GANNETT CO., INC. 
By MCLEAN, Va., April 23, 2014 /PRNewswire/ --
Highlights for the quarter include the following:
-- Significant overall company revenue growth of 13 percent, pro forma
revenue growth of 3 percent
-- Broadcasting Segment revenue doubled, achieved a 20 percent increase on
a pro forma basis
-- Adjusted EBITDA growth of 36 percent to $285 million
-- Free Cash Flow nearly quadrupled to $149 million year-over-year
Gannett Co., Inc. (NYSE: GCI) today reported strong first quarter financial results, including a 27 percent increase in non-GAAP earnings per diluted share to $0.47 for the first quarter compared to $0.37 in the first quarter of 2013. This growth reflects the significant impact of the company's transformative acquisition of Belo Corp., which contributed to record Broadcasting Segment results, as well as solid profitability in the Digital and Publishing Segments.
Gracia Martore, president and chief executive officer, said, "This was a terrific first quarter for Gannett, in which the fundamental changes we've been making to our business meaningfully impacted our top and bottom lines. An outstanding performance by our new broadcast stations fueled double-digit increases in both revenue and profitability in our Broadcast Segment and contributed to total company pro forma revenue growth and a robust level of free cash flow in the first quarter. Our Broadcast group achieved exceptional ratings, particularly throughout the Sochi Winter Games as Gannett stations took the top two spots in prime time and in every Olympic day-part among major market NBC stations. Our Publishing and Digital segments also performed well during the quarter, despite the impact a tough winter had on advertising demand in several markets. Additionally, our latest innovation in Publishing - our new USA TODAY content edition - has now launched in 34 publishing markets and continues to gain significant traction with subscribers."
Martore continued, "With greater scale and new innovative product offerings, we've successfully deepened our connections with customers across all platforms and positioned Gannett to grow and thrive in the digital age. This strategy, combined with our strong and flexible balance sheet, substantial and growing free cash flow and the ongoing, successful integration of Belo make this a promising year ahead for our company."
CONTINUING OPERATIONS
On December 23, 2013, the company completed its acquisition of the Belo Corp. Results for the first quarter of 2014 include the impact of the acquisition. On February 28, 2014, the company and Sander Media LLC announced the completion of the previously announced sale of KMOV-TV.
Operating revenues for the company were $1.40 billion in the quarter, an increase of 13.4 percent from the first quarter in 2013 reflecting revenue growth in the Broadcasting and Digital Segments of 99.5 percent and 2.8 percent, respectively. Publishing Segment revenues declined 3.3 percent in the quarter due, in part, to the effect of extreme winter weather on advertising demand and circulation revenue. Total revenue growth on a pro forma basis, had Gannett owned the Belo television stations during the same quarter last year and excluding Captivate's results, was 2.8 percent.
Net income attributable to Gannett on a non-GAAP basis totaled $108.4 million, an increase of 26.0 percent compared to the first quarter of 2013, while non-GAAP operating income was up 40.7 percent to $226.8 million. The substantial growth in profitability was driven in part by the addition of the Belo television stations. Adjusted EBITDA (a non-GAAP term defined in Table 5) in the quarter was $284.8 million compared to $209.3 million in first quarter of 2013, an increase of 36.1 percent. Adjusted EBITDA on a pro forma basis rose 14.8 percent.
Special items in the first quarter of 2014 include: operating charges of $22.8 million ($0.06 per share) representing primarily workforce restructuring and transformation costs; non-operating charges of $20.4 million ($0.05 per share) related primarily to the redemption of the company's 2017 notes; and a $23.8 million special tax charge ($0.10 per share) related to the sale of the KMOV-TV station in St. Louis, MO. Special items in the first quarter of 2013 included $13.9 million ($0.04 per share) resulting primarily from continued workforce and real estate optimization and a tax benefit of $27.8 million ($0.12 per share).
The table below details first quarter results on a GAAP and non-GAAP basis.
