GANNETT CO., INC. MCLEAN, Va., Oct. 20, 2014 /PRNewswire/ -- Highlights for the quarter include the following:
-- Overall company revenue growth of 15 percent, pro forma revenue growth
of 4 percent, driven by strong Broadcast and Digital Segment results
-- Record Broadcasting Segment revenue increased 105 percent, a 19 percent
increase on a pro forma basis
-- Adjusted EBITDA rose 47 percent to $342 million also driven by strong
Broadcasting and Digital Segment results
-- Free Cash Flow of $186 million, a 76 percent year-over-year increase
Gannett Co., Inc. (NYSE: GCI) today reported non-GAAP earnings per diluted share of $0.59 for the third quarter, a 37.2 percent increase from $0.43 in the third quarter last year. The substantial increase was driven by the strength of the company's expanded television station portfolio in the Broadcasting Segment as well as significantly improved Digital Segment results.
Gracia Martore, president and chief executive officer, said, "We made great progress again this quarter, both in the outstanding performance of our businesses and the continued transformation of the Gannett portfolio. Year-over-year revenue comparisons for each of our business segments improved relative to second quarter comparisons, just as we anticipated. Double digit pro forma growth in Broadcasting revenue, which again reached a record high, was driven by robust political ad spending and retransmission revenue. Strong results at CareerBuilder resulted in a substantial increase in profitability in our Digital Segment. We also successfully completed our acquisition of Cars.com earlier this month, which paves the way for our announced separation. Cars.com is a strong company with tremendous upside that offers significant value to its growing customer base and will contribute considerably to our Digital business."
Martore continued, "Gannett drove increases in both overall company revenue and free cash flow this quarter. As both metrics continue to grow, it gives us even greater confidence that our businesses are well positioned to compete fiercely in their respective markets. Broadcasting, Digital and Publishing are all continually innovating and expanding their product offerings, with the support of a strong balance sheet. We expect to build on our current momentum during the fourth quarter with the addition of Cars.com and the continued successful execution of our strategies."
On August 5, 2014, the company announced its plan to create two publicly traded companies. One will be exclusively focused on its Broadcasting and Digital businesses, and the other on its Publishing business. The planned separation of the Publishing business will be implemented through a tax-free distribution of Gannett's Publishing assets to shareholders. At the same time, the company announced that it signed a definitive agreement to acquire full ownership of Cars.com. The company acquired the 73% interest it did not already own in Classified Ventures LLC, which owns Cars.com, for $1.8 billion in cash on October 1, 2014 and the transaction did not impact third quarter results.
CONTINUING OPERATIONS
Operating revenues in the third quarter totaled $1.44 billion, an increase of 15.2 percent compared to $1.25 billion in the third quarter of 2013. The increase reflects revenue growth in the Broadcasting Segment of almost 105 percent, due primarily to the acquisition of Belo Corp., and Digital Segment revenue growth of 4.4 percent. Publishing Segment revenues were 3.6 percent lower in the quarter. On a pro forma basis (had Gannett owned the Belo and London television stations during the same quarter last year and excluding results for Captivate and the impact of the sale of a print business and Apartments.com), total company revenues were up 3.8 percent in the quarter.
Net income attributable to Gannett on a non-GAAP basis was 36.6 percent higher in the quarter compared to the third quarter in 2013 and totaled $136.3 million. Operating income on the same basis was $280.1 million, a 49.9 percent increase, reflecting in part the expansion of the company's television station portfolio. Adjusted EBITDA (a non-GAAP term detailed in Table 5) grew significantly in the quarter, up 46.6 percent to $341.7 million compared to $233.1 million in third quarter last year.
Special items in the third quarter of 2014 totaled $30.1 million on a pre-tax basis ($0.08 per share) and include: operating charges of $9.6 million ($0.03 per share) representing primarily workforce restructuring, transformation and facility consolidations; non-operating expense of $20.5 million ($0.07 per share) reflecting primarily transaction related costs; and a tax benefit of $5.6 million ($0.02 per share). Special items in the third quarter of 2013 totaled $36.2 million on a pre-tax basis ($0.09 per share) reflecting charges associated with workforce restructuring, facility consolidation and the Captivate transaction.
The table below details third quarter results on a GAAP and non-GAAP basis.
