Highlights for the quarter include the following:
- Earnings totaled $0.49 per diluted
share on a GAAP and a non-GAAP basis, driven by strong Broadcast
and Digital Segment results
- Overall company revenue growth of 5
percent, also driven by strong Broadcast and Digital Segment
results
- Record first quarter Broadcasting
Segment revenue increased 4 percent, more than overcoming the
absence of $51 million of Olympic and political revenue that
benefited the first quarter of 2014
- Record first quarter Digital Segment
revenue increased 85 percent and 10 percent on a pro forma basis,
on the strength of Cars.com and CareerBuilder performance
- Adjusted EBITDA rose 14 percent to $325
million on a year-over-year basis
Gannett Co., Inc. (NYSE: GCI) today reported non-GAAP earnings
per diluted share of $0.49 for the first quarter, a 4.3 percent
increase from $0.47 for the first quarter of 2014. The increase was
driven by substantially better results in the Digital Segment due
in part to the acquisition of Classified Ventures (Cars.com) and
solid results in the Broadcasting Segment despite the absence of
$51 million of Olympic and politically related spending that
benefited the first quarter last year.
Gracia Martore, president and chief executive officer, said,
“We’re off to a great start in 2015 with strong first quarter
results and each of our businesses successfully executing on their
strategic plans as we approach our separation into two publicly
traded companies mid-year. Broadcasting continues to make strong
progress as we continue to successfully integrate our newer
stations and expand our digital and other revenue opportunities. In
our Digital Segment, CareerBuilder and Cars.com continue to surpass
expectations as they evolve and innovate to meet the dynamic needs
of their customers. In Publishing, demand for our pioneering USA
TODAY local content editions continues to escalate and we are
leveraging this increasingly popular content by integrating it into
third party news outlets, expanding our reach and gaining entry to
new communities that value high-quality journalism.”
Martore continued, “With all three of our businesses gaining
momentum, we are very well-positioned to complete the separation of
our businesses later this year. We expect to complete the spin-off
by mid-year, and look forward to the enhanced opportunities we
expect the separation will create for both companies.”
On October 1, 2014, the company completed the acquisition of the
73 percent interest it did not already own in Classified Ventures
LLC, which owns Cars.com. On December 29, 2014, the company
announced that it sold Gannett Healthcare Group. The company also
ceased operations of USA Weekend during the fourth quarter of
2014. Results for the first quarter of 2015 include the impact
of all of these transactions.
CONTINUING
OPERATIONS
Operating revenues in the first quarter were $1.5 billion
compared to $1.4 billion in the first quarter of 2014, an increase
of 4.9 percent year-over-year. Growth of 85.1 percent in Digital
Segment revenues, helped by the acquisition of Cars.com and strong
organic growth at both Cars.com and CareerBuilder, fueled the
increase. Broadcasting Segment revenues were up 3.8 percent
due to higher retransmission revenue offset, in part, by the
absence of Olympic and political spending in the quarter.
Publishing Segment revenues were 8.8 percent lower in the quarter
reflecting, in part, the absence of $37 million of revenue
associated with USA Weekend, Gannett Healthcare Group,
Apartments.com and a commercial printing operation as well as a
significant year-over-year decline in the UK exchange rate. On a
pro forma, constant currency basis, Publishing Segment revenues
were down 5.2 percent, a sequential improvement from fourth quarter
2014 year-over-year comparisons on the same basis.
Net income attributable to Gannett on a non-GAAP basis was
$112.8 million in the quarter, a 4.0 percent increase compared
to the first quarter in 2014. Operating income on the same basis
was 7.5 percent higher and totaled $243.7 million, due
primarily to a significant increase in profitability in the Digital
Segment and the strong performance of the company's television
station portfolio despite very difficult year-over-year
comparisons. Adjusted EBITDA (a non-GAAP term detailed in Table 5)
was up 14.2 percent in the quarter and totaled $325.3 million. The
Adjusted EBITDA margin in the first quarter was 22.1 percent, an
increase of 180 basis points compared to the first quarter last
year.
