — | (22,589) | ||||||||||||||||||||||
Company stock 401(k) contribution | — | — | (11,695) | — | — | 15,619 | 3,924 | ||||||||||||||||||||||
Stock-based awards activity | — | — | (1,707) | — | — | 1,701 | (6) | ||||||||||||||||||||||
Stock-based compensation | — | — | 6,558 | — | — | — | 6,558 | ||||||||||||||||||||||
Repurchase of common stock | — | — | 51,093 | — | — | (79,797) | (28,704) | ||||||||||||||||||||||
Adjustment of redeemable noncontrolling interest to redemption value | 282 | — | — | (282) | — | — | (282) | ||||||||||||||||||||||
Other activity | — | — | 266 | — | — | — | 266 | ||||||||||||||||||||||
Balance at Sept. 30, 2023 | $ | 18,459 | $ | 324,419 | $ | 72,456 | $ | 8,062,624 | $ | (122,435) | $ | (5,376,524) | $ | 2,960,540 | |||||||||||||||
Redeemable noncontrolling interest | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total Equity | |||||||||||||||||||||||
Balance at June 30, 2022 | $ | 16,765 | $ | 324,419 | $ | 27,941 | $ | 7,583,436 | $ | (111,028) | $ | (5,083,045) | $ | 2,741,723 | |||||||||||||||
Net income | 92 | — | — | 146,065 | — | — | 146,065 | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 766 | — | 766 | ||||||||||||||||||||||
Total comprehensive income | 146,831 | ||||||||||||||||||||||||||||
Dividends declared: $0.095 per share | — | — | — | (21,203) | — | — | (21,203) | ||||||||||||||||||||||
Company stock 401(k) contribution | — | — | (6,328) | (3,486) | — | 14,229 | 4,415 | ||||||||||||||||||||||
Stock-based awards activity | — | — | (397) | (219) | — | 615 | (1) | ||||||||||||||||||||||
Stock-based compensation | — | — | 6,416 | — | — | — | 6,416 | ||||||||||||||||||||||
Adjustment of redeemable noncontrolling interest to redemption value | 235 | — | — | (235) | — | — | (235) | ||||||||||||||||||||||
Other activity | — | — | 309 | — | — | — | 309 | ||||||||||||||||||||||
Balance at Sept. 30, 2022 | $ | 17,092 | $ | 324,419 | $ | 27,941 | $ | 7,704,358 | $ | (110,262) | $ | (5,068,201) | $ | 2,878,255 | |||||||||||||||
TEGNA Inc. | |||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NON-CONTROLLING INTEREST | |||||||||||||||||||||||||||||
Unaudited, in thousands of dollars, except per share data | |||||||||||||||||||||||||||||
Nine months ended: | Redeemable noncontrolling interest | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total | ||||||||||||||||||||||
Balance at Dec. 31, 2022 | $ | 17,418 | $ | 324,419 | $ | 27,941 | $ | 7,898,055 | $ | (125,533) | $ | (5,053,160) | $ | 3,071,722 | |||||||||||||||
Net income | (240) | — | — | 400,591 | — | — | 400,591 | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 3,098 | — | 3,098 | ||||||||||||||||||||||
Total comprehensive income | 403,689 | ||||||||||||||||||||||||||||
Dividends declared: $0.30375 per share | — | — | — | (63,078) | — | — | (63,078) | ||||||||||||||||||||||
Company stock 401(k) contribution | — | — | (13,231) | (27,188) | — | 54,569 | 14,150 | ||||||||||||||||||||||
Stock-based awards activity | — | — | (5,316) | (88,695) | — | 80,608 | (13,403) | ||||||||||||||||||||||
Stock-based compensation | — | — | 15,403 | — | — | — | 15,403 | ||||||||||||||||||||||
Repurchase of common stock | — | — | 46,873 | (55,780) | — | (458,541) | (467,448) | ||||||||||||||||||||||
Adjustment of redeemable noncontrolling interest to redemption value | 1,281 | — | — | (1,281) | — | — | (1,281) | ||||||||||||||||||||||
Other activity | — | — | 786 | — | — | — | 786 | ||||||||||||||||||||||
Balance at Sept. 30, 2023 | $ | 18,459 | $ | 324,419 | $ | 72,456 | $ | 8,062,624 | $ | (122,435) | $ | (5,376,524) | $ | 2,960,540 | |||||||||||||||
Redeemable noncontrolling interest | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total | |||||||||||||||||||||||
Balance at Dec. 31, 2021 | $ | 16,129 | $ | 324,419 | $ | 27,941 | $ | 7,459,380 | $ | (97,216) | $ | (5,194,618) | $ | 2,519,906 | |||||||||||||||
Net income | 516 | — | — | 411,868 | — | — | 411,868 | ||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | (13,046) | — | (13,046) | ||||||||||||||||||||||
Total comprehensive income | 398,822 | ||||||||||||||||||||||||||||
Dividends declared: $0.285 per share | — | — | — | (63,533) | — | — | (63,533) | ||||||||||||||||||||||
Company stock 401(k) contribution | — | — | (12,655) | (19,571) | — | 46,569 | 14,343 | ||||||||||||||||||||||
Stock-based awards activity | — | — | (11,967) | (83,339) | — | 79,848 | (15,458) | ||||||||||||||||||||||
Stock-based compensation | — | — | 23,625 | — | — | — | 23,625 | ||||||||||||||||||||||
Adjustment of redeemable noncontrolling interest to redemption value | 447 | — | — | (447) | — | — | (447) | ||||||||||||||||||||||
Other activity | — | — | 997 | — | — | — | 997 | ||||||||||||||||||||||
Balance at Sept. 30, 2022 | $ | 17,092 | $ | 324,419 | $ | 27,941 | $ | 7,704,358 | $ | (110,262) | $ | (5,068,201) | $ | 2,878,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Quarters ended: | Redeemable noncontrolling interest |
|
|
| Common stock |
| Additional paid-in capital |
| Retained earnings |
| Accumulated other comprehensive loss |
|
| Treasury stock |
|
| Total Equity |
| |||||||
Balance as of Dec. 31, 2023 | $ | 18,812 |
|
|
| $ | 324,419 |
| $ | 27,941 |
| $ | 8,091,245 |
| $ | (119,610 | ) |
| $ | (5,619,123 | ) |
| $ | 2,704,872 |
|
Net (loss) income |
| (298 | ) |
|
|
| — |
|
| — |
|
| 189,560 |
|
| — |
|
|
| — |
|
|
| 189,560 |
|
Other comprehensive income, net of tax |
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| 1,111 |
|
|
| — |
|
|
| 1,111 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 190,671 |
| ||||||
Dividends declared: $0.11375 per share |
| — |
|
|
|
| — |
|
| — |
|
| (19,898 | ) |
| — |
|
|
| — |
|
|
| (19,898 | ) |
Company stock 401(k) match contributions |
| — |
|
|
|
| — |
|
| (15,532 | ) |
| (2,719 | ) |
| — |
|
|
| 23,680 |
|
|
| 5,429 |
|
Stock-based awards activity |
| — |
|
|
|
| — |
|
| (54,029 | ) |
| (9,462 | ) |
| — |
|
|
| 55,354 |
|
|
| (8,137 | ) |
Employee stock-based compensation awards |
| — |
|
|
|
| — |
|
| 11,132 |
|
| — |
|
| — |
|
|
| — |
|
|
| 11,132 |
|
Repurchase of common stock |
| — |
|
|
|
| — |
|
| 58,029 |
|
| — |
|
| — |
|
|
| (143,949 | ) |
|
| (85,920 | ) |
Adjustment of redeemable noncontrolling interest to redemption value |
| 660 |
|
|
|
| — |
|
| — |
|
| (660 | ) |
| — |
|
|
| — |
|
|
| (660 | ) |
Other activity |
| — |
|
|
|
| — |
|
| 400 |
|
| — |
|
| — |
|
|
| — |
|
|
| 400 |
|
Balance as of Mar. 31, 2024 | $ | 19,174 |
|
|
| $ | 324,419 |
| $ | 27,941 |
| $ | 8,248,066 |
| $ | (118,499 | ) |
| $ | (5,684,038 | ) |
| $ | 2,797,889 |
|
| Redeemable noncontrolling interest |
|
|
| Common stock |
| Additional paid-in capital |
| Retained earnings |
| Accumulated other comprehensive loss |
|
| Treasury stock |
|
| Total Equity |
| |||||||
Balance as of Dec. 31, 2022 | $ | 17,418 |
|
|
| $ | 324,419 |
| $ | 27,941 |
| $ | 7,898,055 |
| $ | (125,533 | ) |
| $ | (5,053,160 | ) |
| $ | 3,071,722 |
|
Net (loss) income |
| (299 | ) |
|
|
| — |
|
| — |
|
| 104,303 |
|
| — |
|
|
| — |
|
|
| 104,303 |
|
Other comprehensive income, net of tax |
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| 1,078 |
|
|
| — |
|
|
| 1,078 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 105,381 |
| ||||||
Dividends declared: $0.095 per share |
| — |
|
|
|
| — |
|
| — |
|
| (21,360 | ) |
| — |
|
|
| — |
|
|
| (21,360 | ) |
Company stock 401(k) match contributions |
| — |
|
|
|
| — |
|
| (575 | ) |
| (14,491 | ) |
| — |
|
|
| 20,630 |
|
|
| 5,564 |
|
Stock-based awards activity |
| — |
|
|
|
| — |
|
| (3,425 | ) |
| (86,253 | ) |
| — |
|
|
| 76,271 |
|
|
| (13,407 | ) |
Employee stock-based compensation awards |
| — |
|
|
|
| — |
|
| 3,688 |
|
| — |
|
| — |
|
|
| — |
|
|
| 3,688 |
|
Repurchase of common stock |
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
Adjustment of redeemable noncontrolling interest to redemption value |
| 635 |
|
|
|
| — |
|
| — |
|
| (635 | ) |
| — |
|
|
| — |
|
|
| (635 | ) |
Other activity |
| — |
|
|
|
| — |
|
| 312 |
|
| — |
|
| — |
|
|
| — |
|
|
| 312 |
|
Balance as of Mar. 31, 2023 | $ | 17,754 |
|
|
| $ | 324,419 |
| $ | 27,941 |
| $ | 7,879,619 |
| $ | (124,455 | ) |
| $ | (4,956,259 | ) |
| $ | 3,151,265 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
TEGNA Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – Basis of presentation terminated merger agreement and accounting policies
Basis of presentation: Our (or TEGNA’s) accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting, the instructions for Form 10-Q and Article 10 of the U.S. Securities and Exchange Commission (SEC) Regulation S-X. Accordingly, they do not include all information and footnotes which are normally included in the Form 10-K and annual report to shareholders. In our opinion, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. The condensed consolidated financial statements should be read in conjunction with our (or TEGNA’s) audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We use the best information available in developing significant estimates inherent in our financial statements. Actual results could differ from these estimates, and these differences resulting from changes in facts and circumstances could be material. Significant estimates include, but are not limited to, evaluation of goodwill and other intangible assets for impairment, allocation of purchase price to assets and liabilities in business combinations, fair value measurements, post-retirement benefit plans, income taxes including deferred taxes, and contingencies.The condensed consolidated financial statements include the accounts of subsidiaries we control. We eliminate all intercompany balances, transactions, and profits in consolidation. Investments in entities over which we have significant influence, but do not have control, are accounted for under the equity method. Our share of net earnings and losses from these ventures iswere previously included in “Equity loss in unconsolidated investments, net” in the Consolidated Statements of Income, however beginning in the first quarter of 2024 such amounts are now included in “Other non-operating items, net”. Additionally, we now present interest income separately within the Non-operating income (expense) section of our Consolidated Statements of Income.
We operate one operating and reportable segment, which primarily consists of our 64television stations and two radio stations operating in 51 markets, providing high-quality television programming and digital content. Our reportable segment determination is based on our management and internal reporting structure, the nature of products and services we offer, and the financial information that is evaluated regularly by our chief operating decision maker.
Accounting guidance adopted in 2023:2024: We did not adopt any new accounting guidance in 20232024 that had a material impact on our condensed consolidated financial statements or disclosures.
New accounting guidance not yet adopted: ThereIn November 2023, the Financial Accounting Standards Board (FASB) issued new guidance that changes required disclosures related to segment reporting. The guidance will require entities to disclose on a quarterly and annual basis the significant segment expense items that are regularly provided to the entity’s chief operating decision maker (CODM). Entities will also be required to disclose the title and position of their CODM. The new guidance is effective for us beginning in 2024 on an annual basis and the first quarter of 2025 on a quarterly basis, and is to be applied on a retrospective basis. Early adoption of the guidance is permitted. We are currently noevaluating the effect this new guidance will have on our disclosures.