Dollars in thousands, except per share amounts
GAAP Measure Special Items Non-GAAP Measure
------------ ------------- ----------------
Thirteen Workforce Other Non-operating Special tax
restructuring transformation items benefits
costs Thirteen
weeks ended weeks ended
Sept. 28, 2014 Sept. 28, 2014
-------------- --------------
Operating income $270,517 $3,004 $6,621 $ - $ - $280,142
Equity income in unconsolidated 1,756 - - 5,987 - 7,743
investees, net
Other non-operating items (17,450) - - 14,491 - (2,959)
Income before income taxes 188,892 3,004 6,621 20,478 - 218,995
Provision for income taxes 48,900 1,000 1,400 4,300 5,600 61,200
Net income 139,992 2,004 5,221 16,178 (5,600) 157,795
Net income attributable to 118,516 2,004 5,221 16,178 (5,600) 136,319
Gannett Co., Inc.
Net income per share - diluted $0.51 $0.01 $0.02 $0.07 $(0.02) $0.59
Operating expenses including special charges noted above were $1.17 billion in the quarter, an 8.5 percent increase compared to $1.08 billion in the third quarter of 2013 reflecting primarily the Belo acquisition. Operating expenses on a non-GAAP basis totaled $1.16 billion. Pro forma non-GAAP operating expenses declined slightly compared to the third quarter in 2013. Lower Publishing Segment expenses were offset by higher expenses in support of revenue growth in the Broadcasting and Digital Segments.
BROADCASTING
Broadcasting Segment revenues totaled a record $416.5 million and were almost 105 percent higher in the quarter compared to the third quarter a year ago. Acquisitions, as well as substantially higher political and retransmission revenues, drove the increase.
The following table summarizes the year-over-year changes in select Broadcasting Segment revenue categories. Digital revenues are included in the "Other" category.
Broadcasting Revenue Detail
Dollars in thousands
Thirteen Percentage change from
thirteen weeks
weeks ended ended Sept. 29, 2013
Sept. 28, 2014
--------------
Reported Pro Forma
(a)
-------- ----------
Core (Local &
National) $250,647 75% (3%)
Political 39,995 *** ***
Retransmission (b) 91,903 154% 61%
Other 33,964 68% 15%
Total $416,509 105% 19%
======== === ===
(a) The pro forma amounts are presented as if the acquisitions of Belo Corp. and the London Broadcasting TV stations as well as the Captivate
disposition occurred at the beginning of 2013.
(b) Reverse compensation to networks is included as part of programming costs and therefore not included in this line.
Broadcasting Segment revenues on a pro forma basis were 18.6 percent higher compared to the third quarter last year. The increase reflects a 60.9 percent increase in retransmission revenue to approximately $92 million in the quarter in addition to substantially higher politically related advertising of $40.0 million resulting from maximizing the benefit of a strong political footprint. Pro forma digital revenues in the Broadcasting Segment were up 24.1 percent due primarily to growth in digital marketing services products.
Non-GAAP operating expenses in the Broadcasting Segment on a pro forma basis were $238.0 million in the quarter, an increase of 3.6 percent reflecting primarily higher digital initiative investment and reverse network compensation. On a pro forma basis, non-GAAP operating income totaled $179.5 million, an increase of 47.0 percent while Adjusted EBITDA on the same basis totaled $198.6 million, an increase of 40.5 percent compared to the third quarter last year.
Based on current trends and including a full quarter of results for the former Belo and London stations in 2014, we expect the increase in total television revenues for the fourth quarter of 2014 compared to the same quarter of 2013 to exceed 115 percent. On a pro forma basis, the percentage increase in total television revenues in the fourth quarter of 2014 is projected to be in the low-twenties compared to the fourth quarter of 2013.
PUBLISHING
Publishing Segment revenues in the quarter were $826.8 million compared to $858.1 million, a 3.6 percent decline compared to the third quarter of 2013. Publishing Segment revenues on a pro forma basis declined 2.5 percent due primarily to softer advertising demand offset, in part, by higher digital advertising and marketing solutions revenue.
Advertising revenues totaled $494.9 million compared to $520.2 million in the third quarter of 2013, a decline of 4.9 percent. Pro forma advertising revenues declined 4.2 percent year-over-year, a sequential improvement compared to the second quarter comparison. On the same basis, national and classified advertising comparisons in the third quarter were better than second quarter year-over-year comparisons. Employment advertising continued its positive trend and was up 4.2 percent in the quarter due primarily to substantially higher employment advertising at Newsquest in the UK.
A summary of the year-over-year percentage change for each of the company's advertising categories can be found on Table 3.
Circulation revenues totaled $276.8 million compared to $275.0 million in third quarter of 2013, an increase of almost 1 percent. The increase was due primarily to strategic home delivery price increases at local domestic publishing sites, in part due to the added value of the USA TODAY local content editions in 34 local publishing markets.
