Hearst-Argyle Television Announces Results for First Quarter Ended March 31, 2008
Hearst-Argyle Television Announces Results for First Quarter Ended March 31, 2008
NEW YORK, May 1 /PRNewswire-FirstCall/ -- Hearst-Argyle Television, Inc. (NYSE:HTV) today announced first quarter 2008 earnings per diluted share of $0.11 compared to $0.05 and $0.14 in first quarter 2007 and 2006, respectively. During the quarter, the Company reached a final settlement with its insurance carriers related to lost property, lost income and extra expenses incurred due to Hurricane Katrina. Results reflect $9.3 million, or $0.10 per share, of after-tax proceeds associated with recovery of losses incurred or recognized in prior periods and the settlement of property claims.
Results for the Quarter Ended March 31, 2008
For the quarter ended March 31, 2008, total revenue of $165.1 million was down 2.6% compared to the quarter ended March 31, 2007. The change in total revenue primarily reflects:
-- a $13.7 million, or 9%, decrease in net ad sales (excluding political) to $132.9 million, attributable to: -- continued softness in automotive advertising, our largest category, as well as decreases in the retail, furniture, restaurant, movie and health services categories, offset by -- modest gains in the attractions, consumer packaged goods, media, financial services and home improvement services categories; -- an $8.1 million increase in net political revenue to $9.6 million; -- a 22% increase in net digital media revenue to $4.9 million; and -- a 22% increase in retransmission consent revenue to $6.3 million.
Commenting on the announcement, David Barrett, President and Chief Executive Officer, stated, "Much has been reported about the housing slump, uncertain credit markets, the sluggish economy and the resulting impact on consumer confidence and spending across America. A concurrent slowdown in advertising expenditures across much of the media landscape is also evident. Our first quarter results were clearly affected by these national trends, as we posted a 2.6% decline in revenue as compared to the prior year. While we are not able to call the timing or the magnitude of an economic rebound, we remain confident that we will finish 2008 with top and bottom line growth. We are encouraged at both a fundamental level and a strategic level:
-- Twelve of our markets achieved revenue growth in the quarter; -- First quarter revenue weakness was largely concentrated in relatively few of our local markets; -- We continue to realize significant growth in our digital media efforts and earlier this week, we began broadcasting the CW network on the digital multicast channels of KHBS-TV and KHOG-TV serving Fort Smith and Fayetteville Arkansas, as Arkansas CW; -- We continue to realize significant growth in our retransmission revenue efforts; -- We continue to be encouraged by the revenue potential of the Beijing Olympics in August; -- While the timing has obviously shifted in the political battles of the day, the potential for significant political advertising remains strong; -- 18 of 18 HTV top-50 market affiliates outperformed their network's average prime time ratings. Among the top-50 ABC markets, HTV operated stations in Kansas City, Oklahoma City, Milwaukee and West Palm Beach comprised four of the top ten positions; -- We captured some of the most prestigious journalism awards that our industry offers - deservedly recognizing the outstanding quality of our product (a key driver in our many new strategic initiatives); and -- Now more than ever, we are very proud of our strong financial position as we benefit from excellent financial liquidity and flexibility." February 2008 Ratings Highlights
Six HTV stations were number one in household ratings for all key local news
day parts: Monday through Friday, morning, early evening and late news: KCRA Sacramento WBAL Baltimore KMBC Kansas City WGAL Lancaster KETV Omaha KSBW Monterey-Salinas Digital Media Statistics (in thousands) Volume Percentage HTV Digital * Q1 2008 Q1 2007 Increase Increase Average Monthly Unique Visitors 23,007 9,639 13,368 139% Quarterly Page Views 563,546 414,163 149,382 36% Quarterly Video Streams 20,776 12,535 8,241 66% Volume Percentage HTV Wireless * Q1 2008 Q1 2007 Increase Increase Average Monthly Unique Visitors 239 39 200 514% Quarterly Page Views 2,457 850 1,606 189% * Source: Company data Liquidity and Capital Resources
"Our investment-grade balance sheet continues to provide substantial financial flexibility," said Harry Hawks, Executive Vice President and Chief Financial Officer. "We continue to invest in our core business, supporting high definition news production in our largest markets and developing our digital media franchises. At the same time, we continue to use the significant cash flow generated by the business to return capital to investors and reduce debt. During first quarter we:
-- paid $6.6 million of dividends to common stockholders; -- paid $2.4 million of dividends to holders of convertible preferred securities; -- used $1.1 million to repurchase 49,000 shares of common stock, bringing aggregate shares repurchased since 1998 to 4.8 million; and -- repaid $27.0 million of debt, bringing our total debt repayment over the past twelve months to $101.0 million.