Special items in the first quarter of 2015 resulted in a $12.9
million pre-tax gain. Special items impacting operating income
include asset impairments of $5.9 million ($0.02 per share),
workforce restructuring costs of $13.1 million ($0.04 per
share) offset, in part, by a net gain of $6.3 million ($0.02 per
share) for transformation items including a gain on the sale of
real estate. Special items impacting non-operating income relate
primarily to the gain on the sale of Gannett Healthcare Group and
totaled $25.7 million ($0.03 per share). Special items in the first
quarter of 2014 included operating charges of $22.8 million ($0.06
per share), non-operating charges of $20.4 million ($0.05 per
share), and a $23.8 million special tax charge ($0.10 per
share).
The table below details first quarter results on a GAAP and
non-GAAP basis.
Dollars in thousands, except per share amounts GAAP
Non-GAAP Measure Special Items Measure Thirteen
Other Asset Non- Thirteen weeks ended
Workforce transformation impairment operating weeks ended Mar. 29,
2015 restructuring items charges items Mar. 29, 2015 Operating
income $ 230,928 $ 13,142 $ (6,265 ) $ 5,940 $ — $ 243,745 Other
non-operating items 22,780 — — — (25,680 ) (2,900 ) Income before
income taxes 188,007 13,142 (6,265 ) 5,940 (25,680 ) 175,144
Provision for income taxes 60,523 4,743 (2,139 ) 2,282 (17,620 )
47,789 Net income 127,484 8,399 (4,126 ) 3,658 (8,060 ) 127,355 Net
income attributable to Gannett Co., Inc. 112,894 8,399 (4,126 )
3,658 (8,060 ) 112,765 Net income per share - diluted (a) $ 0.49 $
0.04 $ (0.02 ) $ 0.02 $ (0.03 ) $ 0.49 (a) total per share does not
sum due to rounding.
Operating expenses including special charges noted above totaled
$1.24 billion in the quarter compared to $1.20 billion in the first
quarter a year ago, an increase of 3.5 percent. Operating expenses
on a non-GAAP basis were $1.23 billion and reflect the acquisition
of Cars.com. Pro forma non-GAAP operating expenses were down 2.6
percent compared to the first quarter in 2014 due primarily to
lower Publishing Segment expenses.
BROADCASTING
Broadcasting Segment revenues totaled $396.8 million compared to
$382.3 million in the first quarter in 2014, an increase of 3.8
percent despite challenging year-over-year comparisons, given $51
million in Olympic and political advertising that contributed to
Broadcasting Segment revenues in the first quarter of 2014. The
revenue increase was driven by significantly higher retransmission
revenue and record Super Bowl advertising.
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
Thirteenweeks endedMar. 29, 2015
Percentage changefrom thirteen weeksended
Mar. 30, 2014
Core (Local & National) (a) $ 253,108 (2 %) Political 2,054 (79
%) Retransmission (b) 110,188 26 % Other 31,444 15 % Total $
396,794 4 % (a) Percentage change reflects $41
million of revenue associated with the Olympics in the first
quarter of 2014. (b) Reverse compensation to networks is included
as part of programming costs and therefore not included in this
line.
Broadcasting Segment revenues were 3.8 percent higher compared
to the first quarter of 2014 primarily driven by a 26.0 percent
increase in retransmission revenue to $110.2 million compared to
$87.5 million in the first quarter of 2014. Digital revenues in the
Broadcasting Segment were up 11.2 percent reflecting continued
growth in digital marketing services revenue.
Non-GAAP operating expenses in the Broadcasting Segment were
$231.5 million, a 6.2 percent increase from the first quarter of
2014 reflecting higher reverse network compensation. Non-GAAP
operating income totaled $165.3 million, up 0.6 percent from $164.3
million in the first quarter of 2014. Adjusted EBITDA totaled
$184.2 million, an increase of 1.4 percent from $181.7 million
in the first quarter last year.
