Exhibit 99.1
| | | |
| | | FOR IMMEDIATE RELEASE |
| | | Monday, November 3, 2008 |
| | | 7:30 A.M. CST |
BELO REPORTS RESULTS FOR THIRD QUARTER 2008
Television Company’s EPS from Continuing Operations Down $0.01 Due to Weak Economy,
Hurricanes Ike and Gustav
DALLAS– Belo Corp. (NYSE: BLC), one of the nation’s largest pure-play, publicly-traded television companies, today reported earnings per share from continuing operations of $0.14 in the third quarter of 2008 compared to $0.15 in the third quarter of 2007.
Earnings per share from continuing operations for the third quarter of 2007 exclude the results of Belo’s former newspaper businesses and related assets, which were spun off on February 8, 2008. Those results are included in discontinued operations and total $0.03 per share for the third quarter of 2007.
Dunia A. Shive, Belo’s president and Chief Executive Officer, said, “Belo’s third quarter results were impacted by worsening economic conditions that led to a total revenue decline of 6.4 percent. Third quarter results were also negatively impacted by Hurricanes Ike and Gustav, which hit our Houston and New Orleans markets, respectively. The financial impact related to the hurricanes totaled approximately $3.5 million, including an estimated $2.6 million in advertising revenue displaced due to continuous news coverage and lower audience levels stemming from lengthy power outages. Excluding the effects of the hurricanes and spin-off related costs from the third quarter of 2007, the Company’s earnings from operations decreased just 3.4 percent, largely due to expense reductions. In addition, the Company reduced its debt by $42 million using cash generated from operations in the third quarter.”
Shive continued, “Belo’s operating margins and cash flows remain strong. While the difficult advertising environment is expected to continue, I’m confident we are taking the necessary steps to be an even stronger company when the eventual recovery takes hold.”
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Belo Announces Third Quarter 2008 Results
November 3, 2008
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Third Quarter in Review
Operating Results
Total revenues decreased 6.4 percent in the third quarter of 2008 versus the third quarter of 2007 as declines in Belo’s core local and national spot business offset incremental gains from political and Olympics revenue. Total spot revenue, including political, was down 8.8 percent with 13 percent and 18 percent decreases in local and national spot, respectively. Third quarter 2008 revenues were affected by the hurricanes and more importantly a weak advertising environment, particularly in the automotive category which was down 26 percent.
Excluding the $2.6 million in displaced revenue due to the hurricanes, total revenue decreased 4.9 percent and total spot revenue, including political, decreased 7.2 percent. Approximately one-half of the 4.9 percent total revenue decline came from the Company’s stations in Phoenix as that market continues to experience significant economic issues related to the housing crisis.
Third quarter Olympics revenue totaled $9.7 million. Political revenues in the third quarter were $11.7 million, up $8.4 million over the third quarter of 2007.
Advertising revenue associated with Belo’s Web sites increased 18 percent to $7.9 million in the third quarter 2008, representing 4.6 percent of Belo’s total revenues. Retransmission revenues totaled $8.4 million in the third quarter of 2008, a 41 percent increase compared to the third quarter of 2007. The Company expects to generate more than $31 million in retransmission revenue for full year 2008.
Total station expenses decreased 2.4 percent in the third quarter of 2008 versus the same period last year due primarily to the freezing of open positions company wide, staff reductions in certain markets and other cost-saving measures. Station expenses decreased 3.2 percent in the third quarter of 2008 when excluding one-time costs related to Hurricanes Ike and Gustav, which totaled almost $1 million. The Company’s total employment at September 30, 2008 was about 5 percent lower than at December 31, 2007.
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Belo Announces Third Quarter 2008 Results
November 3, 2008
Page Three
Station EBITDA for the third quarter of 2008 was down 13 percent versus the third quarter of 2007, and down 7.6 percent when excluding the effects of Hurricanes Ike and Gustav. Despite the current economic climate, the station EBITDA margin for the third quarter of 2008 was 36.1 percent, and 37.6 percent when excluding the effects of Hurricanes Ike and Gustav.
Corporate
Corporate operating costs were $6 million in the third quarter of 2008 as compared to $8.4 million in the third quarter of 2007, a decrease of 29 percent. The decrease was primarily due to lower share-based compensation, lower bonus expense and other cost-saving measures.
Third quarter combined station and corporate operating costs declined 4.3 percent, or 5 percent when excluding the effects of Hurricanes Ike and Gustav.
