Revenues of $727 million
Diluted Earnings per Share of $0.46
Non-GAAP Adjusted EBITDA of $97
million
Gannett Co., Inc. (NYSE: GCI) ("Gannett" or "Company" or "we")
today reported results of operations derived from the consolidated
financial statements and accounting records of the Company's former
Parent and presented as if the Company were a separate entity.
Recent highlights include:
- Completed the spin from its former
Parent, regular way trading commenced on June 29, 2015.
- Completed the acquisition of the
remaining 59.4% in the Texas-New Mexico Newspaper Partnership in
the U.S. and the acquisition of Romanes Media Group in the U.K.,
resulting in annual revenues of approximately $100 million over the
next twelve months.
- Achieved 92 million unique domestic
digital visitors, a 16% increase over the prior year.
- Increased cost reduction estimate from
$57 million to $67 million. Target run-rate to be reached in first
half of 2016.
- Hired high-profile digital and print
advertising executive as Gannett's first-ever Chief Revenue
Officer.
- Declared first-ever dividend of $0.16
per share payable to shareholders of record as of September 4, 2015
and approved $150 million share buyback program.
Robert J. Dickey, President and Chief Executive Officer, said
"Gannett is laser focused on capturing the demographic led shift
from print to digital by leveraging our industry-leading digital
capabilities. We also are focused on providing greater value to our
advertising customers through the introduction of innovative tools,
such as the recently announced Gravity for Mobile, and the
appointment of our first Chief Revenue Officer, Kevin Gentzel. Our
competitive advantages, coupled with our newly refined content and
advertising strategies, consolidation strategy and healthy balance
sheet, position us to reverse recent revenue trends over time and
deliver value to shareholders."
Operating revenues for the second quarter were $727.1 million
compared to $796.5 million in the second quarter of 2014, a
decrease of $69.4 million or 8.7%. This decline is partially due to
approximately $12.0 million of prior year revenues related to
exited businesses as well as $10.6 million of unfavorable foreign
currency exchange rate changes. Before the impact of exited
businesses and foreign currency, revenues were down $46.8 million,
or 6.0%. This decline in revenues is primarily attributable to
ongoing advertiser demand shifts, partially offset by positive
revenue trends in Gannett's digital products as well as $9.3
million of revenues from businesses acquired late in the quarter.
Before the impact of exited businesses, foreign currency and
acquisitions, revenues were down 7.2%.
Adjusted EBITDA for the quarter was $97.0 million compared to
$125.3 million in the second quarter of 2014, a decrease of $28.3
million or 22.6%. The decline in second quarter adjusted EBITDA was
primarily due to declines in print advertising revenues and $6
million of increased Cars.com affiliate agreement costs, partially
offset by cost reductions and efficiency gains in operating
expenses as well as increases in digital revenues.
During the quarter the Company took several actions resulting in
special charges of $20.5 million. Approximately $15.4 million, or
75.1%, was for workforce restructuring, while the remaining $5.1
million, or 24.9%, was for asset impairments and other related
charges. "We are aggressively taking actions to improve the
efficiency of our operations. This is an ongoing effort to help
offset the declines the industry is experiencing in print
advertising revenues, improve earnings and cash flows and continue
to leverage faster growing parts of our business, particularly
digital. In addition, we have identified an additional $10 million
of efficiency opportunities that will be put in place in the second
half of 2015, resulting in total expected savings from our current
actions of approximately $67 million. We expect to achieve this
run-rate during the first half of 2016 and provide improvements to
our results in the second half of 2015, particularly late in the
year," Dickey continued.
Acquisitions
In late May, the Company acquired the Romanes Media Group.
Located in the United Kingdom, Romanes includes one daily and 28
weekly publications and their associated websites. The transaction
was completed by Gannett subsidiary, Newsquest.
In June, the Company completed the acquisition of the remaining
59.4% interest in the Texas-New Mexico Newspapers Partnership that
it did not own from Digital First Media. The deal was completed
through the assignment of Gannett’s interest in the California
Newspapers Partnership and additional cash consideration, and
resulted in the Company recognizing a pre-tax gain on equity
investment of $21.8 million. As a result, Gannett owns 100% of the
Texas-New Mexico Newspapers Partnership and no longer has any
ownership interest or continuing involvement in California
Newspapers Partnership. The organizations acquired include:
- Texas -- El Paso Times;
- New Mexico -- Alamogordo Daily News;
Carlsbad Current-Argus; The Daily Times in Farmington; Deming
Headlight; Las Cruces Sun-News; Silver City Sun-News;
- Pennsylvania -- Chambersburg Public
Opinion; Hanover Evening Sun; Lebanon Daily News; and the York
Daily Record.