"We finished first quarter with $12.7 million of cash on hand and $286.0 million available under our $500.0 million credit facility. The combination of cash flow from operations and availability under the credit facility provides ample liquidity to repay $90.0 million of private placement notes due in December 2008.
"As reported in our year-end earnings release on February 22, 2008," Hawks added, "we will not be providing annual or quarterly revenue guidance for 2008 at this time. An updated expense outlook is provided below."
Revised 2008 Expense and Expenditure Outlook As of 2/22/08 Revised Outlook Outlook ($'s in millions) 2008 2008 Salaries, Benefits and Other Operating Expenses (SB&O) SB&O, excluding digital media and stock-based compensation expense $403.0 $401.5 Digital media expense 23.0 21.0 Stock-based compensation expense 4.0 4.0 Total Salaries, Benefits and Other Operating Expenses $430.0 $426.5 Amortization of Program Rights 75.0 75.0 Program Payments 74.0 74.0 Depreciation & Amortization 55.0 55.0 Insurance Proceeds 0.0 11.5 Corporate G&A Corporate G&A, excluding stock-based compensation expense 34.0 32.1 Stock-based compensation expense 4.0 4.0 Total Corporate G&A $38.0 $36.1 Interest Expense, net $50.0 $48.2 Interest Expense, net - Capital Trust $9.8 $9.8 Equity in (income) loss of Affiliates, net of tax $2.0 $2.0 Effective Tax Rate 39.0% 34.0% Capital Expenditures $44.0 $40.0
Salaries, Benefits and Other Operating Expense: For first quarter 2008, SB&O expense increased 3.0%, or $3.0 million, to $104.1 million reflecting continued investment in digital media news and sales, as well as higher news payroll in an election year, offset by lower pension expense and reduced spending on all discretionary items. For the full year 2008, we have revised our SB&O expense estimate down to $426.5 million from $430.0 million due to ongoing cost control initiatives.
Amortization of Program Rights: For first quarter 2008, amortization of program rights decreased $0.5 million or 3% to $18.7 million due mainly to lower amortization of off-network syndicated programs at WKCF-TV. For the full year 2008, we expect amortization of program rights expense to be $75.0 million, down slightly from 2007.
Program Payments: For first quarter 2008, program payments decreased 1% to $18.2 million. For the full year 2008, we expect program payments to be $74.0 million, substantially unchanged from 2007, reflecting normal contractual increases for first-run syndicated programming offset by lower off-network program payments at WKCF-TV.
Depreciation and amortization: For first quarter 2008, depreciation and amortization expense declined $0.9 million, or 6%, to $14.1 million due to the depreciation in full of certain fixed assets in 2007. For the full year 2008, depreciation and amortization is expected to be $55.0 million, substantially unchanged from 2007.
Insurance Proceeds: During first quarter we recorded $11.5 million of insurance proceeds arising from the final insurance settlement related to lost property, lost income and extra expenses incurred due to Hurricane Katrina. Total hurricane insurance recoveries were $16.5 million, net of deductibles, given the receipt of an advance payment of $5.0 million in the fourth quarter of 2006.