The Company’s earnings from operations decreased 5.1 percent, or 3.4 percent when excluding the effects of Hurricanes Ike and Gustav in the third quarter of 2008 and spin-off related costs from the third quarter of 2007.
Other Items
Belo’s depreciation and amortization expense totaled $11 million in the third quarter of 2008, a 9.6 percent decrease from the third quarter of 2007.
Interest expense decreased $2.4 million, or 10 percent, in the third quarter of 2008.
The Company paid down $42 million of debt during the third quarter and its total debt at September 30, 2008 was $1.138 billion. The Company’s leverage and interest coverage ratios, as defined in the Company’s credit facility, were 4.4 and 3.0 times, respectively, at September 30, 2008. The Company invested $3.6 million in capital expenditures in the third quarter bringing year-to-date expenditures to $20 million. The Company expects to invest a total of $25 million in capital expenditures for the year.
Discontinued Operations
On February 8, 2008, Belo completed the spin-off of its newspaper businesses and related assets into a separate publicly-traded company, A. H. Belo Corporation. The results of operations
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Belo Announces Third Quarter 2008 Results
November 3, 2008
Page Four
of the Newspaper Group and related corporate expenses are classified as discontinued operations for all periods prior to the spin-off.
Non-GAAP Financial Measures
A reconciliation of station EBITDA and pro forma earnings from operations to earnings from operations, and a reconciliation of earnings per share from continuing operations to earnings per share from continuing operations, before spin-off related charges, are set forth in an exhibit to this release.
Other Matters
The Company announced that later today it is funding the retirement of $350 million in 8 percent senior notes due November 1, 2008 from funds drawn on its credit facility. The Company’s credit facility currently has a lower interest rate than the 8 percent notes.
Fourth Quarter Outlook
In looking to the fourth quarter, Shive said, “The lack of consumer confidence and continued weak economic indicators point to a prolonged soft advertising environment. Current pacing trends indicate about an 8 percent decline in total revenue in the fourth quarter. We expect political revenues to finish around $36 million in the fourth quarter of 2008 and $56 million for the year.
“Because of these extraordinary market conditions, we will continue to focus on cost reduction and debt pay-down for the foreseeable future. We expect year-over-year fourth quarter station expense declines similar to what we experienced in the second and third quarters of this year. Full year corporate operating costs, exclusive of spin-off charges, are projected to be approximately $32 million, down from our previous guidance of $36 million, and a decrease of 21 percent from pro forma 2007 corporate operating expenses.”
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Belo Announces Third Quarter 2008 Results
November 3, 2008
Page Five
A conference call to discuss this earnings release and other matters of interest to shareholders and analysts will follow at 1:00 p.m. CST this afternoon. The conference call will be simultaneously Webcast on the Company’s Web site (www.belo.com/invest). Following the conclusion of the Webcast, a replay of the conference call will be archived on Belo’s Web site. To access the listen-only conference lines, dial 1-800-230-1074. A replay line will be open from 3:00 p.m. CST on November 3 until 11:59 p.m. CST on November 10, 2008. To access the replay, dial 800-475-6701 or 320-365-3844. The access code for the replay is 965609.
About Belo Corp.
Belo Corp. is one of the nation’s largest pure-play, publicly-traded television companies, with 2007 annual revenue of $777 million. The Company owns and operates 20 television stations reaching more than 14 percent of U.S. television households, including ABC, CBS, NBC, FOX, CW and MyNetwork TV affiliates, and their associated Web sites, in 15 highly-attractive markets across the United States. Belo stations consistently deliver distinguished journalism for which they have received significant industry recognition including nine Alfred I. duPont- Columbia University Silver Baton Awards; nine George Foster Peabody Awards; and 23 national Edward R. Murrow Awards – all since 2000, and in each case more than any other commercial station group in the nation. Nearly all Belo stations rank first or second in their local market. Belo owns stations in seven of the top 25 markets in the nation, with six stations located in the fast-growing, top-14 markets of Dallas/Fort Worth, Houston, Seattle/Tacoma and Phoenix. Additionally, the Company has created regional cable news channels in Texas and the Northwest increasing its impact in those regions. Additional information is available at www.belo.com or by contacting Paul Fry, vice president/Investor Relations & Corporate Communications, at 214-977-6835.