Combined, these two transactions are expected to contribute more
than $100 million in revenues to the consolidated results of the
Company over the next twelve months. The Company is actively
working through a robust pipeline of additional acquisition
opportunities.
Cash Flow
Net cash flow used for operating activities was $51.1 million in
the quarter and reflects pre-spin pension contributions of $109.3
million, $93.5 million of which was a one-time contribution to the
Gannett Retirement Plan (GRP). The Company will make additional
pension contributions of $25 million per year to the GRP for the
next five years, and $15 million in year six. The Company does not
expect to make any additional pension contributions to the GRP or
other U.S. plans in the second half of 2015. Negative free cash
flow totaled $65.0 million, again reflecting the pension
contributions. Before the impact of pension contributions, free
cash flows would have been $44.3 million. Capital expenditures in
the second quarter were $14.0 million, primarily for technology
investments and real estate efficiency projects.
On July 28, 2015, the Company's Board of Directors declared its
first-ever quarterly cash dividend of $0.16 per common share. The
dividend will be payable on October 1, 2015 to shareholders of
record on September 4, 2015.
Outlook
"Gannett owns the best overall set of local and national assets
in the industry in both the U.S. and the U.K. and we continue to
leverage these assets and drive incremental efficiency in our base
business. The actions we have put in place recently will result in
approximately $67 million in reduced operating expenses by the
first half of next year and will have an impact on the second half
of 2015. Our continued strong cash flow easily supports our
dividend and share buyback plan, and in fact our Board yesterday
approved our first ever dividend of $0.16 per share, or $0.64 on an
annualized basis, and is supportive of our current $150 million
share buyback program. We are committed to ongoing returns of
capital to our shareholders," Dickey concluded.
For the second half of 2015, the Company expects the
following:
- Capital expenditures of $50 - $55
million, including $10 million one-time spin-related and TNP
expenditures
- Pension contributions of $6 - $8
million, to its U.K. plans
- Depreciation and amortization of
approximately $54 million
* * * *
Conference Call Information
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 investor site,
http://investors.gannett.com/, or
listen-only conference lines. U.S. callers should dial
1-866-293-1610 and international callers should dial 1-412-455-6204
at least 10 minutes prior to the scheduled start of the call. The
confirmation code for the conference call is 87083213.
Forward Looking Statements
Certain statements in this press release may be forward looking
in nature or constitute “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995. The words
“believe,” “expect,” “estimate,” “could,” “should,” “intend,”
“may,” “plan,” “seek,” “anticipate,” “project” and similar
expressions, among others, generally identify “forward-looking
statements,” which speak only as of the date the statements were
made. The matters discussed in these forward-looking statements are
subject to a number of risks, trends and uncertainties that could
cause actual results to differ materially from those projected,
anticipated or implied in the forward-looking statements. A number
of those risks, trends and uncertainties are discussed in the
Company’s filings with the U.S. Securities and Exchange Commission,
including the Company’s registration statement on Form 10. Any
forward-looking statements should be evaluated in light of these
important risk factors. The Company is not responsible for updating
or revising any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by
law.
Non-GAAP Financial Measures
This press release also contains a discussion of certain
non-GAAP financial measures that the Company presents in order to
allow investors and analysts to measure, analyze and compare its
financial condition and results of operations in a meaningful and
consistent manner. A reconciliation of these non-GAAP financial
measures to the most directly comparable GAAP measures can be found
in the tables accompanying this press release.
About Gannett
Gannett Co., Inc. (NYSE: GCI) is a next-generation media
company committed to strengthening communities across our network.
Through trusted, compelling content and unmatched local-to-national
reach, Gannett touches the lives of nearly 100 million people
monthly. With more than 110 markets internationally, it is known
for Pulitzer Prize-winning newsrooms, powerhouse brands such as USA
TODAY and specialized media properties. To connect with us, visit
www.gannett.com.