Based on current trends, we expect the percentage increase in
total television revenues for the second quarter of 2015 compared
to the same quarter in 2014 to be up in the mid-single digits
despite challenging year-over-year comparisons as the second
quarter of 2014 benefited from political advertising of $17
million.
DIGITAL
Operating revenues in the Digital Segment increased
substantially in the quarter, 85.1 percent, compared to the
first quarter of 2014 and totaled $332.7 million. The growth was
fueled by the acquisition of and very strong results at Cars.com.
Digital Segment revenues on a pro forma basis were 10.0 percent
higher reflecting a 27.8 percent increase in revenue growth at
Cars.com and 4.3 percent at CareerBuilder. This substantial
revenue increase at Cars.com was due primarily to higher wholesale
rates that Cars.com charges its affiliates, as well as increased
average revenue per dealer and unit growth in Cars.com direct
markets. A significant increase in its digital
software-as-a-service products helped drive the revenue increase at
CareerBuilder.
Non-GAAP pro forma operating expenses were $273.5 million in the
quarter, unchanged compared to the first quarter of 2014. As a
result, pro forma Digital Segment operating income rose
substantially by 98.7 percent to $59.2 million. Adjusted EBITDA on
the same basis totaled $89.8 million, up 53.7 percent
compared to the first quarter of 2014.
Pro forma digital revenues company-wide, including the Digital
Segment and all digital revenues generated by the other business
segments, were 7.2 percent higher and totaled $513.1 million. The
increase reflects higher affiliate fees at Cars.com as well as
higher revenue associated with CareerBuilder, digital marketing
solutions products and digital advertising.
In March, Gannett's consolidated domestic Internet audience was
122 million unique visitors reaching 48 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 23 million downloads
across iPad, iPhone, Android, Windows and Kindle Fire. USA TODAY
mobile visitors grew 34 percent to 51 million in March compared
to March a year ago according to comScore Mobile Metrix.
Newsquest is also an Internet leader in the UK where its network of
web sites attracted 152.1 million monthly page impressions
from approximately 22.6 million unique users in March
2015.
PUBLISHING
Publishing Segment revenues in the quarter were $768.2 million,
down 8.8 percent compared to $842.1 million in the first quarter of
2014. The decline reflects primarily continued softness in display
advertising, the change in the Cars.com affiliate agreement
economics that impacts our publishing properties, the absence of
$37 million of revenue associated with USA Weekend, Gannett
Healthcare Group, Apartments.com and a commercial printing
operation as well as a year-over-year decline of over
8 percent in the UK exchange rate. Publishing Segment revenues
on a pro forma basis declined 6.3 percent as lower display
advertising was offset, in part, by growth in digital marketing
solutions and digital advertising. On a constant currency basis,
pro forma Publishing Segment revenues were down 5.2 percent, a
sequential improvement from fourth quarter 2014 year-over-year
comparisons on the same basis.
Advertising revenues were 11.3 percent lower in the quarter and
totaled $444.4 million while pro forma advertising revenues were
down 8.4 percent. Pro forma advertising on a constant currency
basis declined 7.1 percent. The comparison improved relative to
fourth quarter comparisons.
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 declined 3.1 percent in the quarter to
$273.2 million due primarily to declines at USA TODAY and
Newsquest. Circulation revenues at local domestic publishing
operations were relatively flat compared to the same period last
year reflecting the beneficial impact of pricing strategies as well
as continued strength of the All Access Content Subscription
Model.
Pro forma Publishing Segment digital revenues were up 4.3
percent due primarily to digital advertising and digital marketing
solutions growth. Digital revenues at Newsquest increased 16.4
percent in local currency while digital revenues at USA TODAY and
its associated businesses were up 9.4 percent. Pro forma digital
revenues at local domestic publishing operations were
2.5 percent higher.