Dollars in thousands, except per share amounts
GAAP Special Items Non-
GAAP
Measure
Measure
-------
Thirteen Workforce Transformation Other Special
restructuring costs non- tax
operating charge
items Thirteen
weeks weeks
ended ended
Mar. Mar.
30, 30,
2014 2014
----- -----
Operating
income $203,994 $3,465 $19,300 $ - $ - $226,759
Other
non-
operating
items (20,748) - - 20,400 - (348)
Income
before
income
taxes 122,089 3,465 19,300 20,400 - 165,254
Provision
for
income
taxes 52,500 1,200 8,200 8,300 (23,800) 46,400
Net
income 69,589 2,265 11,100 12,100 23,800 118,854
Net
income
attributable
to
Gannett
Co.,
Inc. 59,159 2,265 11,100 12,100 23,800 108,424
Net
income
per
share -
diluted
(a) $0.25 $0.01 $0.05 $0.05 $0.10 $0.47
(a) Total per share amount does not sum due to rounding
Operating expenses including special charges noted above were $1.20 billion in the quarter, 10.4 percent higher compared to the first quarter of 2013 primarily due to the acquisition of Belo. On a non-GAAP basis, operating expenses were $1.18 billion, an increase of 9.4 percent. Pro forma non-GAAP operating expenses were unchanged compared to the first quarter a year ago. Lower operating expenses in the Publishing Segment reflecting continued operating efficiencies were offset by higher expenses in the Broadcasting and Digital Segments associated with revenue increases.
BROADCASTING
Record Broadcasting Segment revenues totaled $382.3 million in the quarter, an increase of 99.5 percent due primarily to the Belo acquisition, higher advertising demand associated with the Winter Olympic Games and political spending as well as a substantial increase in retransmission revenue.
The following table summarizes the year-over-year changes in select revenue categories. Digital revenues are included in the Other category.
Broadcasting Revenue Detail
Dollars in thousands
Thirteen Percentage
weeks change from
thirteen
weeks
ended ended March
March 31, 2013
30,
2014
------ ------------
Reported Pro
Forma
(a)
------- -----
Core (Local &
National) $257,371 88% 6%
Political 9,976 *** ***
Retransmission (b) 87,468 142% 66%
Other 27,453 60% 17%
Total $382,268 100% 20%
====== === ===
(a) The pro forma figures are presented as if the acquisition of
Belo Corp. and the Captivate disposition occurred at the beginning
of 2013.
(b) Reverse compensation to network affiliates is included as part
of programming costs and therefore not included in this line.
On a pro forma basis, Broadcasting Segment revenues were 19.6 percent higher compared to the first quarter in 2013. A 6.5 percent increase in core revenues was driven by $41 million of advertising associated with the Winter Olympic Games on the 16 NBC stations the company owns or services partially offset by the loss of Super Bowl revenues that aired on the company's CBS stations in the first quarter in 2013. On the same basis, retransmission revenues were 66.4 percent higher in the quarter and totaled $87.5 million. Politically related advertising demand totaled $10.0 million compared to $1.9 million in the first quarter of 2013. Pro forma digital revenues in the Broadcasting Segment were 22.9 percent higher in the quarter reflecting continued growth in digital marketing services.
Based on current trends and including a full quarter of results for the former Belo stations, we expect the increase in total television revenues for the second quarter of 2014 on a percentage basis to be in the nineties compared to the second quarter of 2013. On a pro forma basis, the percentage increase in total television revenues in the second quarter of 2014 is projected to be up in the mid-teens compared to the second quarter of 2013.
Broadcasting Segment non-GAAP operating expenses totaled $218.0 million in the quarter, an increase of 5.0 percent on a pro forma basis, reflecting primarily higher investments in digital initiatives and reverse network compensation for the former Belo stations. Non-GAAP operating income was up 96.4 percent to $164.3 million while Adjusted EBITDA totaled $181.7 million, an increase of 100.6 percent. On a pro forma basis, non-GAAP operating income rose strongly, up 46.7 percent and Adjusted EBITDA was up 40.3 percent.