In December 2023, the FASB issued accounting standards not yetnew guidance that changes certain disclosures related to income taxes. The guidance requires entities to disclose additional quantitative and qualitative information about the reconciliation between their statutory and effective tax rates. Specifically, the guidance requires disaggregation of the reconciling items using standardized categories. This guidance also requires additional disclosure of income taxes paid to now include disaggregation on a federal, state and foreign basis and to specifically include the amount of income taxes paid to individual jurisdictions when they represent five percent or more of total income tax payments. The new guidance is effective for us beginning in 2025 and may be applied on either a prospective or retrospective basis. Early adoption of the guidance is permitted. We are currently evaluating the effect this new guidance will have on our disclosures.
In March 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule will require companies to make disclosures about climate-related matters, specifically, it will require the disclosure of:
9
On April 4, 2024, the SEC stayed these rules due to pending legal challenges.
We are currently evaluating the final rule to determine its impact on our future disclosures.
Trade receivables and allowances for doubtful accounts: Trade receivables are recorded at invoiced amounts and generally do not bear interest. The allowance for doubtful accounts reflects our estimate of credit exposure, determined principally on the basis of our collection experience, aging of our receivables and any specific reserves needed for certain customers based on their credit risk. Our allowance also takes into account expected future trends which may impact our customers’ ability to pay, such as economic growth (or declines), unemployment and demand for our products and services. We monitor the credit quality of our customers and their ability to pay through the use of analytics and communication with individual customers. As of September 30, 2023,March 31, 2024, our allowance for doubtful accounts was $4.5$2.5 million as compared to $3.7$2.8 million as of December 31, 2022.2023.
Redeemable Noncontrolling interest: Our Premion business operates an advertising network for over-the-top (OTT) streaming and connected television platforms. In March 2020, we sold a minority interest in Premion to an affiliate of Gray Television (Gray) and entered into a commercial reselling agreement with the affiliate. During the first quarter of 2023, we entered into a multi-year extension of the reselling agreement with Gray. Gray’s investment allows it to sell its interest to Premion if there is a change in control of TEGNA or if the commercial agreement terminates. Since redemption of the minority ownership interest is outside our control, Gray’s equity interest is presented outside of the Equity section on the Condensed Consolidated Balance Sheets in the caption “Redeemable noncontrolling interest.” When the redemption or carrying value (the acquisition date fair value adjusted for the noncontrolling interest’s share of net income (loss) and dividends) is less than the recorded redemption value, we adjust the redeemable noncontrolling interest to equal the redemption value with changes recognized as an adjustment to retained earnings. Any such adjustment, when necessary, will be performed as of the applicable balance sheet date.
Treasury Stock: We account for treasury stock under the cost method. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital (APIC) in our Condensed Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of APIC to the extent that there are previously recorded gains to offset the losses. If there are no treasury stockaccumulated gains in APIC, the losses upon re-issuance of treasury stock are recorded as a reduction of retained earnings in our Condensed Consolidated Balance Sheets.
Revenue recognition: Revenue is recognized upon the transfer of control of promised services to our customers in an amount that reflects the consideration we expect to receive in exchange for those services. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Amounts received from customers in advance of providing services to our customers are recorded as deferred revenue.
The primary sources of our revenues are: 1) subscription revenues, reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 2) advertising & marketing services revenues, which include local and national non-political television advertising, digital marketing services (including Premion), advertising on the stations’ websites, tablet and mobile products, and OTT apps; 3) political advertising revenues, which are driven by even-year election cycles at the local and national level (e.g. 2022, 2024, 2022, etc.) and particularly in the second half of those years; and 4) other services, such as production of programming, tower rentals and distribution of our local news content.
| Quarter ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Subscription | $ | 375,324 |
|
| $ | 414,280 |
|
Advertising & Marketing Services |
| 298,692 |
|
|
| 307,845 |
|
Political |
| 27,828 |
|
|
| 5,291 |
|
Other |
| 12,408 |
|
|
| 12,911 |
|
Total revenues | $ | 714,252 |
|
| $ | 740,327 |
|
10
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Subscription | $ | 377,891 | $ | 377,368 | $ | 1,188,297 | $ | 1,158,101 | |||||||||||||||
Advertising & Marketing Services | 312,413 | 320,764 | 937,984 | 1,010,490 | |||||||||||||||||||
Political | 11,643 | 92,904 | 22,925 | 161,727 | |||||||||||||||||||
Other | 11,296 | 12,075 | 35,870 | 31,797 | |||||||||||||||||||
Total revenues | $ | 713,243 | $ | 803,111 | $ | 2,185,076 | $ | 2,362,115 |
NOTE 2 – Goodwill and other intangible assets
The following table displays goodwill, indefinite-lived intangible assets, and amortizable intangible assets as of September 30, 2023March 31, 2024 and December 31, 20222023 (in thousands):
| Mar. 31, 2024 |
|
| Dec. 31, 2023 |
| ||||||||||
| Gross |
|
| Accumulated Amortization |
|
| Gross |
|
| Accumulated Amortization |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodwill | $ | 3,015,973 |
|
| $ | — |
|
| $ | 2,981,587 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Indefinite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
| ||||
Television and radio station FCC broadcast licenses |
| 2,124,731 |
|
|
|
|
|
| 2,124,731 |
|
|
|
| ||
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
| ||||
Retransmission agreements |
| 101,423 |
|
|
| (88,477 | ) |
|
| 113,621 |
|
|
| (95,619 | ) |
Network affiliation agreements |
| 275,524 |
|
|
| (116,239 | ) |
|
| 309,502 |
|
|
| (144,834 | ) |
Other |
| 105,467 |
|
|
| (52,717 | ) |
|
| 71,067 |
|
|
| (49,496 | ) |
Total indefinite-lived and amortizable intangible assets | $ | 2,607,145 |
|
| $ | (257,433 | ) |
| $ | 2,618,921 |
|
| $ | (289,949 | ) |
Sept. 30, 2023 | Dec. 31, 2022 | ||||||||||||||||||||||
Gross | Accumulated Amortization | Gross | Accumulated Amortization | ||||||||||||||||||||
Goodwill | $ | 2,981,587 | $ | — | $ | 2,981,587 | $ | — | |||||||||||||||
Indefinite-lived intangibles: | |||||||||||||||||||||||
Television and radio station FCC broadcast licenses | 2,124,731 | — | 2,123,898 | — | |||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||
Retransmission agreements | 113,621 | (90,183) | 224,827 | (184,796) | |||||||||||||||||||
Network affiliation agreements | 309,503 | (139,042) | 309,503 | (121,664) | |||||||||||||||||||
Other | 71,190 | (47,555) | 71,465 | (41,627) | |||||||||||||||||||
Total indefinite-lived and amortizable intangible assets | $ | 2,619,045 | $ | (276,780) | $ | 2,729,693 | $ | (348,087) |
Our retransmission agreements and network affiliation agreements are amortized on a straight-line basis over their estimated useful lives. Other intangibles primarily include distribution agreements from our multicast networks acquisition, which are also amortized on a straight-line basis overover their useful lives. In 2023,the first quarter of 2024, gross intangible assets and associated accumulated amortization decreased by $111.5$46.2 million, due to certain intangible assets reaching the end of their useful lives.
On January 31, 2024, Premion, LLC acquired substantially all the assets of Octillion Media, a next-generation demand-side platform focused on Local Connected TV(CTV)/Over-the-Top (OTT) advertising. The acquisition will expand Premion’s capabilities in the growing CTV marketplace by combining Octillion’s technology with Premion’s local CTV/OTT advertising solution.
The base purchase price of the acquisition was $56.0 million plus an adjustment for working capital and a maximum earnout of $14.0 million that the sellers will be entitled to receive if the Octillion Media business achieves certain technological and financial milestones during a defined period following the closing. Through the first quarter of 2024, $52.8 million of the purchase price had been paid.
The acquisition was funded with available cash on hand.
We are accounting for the acquisition as a business combination, which required us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired was recorded as goodwill. We have commenced the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized. Based on preliminary valuations we have recorded $34.4 million of intangible assets related to acquired technology and customer relationships. We also recorded an additional $34.4 million as goodwill, which represents the future economic benefits expected to arise from the acquisition that do not qualify for separate recognition, including assembled workforce, as well as future synergies that we expect to generate. The goodwill and intangible assets are expected to be deductible for tax purposes.
The amounts recorded for acquired assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date.
NOTE 3 – Investments and other assets
| Mar. 31, 2024 |
|
| Dec. 31, 2023 |
| ||
|
|
|
|
|
| ||
Cash value life insurance | $ | 51,706 |
|
| $ | 50,865 |
|
Equity method investments |
| 16,520 |
|
|
| 16,195 |
|
Other equity investments |
| 22,454 |
|
|
| 19,526 |
|
Deferred debt issuance costs |
| 7,274 |
|
|
| — |
|
Prepaid assets |
| 8,851 |
|
|
| 9,878 |
|
Other long-term assets |
| 22,583 |
|
|
| 17,057 |
|
Total | $ | 129,388 |
|
| $ | 113,521 |
|
11
Sept. 30, 2023 | Dec. 31, 2022 | ||||||||||
Cash value insurance | $ | 49,567 | $ | 48,919 | |||||||
Equity method investments | 16,587 | 17,003 | |||||||||
Other equity investments | 19,526 | 20,158 | |||||||||
Deferred debt issuance costs | — | 2,232 | |||||||||
Long-term contract assets | 10,907 | 14,135 | |||||||||
Other long-term assets | 17,632 | 24,047 | |||||||||
Total | $ | 114,219 | $ | 126,494 |
Cash value life insurance: We are the beneficiary of life insurance policies on the lives of certain employees/retirees, which are recorded at their cash surrender value as determined by the insurance carrier. These policies are utilized as a partial funding source for deferred compensation and other non-qualified employee retirement plans. Gains and losses on these investments are included in “Other non-operating items, net” within our Consolidated StatementStatements of Income and were not material for all periods presented.
Equity method investments: These are investments in entities in which we have significant influence, but do not have a controlling financial interest. Our share of net earnings and losses from these ventures is included in “Equity loss in unconsolidated investments,“Other non-operating items, net” in the Consolidated Statements of Income.
Other equity investments: Represents investments in non-public businesses that do not have readily determinable pricing, and for which we do not have control orand do not exert significant influence. These investments are recorded at cost less impairments, if any, plus or minus changes in observable prices for those investments.
In the thirdfirst quarter of 20232024 we soldreceived $152.9 million of pre-tax cash proceeds upon the completion of the previously announced sale of Broadcast Music, Inc. (BMI) to a portion ofprivate equity firm. The gain associated with this investment for $26.4 million, which resulted in a gain of $25.8 million that was recordedsale is included in “Other non-operating items, net” within ourin the Consolidated StatementStatements of Income. TheFollowing this sale reduced ourwe no longer have any ownership interest in MadHive to 19% on a fully diluted basis. We determined that no write up of our remaining MadHive investment was required. See Note 10 for additional information about our investment in MadHive.
Deferred debt issuance costs: These costs consist of amounts paid to lenders related to our revolving credit facility. On January 25, 2024, we entered into an amendment of our credit facility which resulted in the capitalization of $6.4 million of fees paid to lenders under the new amendment. Additionally, we reclassified approximately $1.1 million of fees under the previous credit facility agreement as non-current deferred debt issuance costs. See Note 4 for additional details of the revolving credit facility amendment. Debt issuance costs paid for our unsecured notes are accounted for as a reduction in the debt obligation.
Long-term contractPrepaid assets: These amounts primarily consist of an asset related to a long-term services agreement for IT security.
NOTE 4 – Long-term debt
Our long-term debt is summarized below (in thousands):
| Mar. 31, 2024 |
|
| Dec. 31, 2023 |
| ||
|
|
|
|
|
| ||
Unsecured notes bearing fixed rate interest at 4.75% due March 2026 | $ | 550,000 |
|
| $ | 550,000 |
|
Unsecured notes bearing fixed rate interest at 7.75% due June 2027 |
| 200,000 |
|
|
| 200,000 |
|
Unsecured notes bearing fixed rate interest at 7.25% due September 2027 |
| 240,000 |
|
|
| 240,000 |
|
Unsecured notes bearing fixed rate interest at 4.625% due March 2028 |
| 1,000,000 |
|
|
| 1,000,000 |
|
Unsecured notes bearing fixed rate interest at 5.00% due September 2029 |
| 1,100,000 |
|
|
| 1,100,000 |
|
Total principal long-term debt |
| 3,090,000 |
|
|
| 3,090,000 |
|
Debt issuance costs |
| (21,022 | ) |
|
| (22,226 | ) |
Unamortized premiums and discounts, net |
| 4,714 |
|
|
| 5,027 |
|
Total long-term debt | $ | 3,073,692 |
|
| $ | 3,072,801 |
|
On January 25, 2024, we entered into an amendment to our revolving credit facility (the Credit Agreement). Among other things, the amendment amends the revolving credit facility to:
Sept. 30, 2023 | Dec. 31, 2022 | ||||||||||
Unsecured notes bearing fixed rate interest at 4.75% due March 2026 | $ | 550,000 | $ | 550,000 | |||||||
Unsecured notes bearing fixed rate interest at 7.75% due June 2027 | 200,000 | 200,000 | |||||||||
Unsecured notes bearing fixed rate interest at 7.25% due September 2027 | 240,000 | 240,000 | |||||||||
Unsecured notes bearing fixed rate interest at 4.625% due March 2028 | 1,000,000 | 1,000,000 | |||||||||
Unsecured notes bearing fixed rate interest at 5.00% due September 2029 | 1,100,000 | 1,100,000 | |||||||||
Total principal long-term debt | 3,090,000 | 3,090,000 | |||||||||
Debt issuance costs | (23,439) | (26,911) | |||||||||
Unamortized premiums | 5,338 | 6,227 | |||||||||
Total long-term debt | $ | 3,071,899 | $ | 3,069,316 | |||||||
Under the amended Credit Agreement, the Company’s maximum Total Leverage Ratio (as defined in the Credit Agreement) will remain unchanged at 4.50x.