Statements in this communication concerning Belo’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends, capital expenditures, investments, future financings, and other financial and non-financial items that are not historical facts, are “forward-looking statements” as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements.
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Belo Announces Third Quarter 2008 Results
November 3, 2008
Page Six
Such risks, uncertainties and factors include, but are not limited to, uncertainties regarding the costs, consequences (including tax consequences) and other effects of the distribution of the newspaper businesses and related assets of Belo; changes in capital market conditions and prospects, and other factors such as changes in advertising demand, interest rates and programming and production costs; changes in viewership patterns and demography, and actions by Nielsen; changes in the network-affiliate business model for broadcast television; technological changes, including the transition to digital television and the development of new systems to distribute television and other audio-visual content; changes in the ability to secure, and in the terms of, carriage of Belo programming on cable, satellite, telecommunications and other program distribution methods; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; Federal Communications Commission and other regulatory, tax and legal changes; adoption of new accounting standards or changes in existing accounting standards by the Financial Accounting Standards Board or other accounting standard-setting bodies or authorities; the effects of Company acquisitions, dispositions and co-owned ventures; general economic conditions; and significant armed conflict, as well as other risks detailed in Belo’s other public disclosures and filings with the SEC including Belo’s Annual Report onForm 10-K.
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Belo Corp.
Consolidated Statements of Operations
| | | | | | | | | | | | | | | | | |
| | | Three months ended | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| In thousands,except per share amounts (unaudited) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Net Operating Revenues | | $ | 170,823 | | | $ | 182,409 | | | $ | 534,619 | | | $ | 558,980 | |
| | | | | | | | | | | | | | | | | |
Operating Costs and Expenses | | | | | | | | | | | | | | | | |
| Station salaries, wages and employee benefits | | | 56,523 | | | | 59,188 | | | | 175,851 | | | | 178,769 | |
| Station programming and other operating costs | | | 52,567 | | | | 52,638 | | | | 156,659 | | | | 160,869 | |
| Corporate operating costs | | | 5,954 | | | | 8,401 | | | | 21,662 | | | | 29,002 | |
| Spin-off related costs | | | — | | | | 2,805 | | | | 4,659 | | | | 2,805 | |
| Depreciation | | | 11,025 | | | | 12,198 | | | | 32,233 | | | | 33,838 | |
| Amortization | | | — | | | | — | | | | — | | | | 442 | |
| | | | | | | | | | | | | |
| Total operating costs and expenses | | | 126,069 | | | | 135,230 | | | | 391,064 | | | | 405,725 | |
| | | | | | | | | | | | | | | | | |
| Earnings from operations | | | 44,754 | | | | 47,179 | | | | 143,555 | | | | 153,255 | |
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Other income and expense | | | | | | | | | | | | | | | | |
| Interest expense | | | (21,188 | ) | | | (23,609 | ) | | | (65,427 | ) | | | (72,007 | ) |
Other income, net(2) | | | 543 | | | | 1,188 | | | | 1,616 | | | | 6,594 | |
| | | | | | | | | | | | | |
| Total other income and expense | | | (20,645 | ) | | | (22,421 | ) | | | (63,811 | ) | | | (65,413 | ) |
| | | | | | | | | | | | | | | | | |
| Earnings from continuing operations before income taxes | | | 24,109 | | | | 24,758 | | | | 79,744 | | | | 87,842 | |
| Income taxes | | | 9,672 | | | | 9,804 | | | | 49,808 | | | | 32,948 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net earnings from continuing operations | | | 14,437 | | | | 14,954 | | | | 29,936 | | | | 54,894 | |
| | | | | | | | | | | | | | | | | |
| Discontinued operations, net of tax | | | — | | | | 3,804 | | | | (4,499 | ) | | | 15,737 | |