PUBLISHING
Publishing segment revenues in the quarter totaled $842.1 million compared to $871.2 million in the first quarter of 2013, a 3.3 percent decline. The decline reflects, in part, the impact of inclement weather on advertising and circulation demand in certain markets as well as the shift of Easter to the second quarter of 2014 offset by a significant increase in digital advertising.
Advertising revenues totaled $501.3 million in the first quarter compared to $526.5 million, a decline of 4.8 percent compared to the first quarter of 2013. Although advertising demand was tempered by harsh weather, year-over-year advertising comparisons for the quarter were the best since the first quarter of 2013. Overall, national advertising comparisons improved relative to the fourth quarter (based on a comparable 13-week quarter). On the same basis, classified advertising comparisons were better than the fourth quarter driven by improved real estate and employment comparisons. A summary of the year-over-year percent change for the company's advertising categories can be found on Table 3.
Circulation revenues totaled $282.1 million, 1.4 percent lower in the quarter reflecting the positive impact of cover price increases at Newsquest partially offset by lower circulation revenue at local domestic publishing operations.
Publishing Segment digital revenues were 7.6 percent higher in the quarter driven by growth in digital marketing solutions revenue and digital advertising. At USA TODAY and its associated businesses, digital revenue growth of 40.5 percent was fueled by increased user engagement across all digital platforms. Page views were up 33 percent and video plays rose more than 150 percent for the quarter as more advertisers are increasingly seeing the value and return of USA TODAY's digital products. Digital revenues at local domestic publishing operations were up 2.5 percent while Newsquest's digital revenues were 17.5 percent higher, in pounds.
Non-GAAP Publishing segment operating expenses were 1.9 percent lower in the quarter and totaled $786.1 million reflecting continuing cost efficiencies.
Operating income on a non-GAAP basis totaled $56.0 million in the quarter while Adjusted EBITDA was $83.0 million.
DIGITAL
Operating revenues in the Digital segment were $179.7 million in the quarter, up 2.8 percent compared to the first quarter in 2013 due primarily to solid revenue growth at CareerBuilder reflecting accelerating sales growth of talent management software. On April 1, 2014, CareerBuilder announced the acquisition of Broadbean, a leader in online recruitment software that enables job distribution, candidate sourcing and big data analytics for employers. The acquisition when combined with the addition of EMSI in 2012, represents the next step in CareerBuilder's transformation, positioning it as the unparalleled leader in the rapidly growing software-as-a-service market for talent management solutions. Digital segment operating expenses were $155.9 million, an increase of 3.0 percent reflecting investments by CareerBuilder in sales staff and technology development. Digital segment operating income totaled $23.8 million in the quarter and Adjusted EBITDA was $32.1 million.
Pro forma digital revenues company-wide, including the Digital segment and all digital revenues generated by the other business segments, totaled $375.6 million, an increase of 6.0 percent. The substantial increase was due primarily to higher digital advertising and marketing solutions revenue across all segments.
At the end of the quarter, Gannett had approximately 120 domestic web sites affiliated with its local publishing and television markets, USA TODAY, Gannett Government Media and Gannett Healthcare Group. In March, Gannett's consolidated domestic Internet audience share increased 16.3 percent from March in 2013 to 67.5 million unique visitors reaching 29.7 percent of the Internet audience, according to comScore Media Metrix. USATODAY.com is one of the most popular news sites and the USA TODAY app is a top news app with 19.9 million downloads to date across iPad, iPhone, Android, Windows and Kindle Fire. USA TODAY mobile traffic continues to grow as total pages views in March were up 30 percent from March in 2013 to approximately 638 million. USA TODAY monthly application visitors consumed approximately 40 additional pages per month in March 2014 compared to last year, a 38 percent year-over-year increase. Newsquest is also an Internet leader in the UK where its network of web sites attracted 127.4 million monthly page impressions from approximately 18.2 million unique users in March 2014.