Pro forma Publishing Segment digital revenues were 7.2 percent higher in the quarter reflecting continued growth in digital marketing solutions and digital advertising. Digital revenues at Newsquest were up 20.4 percent in local currency while digital revenues at USA TODAY and its associated businesses increased 16.6 percent. Pro forma digital revenues at local domestic publishing operations were 3.9 percent higher.
Pro forma non-GAAP Publishing Segment operating expenses declined 2.1 percent compared to the third quarter of 2013 and totaled $756.1 million in the quarter due primarily to continuing cost efficiency efforts.
Non-GAAP operating income totaled $70.7 million in the quarter while Adjusted EBITDA on the same basis was $98.3 million.
DIGITAL
Operating revenues in the Digital Segment were 4.4 percent higher compared to the third quarter of 2013 and totaled $199.8 million. The revenue growth was driven primarily by higher revenues at CareerBuilder, up 6.9 percent, reflecting strong sales of its human capital software-as-a-service products. Operating expenses in the Digital Segment were just 1.4 percent higher in the quarter. As a result, Digital Segment operating income was $48.3 million, an increase of 15.0 percent. Adjusted EBITDA rose 15.6 percent and totaled $58.2 million.
Pro forma digital revenues company-wide, including the Digital Segment and all digital revenues generated by the other business segments, totaled $404.4 million, an increase of 6.7 percent. The increase reflects higher revenue associated with CareerBuilder, digital marketing solutions products and digital advertising.
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 September, Gannett's consolidated domestic Internet audience was 109 million unique visitors reaching 44 percent of the Internet audience, according to comScore Media Metrix Multi-platform. USATODAY.com is one of the most popular news sites and the USA TODAY app is a top news app with 20.8 million downloads across iPad, iPhone, Android, Windows and Kindle Fire. USA TODAY mobile visitors continued to grow in September up from September a year ago to approximately 48.6 million with a 60 percent increase in mobile visitor reach to 27.5 percent, according to comScore Mobile Metrix. Newsquest is also an Internet leader in the UK where its network of web sites attracted 136.9 million monthly page impressions from approximately 22.2 million unique users in September 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 totaled $1.8 million in the quarter compared to $11.7 million in the third quarter in 2013. The decline reflects higher equity income for Cars.com more than offset by charges related to acquisitions and impairments during the quarter as well as lower results for newspaper partnerships. Excluding special items in the quarter, equity income was $7.7 million, a decline of $4.0 million compared to $11.7 million in the third quarter a year ago. Beginning in the fourth quarter, results for Cars.com will be included in the Digital Segment and excluded from equity income.
Interest expense was $65.9 million in the quarter compared to $41.6 million in the third quarter of 2013 reflecting debt issuances associated with the Belo acquisition and the Cars.com acquisition offset, in part, by a lower average interest rate. On September 8, 2014, the company announced, the successful completion of its private placement offering of $350 million of 4.875% senior notes due 2021 and $325 million of its 5.500% senior notes due 2024 related to the Cars.com acquisition.
Excluding special items, other non-operating expense in the quarter would have been $3.0 million compared to income of $3.4 million in the third quarter of 2013.
Net cash flow from operating activities was $217.7 million in the quarter. Free cash flow (a non-GAAP measure) totaled $185.9 million, a 76.0 percent increase from the third quarter of 2013. The balance of long-term debt was $4.11 billion and total cash was $1.37 billion at quarter end.
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 together 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, non-cash asset impairment charges, certain expenses recognized in non-operating categories 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.
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) other transformation costs, (8) asset impairment charges, (9) depreciation and (10) 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 1-888-208-1812 and international callers should dial 1-719-325-2223 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 3607571. To access the replay, dial 1-888-203-1112 in the U.S. International callers should use the number 1-719-457-0820. The confirmation code for the replay is 3607571. Materials related to the call will be available through the Investor Relations section of the company's web site Monday morning.