As of September 30, 2023,March 31, 2024, cash and cash equivalents totaled $553.0$430.8 million and we had $12.7 million of letters of credit outstanding and unused borrowing capacity of $1.49 billion$737.3 million under our $1.51 billion$750 million revolving credit facility, which now expires in August 2024.January 2029. We were in compliance with all covenants, including the leverage ratio (our one financial covenant) contained in our debt agreements and revolving credit facility. We believe, based on our current financial forecasts and trends, that we will remain compliant with all covenants for the foreseeable future.
12
NOTE 5 – Retirement plans
We have various defined benefit retirement plans. Our principal defined benefit pension plan is the TEGNA Retirement Plan (TRP). The total net pension obligations, including both current and non-current liabilities, as of September 30, 2023,March 31, 2024, were $78.8$75.5 million, of which $5.6$5.8 million is recorded as a current obligation within accrued liabilities on the Condensed Consolidated Balance Sheet.
| Quarter ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Interest cost on benefit obligation | $ | 5,675 |
|
| $ | 6,150 |
|
Expected return on plan assets |
| (5,500 | ) |
|
| (5,225 | ) |
Amortization of prior service cost (credit) |
| 25 |
|
|
| (125 | ) |
Amortization of actuarial loss |
| 1,475 |
|
|
| 1,575 |
|
Expense for company-sponsored retirement plans | $ | 1,675 |
|
| $ | 2,375 |
|
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Interest cost on benefit obligation | $ | 6,133 | $ | 4,270 | $ | 18,399 | $ | 12,811 | |||||||||||||||
Expected return on plan assets | (5,235) | (4,876) | (15,705) | (14,627) | |||||||||||||||||||
Amortization of prior service credit | (116) | (119) | (348) | (361) | |||||||||||||||||||
Amortization of actuarial loss | 1,504 | 1,150 | 4,513 | 3,452 | |||||||||||||||||||
Expense from company-sponsored retirement plans | $ | 2,286 | $ | 425 | $ | 6,859 | $ | 1,275 |
Benefits no longer accrue for TRP and SERP participants as a result of amendments to the plans in past years, and as such we no longer incur a service cost component of pension expense. All other components of our pension expense presented above are included within the “Other non-operating items, net” line item of the Consolidated Statements of Income.
During the ninethree months ended September 30,March 31, 2024 and 2023, and 2022, we did notnot make any cash contributions to the TRP. We made benefit payments to participants of the SERP of $0.9 $2.8 million during both of the ninethree month periods ended September 30, 2023March 31, 2024 and $2.9 million in 2022.2023. Based on actuarial projections and funding levels, we do not expect to make cash payments of $6.9 any cash paymentsmillion to the TRP in 2023.2024. We expect to make additional cash paympayments of $ents of $2.14.9 million to our SERP participants during the remainder of 2023.2024.
NOTE 6 – Accumulated other comprehensive loss
| Retirement |
|
| Foreign |
|
| Total |
| |||
Quarters ended: |
|
|
|
|
|
|
|
| |||
Balance as of Dec. 31, 2023 | $ | (120,142 | ) |
| $ | 532 |
|
| $ | (119,610 | ) |
Amounts reclassified from AOCL |
| 1,111 |
|
|
| — |
|
|
| 1,111 |
|
Total other comprehensive income |
| 1,111 |
|
|
| — |
|
|
| 1,111 |
|
Balance as of Mar. 31, 2024 | $ | (119,031 | ) |
| $ | 532 |
|
| $ | (118,499 | ) |
|
|
|
|
|
|
|
|
| |||
Balance as of Dec. 31, 2022 | $ | (126,065 | ) |
| $ | 532 |
|
| $ | (125,533 | ) |
Amounts reclassified from AOCL |
| 1,078 |
|
|
| — |
|
|
| 1,078 |
|
Total other comprehensive income |
| 1,078 |
|
|
| — |
|
|
| 1,078 |
|
Balance as of Mar. 31, 2023 | $ | (124,987 | ) |
| $ | 532 |
|
| $ | (124,455 | ) |
Retirement Plans | Foreign Currency Translation | Available-For-Sale Investment | Total | ||||||||||||||||||||
Quarters ended: | |||||||||||||||||||||||
Balance at June 30, 2023 | $ | (123,999) | $ | 532 | $ | — | $ | (123,467) | |||||||||||||||
Amounts reclassified from AOCL | 1,032 | — | — | 1,032 | |||||||||||||||||||
Total other comprehensive income | 1,032 | — | — | 1,032 | |||||||||||||||||||
Balance at Sept. 30, 2023 | $ | (122,967) | $ | 532 | $ | — | $ | (122,435) | |||||||||||||||
Balance at June 30, 2022 | $ | (111,560) | $ | 532 | $ | — | $ | (111,028) | |||||||||||||||
Amounts reclassified from AOCL | 766 | — | — | 766 | |||||||||||||||||||
Total other comprehensive income | 766 | — | — | 766 | |||||||||||||||||||
Balance at Sept. 30, 2022 | $ | (110,794) | $ | 532 | $ | — | $ | (110,262) | |||||||||||||||
Retirement Plans | Foreign Currency Translation | Available-For-Sale Investment | Total | ||||||||||||||||||||
Nine months ended: | |||||||||||||||||||||||
Balance at Dec. 31, 2022 | $ | (126,065) | $ | 532 | $ | — | $ | (125,533) | |||||||||||||||
Amounts reclassified from AOCL | 3,098 | — | — | 3,098 | |||||||||||||||||||
Total other comprehensive income | 3,098 | — | — | 3,098 | |||||||||||||||||||
Balance at Sept. 30, 2023 | $ | (122,967) | $ | 532 | $ | — | $ | (122,435) | |||||||||||||||
Balance at Dec. 31, 2021 | $ | (113,090) | $ | 455 | $ | 15,419 | $ | (97,216) | |||||||||||||||
Other comprehensive income before reclassifications | — | 77 | — | 77 | |||||||||||||||||||
Amounts reclassified from AOCL | 2,296 | — | (15,419) | (13,123) | |||||||||||||||||||
Total other comprehensive income | 2,296 | 77 | (15,419) | (13,046) | |||||||||||||||||||
Balance at Sept. 30, 2022 | $ | (110,794) | $ | 532 | $ | — | $ | (110,262) |
Reclassifications from AOCL to the Consolidated Statements of Income are comprised of recognition of a realized gain on an available-for-sale investment as well as pension and other post-retirement components. Pension and other post retirementpost-retirement reclassifications are related to the amortizations of prior service costs and actuarial losses. Amounts reclassified out of AOCL are summarized below (in thousands):
Quarter ended Sept. 30, | Nine months ended Sept. 30, | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
Amortization of prior service credit, net | $ | (116) | $ | (106) | $ | (348) | $ | (354) | ||||||||||||||||||
Amortization of actuarial loss | 1,504 | 1,137 | 4,513 | 3,446 | ||||||||||||||||||||||
Realized gain on available-for-sale investment | — | — | — | (20,800) | ||||||||||||||||||||||
Total reclassifications, before tax | 1,388 | 1,031 | 4,165 | (17,708) | ||||||||||||||||||||||
Income tax effect | (356) | (265) | (1,067) | 4,585 | ||||||||||||||||||||||
Total reclassifications, net of tax | $ | 1,032 | $ | 766 | $ | 3,098 | $ | (13,123) | ||||||||||||||||||
| Quarter ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Amortization of prior service cost (credit), net | $ | 25 |
|
| $ | (125 | ) |
Amortization of actuarial loss |
| 1,475 |
|
|
| 1,575 |
|
Total reclassifications, before tax |
| 1,500 |
|
|
| 1,450 |
|
Income tax effect |
| (389 | ) |
|
| (372 | ) |
Total reclassifications, net of tax | $ | 1,111 |
|
| $ | 1,078 |
|
13
NOTE 7 – Earnings per share
| Quarter ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Net income | $ | 189,262 |
|
| $ | 104,004 |
|
Net loss attributable to the noncontrolling interest |
| 298 |
|
|
| 299 |
|
Adjustment of redeemable noncontrolling interest to redemption value |
| (660 | ) |
|
| (635 | ) |
Earnings available to common shareholders | $ | 188,900 |
|
| $ | 103,668 |
|
|
|
|
|
| |||
Weighted average number of common shares outstanding - basic |
| 177,823 |
|
|
| 224,544 |
|
Effect of dilutive securities: |
|
|
|
|
| ||
Restricted stock units |
| 438 |
|
|
| 187 |
|
Performance share awards |
| 176 |
|
|
| 108 |
|
Weighted average number of common shares outstanding - diluted |
| 178,437 |
|
|
| 224,839 |
|
|
|
|
|
| |||
Net income per share - basic | $ | 1.06 |
|
| $ | 0.46 |
|
Net income per share - diluted | $ | 1.06 |
|
| $ | 0.46 |
|
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net Income | $ | 96,254 | $ | 146,157 | $ | 400,351 | $ | 412,384 | |||||||||||||||
Net (income) loss attributable to the noncontrolling interest | (71) | (92) | 240 | (516) | |||||||||||||||||||
Adjustment of redeemable noncontrolling interest to redemption value | (282) | (235) | (1,281) | (447) | |||||||||||||||||||
Earnings available to common shareholders | $ | 95,901 | $ | 145,830 | $ | 399,310 | $ | 411,421 | |||||||||||||||
Weighted average number of common shares outstanding - basic | 200,779 | 223,968 | 214,297 | 223,456 | |||||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||||
Restricted stock units | 261 | 621 | 170 | 469 | |||||||||||||||||||
Performance shares | 178 | 332 | 124 | 296 | |||||||||||||||||||
Weighted average number of common shares outstanding - diluted | 201,218 | 224,921 | 214,591 | 224,221 | |||||||||||||||||||
Earnings per share - basic | $ | 0.48 | $ | 0.65 | $ | 1.86 | $ | 1.84 | |||||||||||||||
Earnings per share - diluted | $ | 0.48 | $ | 0.65 | $ | 1.86 | $ | 1.83 |
Our calculation of diluted earnings per share includes the dilutive effects for the assumed vesting of outstanding restricted stock units and performance shares.share awards. The diluted earnings per share amounts exclude the effects of approximately 500 thousand stock awards for the three months ended March 31, 2024 as their inclusion would be accretive to earnings per share.
NOTE 8 – Fair value measurement
We measure and record certain assets and liabilities at fair value in the accompanying condensed consolidated financial statements. U.S. GAAP establishes a hierarchy for those instruments measured at fair value that distinguishes between market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 -– Quoted market prices in active markets for identical assets or liabilities;
Level 2 -– Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 -– Unobservable inputs developed using our own estimates and assumptions, which reflect those that a market participant would use.
We also hold other financial instruments including cash and cash equivalents, receivables, accounts payable, contingent consideration and debt. The carrying amounts for cash and cash equivalents, receivables and accounts payable approximated their fair values. The fair value of our total debt, based on the bid and ask quotes for the related debt (Level 2), totaled $2.90 $2.74 billion at September 30, 2023,on March 31, 2024, and $2.95$2.93 billion aton December 31, 2022.2023.
As described in Note 2, in connection with the Octillion acquisition, the sellers may be entitled to earn additional consideration in the form of earnouts depending on the achievement of certain technological and financial milestones. The maximum value of these earnouts is $14.0 million and we currently estimate their fair value to be $12.8 million. The estimated fair value is based on unobservable inputs and is therefore a Level 3 fair value. The Company’s valuation was based on an income approach, which utilized Monte Carlo simulations that included expected payoff estimates calculated based on various discounted cash flow valuations.
NOTE 9 – Share repurchase programs
On June 2, 2023, we entered into anour first accelerated share repurchase (ASR) program (the first ASR) with JPMorgan Chase Bank, NationalNational Association (JPMorgan). Under the terms of the first ASR, we repurchased $300$300 million in TEGNA common sharesstock from JPMorgan, with an initial delivery of approximately 15.2 million shares received on June 6, 2023, representing 80%80% ($240 million) of the value of the first ASR contract. The first ASR program was completed during the third quarter of 2023 at which time JPMorgan delivereddelivered an additional 3.1 million shares to us. The final share settlement was based on the average daily volume-weighted average price of TEGNA shares during the term of the first ASR program, less a discount, less the previously delivered 15.2 million shares.