NON-OPERATING ITEMS
The company's equity earnings include its share of operating results from unconsolidated investees including the California Newspapers Partnership, Texas-New Mexico Newspapers Partnership, Tucson newspaper partnership and other online/digital businesses including Classified Ventures.
Equity income in unconsolidated investees was $8.5 million in the quarter compared to $7.8 million in the first quarter of 2013. The increase reflects special items that impacted equity income in the first quarter of 2013. Excluding special items, equity income would have been relatively unchanged.
Interest expense totaled $69.6 million in the quarter compared to $35.4 million in the first quarter of 2013. The substantial increase reflects primarily the issuance of debt used to fund the acquisition of Belo partially offset by a lower average interest rate. In March, the company redeemed its 9.375 percent notes that were to mature in November 2017 at a price of 104.688 percent. Costs associated with the redemption drove the $19.2 million increase in other non-operating expenses. Excluding special items, other non-operating items would have been an expense of $0.3 million compared to income of $1.4 million in the first quarter of 2013.
Net cash flow from operating activities was $166.0 million while free cash flow (a non-GAAP measure) totaled $148.9 million in the quarter. The balance of long-term debt was $3.45 billion and total cash was $293.0 million at quarter end.
During the first quarter, the company purchased approximately 1.3 million shares for $37.9 million.
On April 1, 2014, Classified Ventures, LLC completed the sale of Apartments.com for $585 million to CoStar Group Inc. Gannett's portion of the purchase price of the sale of Apartments.com was approximately $155 million reflecting its 26.9 percent ownership interest in Classified Ventures. As previously disclosed, the company expects to use the proceeds of the sale to reduce debt and for other purposes consistent with its stated capital allocation strategy.
* * * *
USE OF NON-GAAP INFORMATION
The company uses non-GAAP financial performance and liquidity 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, and should be read in conjunction with financial information presented on a GAAP basis.
The company discusses in this report non-GAAP financial performance measures that exclude from its reported GAAP results the impact of special items consisting of workforce restructuring charges, transformation costs, amortization of acquired advertising contracts, a non-cash charge related to an investment accounted for under the equity method, special charges in other non-operating items, a currency-related loss recognized in other non-operating items and certain credits and charges to its income tax provision.
The company believes that such expenses, charges and credits are not indicative of normal, ongoing operations and their inclusion in results makes for more difficult comparisons between years and with peer group companies. Workforce restructuring and transformation expenses primarily relate to incremental expenses the company has incurred to consolidate or outsource production processes and centralize other functions. Workforce restructuring expenses include payroll and related benefit costs. Transformation costs include incremental expenses incurred by the company to execute on its transformation and growth plan, including those related to the company's recently completed Belo acquisition and incremental expenses associated with optimizing the company's real estate portfolio. Transformation costs include amortization of acquired advertising contracts. In connection with the acquisition of Belo, Gannett recognized intangible assets for Belo's advertising contracts. Unlike most intangible assets which have useful lives of several years, these intangible assets have a benefit period and related amortization period that is less than three months from the date of acquisition. A non-cash asset impairment charge was recorded in the first quarter of 2013 to reduce the book value of an investment accounted for under the equity method to fair value, as the business underlying this asset had experienced significant and sustained unfavorable operating results. In the first quarter of 2014, special charges were recorded in other non-operating items primarily related to the early retirement of the company's 9.375% notes due in 2017. The charges included a call premium paid as well as the write off of unamortized debt issuance costs and original issue discount. Other non-operating items in the first quarter of 2013 include a currency loss related to the weakening of the British pound associated with the downgrade of the U.K. sovereign credit rating. The income tax provision for 2014 reflects a special charge related to Gannett's sale of its interest in television station KMOV-TV in St. Louis, MO in February 2014. The income tax provision for 2013 included special credits related to reserve releases as a result of federal exam resolution and lapse of a statute of limitation.