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Net earnings | | $ | 14,437 | | | $ | 18,758 | | | $ | 25,437 | | | $ | 70,631 | |
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Net earnings per share — Basic | | | | | | | | | | | | | | | | |
| Earnings per share from continuing operations | | $ | 0.14 | | | $ | 0.15 | | | $ | 0.29 | | | $ | 0.53 | |
| Earnings (loss) per share from discontinued operations | | | — | | | | 0.03 | | | | (0.04 | ) | | | 0.16 | |
| | | | | | | | | | | | | |
| Net earnings per share — Basic | | $ | 0.14 | | | $ | 0.18 | | | $ | 0.25 | | | $ | 0.69 | |
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Net earnings per share — Diluted | | | | | | | | | | | | | | | | |
| Earnings per share from continuing operations | | $ | 0.14 | | | $ | 0.15 | | | $ | 0.29 | | | $ | 0.53 | |
| Earnings (loss) per share from discontinued operations | | | — | | | | 0.03 | | | | (0.04 | ) | | | 0.16 | |
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| Net earnings per share — Diluted | | $ | 0.14 | | | $ | 0.18 | | | $ | 0.25 | | | $ | 0.69 | |
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| | | | | | | | | | | | | | | | | |
Average shares outstanding | | | | | | | | | | | | | | | | |
| Basic | | | 102,204 | | | | 102,228 | | | | 102,224 | | | | 102,240 | |
| Diluted | | | 103,336 | | | | 102,735 | | | | 103,357 | | | | 102,887 | |
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Cash dividends declared per share | | $ | 0.15 | | | $ | 0.25 | | | $ | 0.225 | | | $ | 0.375 | |
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| Note 1: | | Certain prior period amounts have been reclassified to conform to current year presentation and to reflect discontinued operations |
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| Note 2: | | Other income (expense), net consists primarily of equity earnings (losses) from partnerships and joint ventures and other miscellaneous income (expense). In 2007, other income (expense) includes $4,000 related to an insurance settlement for losses suffered from Hurricane Katrina. |
Belo Corp.
Consolidated Condensed Balance Sheets
| | | | | | | | | |
| | | September 30, | | | December 31, | |
| In thousands | | 2008 | | | 2007 | |
| | | (unaudited) | | | (unaudited) | |
Assets | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and temporary cash investments | | $ | 5,924 | | | $ | 11,190 | |
| Accounts receivable, net | | | 143,593 | | | | 181,700 | |
| Other current assets | | | 22,472 | | | | 24,789 | |
| Current assets of discontinued operations | | | — | | | | 126,710 | |
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| Total current assets | | | 171,989 | | | | 344,389 | |
| | | | | | | | | |
| Property, plant and equipment, net | | | 223,608 | | | | 226,040 | |
| Intangible assets, net | | | 2,045,793 | | | | 2,045,793 | |
| Other assets | | | 80,188 | | | | 51,650 | |
| Long-term assets of discontinued operations | | | — | | | | 511,188 | |
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| | | | | | | | | |
| Total assets | | $ | 2,521,578 | | | $ | 3,179,060 | |
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Liabilities and Shareholders’ Equity | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable | | $ | 19,279 | | | $ | 31,153 | |
| Accrued expenses | | | 51,241 | | | | 65,575 | |
| Other current liabilities | | | 43,560 | | | | 46,667 | |
| Current liabilities of discontinued operations | | | — | | | | 106,055 | |
| | | | | | | |
| Total current liabilities | | | 114,080 | | | | 249,450 | |
| | | | | | | | | |
| Long-term debt | | | 1,137,867 | | | | 1,168,140 | |
| Deferred income taxes | | | 440,260 | | | | 425,652 | |
| Other liabilities | | | 38,485 | | | | 37,183 | |
| Long-term liabilities of discontinued operations | | | — | | | | 46,927 | |
| Total shareholders’ equity | | | 790,886 | | | | 1,251,708 | |
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| | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 2,521,578 | | | $ | 3,179,060 | |
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| Note: | | Certain prior period amounts have been reclassified to conform to current period presentation and to reflect discontinued operations. |
Belo Corp.