About Gannett
Gannett Co., Inc. is an international media and marketing solutions company that informs and engages more than 110 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 ended weeks ended (Decrease)
Sept. 28, 2014 Sept. 29, 2013
-------------- --------------
Net operating revenues:
Broadcasting $416,509 $203,364 104.8
Publishing advertising 494,899 520,189 (4.9)
Publishing circulation 276,829 274,999 0.7
All other Publishing 55,098 62,891 (12.4)
Digital 199,802 191,447 4.4
Total 1,443,137 1,252,890 15.2
--------- --------- ----
Operating expenses:
Cost of sales and operating expenses, exclusive of depreciation 757,301 713,369 6.2
Selling, general and administrative expenses, exclusive of depreciation 347,123 315,677 10.0
Depreciation 46,681 38,195 22.2
Amortization of intangible assets 14,894 8,071 84.5
Facility consolidation charges 6,621 5,880 12.6
----- ----- ----
Total 1,172,620 1,081,192 8.5
Operating income 270,517 171,698 57.6
------- ------- ----
Non-operating (expense) income:
Equity income in unconsolidated 1,756 11,711 (85.0)
investees, net
Interest expense (65,931) (41,628) 58.4
Other non-operating items (17,450) (17,580) (0.7)
------- -------
Total (81,625) (47,497) 71.9
------- ------- ----
Income before income taxes 188,892 124,201 52.1
Provision for income taxes 48,900 26,700 83.1
------ ------ ----
Net income 139,992 97,501 43.6
Net income attributable to noncontrolling interests (21,476) (17,753) 21.0
------- -------
Net income attributable to Gannett Co., Inc. $118,516 $79,748 48.6
======== ======= ====
Net income per share - basic $0.52 $0.35 48.6
Net income per share - diluted $0.51 $0.34 50.0
Weighted average number of common shares outstanding:
Basic 225,761 228,587 (1.2)
Diluted 232,097 234,438 (1.0)
Dividends declared per share $0.20 $0.20 -
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 1 (continued)
Thirty-nine Thirty-nine % Increase
weeks ended weeks ended
Sept. 28, 2014 Sept. 29, 2013 (Decrease)
-------------- -------------- ---------
Net operating revenues:
Broadcasting $1,197,035 $606,906 97.2
Publishing advertising 1,526,382 1,609,164 (5.1)
Publishing circulation 836,756 840,626 (0.5)
All other Publishing 173,116 183,753 (5.8)
Digital 573,918 552,875 3.8
Total 4,307,207 3,793,324 13.5
--------- --------- ----
Operating expenses:
Cost of sales and operating expenses, exclusive of depreciation 2,300,460 2,159,962 6.5
Selling, general and administrative expenses, exclusive of depreciation 1,056,115 950,407 11.1
Depreciation 136,295 115,588 17.9
Amortization of intangible assets 47,108 26,567 77.3
Facility consolidation and asset 50,216 15,163 ***
impairment charges
Total 3,590,194 3,267,687 9.9
Operating income 717,013 525,637 36.4
------- ------- ----
Non-operating (expense) income:
Equity income in unconsolidated 166,787 28,929 ***
investees, net
Interest expense (199,727) (113,207) 76.4
Other non-operating items (41,180) (28,954) 42.2
------- -------
Total (74,120) (113,232) (34.5)
------- -------- -----
Income before income taxes 642,893 412,405 55.9
Provision for income taxes 207,400 71,700 ***
------- ------ ---
Net income 435,493 340,705 27.8
Net income attributable to noncontrolling interests (49,351) (42,772) 15.4
------- -------
Net income attributable to Gannett Co., Inc. $386,142 $297,933 29.6
======== ======== ====
Net income per share - basic $1.71 $1.30 31.5
Net income per share - diluted $1.66 $1.27 30.7
Weighted average number of common shares outstanding:
Basic 226,374 228,940 (1.1)
Diluted 232,157 234,724 (1.1)
Dividends declared per share $0.60 $0.60 -
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 2
Thirteen Thirteen % Increase
weeks ended weeks ended
Sept. 28, 2014 Sept. 29, 2013 (Decrease)
-------------- -------------- ---------
Net operating revenues:
Broadcasting $416,509 $203,364 104.8
Publishing 826,826 858,079 (3.6)
Digital 199,802 191,447 4.4
Total $1,443,137 $1,252,890 15.2
========== ========== ====
Operating income (net of depreciation, amortization and facility
consolidation charges):
Broadcasting $177,970 $83,810 112.3
Publishing 62,424 62,744 (0.5)
Digital 48,342 42,050 15.0
Corporate (18,219) (16,906) 7.8
Total $270,517 $171,698 57.6
======== ======== ====
Depreciation, amortization and facility consolidation charges:
Broadcasting $20,307 $7,059 ***
Publishing 33,040 32,183 2.7
Digital 9,886 8,309 19.0
Corporate 4,963 4,595 8.0
---
Total $68,196 $52,146 30.8
======= ======= ====
Adjusted EBITDA (a):
Broadcasting $198,397 $91,508 116.8
Publishing 98,348 103,534 (5.0)
Digital 58,228 50,359 15.6
Corporate (13,256) (12,311) 7.7
Total $341,717 $233,090 46.6
======== ======== ====
(a) "Adjusted EBITDA" is a non-GAAP measure used by 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. The definition of "Adjusted EBITDA" is provided in Table No. 5, along
with reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income.