The company also discusses Adjusted EBITDA, a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. Adjusted EBITDA is defined as net income attributable to Gannett before (1) net income attributable to noncontrolling interests, (2) income taxes, (3) interest expense, (4) equity income, (5) other non-operating items, (6) workforce restructuring, (7) transformation costs, (8) depreciation and (9) amortization. When Adjusted EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure is Net income attributable to Gannett. Management does not analyze non-operating items such as interest expense and income taxes on a segment level; therefore, the most directly comparable GAAP financial measure to Adjusted EBITDA when performance is discussed on a segment level is Operating income. This earnings report also discusses free cash flow, a non-GAAP liquidity measure. Free cash flow is defined as "net cash flow from operating activities" as reported on the statement of cash flows reduced by "purchase of property, plant and equipment" as well as "payments for investments" and increased by "proceeds from investments." The company believes that free cash flow is a useful measure for management and investors to evaluate the level of cash generated by operations and the ability of its operations to fund investments in new and existing businesses, return cash to shareholders under the company's capital program, repay indebtedness, add to the company's cash balance, or use in other discretionary activities. Management uses free cash flow to monitor cash available for repayment of indebtedness and in its discussions with the investment community.
Management uses non-GAAP financial performance measures for purposes of evaluating business unit and consolidated company performance. The company therefore believes that each of the non-GAAP measures presented provides useful information to investors by allowing them to view the company's businesses through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods and providing a focus on the underlying ongoing operating performance of its businesses. In addition, many of the company's peer group companies present similar non-GAAP measures so the presentation of such measures facilitates industry comparisons. Tabular reconciliations for the non-GAAP financial measures are contained in Tables 4 through 8 attached to this news release.
As previously announced, the company will hold an earnings conference call at 10:00 a.m. ET today. The call can be accessed via a live webcast through the company's web site, www.gannett.com, or listen-only conference lines. U.S. callers should dial 1-888-417-8463 and international callers should dial 719-325-4759 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 8681007. To access the replay, dial 1-888-203-1112 in the U.S. International callers should use the number 719-457-0820. The confirmation code for the replay is 8681007. Materials related to the call will be available through the Investor Relations section of the company's web site Wednesday morning.
About Gannett
Gannett Co., Inc. is an international media and marketing solutions company that informs and engages more than 100 million people every month through its powerful network of broadcast, digital, mobile and publishing properties. Our portfolio of trusted brands offers marketers unmatched local-to-national reach and customizable, innovative marketing solutions across any platform. Gannett is committed to connecting people - and the companies who want to reach them - with their interests and communities. For more information, visit www.gannett.com.
Certain statements in this press release may be forward looking in nature or "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The forward looking statements contained in this press release are subject to a number of risks, trends and uncertainties that could cause actual performance to differ materially from these forward looking statements. A number of those risks, trends and uncertainties are discussed in the company's SEC reports, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward looking statements in this press release should be evaluated in light of these important risk factors.
Gannett is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this press release by wire services, Internet service providers or other media.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 1
Thirteen Thirteen %
Increase
weeks weeks
ended ended (Decrease)
Mar. 30, Mar. 31,
2014 2013
-------- --------
Net operating
revenues:
Broadcasting $382,268 $191,580 99.5
Publishing
advertising 501,300 526,499 (4.8)
Publishing
circulation 282,076 285,972 (1.4)
All other
Publishing 58,687 58,762 (0.1)
Digital 179,735 174,922 2.8
Total 1,404,066 1,237,735 13.4
--------- --------- ----
Operating
expenses:
Cost of sales
and operating
expenses,
exclusive of
depreciation 767,532 719,724 6.6
Selling,
general and
administrative
expenses,
exclusive of
depreciation 355,213 314,115 13.1
Depreciation 44,764 38,926 15.0
Amortization of
intangible
assets 17,743 9,128 94.4
Facility
consolidation
charges 14,820 4,785 ***
------ -----
Total 1,200,072 1,086,678 10.4
Operating
income 203,994 151,057 35.0
------- ------- ----
Non-operating
(expense)
income:
Equity income
in
unconsolidated
investees, net 8,491 7,794 8.9
Interest
expense (69,648) (35,405) 96.7
Other non-
operating
items (20,748) (1,583) ***
------- ------ ---
Total (81,905) (29,194) ***
------- ------- ---
Income before
income taxes 122,089 121,863 0.2
Provision for
income taxes 52,500 5,400 ***
------ -----
Net income 69,589 116,463 (40.2)
Net income
attributable
to
noncontrolling
interests (10,430) (11,898) (12.3)
------- -------
Net income
attributable
to Gannett
Co., Inc. $59,159 $104,565 (43.4)
======= ======== =====
Net income per
share -basic $0.26 $0.46 (43.5)
Net income per
share -
diluted $0.25 $0.44 (43.2)
Weighted
average number
of common
shares
outstanding:
Basic 227,230 229,396 (0.9)
Diluted 232,268 235,162 (1.2)
Dividends
declared per
share $0.20 $0.20 -
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table
No.