Non-GAAP to GAAP Reconciliations
Station EBITDA and
Pro forma Earnings from Operations
In thousands (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2008 | | | 2008 | | | 2008 | | | 2007 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
| | | As Reported | | | Hurricanes(2) | | | Adjusted | | | As Reported | | | As Reported | | | Hurricanes(2) | | | Adjusted | | | As Reported | |
| Total spot revenue | | $ | 146,221 | | | $ | 2,640 | | | $ | 148,861 | | | $ | 160,372 | | | $ | 461,589 | | | $ | 2,640 | | | $ | 464,229 | | | $ | 495,051 | |
| Other revenue | | | 24,602 | | | | — | | | | 24,602 | | | | 22,037 | | | | 73,030 | | | | — | | | | 73,030 | | | | 63,929 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total revenue | | | 170,823 | | | | 2,640 | | | | 173,463 | | | | 182,409 | | | | 534,619 | | | | 2,640 | | | | 537,259 | | | | 558,980 | |
| Station expenses | | | 109,090 | | | | (875 | ) | | | 108,215 | | | | 111,826 | | | | 332,510 | | | | (875 | ) | | | 331,635 | | | | 339,638 | |
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Station EBITDA(1) | | | 61,733 | | | | 3,515 | | | | 65,248 | | | | 70,583 | | | | 202,109 | | | | 3,515 | | | | 205,624 | | | | 219,342 | |
| Corporate operating costs | | | 5,954 | | | | — | | | | 5,954 | | | | 8,401 | | | | 21,662 | | | | — | | | | 21,662 | | | | 29,002 | |
| Depreciation | | | 11,025 | | | | — | | | | 11,025 | | | | 12,198 | | | | 32,233 | | | | — | | | | 32,233 | | | | 33,838 | |
| Amortization | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 442 | |
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Earnings from operations before spin-off related costs(3) | | | 44,754 | | | | 3,515 | | | | 48,269 | | | | 49,984 | | | | 148,214 | | | | 3,515 | | | | 151,729 | | | | 156,060 | |
| Spin-off related costs | | | — | | | | — | | | | — | | | | 2,805 | | | | 4,659 | | | | — | | | | 4,659 | | | | 2,805 | |
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| Earnings from operations | | $ | 44,754 | | | $ | 3,515 | | | $ | 48,269 | | | $ | 47,179 | | | $ | 143,555 | | | $ | 3,515 | | | $ | 147,070 | | | $ | 153,255 | |
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| Station EBITDA margin | | | 36.1 | % | | | | | | | 37.6 | % | | | 38.7 | % | | | 37.8 | % | | | | | | | 38.3 | % | | | 39.2 | % |
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| Note 1: | | Belo’s management uses Station EBITDA as the primary measure of profitability to evaluate operating performance and to allocate capital resources and bonuses to eligible operating company employees. Station EBITDA represents the Company’s earnings from operations before interest expense, income taxes, depreciation, amortization, corporate expense and spin-off related operating costs. Other income (expense), net is not allocated to television station earnings from operations because it consists primarily of equity in earnings (losses) from investments in partnerships and joint ventures and other non-operating income (expense). |
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| Note 2: | | Represents estimated revenues lost and incremental expenses incurred specifically related to Hurricanes Gustav and Ike, which affected Belo television stations in Houston and New Orleans. |
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| Note 3: | | Belo’s management believes pro forma earnings from operations before the effects of Hurricanes Gustav and Ike and before spin-off related costs is a useful measure for investors as it provides a meaningful basis for comparison of core operating results for the three months and nine months ended September 30, 2008 to the same periods in the prior year. |
Net Earnings From Continuing Operations Before Spin-Off Related Charges
In thousands (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine months ended September 30, 2008 | | | Nine months ended September 30, 2007 | |
| | | Earnings | | | EPS | | | Shares | | | Earnings | | | EPS | | | Shares | |
| Net earnings from continuing operations | | $ | 29,936 | | | $ | 0.29 | | | | 103,357 | | | $ | 54,894 | | | $ | 0.53 | | | | 102,887 | |
| Spin-off related operating and financing costs, net of tax | | | 3,151 | | | | 0.03 | | | | 103,357 | | | | 1,683 | | | | 0.02 | | | | 102,887 | |
| Spin-off related tax charge | | | 18,235 | | | | 0.18 | | | | 103,357 | | | | — | | | | | | | | | |
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| Net earnings from continuing operations before spin-off related charges | | $ | 51,322 | | | $ | 0.50 | | | | 103,357 | | | $ | 56,577 | | | $ | 0.55 | | | | 102,887 | |
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| | | Three months ended September 30, 2008 | | | Three months ended September 30, 2007 | |
| | | Earnings | | | EPS | | | Shares | | | Earnings | | | EPS | | | Shares | |
| Net earnings from continuing operations | | $ | 14,437 | | | $ | 0.14 | | | | 103,336 | | | $ | 14,954 | | | $ | 0.15 | | | | 102,735 | |
| Spin-off related operating and financing costs, net of tax | | | — | | | | | | | | | | | | 1,683 | | | | 0.02 | | | | 102,735 | |
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| Net earnings from continuing operations before spin-off related charges | | $ | 14,437 | | | $ | 0.14 | | | | 103,336 | | | $ | 16,637 | | | $ | 0.16 | | | | 102,735 | |
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