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 2 (continued)
Thirty-nine Thirty-nine % Increase
weeks ended weeks ended
Sept. 28, 2014 Sept. 29, 2013 (Decrease)
-------------- -------------- ---------
Net operating revenues:
Broadcasting $1,197,035 $606,906 97.2
Publishing 2,536,254 2,633,543 (3.7)
Digital 573,918 552,875 3.8
Total $4,307,207 $3,793,324 13.5
========== ========== ====
Operating income (net of depreciation, amortization and facility
consolidation and asset impairment charges):
Broadcasting $503,841 $265,578 89.7
Publishing 158,651 208,073 (23.8)
Digital 107,861 100,931 6.9
Corporate (53,340) (48,945) 9.0
Total $717,013 $525,637 36.4
======== ======== ====
Depreciation, amortization and facility consolidation and asset
impairment charges:
Broadcasting $68,122 $20,968 ***
Publishing 122,754 95,834 28.1
Digital 27,777 26,799 3.6
Corporate 14,966 13,717 9.1
Total $233,619 $157,318 48.5
======== ======== ====
Adjusted EBITDA (a):
Broadcasting $574,303 $287,185 100.0
Publishing 308,451 339,607 (9.2)
Digital 135,638 127,730 6.2
Corporate (38,374) (35,228) 8.9
Total $980,018 $719,294 36.2
======== ======== ====
(a) "Adjusted EBITDA" is a non-GAAP measure used by 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. The definition of "Adjusted EBITDA" is provided in Table No. 5, along
with reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income.
PUBLISHING SEGMENT REVENUE COMPARISONS
Gannett Co., Inc. and Subsidiaries
Unaudited
Table No. 3
The following percentage changes for the Publishing Segment advertising and classified revenue categories are presented as
if the sale of Apartments.com occurred at the beginning of 2013.
Third quarter 2014 year-over-year comparisons:
U.S. Newsquest Total
Publishing (in pounds) Publishing
(including USA Segment
TODAY)
-----
Retail (5.4%) (2.1%) (4.2%)
National (10.7%) (3.3%) (9.6%)
Classified:
Automotive (1.4%) (6.3%) (1.1%)
Employment (1.6%) 9.3% 4.2%
Real Estate (4.5%) (7.6%) (2.8%)
Legal (4.9%) -% (4.9%)
Other (7.0%) (6.1%) (4.3%)
Total classified (3.6%) (2.3%) (1.4%)
----- ----- -----
Total advertising (5.8%) (2.3%) (4.2%)
===== ===== =====
Year-to-date 2014 year-over-year comparisons:
U.S. Newsquest Total
Publishing (in pounds) Publishing
(including USA Segment
TODAY)
-----
Retail (5.7%) (2.2%) (4.6%)
National (10.6%) (3.8%) (9.6%)
Classified:
Automotive (2.2%) (5.8%) (1.7%)
Employment (5.5%) 8.0% 1.1%
Real Estate (4.7%) (9.0%) (3.5%)
Legal (5.2%) -% (5.2%)
Other (8.5%) (6.1%) (5.3%)
----- ----- -----
Total classified (4.9%) (2.9%) (2.5%)
----- ----- -----
Total advertising (6.3%) (2.7%) (4.7%)
===== ===== =====
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 Other Special tax
transformation benefits
costs Non-operating Thirteen
weeks ended restructuring items weeks ended
Sept. 28, 2014 Sept. 28, 2014
-------------- --------------
Cost of sales and operating expenses, exclusive of $757,301 $(2,268) $ - $ - $ - $755,033
depreciation
Selling, general and administrative 347,123 (736) - - - 346,387
expenses, exclusive of depreciation
Facility consolidation charges 6,621 - (6,621) - - -
Operating expenses 1,172,620 (3,004) (6,621) - - 1,162,995
Operating income 270,517 3,004 6,621 - - 280,142
Equity income in unconsolidated investees, net 1,756 - - 5,987 - 7,743
Other non-operating items (17,450) - - 14,491 - (2,959)
Total non-operating (expense) income (81,625) - - 20,478 - (61,147)
Income before income taxes 188,892 3,004 6,621 20,478 - 218,995
Provision for income taxes 48,900 1,000 1,400 4,300 5,600 61,200
Net income 139,992 2,004 5,221 16,178 (5,600) 157,795
Net income attributable to Gannett Co., Inc. 118,516 2,004 5,221 16,178 (5,600) 136,319
Net income per share - diluted $0.51 $0.01 $0.02 $0.07 $(0.02) $0.59
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirteen Workforce Other Non-operating
transformation items
costs Thirteen
weeks ended restructuring weeks ended
Sept. 29, 2013 Sept. 29, 2013
-------------- --------------
Cost of sales and operating expenses, exclusive of $713,369 $(7,162) $ - $ - $706,207
depreciation
Selling, general and administrative 315,677 (2,084) - - 313,593
expenses, exclusive of depreciation
Facility consolidation charges 5,880 - (5,880) - -