Pro forma non-GAAP Publishing Segment operating expenses were
4.3 percent lower compared with first quarter of 2014 and totaled
$730.1 million. The decline reflects continuing efforts to create
efficiencies.
Non-GAAP operating income totaled $38.1 million in the quarter
while Adjusted EBITDA on the same basis totaled $66.4 million.
These results were unfavorably impacted by approximately $8.9
million due to changes to the Cars.com affiliate agreement and the
absence of Apartments.com.
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 prior to its acquisition on October
1st. Equity income in unconsolidated investees was $5.1 million, a
decline of 40.4 percent compared to the first quarter of 2014, due
primarily to the absence of equity income from Cars.com and
Apartments.com.
Interest expense was $70.8 million in the quarter compared to
$69.6 million the first quarter last year due to higher average
debt outstanding partially offset by a lower average interest
rate.
Other non-operating income in the first quarter totaled $22.8
million compared to an expense of $20.7 million in the first
quarter of 2014. The increase reflects primarily the gain on the
sale of the Gannett Healthcare Group in the first quarter of 2015
and costs associated with a bond redemption in the first quarter a
year ago. Excluding special items, expense from other non-operating
items in the quarter would have been $2.9 million compared to
expense of $0.3 million in the first quarter in 2014.
Net cash flow from operating activities was $145.5 million in
the quarter. Free cash flow (a non-GAAP measure) totaled $129.2
million. Long-term debt outstanding was $4.35 billion and total
cash was $135.7 million at quarter end.
During the first quarter, the company repurchased approximately
1.1 million shares of its outstanding stock for $37.5 million.
* * * *
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 1-888-695-0608 and international callers
should dial 1-719-325-2392 at least 10 minutes prior to the
scheduled start of the call. The confirmation code for the
conference call is 6321738. 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
6321738. Materials related to the call will be available through
the Investor Relations section of the company's web site Tuesday
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 weeks
ended weeks ended % Increase Mar. 29, 2015 Mar. 30, 2014 (Decrease)
Net operating revenues: Broadcasting $ 396,794 $ 382,268 3.8
Digital 332,699 179,735 85.1 Publishing advertising 444,408 501,300
(11.3 ) Publishing circulation 273,234 282,076 (3.1 ) All other
Publishing 50,546 58,687 (13.9 ) Intersegment eliminations (24,916
) —
***
Total 1,472,765 1,404,066 4.9
Operating expenses: Cost of sales and operating
expenses, exclusive of depreciation 700,639 767,532 (8.7 ) Selling,
general and administrative expenses, exclusive of depreciation
447,244 355,213 25.9 Depreciation 49,483 44,764 10.5 Amortization
of intangible assets 32,087 17,743 80.8 Facility consolidation and
asset impairment charges 12,384 14,820 (16.4 )
Total 1,241,837 1,200,072 3.5
Operating income 230,928 203,994 13.2
Non-operating (expense) income: Equity income in
unconsolidated investees, net 5,058 8,491 (40.4 ) Interest expense
(70,759 ) (69,648 ) 1.6 Other non-operating items 22,780
(20,748 ) ***
Total (42,921 ) (81,905 ) (47.6 )
Income before income taxes 188,007 122,089 54.0
Provision for income taxes 60,523 52,500 15.3
Net income 127,484 69,589 83.2 Net income attributable to
noncontrolling interests (14,590 ) (10,430 ) 39.9
Net