On November 9, 2023, we entered into a second accelerated share repurchase (the second ASR) program with JPMorgan. Under the terms of the second ASR, we repurchased $325 million in TEGNA common stock from JPMorgan, with an initial delivery of approximately 17.3 million shares received on November 13, 2023, representing 80% ($260 million) of the value of the second ASR contract. The second ASR program was completed on February 22, 2024, shortly after which date JPMorgan delivered an additional 4.0 million shares to us. The final share settlement was based on the average daily volume-weighted average price of TEGNA shares during the term of the second ASR program, less a discount, less the previously delivered 17.3 million shares.
14
In December 2023, our Board of Directors authorized a new share repurchase program for up to $650.0 million of our common stock, which was in addition to the second ASR program. This new share repurchase program expires on December 31, 2025. In the first quarter of 2024, 5.8 million shares were repurchased under this program at an average share price of $14.50 for an aggregate cost of $84.5 million, of which $2.1 million had not yet been paid as of the end of the first quarter.
During the first quarter of 2024, we returned $102.3 million of capital to shareholders with $82.4 million of share repurchases, representing 5.7 million shares, and paid $19.9 million in dividends. Excluded from this commitment are share repurchases completed under our previously announced accelerated share repurchase program which were completed during the quarter on February 27, 2024, including final settlement of approximately 4.0 million shares.
Our capital allocation plan is subject to a variety of factors, including our strategic plans, market and economic conditions and the discretion of our Board of Directors.
NOTE 10 – Other matters
Litigation
Antitrust matters
In the third quarter of 2018, certain national media outlets reported the existence of a confidential investigation by the United States Department of Justice Antitrust Division (DOJ) into the local television advertising sales practices of station owners. We received a Civil Investigative Demand (CID) in connection with the DOJ’s investigation. On November 13 and December 13, 2018, the DOJ and seven other broadcasters settled a DOJ complaint alleging the exchange of certain competitively sensitive information in the broadcast television industry. In June 2019, we and four other broadcasters entered into a substantially identical agreement with DOJ, which was entered by the court on December 3, 2019. The settlement contains no finding of wrongdoing or liability and carries no penalty. It prohibits us and the other settling entities from sharing certain confidential business information as alleged by the DOJ, or using such information pertaining to other broadcasters, except under limited circumstances. The settlement also requires the settling parties to make certain enhancements to their antitrust compliance programs, to continue to cooperate with the DOJ’s investigation, and to permit DOJ to verify compliance. The costs of compliance have not been material, nor do we expect future compliance costs to be material.
Since the national media reports, numerous putative class action lawsuits were filed against owners of television stations (the Advertising Cases) in different jurisdictions. Plaintiffs are a class consisting of all persons and entities in the United States who paid for all or a portion of advertisement time on local television provided by the defendants. The Advertising Cases assert antitrust and other claims and seek monetary damages, attorneys’ fees, costs and interest, as well as injunctions against the allegedly wrongful conduct.
These cases were consolidated into a single proceeding in the United States District Court for the Northern District of Illinois, captioned In re: Local TV Advertising Antitrust Litigation on October 3, 2018. At the court’s direction, plaintiffs filed an amended complaint on April 3, 2019, that superseded the original complaints. Although we were named as a defendant in sixteen of the original complaints, the amended complaint did not name TEGNA as a defendant. After TEGNA and four other broadcasters entered into the consent decrees with the DOJ in June 2019, the plaintiffs sought leave from the court to further amend the complaint to add TEGNA and the other settling broadcasters to the proceeding. The court granted the plaintiffs’ motion, and the plaintiffs filed the second amended complaint on September 9, 2019. On October 8, 2019, the defendants jointly filed a motion to dismiss the matter. On November 6, 2020, the court denied the motion to dismiss. On March 16, 2022, the plaintiffs filed a third amended complaint, which, among other things, added ShareBuilders, Inc., as a named defendant. ShareBuilders filed a motion to dismiss on April 15, 2022, which was granted by the court without prejudice on August 29, 2022. TEGNA has filed its answer to the third amended complaint denying any violation of law and asserting various affirmative defenses.
On May 26, 2023, plaintiffs moved for preliminary approval of settlements with four co-defendants – CBS Corp (n/k/a Paramount Global), Fox Corp., certain Cox entities (including Cox Media Group, LLC, Cox Enterprises, Inc., CMG Media Corporation and Cox Reps, Inc.) and ShareBuilders, Inc. Although ShareBuilders prevailed on its motion to dismiss the case, as noted above, because the court had dismissed the claims without prejudice, ShareBuilders entered into a zero dollar-dollar settlement with the plaintiffs in order to ensure that the plaintiffs do not re-file the claims in the future. In exchange for a release of plaintiffs’ claims against them, the settling defendants, among other things, collectively agreed to pay $48$48 million, while expressly denying any liability or wrongdoing. The Court is in the process of reviewing the proposed settlements to determine whether they are fair to the proposed settlement class, the settling defendants, and the non-settling defendants. A hearing on final approval ofcourt approved the settlements is currently scheduled for in December 7, 2023.
Discovery in the Advertising Cases is ongoing. We believe that the claims asserted in the Advertising Cases are without merit and intend to defend vigorously against them.
15
November 7, 2023, TEGNA received four
demand letters from purported TEGNA shareholders in connection with TEGNA’s filing of a definitive proxy statement with the SEC on April 13, 2022 relating to the Merger (the “definitive proxy statement”). Each letter alleged deficiencies in the definitive proxy statement that were similar to the deficiencies alleged in the complaints referenced above.
We, along with a number of our subsidiaries, also are defendants in other judicial and administrative proceedings involving matters incidental to our business. We do not believe that any material liability will be imposed as a result of any of the foregoing matters.
Related Party Transactions
We have an equity investment in MadHive, Inc. (MadHive) which is a related party of TEGNA. We also have commercial agreements with MadHive, under which MadHive supports our Premion business in acquiring over-the-top advertising inventory and delivering corresponding advertising impressions. In the thirdfirst quarter 2024 and first nine months of 2023, we incurred expenses of $ $22.714.3 million and $71.8 million, respectively, as a result of the commercial agreements with MadHive. In the third quarter and first nine months of 2022, we incurred expenses of $30.4 million and $86.3$25.1 million, respectively, as a result of the commercial agreements with MadHive. As of September 30, 2023,March 31, 2024, and December 31, 20222023, we had accounts payable and accrued liabilities associated with the MadHive commercial agreements of $6.6$4.9 million and $10.0$5.4 million, respectively.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company Overview
We are an innovative media company serving the greater good of our communities. Across platforms, we tell empowering stories, conduct impactful investigations and deliver innovative marketing services. With 64 television stations and two radio stations in 51 U.S. markets, we are the largest owner of top four network affiliates in the top 25 markets among independent station groups, reaching approximately 39% of all U.S. television households. We also own leading multicast networks True Crime Network Twist and Quest. Each television station also has a robust digital presence across online, mobile, connected television and social platforms, reaching consumers on all devices and platforms they use to consume news content. We have been consistently honored with the industry’s top awards, including Edward R. Murrow, George Polk, Alfred I. DuPont and Emmy Awards. Through TEGNA Marketing Solutions (TMS), our integrated sales and back-end fulfillment operations, we deliver results for advertisers across television, digital and over-the-top (OTT) platforms, including Premion, our OTT advertising network.
We have one operating and reportable segment. The primary sources of our revenues are: 1) subscription revenues, reflecting fees paid by satellite, cable, OTT (companies that deliver video content to consumers over the Internet) and telecommunications providers to carry our television signals on their systems; 2) advertising & marketing services (AMS) revenues, which include local and national non-political television advertising, digital marketing services (including Premion), and advertising on the stations’ websites, tablet and mobile products and OTT apps; 3) political advertising revenues, which are driven by even year election cycles at the local and national level (e.g. 2022, 2024, 2022, etc.) and particularly in the second half of those years; and 4) other services, such as production of programming, tower rentals, and distribution of our local news content.
The following discussion is a comparison of our consolidated results on a GAAP basis. The year-to-year comparison of financial results is not necessarily indicative of future results. In addition, see the section titled “Results from Operations - Non-GAAP Information” for additional tables presenting information that supplements our financial information provided on a GAAP basis.
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | Change from 2022 | 2021 | Change from 2021 | 2023 | 2022 | Change from 2022 | 2021 | Change from 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 713,243 | $ | 803,111 | (11 | %) | $ | 756,487 | (6 | %) | $ | 2,185,076 | $ | 2,362,115 | (7 | %) | $ | 2,216,446 | (1 | %) | |||||||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenues | 438,260 | 428,891 | 2 | % | 399,751 | 10 | % | 1,295,720 | 1,260,576 | 3 | % | 1,191,561 | 9 | % | |||||||||||||||||||||||||||||||||||||||||||||
Business units - Selling, general and administrative expenses | 98,394 | 98,582 | 0 | % | 100,425 | (2 | %) | 294,734 | 300,136 | (2 | %) | 286,700 | 3 | % | |||||||||||||||||||||||||||||||||||||||||||||
Corporate - General and administrative expenses | 13,552 | 13,367 | 1 | % | 11,891 | 14 | % | 52,158 | 48,299 | 8 | % | 51,944 | 0 | % | |||||||||||||||||||||||||||||||||||||||||||||
Depreciation | 15,083 | 15,219 | (1 | %) | 16,792 | (10 | %) | 45,119 | 46,058 | (2 | %) | 48,526 | (7 | %) | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 13,297 | 14,953 | (11 | %) | 15,774 | (16 | %) | 40,175 | 44,952 | (11 | %) | 47,307 | (15 | %) | |||||||||||||||||||||||||||||||||||||||||||||
Asset impairment and other | — | (159) | *** | 504 | *** | 3,359 | (322) | *** | (2,394) | *** | |||||||||||||||||||||||||||||||||||||||||||||||||
Merger termination fee | — | — | *** | — | *** | (136,000) | — | *** | — | *** | |||||||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | $ | 578,586 | $ | 570,853 | 1 | % | $ | 545,137 | 6 | % | $ | 1,595,265 | $ | 1,699,699 | (6 | %) | $ | 1,623,644 | (2 | %) | |||||||||||||||||||||||||||||||||||||||
Total operating income | $ | 134,657 | $ | 232,258 | (42 | %) | $ | 211,350 | (36 | %) | $ | 589,811 | $ | 662,416 | (11 | %) | $ | 592,802 | (1 | %) | |||||||||||||||||||||||||||||||||||||||
Non-operating expenses | (10,602) | (42,274) | (75 | %) | (45,781) | (77 | %) | (85,633) | (117,437) | (27 | %) | (140,947) | (39 | %) | |||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | 27,801 | 43,827 | (37 | %) | 36,870 | (25 | %) | 103,827 | 132,595 | (22 | %) | 103,470 | — | % | |||||||||||||||||||||||||||||||||||||||||||||
Net income | 96,254 | 146,157 | (34 | %) | 128,699 | (25 | %) | 400,351 | 412,384 | (3 | %) | 348,385 | 15 | % | |||||||||||||||||||||||||||||||||||||||||||||
Net (income) loss attributable to redeemable noncontrolling interest | (71) | (92) | (23 | %) | (419) | (83 | %) | 240 | (516) | *** | (861) | *** | |||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to TEGNA Inc. | $ | 96,183 | $ | 146,065 | (34 | %) | $ | 128,280 | (25 | %) | $ | 400,591 | $ | 411,868 | (3 | %) | $ | 347,524 | 15 | % | |||||||||||||||||||||||||||||||||||||||
Earnings per share - basic | $ | 0.48 | $ | 0.65 | (26 | %) | $ | 0.58 | (17 | %) | $ | 1.86 | $ | 1.84 | 1 | % | $ | 1.57 | 18 | % | |||||||||||||||||||||||||||||||||||||||
Earnings per share - diluted | $ | 0.48 | $ | 0.65 | (26 | %) | $ | 0.58 | (17 | %) | $ | 1.86 | $ | 1.83 | 2 | % | $ | 1.56 | 19 | % | |||||||||||||||||||||||||||||||||||||||
*** Not meaningful |
| Quarter ended Mar. 31, | ||||||||
| 2024 |
|
| 2023 |
|
| Change | ||
|
|
|
|
|
|
|
| ||
Revenues | $ | 714,252 |
|
| $ | 740,327 |
|
| (4%) |
|
|
|
|
|
|
| |||
Operating expenses: |
|
|
|
|
|
|
| ||
Cost of revenues |
| 430,567 |
|
|
| 426,932 |
|
| 1% |
Business units - Selling, general and administrative expenses |
| 102,260 |
|
|
| 99,109 |
|
| 3% |
Corporate - General and administrative expenses |
| 14,798 |
|
|
| 12,100 |
|
| 22% |
Depreciation |
| 14,310 |
|
|
| 15,049 |
|
| (5%) |
Amortization of intangible assets |
| 13,660 |
|
|
| 13,582 |
|
| 1% |
Asset impairment and other |
| 1,097 |
|
|
| — |
|
| *** |
Total | $ | 576,692 |
|
| $ | 566,772 |
|
| 2% |
|
|
|
|
|
|
| |||
Operating income | $ | 137,560 |
|
| $ | 173,555 |
|
| (21%) |
|
|
|
|
|
|
| |||
Non-operating income (expense) |
| 112,963 |
|
|
| (37,732 | ) |
| *** |
Provision for income taxes |
| 61,261 |
|
|
| 31,819 |
|
| 93% |
Net income |
| 189,262 |
|
|
| 104,004 |
|
| 82% |
Net loss attributable to redeemable noncontrolling interest |
| 298 |
|
|
| 299 |
|
| (0%) |
Net income attributable to TEGNA Inc. | $ | 189,560 |
|
| $ | 104,303 |
|
| 82% |
|
|
|
|
|
|
| |||
Net Income per share - basic | $ | 1.06 |
|
| $ | 0.46 |
|
| *** |
Net Income per share - diluted | $ | 1.06 |
|
| $ | 0.46 |
|
| *** |
*** Not meaningful
Revenues
Our Subscription revenue category includes revenue earned from cable, satellite and satellitetelecommunication providers for the right to carry our signals and the distribution of TEGNA stations on OTT streaming services. Our AMS category includes all sources of our traditional television advertising and digital revenues, including Premion and other digital advertising and marketing revenues across our platforms.