Operating expenses 1,081,192 (9,246) (5,880) - 1,066,066
Operating income 171,698 9,246 5,880 - 186,824
Other non-operating items (17,580) - - 21,025 3,445
Total non-operating (expense) income (47,497) - - 21,025 (26,472)
Income before income taxes 124,201 9,246 5,880 21,025 160,352
Provision for income taxes 26,700 3,600 2,300 10,200 42,800
Net income 97,501 5,646 3,580 10,825 117,552
Net income attributable to Gannett Co., Inc. 79,748 5,646 3,580 10,825 99,799
Net income per share - diluted $0.34 $0.02 $0.02 $0.05 $0.43
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Table No. 4 (continued)
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirty-nine Workforce Other Asset Non-operating
transformation impairment items
costs Special tax charge Thirty-nine
weeks ended restructuring weeks ended
Sept. 28, 2014 Sept. 28, 2014
-------------- --------------
Cost of sales and operating expenses, $2,300,460 $(26,155) $ - $ - $ - $ - $2,274,305
exclusive of depreciation
Selling, general and administrative 1,056,115 (3,231) - - - - 1,052,884
expenses, exclusive of depreciation
Amortization of intangible assets 47,108 - (4,480) - - - 42,628
Facility consolidation and asset 50,216 - (34,029) (16,187) - - -
impairment charges
Operating expenses 3,590,194 (29,386) (38,509) (16,187) - - 3,506,112
Operating income 717,013 29,386 38,509 16,187 - - 801,095
Equity income in unconsolidated 166,787 - - - (142,003) - 24,784
investees, net
Other non-operating items (41,180) - - - 39,371 - (1,809)
Total non-operating (expense) income (74,120) - - - (102,632) - (176,752)
Income before income taxes 642,893 29,386 38,509 16,187 (102,632) - 624,343
Provision for income taxes 207,400 10,800 14,500 800 (39,700) (18,200) 175,600
Net income 435,493 18,586 24,009 15,387 (62,932) 18,200 448,743
Net income attributable to Gannett Co., Inc. 386,142 18,586 24,009 15,387 (62,932) 18,200 399,392
Net income per share - diluted $1.66 $0.08 $0.10 $0.07 $(0.27) $0.08 $1.72
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirty-nine Workforce Other Special tax
transformation benefits
costs Non-operating Thirty-nine
weeks ended restructuring items weeks ended
Sept. 29, 2013 Sept. 29, 2013
-------------- --------------
Cost of sales and operating expenses, $2,159,962 $(29,692) $ - $ - $ - $2,130,270
exclusive of depreciation
Selling, general and administrative 950,407 (6,647) - - - 943,760
expenses, exclusive of depreciation
Facility consolidation charges 15,163 - (15,163) - - -
Operating expenses 3,267,687 (36,339) (15,163) - - 3,216,185
Operating income 525,637 36,339 15,163 - - 577,139
Equity income in unconsolidated 28,929 - - 731 - 29,660
investees, net
Other non-operating items (28,954) - - 33,501 - 4,547
Total non-operating (expense) income (113,232) - - 34,232 - (79,000)
Income before income taxes 412,405 36,339 15,163 34,232 - 498,139
Provision for income taxes 71,700 14,300 6,000 14,600 27,800 134,400
Net income 340,705 22,039 9,163 19,632 (27,800) 363,739
Net income attributable to Gannett Co., Inc. 297,933 22,039 9,163 19,632 (27,800) 320,967
Net income per share - diluted (a) $1.27 $0.09 $0.04 $0.08 $(0.12) $1.37
(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) other transformation costs, (8) asset impairment charges
(9) depreciation and (10) 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 Sept. 28, 2014:
Broadcasting Publishing Digital Corporate Consolidated
Total
-----
Net income attributable to Gannett Co., Inc. $118,516
(GAAP basis)
Net income attributable to noncontrolling 21,476
interests
Provision for income taxes 48,900
Interest expense 65,931
Equity income in unconsolidated investees, net (1,756)
Other non-operating items 17,450
Operating income (GAAP basis) $177,970 $62,424 $48,342 $(18,219) $270,517
Workforce restructuring 120 2,884 - - 3,004
Other transformation costs 1,230 5,391 - - 6,621
Adjusted operating income (non-GAAP basis) 179,320 70,699 48,342 (18,219) 280,142
Depreciation 12,629 23,898 5,191 4,963 46,681
Amortization 6,448 3,751 4,695 - 14,894
Adjusted EBITDA (non-GAAP basis) $198,397 $98,348 $58,228 $(13,256) $341,717
======== ======= ======= ======== ========
Thirteen weeks ended Sept. 29, 2013:
Broadcasting Publishing Digital Corporate Consolidated
Total
-----
