Total programming costs rose 27.9 percent to $157.1 million in the second quarter ended June 30.
The media company has been pushed to rethink its business strategy due to higher programming costs and a challenging advertising environment as most advertisers shift to digital platforms.
2Q 2017 Financial Highlights (compared to 2Q 2016)
- Consolidated operating revenues fell 2% to $469.5 million; excluding political advertising and real estate revenues, consolidated operating revenues increased 2%
- Strategic shift at WGN America to a higher return original programming strategy resulted in $20 million of additional expense for cancellation costs, accelerated amortization of license fees and the write-off of certain other capitalized program development projects
- Consolidated operating profit, which includes the above $20 million of additional expenses at WGN America, was $18.3 million, compared to $56.2 million for the second quarter of 2016
- Consolidated Adjusted EBITDA, which includes the above $20 million of additional expenses at WGN America, decreased to $95.4 million from $125.1 million in the second quarter of 2016
- Total Television and Entertainment net advertising revenues (which include political and digital revenues) fell 7%, to $312.9 million
- Retransmission revenues increased 26% to $105.0 million
- Carriage fee revenues increased 5% to $31.9 million
- Cash distributions from TV Food Network were $38.1 million
- FCC spectrum auction proceeds of $185 million were received by the Company in the third quarter of 2017 with remaining proceeds of $5 million expected in the second half of 2017
- CareerBuilder sale closed on July 31, 2017 and the Company received cash of $158 million while retaining an approximate 7% ownership interest on a fully diluted basis
“We saw strong sequential growth in retransmission revenues during the quarter, which helped offset some softness in core advertising at the national level. While our overall performance was significantly affected by non-recurring expenses and accelerated amortization related to the shift in programming strategy at WGN America, those changes are now behind us, and we expect a much more profitable 2018 with more original hours than the network has ever carried. We continue to aggressively manage expenses across the business; adjusted for the non-recurring costs at WGN America, total consolidated cash expenses were flat despite the continuing increases in network affiliate fees and the increased level of original programming amortization. We also continued monetizing non-core assets, as we sold several real estate properties in the first half of the year, and more recently participated in the sale of CareerBuilder and received a significant portion of our spectrum proceeds. Finally, we remain on track to close our previously announced transaction with Sinclair.”