Corporate, general and administrative expense: For first quarter, corporate, general and administrative expense increased $0.9 million or 12% to $8.7 million due to higher personnel and professional service costs related to digital media, offset in part by lower business insurance, accounting and administrative expenses. For the full year 2008, corporate expense is expected to be down 5% to $36.1 million reflecting the absence of banking, legal and other expenses associated with the tender offer in 2007, offset in part by continued investment in the growing digital media operation. The $36.1 million estimate is reduced from $38.0 million previously forecast.
Interest expense: For first quarter 2008, interest expense decreased $3.0 million to $12.9 million, reflecting substantially lower debt balances. As of March 31, 2008 total debt outstanding was $766.1 million compared to $867.2 million as of March 31, 2007. The Company repaid $74.0 million of debt in 2007 and $27.0 million in first quarter 2008. More specifically, we repaid $125.0 million of 7% senior notes and $90.0 million of 7.18% private placement notes during fourth quarter 2007. The reduction in notes outstanding was offset in part by borrowing $114.0 million under the credit facility. For the full year, we forecast interest expense, net of interest income, of $48.2 million down from $50.0 million consistent with lower estimated debt balances.
Equity in (income) loss of affiliates, net of tax: For first quarter, equity in loss of affiliates, net of tax, was $1.4 million mainly reflecting our share of losses of Ripe Digital Entertainment. For the full year 2008, we expect equity losses of approximately $2.0 million, reflecting our share of net income of Internet Broadcasting more than offset by our share of losses from Ripe.
Effective tax rate: For first quarter 2008, the effective tax rate was 27.3% compared to 48.0% in first quarter 2007. A portion of the insurance gain was offset by capital loss carry forwards resulting in a lower effective tax rate. For the full year 2008, the effective tax rate is expected to be approximately 34.0%, revised downward from 39% previously forecast to reflect the lower effective tax rate in the first quarter. As disclosed previously, the tax provision could vary significantly from quarter to quarter as we adjust tax positions when events occur, consistent with FIN 48.
Capital Expenditures: During first quarter, we invested $7.2 million in station operations, a significant portion of which supports high definition news production in our largest markets. In 2008, capital expenditures are expected to be $40.0 million revised down from our previous estimate of $44.0 million. A significant portion of 2008 capital spending relates to the conversion to digital television and high definition news production and the development of digital media.
Non-GAAP Measures
For a reconciliation of non-GAAP financial measurements contained in this news release and the accompanying income statements, please see the Supplemental Disclosures table at the end of this release.
About Hearst-Argyle
Hearst-Argyle Television, Inc. owns 26 television stations, and manages an additional three television and two radio stations owned by Hearst Corporation, in geographically diverse U.S. markets. The Company's television stations reach approximately 20 million households, or about 18% of U.S. TV households, making it one of America's largest television station groups. Hearst-Argyle owns 12 ABC-affiliated stations, and manages one ABC station owned by Hearst Corporation, and is the largest ABC affiliate group. The Company also owns 10 NBC affiliates, making it the second-largest NBC affiliate owner. Hearst-Argyle owns two CBS affiliates. Also, Hearst-Argyle owns more than 30 Websites and currently multicasts 18 digital weather channels and one digital channel carrying CW Network programming. Hearst- Argyle is an investor in Internet Broadcasting (http://www.ibsys.com/), which operates a nationwide network of local Websites, and Ripe Digital Entertainment, which provides advertising-supported short-form video content on various on-demand video platforms. Hearst-Argyle Series A Common Stock trades on the New York Stock Exchange under the symbol "HTV." HTV debt is rated investment grade by Moody's (Baa3), Standard & Poor's (BBB-) and Fitch (BBB-); Hearst Corporation, Hearst-Argyle's majority owner, is an investor in Fitch's parent Company. Hearst-Argyle's corporate Web address is www.hearstargyle.com.