2
Thirteen Thirteen %
Increase
weeks weeks
ended ended (Decrease)
Mar. 30, Mar. 31,
2014 2013
--------- ---------
Net
operating
revenues:
Broadcasting $382,268 $191,580 99.5
Publishing 842,063 871,233 (3.3)
Digital 179,735 174,922 2.8
Total $1,404,066 $1,237,735 13.4
======== ======== ====
Operating
income
(net
of
depreciation,
amortization
and
facility
consolidation
charges):
Broadcasting $154,549 $83,676 84.7
Publishing 42,988 60,137 (28.5)
Digital 23,824 23,604 0.9
Corporate (17,367) (16,360) 6.2
Total $203,994 $151,057 35.0
======== ======== ====
PUBLISHING SEGMENT REVENUE COMPARISONS
Gannett Co., Inc. and Subsidiaries
Unaudited
Table No. 3
The percentage changes for the Publishing segment
advertising and classified revenue categories were as
follows:
First quarter 2014 year-over-year
advertising comparisons:
U.S. Newsquest Total
Publishing (in pounds) Publishing
(including USA segment
TODAY)
-----
Retail (7.1%) (4.2%) (6.2%)
National (1.5%) (14.0%) (2.1%)
Classified (5.9%) (4.4%) (3.9%)
Total
advertising (5.8%) (5.2%) (4.8%)
===== ===== =====
First quarter 2014 year-over-year
classified comparisons:
U.S. Newsquest Total
Publishing (in pounds) Publishing
(including USA segment
TODAY)
-----
Automotive (1.5%) (4.9%) (1.2%)
Employment (8.4%) 5.4% (2.0%)
Real
Estate (3.3%) (10.3%) (3.7%)
Legal (7.2%) -% (7.2%)
Other (10.0%) (7.8%) (7.3%)
Total
classified (5.9%) (4.4%) (3.9%)
===== ===== =====
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures are not to be considered in isolation from or as a substitute for the related GAAP measures and should be read
only in conjunction with financial information presented on a GAAP basis.
Tables No. 4 through No. 8 reconcile these non-GAAP measures to the most directly comparable GAAP measure.