Net income attributable to Gannett Co., Inc. $79,748
(GAAP basis)
Net income attributable to noncontrolling 17,753
interests
Provision for income taxes 26,700
Interest expense 41,628
Equity income in unconsolidated investees, net (11,711)
Other non-operating items 17,580
Operating income (GAAP basis) $83,810 $62,744 $42,050 $(16,906) $171,698
Workforce restructuring 639 8,607 - - 9,246
Other transformation costs 139 5,741 - - 5,880
--- ----- --- --- -----
Adjusted operating income (non-GAAP basis) 84,588 77,092 42,050 (16,906) 186,824
Depreciation 6,747 22,300 4,553 4,595 38,195
Amortization 173 4,142 3,756 - 8,071
Adjusted EBITDA (non-GAAP basis) $91,508 $103,534 $50,359 $(12,311) $233,090
======= ======== ======= ======== ========
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 5 (continued)
Thirty-nine weeks ended Sept. 28, 2014:
Broadcasting Publishing Digital Corporate Consolidated
Total
-----
Net income attributable to Gannett Co., Inc. $386,142
(GAAP basis)
Net income attributable to noncontrolling 49,351
interests
Provision for income taxes 207,400
Interest expense 199,727
Equity income in unconsolidated investees, net (166,787)
Other non-operating items 41,180
Operating income (GAAP basis) $503,841 $158,651 $107,861 $(53,340) $717,013
Workforce restructuring 2,340 27,046 - - 29,386
Other transformation costs 14,095 24,414 - - 38,509
Asset impairment charges - 16,187 - - 16,187
Adjusted operating income (non-GAAP basis) 520,276 226,298 107,861 (53,340) 801,095
Depreciation 35,953 70,634 14,742 14,966 136,295
Adjusted amortization (non-GAAP basis) 18,074 11,519 13,035 - 42,628
Adjusted EBITDA (non-GAAP basis) $574,303 $308,451 $135,638 $(38,374) $980,018
======== ======== ======== ======== ========
Thirty-nine weeks ended Sept. 29, 2013:
Broadcasting Publishing Digital Corporate Consolidated
Total
-----
Net income attributable to Gannett Co., Inc. $297,933
(GAAP basis)
Net income attributable to noncontrolling 42,772
interests
Provision for income taxes 71,700
Interest expense 113,207
Equity income in unconsolidated investees, net (28,929)
Other non-operating items 28,954
Operating income (GAAP basis) $265,578 $208,073 $100,931 $(48,945) $525,637
Workforce restructuring 639 35,700 - - 36,339
Other transformation costs 139 15,024 - - 15,163
--- ------ --- --- ------
Adjusted operating income (non-GAAP basis) 266,356 258,797 100,931 (48,945) 577,139
Depreciation 20,294 68,301 13,276 13,717 115,588
Amortization 535 12,509 13,523 - 26,567
Adjusted EBITDA (non-GAAP basis) $287,185 $339,607 $127,730 $(35,228) $719,294
======== ======== ======== ======== ========
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 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 to 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.
Thirteen Thirty-nine
weeks ended weeks ended
Sept. 28, 2014 Sept. 28, 2014
-------------- --------------
Net cash flow from operating activities $217,662 $572,601
Purchase of property, plant and equipment (34,654) (91,559)
Payments for investments - (5,318)
Proceeds from investments 2,936 166,251
Free cash flow $185,944 $641,975
======== ========
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 ended weeks ended weeks ended weeks ended
Sept. 28, 2014 Sept. 29, 2013 Sept. 28, 2014 Sept. 29, 2013
-------------- -------------- -------------- --------------
Income before taxes (per Table 4) $188,892 $124,201 $218,995 $160,352
Noncontrolling interests (per Table 1) (21,476) (17,753) (21,476) (17,753)
------- ------- ------- -------
Income before taxes attributable to $167,416 $106,448 $197,519 $142,599
Gannett Co., Inc.
Provision for income taxes (per Table 4) $48,900 $26,700 $61,200 $42,800
Effective tax rate 29.2% 25.1% 31.0% 30.0%
GAAP Non-GAAP
---- --------
Thirty-nine Thirty-nine Thirty-nine Thirty-nine
weeks ended weeks ended weeks ended weeks ended
Sept. 28, 2014 Sept. 29, 2013 Sept. 28, 2014 Sept. 29, 2013
-------------- -------------- -------------- --------------
Income before taxes (per Table 4) $642,893 $412,405 $624,343 $498,139
Noncontrolling interests (per Table 1) (49,351) (42,772) (49,351) (42,772)
------- ------- ------- -------
Income before taxes attributable to $593,542 $369,633 $574,992 $455,367
Gannett Co., Inc.