In December 2007, Hearst Corporation disclosed that its board of directors had authorized it to acquire up to an additional 8 million shares of HTV Series A Common Stock in open-market and privately negotiated transactions in order to increase its ownership percentage to approximately 82% (on a fully- diluted basis), allowing for tax consolidation and other benefits. Hearst has acquired approximately 4.1 million shares since the December 2007 authorization. Pursuant to a Schedule 13-D Amendment filed April 15, 2008, as of April 11, 2008, Hearst owns approximately 77.8% of Hearst-Argyle Television, Inc.'s capital stock, assuming all 500,000 shares of Series B Convertible Preferred Securities held by Hearst were converted into 986,131 common shares.
FORWARD-LOOKING STATEMENTS
This news release includes forward-looking statements. We base these forward-looking statements on our current expectations and projections about future events. These forward-looking statements generally can be identified by the use of statements that include phrases such as "anticipate", "will", "may", "likely", "plan", "believe", "expect", "intend", "project", "forecast" or other such similar words and/or phrases. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this news release, concerning, among other things, trends and projections involving revenue, income, earnings, cash flow, liquidity, operating expenses, assets, liabilities, capital expenditures, dividends and capital structure, involve risks and uncertainties, and are subject to change based on various important factors. Those factors include the impact on our operations from:
-- Changes in Federal regulation of broadcasting, including changes in Federal communications laws or regulations; -- Local regulatory actions and conditions in the areas in which our stations operate; -- Competition in the broadcast television markets we serve; -- Our ability to obtain quality programming for our television stations; -- Successful integration of television stations we acquire; -- Pricing fluctuations in local and national advertising; -- Changes in national and regional economies; -- Our ability to service and refinance our outstanding debt; -- Changes in advertising trends and our advertisers' financial condition; and -- Volatility in programming costs, industry consolidation, technological developments, and major world events.
These and other matters may cause actual results to differ from those we describe. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Hearst-Argyle Television, Inc. Condensed Consolidated Statements of Income Three Months Ended March 31 2008 (1) 2007 (1) 2006 (1) (In thousands, except per share data) Total revenue (2) $165,053 $169,383 $174,017 Station operating expenses: Salaries, benefits and other operating costs 104,128 101,074 96,787 Amortization of program rights 18,712 19,228 15,332 Depreciation and amortization 14,052 14,996 15,388 Insurance settlement (11,549) - - Corporate, general and administrative expenses 8,716 7,779 7,273 Operating income 30,994 26,306 39,237 Interest expense 12,883 15,890 16,462 Interest income (19) (346) (1,302) Interest expense, net - Capital Trust 2,438 2,438 2,438 Income before income taxes 15,692 8,324 21,639 Income tax expense 4,290 3,993 8,548 Equity in (income) of affiliates, net of tax (3) 1,362 80 74 Net income 10,040 4,251 13,017 Less preferred stock dividends - - - Income applicable to common stockholders $10,040 $4,251 $13,017 Income per common share, basic $0.11 $0.05 $0.14 Number of common shares used in the calculation 93,509 93,183 $92,655 Income per common share, diluted $0.11 $0.05 $0.14 Number of common shares used in the calculation (4) 94,120 94,189 93,191 Dividends per common share declared $0.07 $0.07 $0.07 Supplemental Financial Data: Net local & national ad revenue (excluding political) $132,877 $146,618 $152,939 Net digital media revenue 4,892 4,024 3,173 Net political revenue 9,602 1,535 2,144 Network compensation 2,176 2,489 2,005 Retransmission consent revenue 6,276 5,165 4,609 Other revenues 9,230 9,552 9,147 Stock-based compensation expense 2,083 2,046 1,918 Supplemental Non-GAAP Data (*): Adjusted EBITDA $45,046 $41,302 $54,625 Free cash flow $36,817 $11,544 $30,460 (*) See Supplemental Disclosures Regarding Non-GAAP Financial Information at the end of this news release. See accompanying notes on the following pages. Hearst-Argyle Television, Inc. Condensed Consolidated Balance Sheets March 31, 2008 December 31, 2007 (In thousands, except share data) Assets Current assets: Cash and cash equivalents $12,734 $5,964 Accounts receivable, net 132,654 164,764 Program and barter rights 44,992 65,097 Deferred income tax asset 4,794 4,794 Other 6,833 5,698 Total current assets 202,007 246,317 Property, plant and equipment, net 301,299 305,971 Intangible assets, net 2,511,850 2,513,340 Goodwill 816,728 816,728 Other assets: Deferred financing costs, net 7,781 8,000 Investments 40,563 41,948 Program and barter rights, noncurrent 11,541 8,399 Pension and other assets 16,436 18,273 Total other assets 76,321 76,620 Total assets $3,908,205 $3,958,976 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $90,004 $90,016 Accounts payable 9,727 15,103 Accrued liabilities 38,316 48,376 Program and barter rights payable 44,199 64,687 Payable to Hearst Corporation, net 5,469 5,747 Other 5,770 6,482 Total current liabilities 193,485 230,411 Program and barter rights payable, noncurrent 19,635 15,587 Long-term debt 676,110 703,110 Note payable to Capital Trust 134,021 134,021 Deferred income tax liability 858,064 856,790 Other liabilities 68,294 66,658 Total noncurrent liabilities 1,756,124 1,776,166 Commitments and contingencies Stockholders' equity: Preferred Stock - - Series A common stock 573 573 Series B common stock 413 413 Additional paid-in capital 1,340,604 1,336,786 Retained earnings 746,734 743,264 Accumulated other comprehensive loss, net (12,580) (12,580) Treasury stock, at cost (117,148) (116,057) Total stockholders' equity 1,958,596 1,952,399 Total liabilities and stockholders' equity $3,908,205 $3,958,976 Hearst-Argyle Television, Inc. Condensed Consolidated Statements of Cash Flows Three months ended March 31, 2008 2007 (Unaudited) (In thousands) Operating Activities Net income $10,040 $4,251 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,564 13,229 Amortization of intangible assets 1,488 1,767 Amortization of deferred financing costs 219 448 Amortization of program rights 18,712 19,228 Deferred income taxes 1,291 203 Equity in loss (income) of affiliates, net 1,362 80 Provision for doubtful accounts 415 285 Stock-based compensation expense 2,083 2,046 Insurance settlement (11,549) - Business interruption insurance proceeds 8,659 - Program payments (18,189) (18,343) Changes in operating assets and liabilities: Decrease (increase) in Accounts receivable 31,695 17,780 Decrease (increase) in Other assets 745 1,334 (Decrease) increase in Accounts payable and accrued liabilities (16,172) (24,497) (Decrease) increase in Other liabilities 644 3,705 Net cash provided by operating activities $44,007 $21,516 Investing Activities Purchases of property, plant and equipment (7,190) (9,972) Property loss insurance proceeds 2,890 1,000 Investment in affiliates and other, net - (3) Net cash used in investing activities $(4,300) $(8,975) Financing Activities Payments on credit facility (27,000) - Dividends paid on common stock (6,569) (6,523) Series A Common Stock repurchases (1,091) - Principal payments & repurchase of long term debt (12) (7) Proceeds from employee stock purchase plan & stock option exercises 1,735 7,343 Net cash (used in) provided by financing activities $(32,937) $813 Increase in cash and cash equivalents 6,770 13,354 Cash and cash equivalents at beginning of period 5,964 18,610 Cash and cash equivalents at end of period $12,734 $31,964 Cash paid during the period for Interest $8,731 $7,331 Interest payable on Note payable to Capital Trust $2,438 - Taxes, net of refunds $5,501 $22,926 Notes to Consolidated Statements of Income (1) Results of operations for the three months ended March 31, 2008, 2007 and 2006 include (i) the results of our 25 television stations, which were owned for the entire period presented, and the management fees derived by the three television and two radio stations managed by us for the entire