17
Our revenues and operating results are subject to seasonal fluctuations. Generally, our second and fourth quarter revenues and operating results are stronger than those we report for the first and third quarter.quarters. This is driven by the second quarter reflecting increased spring seasonal advertising, while the fourth quarter typically includes increased advertising related to the holiday season. In addition, our revenue and operating results are subject to significant fluctuations across yearly periods resulting from political advertising. In even numbered years, political spending is usually significantly higher than in odd numbered years due to advertising for the local, state and national elections. Additionally, every four years, we typically experience even greater increases in political advertising in connection with the presidential election. The strong demand for advertising from political advertisers in these even years can result in the significant use of our available inventory (leading to a “crowd out” effect), which can diminish our AMS revenue in the even year of a two-year election cycle, particularly in the fourth quarter of those years.
In recent years, our business has evolved toward generating more recurring and highly profitable revenue streams, driven by the increased contribution of political and subscription revenue streams as a percentage of our total revenue. Such revenues have been a majority of our overall revenue in the past few years and we expect this to continue.
The following table summarizes the year-over-year changes in our revenue categories (in thousands):
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | Change from 2022 | 2021 | Change from 2021 | 2023 | 2022 | Change from 2022 | 2021 | Change from 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Subscription | $ | 377,891 | $ | 377,368 | — | % | $ | 368,672 | 3 | % | $ | 1,188,297 | $ | 1,158,101 | 3 | % | $ | 1,130,490 | 5 | % | |||||||||||||||||||||||||||||||||||||||
Advertising & Marketing Services | 312,413 | 320,764 | (3) | % | 364,234 | (14) | % | 937,984 | 1,010,490 | (7) | % | 1,027,957 | (9) | % | |||||||||||||||||||||||||||||||||||||||||||||
Political | 11,643 | 92,904 | (87) | % | 15,010 | (22) | % | 22,925 | 161,727 | (86) | % | 34,019 | (33) | % | |||||||||||||||||||||||||||||||||||||||||||||
Other | 11,296 | 12,075 | (6) | % | 8,571 | 32 | % | 35,870 | 31,797 | 13 | % | 23,980 | 50 | % | |||||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 713,243 | $ | 803,111 | (11) | % | $ | 756,487 | (6 | %) | $ | 2,185,076 | $ | 2,362,115 | (7) | % | $ | 2,216,446 | (1) | % | |||||||||||||||||||||||||||||||||||||||
| Quarter ended Mar. 31, | ||||||||
| 2024 |
|
| 2023 |
|
| Change | ||
|
|
|
|
|
|
|
| ||
Subscription | $ | 375,324 |
|
| $ | 414,280 |
|
| (9%) |
Advertising & Marketing Services |
| 298,692 |
|
|
| 307,845 |
|
| (3%) |
Political |
| 27,828 |
|
|
| 5,291 |
|
| *** |
Other |
| 12,408 |
|
|
| 12,911 |
|
| (4%) |
Total revenues | $ | 714,252 |
|
| $ | 740,327 |
|
| (4%) |
*** Not meaningful
Total revenues decreased $89.9 million in the third quarter of 2023 and $177.0$26.1 million in the first nine monthsquarter of 20232024 compared to the same periodsperiod in 2022.2023. The net decreases weredecrease was primarily driven by a $39.0 million decline in subscription revenue primarily due to decreasesdeclines in political revenue ($81.3 million third quarter, $138.8 million first nine months) due to the absence in 2023subscribers and a temporary disruption of the mid-term election cycle that occurred in 2022. Additionally, AMS revenueservice with a distribution partner which was down ($8.4 million third quarter, $72.5 million first nine months), reflecting softer demand for advertising due to macroeconomic headwinds as well as the loss of a large national account in our Premion business. The first nine monthssuccessfully resolved on January 13, 2024. These declines were also impactedpartially offset by the Winter Olympics and Super Bowl airing last year on NBC, our largest network affiliate partner. Partially offsetting these decreases was an increase in subscription revenue ($0.5 million third quarter, $30.2 million first nine months) primarily due to annual rate increases under existing and newly renegotiatedour retransmission agreements, partially offset by declines in subscribers.
Cost of 2023 and $31.4revenues
Cost of revenues increased $3.6 million in the first nine monthsquarter of 20232024 compared to the same periodsperiod in 2021.2023. The net decreases wereincrease was primarily due to decreasesa $2.3 million increase in AMS revenue ($51.8payroll costs and $1.3 million third quarter, $90.0 million first nine months) reflecting softer demand for advertising, particularly national, caused by macroeconomic headwinds. Partially offsetting these declines were increases in subscription revenue ($9.2 million third quarter, $57.8 million first nine months) mainly due to annual rate increases under existing and newly renegotiated retransmission agreements, partially offset by declines in subscribers.
months) driven by rate increases under existing and newly renegotiated affiliation agreements.
Business unit selling, general and administrative expenses decreased $0.2 million in the third quarter of 2023 and $5.4increased $3.2 million in the first nine monthsquarter of 20232024 compared to the same period in 2022. 2023. The decreases wereincrease was primarily due to decreases in sales compensation driven by a decline in advertising revenue and due to a lower stock-based compensation expense.
Corporate - General and administrative expenses
Our corporate costs are separated from our direct business expenses and are recorded as general and administrative expenses in our Consolidated StatementStatements of Income. This category primarily consists of broad corporate management and support functions including Legal, Human Resources, and Finance, as well as activities and costs not directly attributable to the operations of our media business.
Depreciation
Depreciation expense decreased by an increase in M&A-related costs incurred in connection with the now terminated Merger and employee retention costs following the termination of the Merger. Partially offsetting these increases was a decrease in stock-based compensation expense driven by a decline in our stock price.
Amortization of intangible assets
Intangible asset amortization expense decreased by $1.7 million in the third quarter of 2023 and $3.4increased $0.1 million in the first nine monthsquarter of 20232024 compared to the same periodsperiod in 2021.2023. The increase was primarily due to the amortization of intangible assets acquired in the Octillion Media acquisition, partially offset by a decrease wasin amortization due to certain assets reaching the end of their assumed useful lives.
18
Operating income
Operating income decreased $36.0 million in the first nine months of 2021. The 2023 activity was due to a $3.4 million impairment charge recognized on programming assets in the second quarter of 2023. The 2021 activity was primarily related to reimbursements from spectrum repacking ($0.6 million third quarter, $5.0 million first nine months), partially offset by a $1.5 million contract termination fee which was incurred in the second quarter of 2021. Additionally, in the third quarter of 2021 there was a $1.1 million write off of certain assets which impacted both the quarter and nine month period comparisons.
Non-operating income (expense)
Non-operating income (expense) increased $150.7 million in the first quarter of 2024 compared to the same period in 2023. The decreaseincrease was primarily due to a $25.8$152.9 million gain recognized on the sale of a portion of our MadHive investment in Broadcast Music, Inc. in the thirdfirst quarter of 2023 and a $5.8 million increase in interest2024.
Provision for income primarily from interest earned on short-term time-deposit and money market investments.
Income tax expense increased $29.4 million in the first nine monthsquarter of 20232024 compared to the same period in 2022.2023. The decreaseincrease was primarily due to a $25.8 million gain recognized on the sale of a portion of our MadHive investment in the third quarter of 2023 and a $21.3 million increase in interest income, primarily from interest earned on short-term time-deposit and money market investments. Partially offsetting this decrease was the absence of a $20.8 million gain related to the modification of our previously held MadHive debt investment.
Net income
Net income attributable to TEGNA Inc.
The weighted average number of diluted common shares outstanding inas of the thirdfirst quarter of 2024 and 2023 and 2022 were 201.2178.4 million and 224.9 million, respectively. The weighted average number of diluted shares outstanding in the first nine months of 2023 and 2022 was 214.6 million and 224.2224.8 million, respectively. The decline in the number of diluted common shares outstanding was primarily due to share repurchases of 39.5 million under our ASR programs which began in the second quarter of 2023, the receipt of 8.6 million shares to satisfy the mergerMerger termination fee which occurred in the second quarter of 2023 and share repurchases of 7.6 million starting in the third quarter of 2023 through the first quarter of 2024 under our authorized repurchase of 18.3 million shares under the accelerated share repurchase program commenced in June 2023, which was completed in August 2023.
19
Results from Operations - Non-GAAP Information
Presentation of Non-GAAP information
We use non-GAAP financial performance 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, nor should they be considered superior to the related GAAP measures and should be read together with financial information presented on a GAAP basis. Also, our non-GAAP measures may not be comparable to similarly titled measures of other companies.
We also discuss Adjusted free cash flow and Adjusted free cash flow as a percentage of revenues, non-GAAP performance measuremeasures that the Board of Directors uses to review the performance of the business. Freebusiness and compensate senior management. Adjusted free cash flow is reviewed by the Board of Directors as a percentage of revenue over a trailing two-year period (reflecting both an even and odd year reporting period given the political cyclicality of our business). The most directly comparable GAAP financial measure to Adjusted free cash flow is Net income attributable to TEGNA. FreeAdjusted free cash flow is calculated as non-GAAP Adjusted EBITDA (as defined above), further adjusted by adding back (1) employee stock-based compensation awards, (2) non-cashCompany stock 401(k) company match contributions, (3) syndicated programming amortization, (4) dividends received from equity method investments, (5) reimbursements from spectrum repacking, and (6) proceeds from company-owned life insurance policies.policies and (7) interest income. This is further adjusted by deducting payments made for (1) syndicated programming, (2) pension, (3) interest, (4) taxes (net of refunds) and (5) purchases of property and equipment. Like Adjusted EBITDA, free cash flow is not intended to be a measure of residual cash flow available for management’s discretionary use.