income attributable to Gannett Co., Inc. $ 112,894 $
59,159 90.8
Net income per share -
basic $ 0.50 $ 0.26 92.3
Net income per share - diluted
$ 0.49 $ 0.25 96.0
Weighted average number of common
shares outstanding: Basic 227,089 227,230 (0.1 ) Diluted
231,931 232,268 (0.1 )
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 weeks
ended weeks ended % Increase Mar. 29, 2015 Mar. 30, 2014 (Decrease)
Net operating revenues: Broadcasting $ 396,794 $ 382,268 3.8
Digital 332,699 179,735 85.1 Publishing 768,188 842,063 (8.8 )
Intersegment eliminations (24,916 ) — ***
Total $ 1,472,765 $ 1,404,066 4.9
Operating income (net of depreciation, amortization and
facility consolidation and asset impairment charges):
Broadcasting $ 175,330 $ 154,549 13.4 Digital 56,153 23,824 ***
Publishing 18,305 42,988 (57.4 ) Corporate (18,860 ) (17,367 ) 8.6
Total $ 230,928 $ 203,994 13.2
Depreciation, amortization and facility consolidation and
asset impairment charges: Broadcasting $ 21,261 $ 27,194 (21.8
) Digital 32,827 8,288 *** Publishing 36,125 36,591 (1.3 )
Corporate 3,741 5,254 (28.8 )
Total $ 93,954
$ 77,327 21.5
Adjusted EBITDA
(a): Broadcasting $ 184,230 $ 181,743 1.4 Digital 89,829 32,112
*** Publishing 66,375 83,044 (20.1 ) Corporate (15,119 ) (12,113 )
24.8
Total $ 325,315 $ 284,786 14.2
(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 on a pro forma basis. See Table No. 8 for
more information.
First quarter 2015 year-over-year
comparisons: U.S. Publishing Total
Publishing Total (including USA Newsquest
Segment
Publishing TODAY) (in pounds) (constant currency) Segment
Retail (6.7%) (1.0%) (6.1%) (7.0%) National (19.7%) (1.1%) (18.2%)
(18.8%) Classified: Automotive (3.4%) (6.6%) (3.8%) (4.7%)
Employment (1.7%) (5.5%) (2.8%) (5.4%) Real Estate (0.7%) (10.0%)
(4.4%) (7.8%) Legal (7.4%) —% (7.4%) (7.4%) Other (1.8%) (4.7%)
(2.7%) (5.5%) Total classified (2.8%) (6.3%) (3.7%) (5.8%) Total
advertising (7.7%) (4.0%) (7.1%) (8.4%)
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 items, non-cash asset impairment charges,
certain gains and expenses recognized in non-operating categories
and a charge to its income tax provision. The company believes that
such expenses, charges and gains 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 items, (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.
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 Non-GAAP Measure Special Items
Measure Thirteen Other Asset Non- Thirteen weeks ended Workforce
transformation impairment operating weeks ended Mar. 29, 2015
restructuring items charges items Mar. 29, 2015 Cost of sales and
operating expenses, exclusive of depreciation $ 700,639 $ (10,653 )
$ 12,709 $ — $ — $ 702,695
Selling, general and administrative
expenses, exclusive of depreciation
447,244 (2,489 ) — — — 444,755 Facility consolidation and asset
impairment charges 12,384 — (6,444 ) (5,940 ) — — Operating
expenses 1,241,837 (13,142 ) 6,265 (5,940 ) — 1,229,020 Operating
income 230,928 13,142 (6,265 ) 5,940 — 243,745 Other non-operating
items 22,780 — — — (25,680 ) (2,900 ) Total non-operating (expense)
income (42,921 ) — — — (25,680 ) (68,601 ) Income before income
taxes 188,007 13,142 (6,265 ) 5,940 (25,680 ) 175,144 Provision for
income taxes 60,523 4,743 (2,139 ) 2,282 (17,620 ) 47,789 Net
income 127,484 8,399 (4,126 ) 3,658 (8,060 ) 127,355 Net income
attributable to Gannett Co., Inc. 112,894 8,399 (4,126 ) 3,658
(8,060 ) 112,765 Net income per share - diluted (a) $ 0.49 $ 0.04 $
(0.02 ) $ 0.02 $ (0.03 ) $ 0.49 GAAP Non-GAAP Measure
Special Items Measure Thirteen Other Non-