Table No. 4
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirteen Workforce Transformation Other Special
costs non- tax
operating charge
items Thirteen
weeks restructuring weeks
ended ended
Mar. 30, Mar. 30,
2014 2014
---- ----
Cost of sales and operating expenses, exclusive of depreciation $767,532 $(2,727) $ - $ - $ - $764,805
Selling, general and administrative expenses, exclusive of depreciation 355,213 (738) - - - 354,475
Amortization of intangible assets 17,743 - (4,480) - - 13,263
Facility consolidation charges 14,820 - (14,820) - - -
Operating expenses 1,200,072 (3,465) (19,300) - - 1,177,307
Operating income 203,994 3,465 19,300 - - 226,759
Other non-operating items (20,748) - - 20,400 - (348)
Total non-operating (expense) income (81,905) - - 20,400 - (61,505)
Income before income taxes 122,089 3,465 19,300 20,400 - 165,254
Provision for income taxes 52,500 1,200 8,200 8,300 (23,800) 46,400
Net income 69,589 2,265 11,100 12,100 23,800 118,854
Net income attributable to Gannett Co., Inc. 59,159 2,265 11,100 12,100 23,800 108,424
Net income per share - diluted (a) $0.25 $0.01 $0.05 $0.05 $0.10 $0.47
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirteen Workforce Transformation Asset Other Special
costs impairment non- tax
operating benefits
items Thirteen
weeks restructuring weeks
ended ended
Mar. 31, Mar. 31,
2013 2013
---- ----
Cost of sales and operating expenses, exclusive of depreciation $719,724 $(4,491) $ - $ - $ - $ - $715,233
Selling, general and administrative expenses, exclusive of depreciation 314,115 (875) - - - - 313,240
Facility consolidation charges 4,785 - (4,785) - - - -
Operating expenses 1,086,678 (5,366) (4,785) - - - 1,076,527
Operating income 151,057 5,366 4,785 - - - 161,208
Equity income in unconsolidated investees, net 7,794 - - 731 - - 8,525
Other non-operating items (1,583) - 920 - 2,077 - 1,414
Total non-operating (expense) income (29,194) - 920 731 2,077 - (25,466)
Income before income taxes 121,863 5,366 5,705 731 2,077 - 135,742
Provision for income taxes 5,400 2,100 2,200 300 - 27,800 37,800
Net income 116,463 3,266 3,505 431 2,077 (27,800) 97,942
Net income attributable to Gannett Co., Inc. 104,565 3,266 3,505 431 2,077 (27,800) 86,044
Net income per share - diluted (a) $0.44 $0.01 $0.01 $ - $0.01 $(0.12) $0.37
(a) Total per share amount does not sum due to rounding.
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 5
"Adjusted EBITDA", a non-GAAP measure, is defined as net income attributable to Gannett before (1) net income attributable to noncontrolling interests, (2) income taxes, (3)
interest expense, (4) equity income, (5) other non-operating items, (6) workforce restructuring, (7) transformation costs, (8) depreciation and (9) amortization. When Adjusted
EBITDA is discussed in reference to performance on a consolidated basis, the most directly comparable GAAP financial measure to Adjusted EBITDA is Net income. Management does not
analyze non-operating items such as interest expense and income taxes on a segment level; therefore, the most directly comparable GAAP financial measure to Adjusted EBITDA when
performance is discussed on a segment level is Operating income. Management believes that use of this measure allows investors and management to measure, analyze and compare the
performance of its business segment operations at a more detailed level and in a meaningful and consistent manner.
Reconciliations of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated
statements of income, follow:
Thirteen weeks ended Mar. 30, 2014:
Broadcasting Publishing Digital Corporate Consolidated
Total
-----
Net income attributable to Gannett Co., Inc. $59,159
(GAAP basis)
Net income attributable to noncontrolling interests 10,430
Provision for income taxes 52,500
Interest expense 69,648
Equity income in unconsolidated investees, net (8,491)
Other non-operating items 20,748
Operating income (GAAP basis) $154,549 $42,988 $23,824 $(17,367) $203,994
Workforce restructuring - 3,465 - - 3,465
Transformation costs 9,756 9,544 - - 19,300
Adjusted operating income (non-GAAP basis) 164,305 55,997 23,824 (17,367) 226,759
Depreciation 11,697 23,260 4,553 5,254 44,764
Adjusted amortization (non-GAAP basis) 5,741 3,787 3,735 - 13,263
Adjusted EBITDA (non-GAAP basis) $181,743 $83,044 $32,112 $(12,113) $284,786
======== ======= ===== ======= ========
Thirteen weeks ended Mar. 31, 2013:
Broadcasting Publishing Digital Corporate Consolidated
Total
-----
Net income attributable to Gannett Co., Inc. $104,565
(GAAP basis)
Net income attributable to noncontrolling interests 11,898
Provision for income taxes 5,400
Interest expense 35,405
Equity income in unconsolidated investees, net (7,794)
Other non-operating items 1,583
Operating income (GAAP basis) $83,676 $60,137 $23,604 $(16,360) $151,057
Workforce restructuring - 5,366 - - 5,366
Transformation costs - 4,785 - - 4,785
--- ----- --- --- -----
Adjusted operating income (non-GAAP basis) 83,676 70,288 23,604 (16,360) 161,208
Depreciation 6,754 23,225 4,386 4,561 38,926
Amortization 181 4,226 4,721 - 9,128
Adjusted EBITDA (non-GAAP basis) $90,611 $97,739 $32,711 $(11,799) $209,262
======= ======= ===== ======= ========
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 6
"Free cash flow" is a non-GAAP liquidity
measure used in addition to and in
conjunction with results presented in
accordance with GAAP. Free cash flow
should not be relied upon to the exclusion
of GAAP financial measures.