period presented; and (ii) the results of operations of WKCF-TV, after our acquisition of the station on August 31, 2006. (2) Total revenue includes local & national, digital media and political advertising revenue net of agency commission expense, network compensation, retransmission consent revenue and other revenue consisting primarily of trade and barter revenue. (3) Primarily represents the Company's equity interests in the operating results of Internet Broadcasting, Ripe Digital Entertainment and other investments. (4) For all periods presented, diluted shares do not include 5,127,881 common shares underlying the 7.5% Series B Redeemable Convertible Preferred Securities because to do so would have been antidilutive (80,413 of the Series B Convertible Preferred Shares are held by the Company and are not taken into account for the purposes of computing the conversion into Series A Shares). When the securities related to the Capital Trust are dilutive, the interest, net of tax, related to the Capital Trust is added back to Income applicable to common stockholders for purposes of the diluted EPS calculation. Hearst-Argyle Television, Inc. Supplemental Disclosures Regarding Non-GAAP Financial Information Adjusted EBITDA
In order to evaluate the operating performance of our business, we use certain financial measures, some of which are calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"), such as net income, and some of which are not, such as adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"). In order to calculate the non-GAAP measure adjusted EBITDA, we exclude from net income the financial items that we believe are less integral to the day-to-day operation of our business. We have outlined below the type and scope of these exclusions and the limitations on the use of the adjusted EBITDA measure as a result of these exclusions. Adjusted EBITDA is not an alternative to net income, operating income, or net cash provided by operating activities, as calculated and presented in accordance with GAAP. Investors and potential investors in our securities should not rely on adjusted EBITDA as a substitute for any GAAP financial measure. In addition, our calculation of adjusted EBITDA may or may not be consistent with that of other companies. We strongly urge investors and potential investors in our securities to review the reconciliation presented in the table below of adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
We use the adjusted EBITDA measure as a supplemental financial metric to evaluate the performance of our business that, when viewed together with our GAAP results and the accompanying reconciliations, we believe provides a more complete understanding of the factors and trends affecting our business than the GAAP results alone. Adjusted EBITDA is a common alternative measure of financial performance used by investors, financial analysts, and rating agencies. These groups use adjusted EBITDA, along with other measures, to estimate the value of a company, compare the operating performance of a company to others in its industry, and evaluate a company's ability to meet its debt service requirements. In addition, adjusted EBITDA is a key financial measure for the Company's stockholders and financial lenders, since the Company's current debt financing agreements require the measurement of adjusted EBITDA, along with other measures, in connection with the Company's compliance with debt covenants.
We define adjusted EBITDA as net income adjusted to exclude the following line items presented in our consolidated statements of income: interest expense; interest income, interest expense, net - Capital Trust; income taxes; depreciation and amortization; equity in income or loss of affiliates; other income and expense; and non-recurring special charges. Set forth below are descriptions of each of the financial items that have been excluded from net income in order to calculate adjusted EBITDA as well as the material limitations associated with using adjusted EBITDA rather than net income, the most directly comparable GAAP financial measure, when evaluating the operating performance of our core operations.