20
Discussion of Special Charges and Credits Affecting Reported Results
Our results included the following items we consider “special items” that, while at times recurring, are not normal and can vary significantly from period to period:
Quarter and nine months ended September 30, 2023:
Quarter ended March 31, 2023:
•Other non-operating items consisting of a gain recognized on an available-for-sale investment and an impairment charge related to another investment; and
|
|
|
|
| Special Items |
|
|
|
| |||||||||||||||||||||||
Quarter ended Mar. 31, 2024 |
| GAAP |
|
| Retention costs - SBC |
|
| Retention costs - Cash |
|
| M&A-related costs |
|
| Workforce restructuring |
|
| Asset impairment and other |
|
| Other non-operating item |
|
| Non-GAAP |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Corporate - General and administrative expenses |
| $ | 14,798 |
|
| $ | (752 | ) |
| $ | (221 | ) |
| $ | (2,290 | ) |
| $ | (111 | ) |
| $ | — |
|
| $ | — |
|
| $ | 11,424 |
|
Operating expenses |
|
| 576,692 |
|
|
| (2,893 | ) |
|
| (570 | ) |
|
| (2,290 | ) |
|
| (1,807 | ) |
|
| (1,097 | ) |
|
| — |
|
|
| 568,035 |
|
Operating income |
|
| 137,560 |
|
|
| 2,893 |
|
|
| 570 |
|
|
| 2,290 |
|
|
| 1,807 |
|
|
| 1,097 |
|
|
| — |
|
|
| 146,217 |
|
Income before income taxes |
|
| 250,523 |
|
|
| 2,893 |
|
|
| 570 |
|
|
| 2,290 |
|
|
| 1,807 |
|
|
| 1,097 |
|
|
| (152,867 | ) |
|
| 106,313 |
|
Provision for income taxes |
|
| 61,261 |
|
|
| 431 |
|
|
| 77 |
|
|
| 593 |
|
|
| 445 |
|
|
| 284 |
|
|
| (36,621 | ) |
|
| 26,470 |
|
Net income attributable to TEGNA Inc. |
|
| 189,560 |
|
|
| 2,462 |
|
|
| 493 |
|
|
| 1,697 |
|
|
| 1,362 |
|
|
| 813 |
|
|
| (116,246 | ) |
|
| 80,141 |
|
Earnings per share - diluted (a) |
| $ | 1.06 |
|
| $ | 0.01 |
|
| $ | — |
|
| $ | 0.01 |
|
| $ | 0.01 |
|
| $ | — |
|
| $ | (0.65 | ) |
| $ | 0.45 |
|
(a) Per share amounts do not sum due to rounding.
|
|
|
|
| Special Items |
|
|
|
| |||
Quarter ended Mar. 31, 2023 |
| GAAP |
|
| M&A-related costs |
|
| Non-GAAP |
| |||
|
|
|
|
|
|
|
|
|
| |||
Corporate - General and administrative expenses |
| $ | 12,100 |
|
| $ | (2,766 | ) |
| $ | 9,334 |
|
Operating expenses |
|
| 566,772 |
|
|
| (2,766 | ) |
|
| 564,006 |
|
Operating income |
|
| 173,555 |
|
|
| 2,766 |
|
|
| 176,321 |
|
Income before income taxes |
|
| 135,823 |
|
|
| 2,766 |
|
|
| 138,589 |
|
Provision for income taxes |
|
| 31,819 |
|
|
| 181 |
|
|
| 32,000 |
|
Net income attributable to TEGNA Inc. |
|
| 104,303 |
|
|
| 2,585 |
|
|
| 106,888 |
|
Earnings per share - diluted |
| $ | 0.46 |
|
| $ | 0.01 |
|
| $ | 0.47 |
|
Special Items | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarter ended Sept. 30, 2023 | GAAP measure | Retention costs - SBC | Retention costs - Cash | Other non-operating item | Special tax item | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenues | $ | 438,260 | $ | (751) | $ | — | $ | — | $ | — | $ | 437,509 | ||||||||||||||||||||||||||||||||||||||||||||
Business units - Selling, general and administrative expenses | 98,394 | (501) | (639) | — | — | 97,254 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate - General and administrative expenses | 13,552 | (440) | (553) | — | — | 12,559 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 578,586 | (1,692) | (1,192) | — | — | 575,702 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income | 134,657 | 1,692 | 1,192 | — | — | 137,541 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other non-operating items, net | 33,072 | — | — | (25,809) | — | 7,263 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total non-operating expenses | (10,602) | — | — | (25,809) | — | (36,411) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 124,055 | 1,692 | 1,192 | (25,809) | — | 101,130 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | 27,801 | 237 | 152 | (6,604) | 1,516 | 23,102 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to TEGNA Inc. | 96,183 | 1,455 | 1,040 | (19,205) | (1,516) | 77,957 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share - diluted | $ | 0.48 | $ | 0.01 | $ | 0.01 | $ | (0.10) | $ | (0.01) | $ | 0.39 | ||||||||||||||||||||||||||||||||||||||||||||
Special Items | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarter ended Sept. 30, 2022 | GAAP measure | M&A-related costs | Asset impairment and other | Special tax item | Non-GAAP measure | |||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate - General and administrative expenses | $ | 13,367 | $ | (3,701) | $ | — | $ | — | $ | 9,666 | ||||||||||||||||||||||||||||||||||||||||||||||
Asset impairment and other | (159) | — | 159 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 570,853 | (3,701) | 159 | — | 567,311 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income | 232,258 | 3,701 | (159) | — | 235,800 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 189,984 | 3,701 | (159) | — | 193,526 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | 43,827 | 47 | (37) | 2,588 | 46,425 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to TEGNA Inc. | 146,065 | 3,654 | (122) | (2,588) | 147,009 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share - diluted (a) | $ | 0.65 | $ | 0.02 | $ | — | $ | (0.01) | $ | 0.65 | ||||||||||||||||||||||||||||||||||||||||||||||
(a) Per share amounts do not sum due to rounding. |
21
Special Items | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine months ended Sept. 30, 2023 | GAAP measure | M&A-related costs | Retention costs - SBC | Retention costs - Cash | Merger termination fee | Asset impairment and other | Other non-operating item | Special tax item | Non-GAAP measure | |||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenues | $ | 1,295,720 | $ | — | $ | (751) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,294,969 | ||||||||||||||||||||||||||||||||||||||
Business units - Selling, general and administrative expenses | 294,734 | — | (501) | (639) | — | — | — | — | 293,594 | |||||||||||||||||||||||||||||||||||||||||||||||
Corporate - General and administrative expenses | 52,158 | (19,848) | (440) | (553) | — | — | — | — | 31,317 | |||||||||||||||||||||||||||||||||||||||||||||||
Asset impairment and other | 3,359 | — | — | — | — | (3,359) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Merger termination fee | (136,000) | — | — | — | 136,000 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 1,595,265 | (19,848) | (1,692) | (1,192) | 136,000 | (3,359) | — | — | 1,705,174 | |||||||||||||||||||||||||||||||||||||||||||||||
Operating income | 589,811 | 19,848 | 1,692 | 1,192 | (136,000) | 3,359 | — | — | 479,902 | |||||||||||||||||||||||||||||||||||||||||||||||
Other non-operating items, net | 44,264 | — | — | — | — | — | (25,809) | — | 18,455 | |||||||||||||||||||||||||||||||||||||||||||||||
Total non-operating expenses | (85,633) | — | — | — | — | — | (25,809) | — | (111,442) | |||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 504,178 | 19,848 | 1,692 | 1,192 | (136,000) | 3,359 | (25,809) | — | 368,460 | |||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | 103,827 | 4,552 | 237 | 152 | (24,504) | 860 | (6,604) | 7,959 | 86,479 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to TEGNA Inc. | 400,591 | 15,296 | 1,455 | 1,040 | (111,496) | 2,499 | (19,205) | (7,959) | 282,221 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income per share-diluted (a) | $ | 1.86 | $ | 0.07 | $ | 0.01 | $ | — | $ | (0.52) | $ | 0.01 | $ | (0.09) | $ | (0.04) | $ | 1.31 | ||||||||||||||||||||||||||||||||||||||
(a) Per share amounts do not sum due to rounding. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Items | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine months ended Sept. 30, 2022 | GAAP measure | M&A-related costs | Asset impairment and other | Other non-operating items | Special tax items | Non-GAAP measure | ||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate - General and administrative expenses | $ | 48,299 | $ | (18,147) | $ | — | $ | — | $ | — | $ | 30,152 | ||||||||||||||||||||||||||||||||||||||||||||
Asset impairment and other | (322) | — | 322 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 1,699,699 | (18,147) | 322 | — | — | 1,681,874 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income | 662,416 | 18,147 | (322) | — | — | 680,241 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other non-operating items, net | 16,764 | — | — | (18,308) | — | (1,544) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total non-operating expenses | (117,437) | — | — | (18,308) | — | (135,745) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 544,979 | 18,147 | (322) | (18,308) | — | 544,496 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes | 132,595 | 85 | (78) | 168 | (4,529) | 128,241 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to TEGNA Inc. | 411,868 | 18,062 | (244) | (18,476) | 4,529 | 415,739 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income per share-diluted | $ | 1.83 | $ | 0.08 | $ | — | $ | (0.08) | $ | 0.02 | $ | 1.85 |
Quarter ended Sept. 30, | Nine months ended Sept. 30, | ||||||||||||||||||||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
Net income attributable to TEGNA Inc. (GAAP basis) | $ | 96,183 | $ | 146,065 | (34 | %) | $ | 400,591 | $ | 411,868 | (3 | %) | |||||||||||||||||||||||
Plus (Less): Net income (loss) attributable to redeemable noncontrolling interest | 71 | 92 | (23 | %) | (240) | 516 | *** | ||||||||||||||||||||||||||||
Plus: Provision for income taxes | 27,801 | 43,827 | (37 | %) | 103,827 | 132,595 | (22 | %) | |||||||||||||||||||||||||||
Plus: Interest expense | 43,418 | 43,406 | — | % | 129,121 | 129,976 | (1 | %) | |||||||||||||||||||||||||||
Plus: Equity loss in unconsolidated investments, net | 256 | 178 | 44 | % | 776 | 4,225 | (82 | %) | |||||||||||||||||||||||||||
(Less): Other non-operating items, net | (33,072) | (1,310) | *** | (44,264) | (16,764) | *** | |||||||||||||||||||||||||||||
Operating income (GAAP basis) | 134,657 | 232,258 | (42 | %) | 589,811 | 662,416 | (11 | %) | |||||||||||||||||||||||||||
Plus: M&A-related costs | — | 3,701 | *** | 19,848 | 18,147 | 9 | % | ||||||||||||||||||||||||||||
Plus: Retention costs - SBC | 1,692 | — | *** | 1,692 | — | *** | |||||||||||||||||||||||||||||
Plus: Retention costs - Cash | 1,192 | — | *** | 1,192 | — | *** | |||||||||||||||||||||||||||||
(Less) Plus: Asset impairment and other | — | (159) | *** | 3,359 | (322) | *** | |||||||||||||||||||||||||||||
Less: Merger termination fee | — | — | *** | (136,000) | — | *** | |||||||||||||||||||||||||||||
Adjusted operating income (non-GAAP basis) | 137,541 | 235,800 | (42 | %) | 479,902 | 680,241 | (29 | %) | |||||||||||||||||||||||||||
Plus: Depreciation | 15,083 | 15,219 | (1 | %) | 45,119 | 46,058 | (2 | %) | |||||||||||||||||||||||||||
Plus: Amortization of intangible assets | 13,297 | 14,953 | (11 | %) | 40,175 | 44,952 | (11 | %) | |||||||||||||||||||||||||||
Adjusted EBITDA (non-GAAP basis) | 165,921 | 265,972 | (38 | %) | 565,196 | 771,251 | (27 | %) | |||||||||||||||||||||||||||
Corporate - General and administrative expense (non-GAAP basis) | 12,559 | 9,666 | 30 | % | 31,317 | 30,152 | 4 | % | |||||||||||||||||||||||||||
Adjusted EBITDA, excluding Corporate (non-GAAP basis) | $ | 178,480 | $ | 275,638 | (35 | %) | $ | 596,513 | $ | 801,403 | (26 | %) | |||||||||||||||||||||||
*** Not meaningful |
| Quarter ended Mar. 31, |
| |||||||||
| 2024 |
|
| 2023 |
|
| Change |
| |||
|
|
|
|
|
|
|
|
| |||
Net income attributable to TEGNA Inc. (GAAP basis) | $ | 189,560 |
|
| $ | 104,303 |
|
|
| 82 | % |
Less: Net loss attributable to redeemable noncontrolling interest |
| (298 | ) |
|
| (299 | ) |
|
| (0 | %) |
Plus: Provision for income taxes |
| 61,261 |
|
|
| 31,819 |
|
|
| 93 | % |
Plus: Interest expense |
| 42,368 |
|
|
| 42,906 |
|
|
| (1 | %) |
Less: Interest income |
| (5,573 | ) |
|
| (7,573 | ) |
|
| (26 | %) |
(Less) Plus: Other non-operating items, net |
| (149,758 | ) |
|
| 2,399 |
|
| *** |
| |
Operating income (GAAP basis) |
| 137,560 |
|
|
| 173,555 |
|
|
| (21 | %) |
Plus: M&A-related costs |
| 2,290 |
|
|
| 2,766 |
|
|
| (17 | %) |
Plus: Asset impairment and other |
| 1,097 |
|
|
| — |
|
| *** |
| |
Plus: Workforce restructuring |
| 1,807 |
|
|
| — |
|
| *** |
| |
Plus: Retention costs - Employee stock-based compensation awards |
| 2,893 |
|
|
| — |
|
| *** |
| |
Plus: Retention costs - Cash |
| 570 |
|
|
| — |
|
| *** |
| |
Adjusted operating income (non-GAAP basis) |
| 146,217 |
|
|
| 176,321 |
|
|
| (17 | %) |
Plus: Depreciation |
| 14,310 |
|
|
| 15,049 |
|
|
| (5 | %) |
Plus: Amortization of intangible assets |
| 13,660 |
|
|
| 13,582 |
|
|
| 1 | % |
Adjusted EBITDA | $ | 174,187 |
|
| $ | 204,952 |
|
|
| (15 | %) |
Stock-based compensation: |
|
|
|
|
|
|
|
| |||
Employee awards |
| 8,240 |
|
|
| 3,688 |
|
| *** |
| |
Company stock 401(k) match contributions |
| 5,429 |
|
|
| 5,564 |
|
|
| (2 | %) |
Adjusted EBITDA before stock-based compensation costs | $ | 187,856 |
|
| $ | 214,204 |
|
|
| (12 | %) |
*** Not meaningful
In the thirdfirst quarter of 20232024 Adjusted EBITDA margin was 25% without corporate expense or 23%24% with corporate expense, compared to third quarter of 2022 Adjusted EBITDA margin of 34% without corporate expense or 33% with corporate expense. For the nine months ended September 30, 2023, Adjusted EBITDA margin was 27% without corporatestock-based compensation expense or 26% with corporate expense,without those expenses. Our total Adjusted EBITDA decreased $30.8 million, or 15%, in 2024 compared to nine months ended September 30, 2022 Adjusted EBITDA of 34% without corporate expense or 33% with corporate expense. These margin decreases were2023. This decrease was primarily driven by the operational factors discussed above within the revenue and operating expense fluctuation explanation sections, most notably, the decrease in subscription and AMS and political revenues and theoffset by an increase in programming expenses.political revenue.