Free cash flow is a non-GAAP liquidity
measure that is defined as "Net cash flow
from operating activities" as reported on
the statement of cash flows reduced by
"Purchase of property, plant and
equipment" as well as "Payments for
investments" and increased by "Proceeds
from investments." The company believes
that free cash flow is a useful measure
for management and investors to evaluate
the level of cash generated by operations
Thirteen
weeks
ended
Mar.
30,
2014
-----
Net cash flow from
operating activities $166,002
Purchase of property,
plant and equipment (21,851)
Payments for investments (1,000)
Proceeds from
investments 5,759
Free cash flow $148,910
======
TAX RATE CALCULATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 7
The calculations of the company's effective tax rate on a GAAP and non-GAAP basis are below:
GAAP Non-GAAP
---- --------
Thirteen Thirteen Thirteen Thirteen
weeks weeks weeks weeks
ended ended ended ended
Mar. 30, Mar. 31, Mar. 30, Mar. 31,
2014 2013 2014 2013
--------- --------- --------- ---------
Income before
taxes (per
Table 4) $122,089 $121,863 $165,254 $135,742
Noncontrolling
interests
(per Table
1) (10,430) (11,898) (10,430) (11,898)
------- ------- ------- -------
Income before
taxes
attributable
to Gannett
Co., Inc. $111,659 $109,965 $154,824 $123,844
====== ====== ====== ======
Provision for
income taxes
(per Table
4) $52,500 $5,400 $46,400 $37,800
Effective tax
rate 47.0% 4.9% 30.0% 30.5%
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 8
A reconciliation of the company's Broadcasting segment revenues and expenses on an as reported
basis to a pro forma basis is below:
Thirteen weeks ended
Mar. 31, 2013:
Gannett Belo Pro forma Gannett
adjustments pro
(a) forma
combined
(as (as
reported) reported)
------- -------
Broadcasting revenue:
Local/national $136,614 $125,660 $(20,601) $241,673
Political 1,641 639 (401) 1,879
Retransmission 36,122 18,885 (2,451) 52,556
Other 17,203 15,154 (8,946) 23,411
------ ------ ------
Total
broadcasting
revenue 191,580 160,338 (32,399) 319,519
Broadcasting
expenses 107,904 120,137 (20,505) 207,536
Broadcasting
operating
income $83,676 $40,201 $(11,894) $111,983
======= ======= ======== ======
(a) The pro forma adjustments include reductions to revenues and expenses for the former Belo
stations in Phoenix, AZ and St. Louis, MO totaling $26 million and $20 million, respectively.
Subsidiaries of Gannett and Sander Media, a holding company that has a station-operation
agreement with Gannett, agreed to sell these stations upon receiving government approval. KMOV-
TV, the television station in St. Louis, was sold in February 2014. The sale of the two stations
in Phoenix is pending. Pro forma adjustments also include reductions to revenues and expenses
for Captivate that totaled $6 million each in the first quarter of 2013 as Gannett sold its
controlling interest in Captivate in the third quarter of 2013. The pro forma adjustment for
broadcasting expense reflects the addition of $6 million of amortization for definite-lived
intangible assets as if the acquisition of Belo had occurred on the first day of 2013.
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SOURCE Gannett Co., Inc.