Thirteen weeks ended Workforce transformation operating
Special tax
weeks ended Mar. 30, 2014 restructuring costs items charge Mar. 30,
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
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 items, (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. 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. 29, 2015: Consolidated Broadcasting Digital Publishing
Corporate Total
Net income attributable to Gannett Co.,
Inc. (GAAP basis)
$ 112,894
Net income attributable to noncontrolling
interests
14,590 Provision for income taxes 60,523 Interest expense 70,759
Equity income in unconsolidated investees, net (5,058 ) Other
non-operating items (22,780 ) Operating income (GAAP basis) $
175,330 $ 56,153 $ 18,305 $ (18,860 ) $ 230,928 Workforce
restructuring 348 849 11,945 — 13,142 Other transformation items
(10,342 ) 2,174 1,903 — (6,265 ) Asset impairment charges —
— 5,940 — 5,940 Adjusted operating
income (non-GAAP basis) 165,336 59,176 38,093 (18,860 ) 243,745
Depreciation 13,296 7,853 24,593 3,741 49,483 Amortization 5,598
22,800 3,689 — 32,087 Adjusted
EBITDA (non-GAAP basis) $ 184,230 $ 89,829 $ 66,375
$ (15,119 ) $ 325,315
Thirteen weeks ended
Mar. 30, 2014: Consolidated Broadcasting Digital Publishing
Corporate Total
Net income attributable to Gannett Co.,
Inc. (GAAP basis)
$ 59,159 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 $ 23,824 $ 42,988 $ (17,367 ) $ 203,994 Workforce
restructuring — — 3,465 — 3,465 Other transformation costs 9,756
— 9,544 — 19,300 Adjusted
operating income (non-GAAP basis) 164,305 23,824 55,997 (17,367 )
226,759 Depreciation 11,697 4,553 23,260 5,254 44,764 Adjusted
amortization (non-GAAP basis) 5,741 3,735 3,787
— 13,263 Adjusted EBITDA (non-GAAP basis) $
181,743 $ 32,112 $ 83,044 $ (12,113 ) $
284,786
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 weeks ended Mar. 29, 2015
Net cash flow from operating activities $ 145,464 Purchase
of property, plant and equipment (19,121 ) Payments for investments
(5,000 ) Proceeds from investments 7,883 Free cash flow $
129,226
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
Mar. 29, 2015 Mar. 30, 2014 Mar. 29, 2015 Mar. 30, 2014
Income before taxes (per Table 4) $ 188,007 $ 122,089 $ 175,144 $
165,254 Noncontrolling interests (per Table 1) (14,590 ) (10,430 )
(14,590 ) (10,430 ) Income before taxes attributable to Gannett
Co., Inc. $ 173,417 $ 111,659 $ 160,554 $
154,824 Provision for income taxes (per Table 4) $
60,523 $ 52,500 $ 47,789 $ 46,400 Effective tax rate 34.9 %
47.0 % 29.8 % 30.0 %
NON-GAAP FINANCIAL
INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 8 A
reconciliation of the company's revenues and expenses on an as
reported basis to a pro forma basis is below:
Thirteen
weeks ended Mar. 30, 2014: Gannett Special Pro forma Gannett
(as reported) items (a) adjustments (b) pro forma
Broadcasting operating revenue: Local/national $ 257,371 $ —
$ 9,646 $ 267,017 Political 9,976 — 535 10,511 Retransmission
87,468 — 1,698 89,166 Other 27,453 — 925
28,378
Total broadcasting operating revenue 382,268 —
12,804 395,072
Broadcasting operating expenses 227,719
(9,756 ) 10,709 228,672
Broadcasting
operating income $ 154,549 $ 9,756 $ 2,095
$ 166,400 Gannett Special Pro forma Gannett
(as reported) items (a) adjustments (c) pro forma
Digital
operating revenue $ 179,735 $ — $ 122,697 $ 302,432
Digital
operating expenses 155,911 — 116,736
272,647
Digital operating income $ 23,824 $ —
$ 5,961 $ 29,785 Gannett Special Pro
forma Gannett (as reported) items (a) adjustments (d) pro forma