-- Interest expense, Interest income and Interest expense, net - Capital Trust. By excluding these expenses, we are better able to compare our core operating results with other companies that have different financing arrangements and capital structures. Nevertheless, the amount of interest we are required to pay does reduce the amount of funds otherwise available for use in our core business and therefore may be useful for an investor to consider. -- Income tax expense. By excluding income taxes, we are better able to compare our core operating results with other companies that have different income tax rates. Nevertheless, the amount of income taxes we incur does reduce the amount of funds otherwise available for use in our core business and therefore may be useful for an investor to consider. -- Depreciation and amortization. By excluding these non-cash charges, we are better able to compare our core operating results with other companies that have different histories of acquiring other businesses. Nevertheless, depreciation and amortization are important expenses for investors to consider, even though they are non-cash charges, because they represent generally the wear and tear on our property, plant and equipment and the gradual decline in value over time of our intangible assets with finite lives. Furthermore, depreciation expense is affected by the level of capital expenditures we make to support our core business and therefore may be useful for an investor to consider. -- Impairment Loss. The impairment loss is a non-recurring, non-cash item resulting from the write down of intangibles and goodwill as part of our routine FAS 142 analysis. Excluding the impairment loss provides investors with more comparable information about our Company's operating performance. -- Equity in loss (income) of affiliates, net. This is a non-cash item which represents our proportionate share of income or loss from affiliates in which we hold minority interests. As we do not control these affiliates, we believe it is more appropriate to evaluate the performance of our core business by excluding their results. However, as we make investments in affiliates for purposes which are strategic to the Company, the financial results of such affiliates may be useful for an investor to consider. -- Other expense and special charges. These are non-recurring items which are unrelated to the operations of our core business and, when they do occur, can fluctuate significantly from one period to the next. By excluding these items, we are better able to compare the operating results of our underlying, recurring core business from one reporting period to the next. Nevertheless, the amounts and the nature of these items may be useful for an investor to consider, as they can be material and can sometimes increase or decrease the amount of funds otherwise available for use in our core business.
The following tables provide a reconciliation of net income to adjusted EBITDA in each of the periods presented:
Three Months Ended March 31, 2008 2007 2006 (In thousands) Net income $10,040 $4,251 $13,017 Add: Income taxes 4,290 3,993 8,548 Add: Equity in loss of affiliates, net of tax 1,362 80 74 Add: Interest expense, net - Capital Trust 2,438 2,438 2,438 Add: Interest expense 12,883 15,890 16,462 Less: Interest Income (19) (346) (1,302) Operating income 30,994 26,306 39,237 Add: Depreciation and amortization 14,052 14,996 15,388 Adjusted EBITDA $45,046 $41,302 $54,625 Hearst-Argyle Television, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information (continued)
Free Cash Flow
In order to evaluate the operating performance of our business, we use the non-GAAP measure free cash flow. Free cash flow reflects our net cash flow from operating activities less capital expenditures. Free cash flow is a primary measure used not only internally by our management, but externally by our investors, analysts and peers in our industry, to value our operating performance and compare our performance to other companies in our peer group. Our management believes that free cash flow provides investors with useful information concerning cash available to allow us to make strategic acquisitions and investments, service debt, pay dividends, meet tax obligations, and fund ongoing operations and working capital needs. Free cash flow is also an important measure because it allows investors to assess our performance in the same manner that our management assesses our performance.
However, free cash flow is not an alternative to net cash flow provided by operating activities, as calculated and presented in accordance with GAAP, and should not be relied upon as such. Specifically, because free cash flow deducts capital expenditures from net cash flow provided by operating activities, investors and potential investors should consider the types of events and transactions which are not reflected in free cash flow. In addition, our calculation of free cash flow may or may not be consistent with that of other companies. We strongly urge investors and potential investors in our securities to review the reconciliation presented in the table below of free cash flow to net cash flow provided by operating activities, the most directly comparable GAAP financial measure.
The following table provides a reconciliation of net cash flow provided by operating activities to free cash flow in each of the periods presented:
Three Months Ended March 31, 2008 2007 2006 (In thousands) Net cash flow provided by operating activities $44,007 $21,516 $37,487 Less capital expenditures 7,190 9,972 7,027 Free cash flow $36,817 $11,544 $30,460
First Call Analyst:
FCMN Contact:
Source: Hearst-Argyle Television, Inc.
CONTACT: Harry Hawks, Executive Vice President & CFO, +1-212-887-6823,
hhawks@hearst.com, Ellen McClain, Vice President, Finance, +1-212-887-6825,
emcclain@hearst.com, or Tom Campo, Investor Relations, +1-212-887-6827
Web site: http://www.hearstargyle.com/
Profile: International Entertainment
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