22
Adjusted Free Cash Flow Reconciliation
Two-year period ended Sept. 30, | |||||||||||
2023 | 2022 | ||||||||||
Net income attributable to TEGNA Inc. (GAAP basis) | $ | 1,160,491 | $ | 1,133,127 | |||||||
Plus: Provision for income taxes | 338,208 | 352,670 | |||||||||
Plus: Interest expense | 349,222 | 365,187 | |||||||||
Plus: M&A-related costs | 44,103 | 21,885 | |||||||||
Plus: Depreciation | 122,629 | 128,082 | |||||||||
Plus: Amortization of intangible assets | 115,761 | 125,076 | |||||||||
Plus: Stock-based compensation | 54,262 | 62,868 | |||||||||
Plus: Company stock 401(k) contribution | 36,378 | 34,932 | |||||||||
Plus: Syndicated programming amortization | 132,137 | 142,980 | |||||||||
Plus: Advisory fees related to activism defense | — | 16,611 | |||||||||
Plus: Cash dividend from equity investments for return on capital | 3,344 | 6,035 | |||||||||
Plus: Cash reimbursements from spectrum repacking | 236 | 5,774 | |||||||||
Plus: Net income attributable to redeemable noncontrolling interest | 870 | 2,176 | |||||||||
Plus: Reimbursement from Company-owned life insurance policies | 1,895 | 1,456 | |||||||||
Plus: Retention costs, cash portion | 1,192 | — | |||||||||
Plus (Less): Equity loss (income) in unconsolidated investments, net | 9,246 | 11,948 | |||||||||
Plus (Less): Asset impairment and other | 3,123 | (2,051) | |||||||||
(Less) Plus: Other non-operating items, net | (68,180) | (6,830) | |||||||||
Less: Merger termination fee | (136,000) | — | |||||||||
Less: Syndicated programming payments | (127,545) | (146,021) | |||||||||
Less: Income tax payments, net of refunds | (304,860) | (348,387) | |||||||||
Less: Pension contributions | (9,599) | (10,250) | |||||||||
Less: Interest payments | (338,436) | (364,287) | |||||||||
Less: Purchases of property and equipment | (104,292) | (113,519) | |||||||||
Free cash flow (non-GAAP basis) | $ | 1,284,185 | $ | 1,419,462 | |||||||
Revenue | $ | 6,238,968 | $ | 6,290,783 | |||||||
Free cash flow as a % of Revenue | 20.6 | % | 22.6 | % | |||||||
| Two-year period ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Net income attributable to TEGNA Inc. (GAAP basis) | $ | 1,162,519 |
|
| $ | 1,099,110 |
|
Plus: Provision for income taxes |
| 349,092 |
|
|
| 334,056 |
|
Plus: Interest expense |
| 345,674 |
|
|
| 356,093 |
|
Plus: M&A-related costs |
| 32,421 |
|
|
| 27,021 |
|
Plus: Depreciation |
| 119,969 |
|
|
| 125,189 |
|
Plus: Amortization of intangible assets |
| 112,009 |
|
|
| 120,715 |
|
Plus: Employee stock-based compensation awards |
| 55,615 |
|
|
| 56,923 |
|
Plus: Company stock 401(k) match contribution |
| 37,381 |
|
|
| 36,063 |
|
Plus: Syndicated programming amortization |
| 114,427 |
|
|
| 136,964 |
|
Plus: Workforce restructuring expense |
| 1,807 |
|
|
| — |
|
Plus: Advisory fees related to activism defense |
| — |
|
|
| 12,012 |
|
Plus: Cash dividend from equity investments for return on capital |
| 500 |
|
|
| 4,276 |
|
Plus: Cash reimbursements from spectrum repacking |
| 265 |
|
|
| 3,842 |
|
Plus: Net income attributable to redeemable noncontrolling interest |
| 1 |
|
|
| 1,457 |
|
Plus: Reimbursement from Company-owned life insurance policies |
| 1,879 |
|
|
| 1,929 |
|
Plus: Retention costs, cash portion |
| 5,018 |
|
| — |
| |
Plus (Less): Asset impairment and other |
| 4,191 |
|
|
| (1,207 | ) |
Less: Other non-operating items, net |
| (162,922 | ) |
|
| (5,746 | ) |
Less: Merger termination fee |
| (136,000 | ) |
|
| — |
|
Less: Syndicated programming payments |
| (110,970 | ) |
|
| (140,650 | ) |
Less: Income tax payments, net of refunds |
| (298,525 | ) |
|
| (351,206 | ) |
Less: Pension contributions |
| (9,613 | ) |
|
| (12,149 | ) |
Less: Interest payments |
| (332,842 | ) |
|
| (345,153 | ) |
Less: Purchases of property and equipment |
| (105,400 | ) |
|
| (104,069 | ) |
Adjusted free cash flow (non-GAAP basis) | $ | 1,186,496 |
|
| $ | 1,355,470 |
|
|
|
|
|
|
| ||
Revenue | $ | 6,130,304 |
|
| $ | 6,286,614 |
|
Adjusted free cash flow as a % of Revenue |
| 19.4 | % |
|
| 21.6 | % |
Our Adjusted free cash flow a non-GAAP performance measure, was $1.28$1.19 billion and $1.42$1.36 billion for the two-year periods ended September 30,March 31, 2024 and 2023, respectively.
Our share of net earnings and 2022, respectively.
Starting in the fourth quarter of 2023, TEGNA began presenting interest income as a separate line item on its Statements of Income as a result of its increasing size. Prior to this, interest income was included in Other non-operating items, net. Prior year amounts have been reclassified to conform to the new presentation. Interest income is included in Adjusted free cash flow while Other non-operating items, net is not, consistent with past presentations.
Liquidity, Capital Resources and Cash Flows
Our operations have historically generated positive cash flow that, along with availability under our existing revolving credit facility and cash and cash equivalents on hand, has been sufficient to fund our capital expenditures, interest payments, dividends, share repurchases, investments in strategic initiatives and other operating requirements.
We paid dividends totaling $63.1$19.9 million and $63.5$21.4 million in the first ninethree months ofended March 31, 2024 and 2023, and 2022, respectively. In the second quarter of 2023On May 8, 2024 we announced a 20% increasethat our Board of Directors further increased the dividend by 10%, from 11.375 to our quarterly dividend from 9.5 to 11.37512.5 cents per share. We paid the previously declared regularThis increase builds on a 20 percent increase to TEGNA’s dividend in 2023. The increased dividend will be in effect for quarterly dividend of 9.5 cents per share onpayments, beginning with the July 3, 2023,1, 2024 payment, to stockholders of record as of the close of business on June 9, 2023, and paid the increased dividend of 11.375 cents per share on October7, 2024.
23
On June 2, 2023, to stockholders of record as of the close of business on September 8, 2023. We expect the increased dividend to be in effect in future regular quarterly dividend payments, subject to the Board of Directors’ declaration.
On August 3,November 9, 2023, TEGNA announced an additional ASRwe entered into a second accelerated share repurchase (the second ASR) program with a valueJPMorgan. Under the terms of the second ASR, we repurchased $325 million which is expected to commence in the fourth quarter of 2023. Similar to the initial ASR program, we expect to receiveTEGNA common stock from JPMorgan, with an initial delivery of approximately 17.3 million shares equal toreceived on November 13, 2023, representing 80% ($260 million) of the value of the second ASR contract. The second ASR program with thewas completed on February 22, 2024, shortly after which JPMorgan delivered an additional 4.0 million shares to us. The final number of shares received to beshare settlement was based on the average daily volume-weighted average price of TEGNA shares during the term of the second ASR program, less a discount, and subjectless the previously delivered 17.3 million shares.
In December 2023, our Board of Directors authorized a new share repurchase program for up to customary adjustments pursuant to the terms of the ASR.
Our comprehensive capital allocation framework supports shareholder value creation through a predictable and sustained distribution of free cash flow to shareholders. We are on track and reaffirm our expectation to return 40-60 percent of Adjusted free cash flow generated in 2024-2025 to shareholders through share repurchases and dividends, with the remaining Adjusted free cash flow expected to be used for organic investments and/or bolt-on acquisitions and to prepare for future debt retirement. We will continue to analyze all uses of capital, including regular evaluation of the dividend, with a goal of maximizing long-term shareholder value creation.
Consistent with this framework, we are on track to return approximately $350 million of capital to shareholders in 2024 through dividends and opportunistic share repurchases from time to time on the open market at prevailing prices or in negotiated transactions.
Our Adjusted free cash flow guidance free cash flow guidance includes the impact of transformation initiatives to streamline operations, pursue innovation-driven opportunities, and achieve cost reductions. We expect to complete these transformation initiatives by the end of 2025, with initial benefits expected to occur in the second half of 2024. We expect to realize annualized cost savings of $90-$100 million exiting 2025.
During the first quarter of 2024, we returned $102.3 million of capital to shareholders with $82.4 million of share repurchases, representing 5.7 million shares, and paid $19.9 million in dividends. Excluded from this commitment are share repurchases under our previously announced accelerated share repurchase program, which were completed during the quarter on February 27, 2024, including final settlement of approximately 4.0 million shares.
Our capital allocation plan is subject to a variety of factors, including our strategic plans, market and economic conditions and the discretion of our Board of Directors.
In addition to the above share repurchase initiatives, during 20232024 we deployed surplus cash in time deposit and money market investments with several financial institutions.
On January 25, 2024, we entered into an amendment to our revolving credit facility we havefacility. Among other things, the ability to draw loans based on two different interest rate indices, one of which was previously based onamendment amends the London Interbank Offered Rate (LIBOR). During the second quarter of 2023, we amended our revolving credit facility to:
Under the amended Credit Agreement, the Company’s maximum Total Leverage Ratio (as defined in the Credit Agreement) will remain unchanged at 4.50x. None of the available capacity on the Company.
24
As of September 30, 2023,March 31, 2024, we were in compliance with all covenants contained in our debt agreements and credit facility. Our leverage ratio, calculated in accordance with our revolving credit agreement,Credit Agreement, was 2.58x,2.79x, below thethe maximum permitted leverage ratio of 4.50x. TheThe leverage ratio is calculated using annualized adjusted EBITDA (as defined in the credit agreement)Credit Agreement) for the trailing eight quarters. We expect to remain compliant with all covenants for the foreseeable future.
As of September 30, 2023,March 31, 2024, our total debt was $3.07$3.07 billion,, cash and cash equivalents totaled $553.0$430.8 million,, and we had unused borrowing capacity of $1.49 billion$737.3 million under our revolving credit facility. Our debt consists of unsecured notes which have fixed interest rates.
Our financial and operating performance, as well as our ability to generate sufficient cash flow to maintain compliance with credit facility covenants, are subject to certain risk factors. See Item 1A. “Risk Factors,” in our 20222023 Annual Report on Form 10-K for further discussion. We expect our existing cash and cash equivalents, expected future cash flow from our operations, and borrowing capacity under the revolving credit facility will be more than sufficient to fund the $325 million ASR scheduled for the fourth quarter and to satisfy our recurring contractual commitments, debt service obligations, capital expenditure requirements, and other working capital needs for the next twelve months and beyond.
