The aftermath of the failed merger did not take up a lot of the conference call with analysts to discuss the quarterly results, but the company did say it is not considering a settlement of its $1 billion lawsuit against Sinclair.
“We feel really strongly about our breach case against Sinclair,” said Eddie Lazarus, Tribune’s general counsel and EVP of Strategy. “We’re going to pursue it aggressively. We’re moving into the discovery phase now.” He estimated that the case could take about 18 months to reach a resolution. In August, Tribune sued Sinclair for $1 billion, and its former merger partner filed a counter-claim.
Diluted earnings per share in the third quarter came in at 61 cents, compared with a loss in the year-earlier period of 21 cents. Revenue rose 11% to $498 million. Both metrics handily beat Wall Street expectations.
Political advertising revenue in the period totaled $42.5 million, up 90% from the last midterm election in 2014 and 36% from the comparable quarter in the presidential year of 2016. CEO Peter Kern said the political groundswell (an industry tide estimated by the Television Advertising Bureau this week at $3 billion in 2018) is no longer a cyclical phenomenon. “We may be seeing a fundamental shift toward an ‘always-on’ political cycle,” he said.
Shares in Tribune are down 7% in 2018 to date but they have rallied nearly 20% since the Sinclair deal hit the rocks in July. Asked why the company did not decide to buy back stock after the merger did not go forward, Kern said, “We didn’t feel compelled to prop the stock up. … we did not want to have a knee-jerk response, like, ‘Oh, the deal fell through, that means our stock is too cheap.'”
Kern said the company’s strategy is to evolve into a “pure broadcaster.” Tribune has sold off real estate assets such as the iconic Tribune Tower in Chicago, which served as its longtime headquarters.
One non-broadcast part of the Tribune portfolio that is still in the fold, however, is WGN America. The general- entertainment cable network has operated with less sizzle since the era when former CEO Peter Liguori (one of the original architects of FX) pumped up spending and shepherded critically acclaimed originals like Underground. Even so, Kern said no further reductions in programming budgets are expected and the network is expected to be more consistent on the balance sheet.
“We don’t have these super-expensive, hit-per-quarter things going on.,” he said. “We’ve got a regular rhythm of original programming coming throughout the year and we’ve got acquired programming and other things. … We’re not looking to peel more costs out of programming.”