Publishing operating revenue: Advertising $ 501,300 $
— $ (16,297 ) $ 485,003 Circulation 282,076 — (98 ) 281,978 Other
58,687 — (5,867 ) 52,820
Total publishing
operating revenue 842,063 — (22,262 ) 819,801
Publishing
operating expenses 799,075 (13,009 ) (23,337 ) 762,729
Publishing operating income $ 42,988 $ 13,009
$ 1,075 $ 57,072 Gannett Special
Pro forma Gannett (as reported) items (a) adjustments (e) pro forma
Intersegment elimination operating revenue $ — $ — $
(19,667 ) $ (19,667 )
Intersegment elimination operating
expenses — — (19,667 ) (19,667 )
Intersegment
elimination operating income $ — $ — $ — $
—
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 8 (continued)
Gannett Special Pro forma Gannett (as reported) items (a)
adjustments (f) pro forma
Company-wide operating
revenue $ 1,404,066 $ — $ 93,572 $ 1,497,638
Company-wide
operating expenses 1,200,072 (22,765 ) 84,441
1,261,748
Company-wide operating income $ 203,994 $
22,765 $ 9,131 $ 235,890
(a)
See reconciliation of special items in
Table 5.
(b)
The pro forma adjustments include
additions to revenues and expenses as if the third quarter 2014
acquisition of six London Broadcasting Television stations had
occurred on the first day of 2014.
(c)
The pro forma adjustments include
additions to revenue and expenses for the acquisition of Classified
Ventures on October 1, 2014 as if it had occurred on the first day
of 2014. The pro forma adjustment reflects the addition of revenue
amortization for certain unfavorable contracts and amortization for
definite-lived intangible assets. Beginning in the fourth quarter
of 2014, we began reporting an intersegment elimination with the
acquisition of Classified Ventures. In addition, prior quarter
intersegment eliminations that were previously reported within the
Publishing and Digital segments were adjusted on a pro forma basis
to the new intersegment elimination line.
(d)
The pro forma adjustments include a
decrease of revenue and expense for Apartments.com, which was sold
by Classified Ventures in the second quarter of 2014. Pro forma
adjustments also include a decrease of revenue and expense related
to the sale of a printing press in the second quarter of 2014, the
shutdown of USA Weekend in the fourth quarter of 2014 and the sale
of the Gannett Healthcare Group on December 29, 2014. The above
adjustments reflect the impact of these dispositions as if they
occurred on the first day of 2014. Beginning in the fourth quarter
of 2014, we began reporting an intersegment elimination with the
acquisition of Classified Ventures. In addition, prior quarter
intersegment eliminations that were previously reported within the
Publishing and Digital segments were adjusted on a pro forma basis
to the new intersegment elimination line.
(e)
Beginning in the fourth quarter of 2014,
we began reporting an intersegment elimination with the acquisition
of Classified Ventures. Pro forma adjustments include intersegment
eliminations between Classified Ventures and the company's
newspapers and TV stations. In addition, prior quarter intersegment
eliminations that were previously reported within the Publishing
and Digital segments were adjusted on a pro forma basis to the new
intersegment line.
(f)
The pro forma adjustments include all the
pro forma adjustments discussed above.
Gannett Co., Inc.For investor inquiries, contact:Jeffrey
HeinzVice President, Investor
Relations703-854-6917jheinz@gannett.comorFor
media inquiries, contact:Jeremy GainesVice President, Corporate
Communications703-854-6049jmgaines@gannett.com