The following table provides a summary of our cash flow information followed by a discussion of the key elements of our cash flow (in thousands):
Nine months ended Sept. 30, | |||||||||||
2023 | 2022 | ||||||||||
Balance of cash and cash equivalents beginning of the period | $ | 551,681 | $ | 56,989 | |||||||
Operating activities: | |||||||||||
Net income | 400,351 | 412,384 | |||||||||
Depreciation, amortization and other non-cash adjustments | 89,814 | 114,895 | |||||||||
Merger termination fee | (136,000) | — | |||||||||
Pension expense, net of employer contributions | 3,982 | (1,697) | |||||||||
Decrease in trade receivables | 50,207 | 51,986 | |||||||||
Decrease in interest and taxes payable | (29,601) | (23,104) | |||||||||
All other operating activities | 30,086 | 46,241 | |||||||||
Cash flow from operating activities | 408,839 | 600,705 | |||||||||
Investing activities: | |||||||||||
Purchase of property and equipment | (29,301) | (35,527) | |||||||||
All other investing activities | 26,206 | (535) | |||||||||
Cash flow used for investing activities | (3,095) | (36,062) | |||||||||
Financing activities: | |||||||||||
Payment under revolving credit facilities, net | — | (166,000) | |||||||||
Dividends paid | (63,078) | (63,533) | |||||||||
Repurchase of common stock | (327,914) | — | |||||||||
All other financing activities | (13,403) | (15,458) | |||||||||
Cash flow used for financing activities | (404,395) | (244,991) | |||||||||
Increase in cash and cash equivalents | 1,349 | 319,652 | |||||||||
Balance of cash and cash equivalents end of the period | $ | 553,030 | $ | 376,641 |
| Three months ended Mar. 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of the period | $ | 361,036 |
|
| $ | 551,681 |
|
|
|
|
|
|
| ||
Operating activities: |
|
|
|
|
| ||
Net income |
| 189,262 |
|
|
| 104,004 |
|
Gain on investment sale |
| (152,867 | ) |
|
| — |
|
Depreciation, amortization and other non-cash adjustments |
| 44,765 |
|
|
| 38,120 |
|
Pension expense, net of contributions |
| 742 |
|
|
| 1,416 |
|
Decrease in trade receivables |
| 22,153 |
|
|
| 20,615 |
|
(Decrease) increase in accounts payable |
| (34,950 | ) |
|
| 12,100 |
|
Increase (decrease) in interest and taxes payable |
| 26,958 |
|
|
| (1,627 | ) |
All other operating activities |
| 4,317 |
|
|
| (4,241 | ) |
Net cash flow from operating activities |
| 100,380 |
|
|
| 170,387 |
|
|
|
|
|
|
| ||
Investing activities: |
|
|
|
|
| ||
Purchase of property and equipment |
| (4,911 | ) |
|
| (2,845 | ) |
Payments for acquisitions of businesses and assets, net of cash acquired |
| (52,799 | ) |
|
| (1,150 | ) |
Proceeds from investments |
| 152,867 |
|
|
| 23 |
|
All other investing activities |
| (8,933 | ) |
|
| (150 | ) |
Net cash flow provided by (used for) investing activities |
| 86,224 |
|
|
| (4,122 | ) |
|
|
|
|
|
| ||
Financing activities: |
|
|
|
|
| ||
Repurchase of common stock |
| (82,394 | ) |
|
| — |
|
Dividends paid |
| (19,898 | ) |
|
| (21,360 | ) |
Payment of debt issuance costs |
| (6,448 | ) |
|
| — |
|
All other financing activities |
| (8,136 | ) |
|
| (13,407 | ) |
Net cash flow used for financing activities |
| (116,876 | ) |
|
| (34,767 | ) |
Net change in cash and cash equivalents |
| 69,728 |
|
|
| 131,498 |
|
Cash and cash equivalents at end of the period | $ | 430,764 |
|
| $ | 683,179 |
|
Operating activities - Cash flow from operating activities was $408.8$100.4 million forfor the ninethree months ended September 30, 2023,March 31, 2024, compared to $600.7$170.4 million for the same period in 2022. Net income2023. The decrease of $70.0 million was primarily driven by changes in working capital, primarily accounts payable, due to the timing of payments. Also contributing to the decrease was the impact of the December 2023 temporary service disruption with one of our distribution partners which negatively impacted in 2023 by the one time merger termination fee of $136 million that was settledcollections in the secondfirst quarter of 2023. The merger termination fee was satisfied in the form of TEGNA common stock and therefore did not impact cash flows. The decrease in operating cash flow of $191.9 million was driven by a $177.0 million decline in revenue and a $39.8 million increase in programming costs,2024. These declines were partially offset by a $23.the timing of payments to one of our network affiliation partners.0
million decrease in taxes paid in the first nine months of 2023 as compared to 2022 primarily due to a decline in income before taxes.
Investing activities - Cash flow used forfrom investing activities was $3.1was a net cash inflow of $86.2 million for the ninethree months ended September 30, 2023,March 31, 2024, compared to $36.1a net cash outflow of $4.1 million for the same period in 2022.2023. The decrease of $33.0 millionincrease in net cash used forflows of $90.3 million from investing activities was primarily driven by an increaseproceeds of $24.2$152.9 million in proceeds from investments, primarily due to the sale of a portion of our investment in MadHiveBMI in the thirdfirst quarter of 2023.2024. This was partially offset by cash outflows of $52.8 million for the acquisition of Octillion Media.
25
Financing activities - Cash flow used for financing activities was $404.4$116.9 million for the ninethree months ended September 30, 2023,March 31, 2024, compared to $245.0$34.8 million for the same period in 2022.2023. The changeincrease was primarily due to our payment to JPMorgan of $300 million pursuant to the ASR program in which we received a total of 18.3 million shares 2023. Also contributing to the change was our repurchase of 1.7common stock. In the first quarter of 2024 we repurchased approximately $82.4 million additionalof shares for $27.9under our authorized share repurchase program. Additionally, we paid $6.4 million in fees in conjunction with the third quarteramendment of 2023. Lastly, our revolving credit facility had no net repaymentsrevolver in the first nine monthsquarter of 2023 as compared to net repayments of $166.0 million in the first nine months of 2022.2024.
Certain statements in this Quarterly Report on Form 10-Q that do not describe historical facts may constitute forward-looking statements within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in the communication, the words “believes,” “estimates,” “plans,” “expects,” “should,” “could,” “outlook,” and “anticipates” and similar expressions as they relate to the Company, or its management financial results are intended to identify forward-looking statements. Forward-looking statements in this communication may include, without limitation, statements regarding anticipated growth rates, the Company’s capital allocation framework, the Company’s business transformation initiatives, and the Company’s other plans, objectives and expectations. Forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, projections and estimates expressed in such statements, many of which are outside the Company’s control. These risks, uncertainties and other factors include, but are not limited to, risks and uncertainties related to: changes in the market price of the Company’s shares, general market conditions; constraints, volatility, or disruptions in the capital markets; the possibility that the Company’s share repurchases, including through ASR programs, and the execution of the capital allocation framework may not enhance long-term stockholder value; the Company’s ability to realize cost savings and execute its business transformation initiatives; the possibility that share repurchases could increase the volatility of the price of the Company’s common stock; legal proceedings, judgments or settlements; the response of customers, suppliers and business partners to the Company’s plans, operations and business as a standalone company; the Company’s ability to re-price or renew subscribers; potential regulatory actions; changes in consumer behaviors and impacts on and modifications to TEGNA’sthe Company’s operations and business relating thereto; other business effects, including the effects of industry, market, economic, political or regulatory conditions; information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity, malware or ransomware attacks; and economic, competitive, governmental, technological and other factors and risks that may affect the Company’s operations or financial results, which are discussed in our Annual Report on Form 10-K.
Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of the Company. Each such statement speaks only as of the day it was made. We undertake no obligation to update or to revise any forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, refer to the following section of our 20222023 Annual Report on Form 10-K: “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.” Our exposures to market risk have not changed materially since December 31, 2022.
As of September 30, 2023,March 31, 2024, we did not have any floating interest obligations outstanding and had unused borrowing capacity of $1.49 billion under our $1.51 billion$750 million revolving credit facility, which expires in August 2024. During the second quarter of 2023, we amended our revolving credit facility to replace the LIBOR-based interest rate index, which was phased out, with a Secured Overnight Financing Rate (SOFR) based interest rate index. The transition from LIBOR to SOFR did not have a material impact on the Company. January 2029. Any amounts borrowed under the revolving credit facility in the future are subject to a variable rate. Refer to Note 8 to the condensed consolidated financial statements for information regarding the fair value of our long-term debt.
Item 4. Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2023.March 31, 2024. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective, as of September 30, 2023,March 31, 2024, to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
There have been no material changes in our internal controls or in other factors during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 10 to the condensed consolidated financial statements for information regarding our legal proceedings.
26
Item 1A. Risk Factors
While we attempt to identify, manage and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. “Item 1A. Risk Factors” of our 20222023 Annual Report on Form 10-K describes the risks and uncertainties that we believe may have the potential to materially affect our business, results of operations, financial condition, cash flows, projected results and future prospects. Other than those risk factors related to the now terminated merger, weWe do not believe that there have been any material changes from the risk factors previously disclosed in our 20222023 Annual Report on Form 10-K, with the exception of the below risk factor related to the repurchasing of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table presents stock repurchases by the Company during the three-month periodthree months ended September 30, 2023March 31, 2024 (in thousands, except per share amount)amounts):
Period Ended | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | |||||||||||||||||||||||||
July 1, 2023 - July 31, 2023 | — | $ | — | — | $ | 360,000 | 1 | ||||||||||||||||||||||
August 1, 2023 - August 31, 20232 | 3,091 | $ | 16.42 | 3,091 | $ | 300,000 | |||||||||||||||||||||||
September 1, 2023 - September 30, 20233 | 1,749 | $ | 15.96 | 1,749 | $ | 272,086 | 4 | ||||||||||||||||||||||
Total Third Quarter 2023 | 4,840 | 4,840 |
Period Ended |
| Total |
|
| Average |
|
| Total Number |
|
| Approximate |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
January 1, 2024 - January 31, 2024 |
| — |
|
| $ | — |
|
| — |
|
|
| 715,000 |
| (1) | ||
February 1, 2024 - February 29, 2024 |
|
| 3,999 |
|
|
| 14.51 |
|
|
| 3,999 |
|
|
| 650,000 |
| (2) |
March 1, 2024 - March 31, 2024 |
|
| 5,828 |
|
| $ | 14.50 |
|
|
| 5,828 |
|
|
| 565,505 |
| (3) |
Total First Quarter 2024 |
|
| 9,827 |
|
|
|
|
|
| 9,827 |
|
|
|
|
|
(1) Represents as of the beginning of the thirdfirst quarter of 20232024 (i) $300the remaining value of the $650 million remaining under the share repurchase program authorized by our Board of Directors in December 2020 described in footnote 3 below,2023 and (ii) $60the remaining $65 million remaining(20% of the total value) under the second ASR program which was settled in the third quarter of 2023, described in footnote 2 below.
(2) In the secondfourth quarter of 2023, we entered into ana second ASR agreement with JPMorgan Chase Bank, National Association (JPMorgan) to repurchase TEGNA common stock with an aggregate value of $300$325 million. Under the terms of the ASR, we paid JPMorgan $300$325 million and received an initial delivery of approximately 15.217.3 million shares in the second quarterNovember of 2023, representing approximately 80% ($240260 million) of the value of the second ASR. The second ASR program was completed during August of 2023, aton February 22, 2024, shortly after which timedate JPMorgan delivered an additional 3.14.0 million shares to us. This final share settlement was based on the average daily volume-weighted average price of TEGNA shares during the term of theThe second ASR program was separately authorized by our Board of $16.42, which was netDirectors and therefore did not impact the $650 million share repurchase program authorized by our Board of a discount, less the previously delivered 15.2 million shares.
(3) In December 2020,2023, our Board of Directors authorized the renewal of our share repurchase program for up to $300$650 million of our common stock over threetwo years. The shares may be repurchased at management’s discretion, either on the open market or in privately negotiated block transactions. Management’s decision to repurchase shares will depend on price, blackout periods and other corporate developments. Purchases may occur from time to time and no maximum purchase price has been set. No purchases occurred under this program from its inception through June 30, 2023. In SeptemberMarch of 2023,2024, we repurchased 1.75.8 million shares under this program at an aggregate cost of $27.9 million.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
On August 30, 2023, David T. Lougee,March 7, 2024, Lynn Beall (Trelstad), Executive Vice President and Chief ExecutiveOperating Officer, entered into a Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K of the Exchange Act) with the intent of selling up to 425,00075,000 shares of the Company’s common stock for estate planning and diversification purposes. The plan expires upon the earlier of November 29,October 31, 2024, or the completion of all authorized transactions under the plan. Sales made by Mr. Lougee under the plan would represent his first sales of the Company’s stock since becoming President and CEO in 2017. If all 425,000 shares are sold during the plan period, Mr. Lougee will still hold shares of the Company’s common stock in excess of three times the Company’s CEO minimum ownership guideline.
27
The adoption of this trading plan occurred during an open insider trading window and is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended.
Item 6. Exhibits
Exhibit Number | Description | |||||||
3-1 | ||||||||
3-2 | ||||||||
10-1 | ||||||||
10-2 | ||||||||
10-3 | Form of Executive Officer Performance Share Award Agreement. * | |||||||
10-4 | ||||||||
10-5 | ||||||||
10-6 | ||||||||
10-7 | ||||||||
31-1 | ||||||||
31-2 | ||||||||
32-1 | ||||||||
32-2 | ||||||||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
* Asterisks identify management contracts and compensatory plans and arrangements.
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: | TEGNA INC. | ||||
/s/ Clifton A. McClelland III | |||||
Clifton A. McClelland III | |||||
Senior Vice President and Controller | |||||
(on behalf of Registrant and as Principal Accounting Officer) |
29