Provision for income taxes (per Table 4) $207,400 $71,700 $175,600 $134,400
Effective tax rate 34.9% 19.4% 30.5% 29.5%
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 Sept. 28, 2014:
Gannett Special Pro forma Gannett
(as reported) items (a) adjustments (b) pro forma
------------ -------- --------------- ---------
Broadcasting revenue:
Local/national $250,647 $ - $713 $251,360
Political 39,995 - 1 39,996
Retransmission 91,903 - 193 92,096
Other 33,964 - 81 34,045
------ --- ---
Total broadcasting revenue 416,509 - 988 417,497
Broadcasting expenses 238,539 (1,350) 803 237,992
Broadcasting operating income $177,970 $1,350 $185 $179,505
======== ====== ==== ========
(a) See reconciliation of special items in Table 5.
(b) Gannett acquired six television stations from London Broadcasting on July 8, 2014. Results from these television stations from that date and forward are included in the as reported numbers above. The Gannett pro forma numbers above present results as if the acquisition had
taken place on the first day of Gannett's third quarter.
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 8 (continued)
A reconciliation of the company's revenues and expenses on an as reported basis to a pro forma basis is below:
Thirteen weeks ended Sept. 29, 2013:
Gannett Belo Special Pro forma
adjustments (b) Gannett
(as reported) (as reported) items (a) pro forma
------------ ------------ -------- ---------
Broadcasting revenue:
Local/national $143,317 $125,518 $ - $(9,563) $259,272
Political 3,606 2,636 - (394) 5,848
Retransmission 36,240 21,996 - (1,004) 57,232
Other 20,201 16,042 - (6,637) 29,606
------ ------ --- ------
Total broadcasting revenue 203,364 166,192 - (17,598) 351,958
Broadcasting expenses 119,554 123,828 (778) (12,793) 229,811
Broadcasting operating income $83,810 $42,364 $778 $(4,805) $122,147
======= ======= ==== ======= ========
(a) See reconciliation of special items in Table 5.
(b) The pro forma adjustments include reductions to revenues and expenses for the former Belo stations in Phoenix, AZ and St. Louis, MO totaling $25 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 and the two television stations in Phoenix were sold in June 2014. Revenue and expense adjustments totaling $12 million and $10 million, respectively, were added as if the third quarter 2014 acquisition of six
London Broadcasting Television stations had occurred on the first day of 2013. Pro forma adjustments also include reductions to revenues and expenses for Captivate that totaled $5 million and $6 million, respectively, 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. In addition, the pro forma adjustment for broadcasting expense removes $3 million of merger costs incurred by Belo.
Thirteen weeks ended Sept. 29, 2013:
Gannett Special Pro forma
adjustments (b) Gannett
(as reported) items (a) pro forma
------------ -------- ---------
Publishing revenue:
Advertising $520,189 $ - $(3,721) $516,468
Circulation 274,999 - - 274,999
Other 62,891 - (6,412) 56,479
Total publishing revenue 858,079 - (10,133) 847,946
Publishing expenses 795,335 (14,348) (8,499) 772,488
Publishing operating income $62,744 $14,348 $(1,634) $75,458
======= ======= ======= =======
(a) See reconciliation of special items in Table 5.
(b) The pro forma adjustments include a reduction of $4 million in revenue and $1 million in expense for Apartments.com, which was sold by Classified Ventures in the second quarter of 2014. Pro forma adjustments also include a reduction of $6 million of revenue and $7 million of expense related to the sale of a printing press
in the second quarter of 2014.
Thirteen weeks ended Sept. 29, 2013:
Gannett Belo Special Pro forma
adjustments (b) Gannett
(as reported) (as reported) items (a) pro forma
------------ ------------ -------- ---------
Company-wide operating revenue $1,252,890 $166,192 $ - $(27,731) $1,391,351
Company-wide operating expenses 1,081,192 123,828 (15,126) (21,292) 1,168,602
--------- ------- ------- -------
Company-wide operating income $171,698 $42,364 $15,126 $(6,439) $222,749
======== ======= ======= ======= ========
(a) See reconciliation of special items in Table 5.
(b) The pro forma adjustments include the Broadcasting and Publishing pro forma adjustments discussed above.
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SOURCE Gannett Co., Inc.