CONDENSED COMBINED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share
amounts)
Table No. 1 Three months ended Six
months ended June 28, 2015 June 29, 2014 June 28, 2015 June 29,
2014
Operating revenues: Advertising $ 410,487 $ 463,976 $
807,753 $ 916,416 Circulation 265,904 275,482 537,162 555,330 Other
50,681 57,064 99,517 113,909
Total
operating revenues 727,072 796,522 1,444,432
1,585,655
Operating expenses: Cost of sales
and operating expenses 468,531 509,742 948,375 1,024,210 Selling,
general and administrative expenses 176,884 182,105 355,213 370,470
Depreciation 23,958 24,403 48,386 48,842 Amortization of intangible
assets 3,608 3,475 7,007 6,987 Facility consolidation and asset
impairment charges 5,097 9,479 6,646 19,023
Total operating expenses 678,078 729,204
1,365,627 1,469,532
Operating income 48,994
67,318 78,805 116,123
Non-operating
income: Equity income in unconsolidated investees, net 4,495
3,083 10,802 7,258 Other non-operating items 22,895 488
21,437 679
Total non-operating income 27,390
3,571 32,239 7,937
Income before
income taxes 76,384 70,889 111,044 124,060 Provision for income
taxes 23,057 18,780 24,470 30,772
Net
income $ 53,327 $ 52,109 $ 86,574 $ 93,288
Earnings per share - basic and diluted $ 0.46 $ 0.45
$ 0.75 $ 0.81
Weighted average number of common shares
outstanding: Basic and diluted 114,959 114,959 114,959 114,959
REVENUE COMPARISONS
Gannett Co., Inc. and Subsidiaries
Unaudited
Table No. 2 Second quarter
2015 year-over-year comparisons:
Domestic
Publishing
Newsquest
(in pounds)
Total
(constant currency)
Total Retail (10.6 %) 2.3 % (12.4 %) (13.4 %) National (13.9
%) (2.9 %) (12.8 %) (13.6 %) Classified (5.3 %) (8.0 %) (6.1 %)
(8.3 %) Total advertising (9.3 %) (3.8 %) (10.1 %) (11.5 %)
Circulation (2.4 %) (1.1 %) (2.5 %) (3.5 %) Other revenue (12.8 %)
8.5 % (9.7 %) (11.0 %) Total (7.0 %) (2.2 %) (7.4 %) (8.7 %)
Year-to-date 2015 year-over-year comparisons:
Domestic
Publishing
Newsquest
(in pounds)
Total
(constant currency)
Total Retail (9.6 %) 0.7 % (12.2 %) (13.2 %) National (18.0
%) (1.9 %) (16.5 %) (17.2 %) Classified (5.5 %) (7.2 %) (6.0 %)
(8.1 %) Total advertising (9.5 %) (3.9 %) (10.5 %) (11.9 %)
Circulation (2.1 %) (2.8 %) (2.4 %) (3.3 %) Other revenue (14.4 %)
7.5 % (11.4 %) (12.6 %) Total (7.1 %) (2.8 %) (7.7 %) (8.9 %)
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.
Adjusted EBITDA is a non-GAAP financial performance measure that
the Company believes offers a useful view of the overall operation
of our business. The Company considers adjusted EBITDA, which may
not be comparable to a similarly titled measure reported by other
companies, to be defined as net income before (1) income
taxes, (2) equity income, (3) other non-operating items,
(4) workforce restructuring, (5) other transformation
items, (6) asset impairment charges, (7) depreciation and
(8) amortization. The most directly comparable GAAP financial
measure is net income.
Free cash flow is a non-GAAP liquidity measure that adjusts our
reported GAAP results for items that we believe are critical to the
ongoing success of our business, which results in a free cash flow
figure available for use in operations, additional investment and
return to shareholders. The Company considers free cash flow, which
may not be comparable to a similarly titled measure reported by
other companies, to be defined as net cash flow from (used for)
operating activities as reported on the statement of cash flows
less capital expenditures. The most directly comparable GAAP
financial measure is net cash from operating activities.
The Company uses non-GAAP financial performance measures for
purposes of evaluating our performance and liquidity. Therefore,
the Company believes that each of the non-GAAP measures presented
provides useful information to investors by allowing them to view
our businesses through the eyes of our management and Board of
Directors, facilitating comparison of results across historical
periods, and providing a focus on the underlying ongoing operating
performance of our business. Many of our peer group companies
present similar non-GAAP measures to better facilitate industry
comparisons.
NON-GAAP FINANCIAL INFORMATION ADJUSTED EBITDA
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 3 Three months
ended Six months ended June 28, 2015 June 29, 2014 June 28, 2015
June 29, 2014 Net income (GAAP basis) $ 53,327 $ 52,109 $
86,574 $ 93,288 Provision for income taxes 23,057 18,780 24,470
30,772 Equity income in unconsolidated investees, net (4,495 )
(3,083 ) (10,802 ) (7,258 ) Other non-operating items (22,895 )
(488 ) (21,437 ) (679 ) Operating income (GAAP basis) 48,994 67,318
78,805 116,123 Workforce restructuring 15,369 20,655 27,314 24,120
Other transformation items 1,479 9,479 3,028 19,023 Asset
impairment charges 3,618 — 3,618 —
Adjusted operating income (non-GAAP basis) 69,460 97,452 112,765
159,266 Depreciation 23,958 24,403 48,386 48,842 Amortization 3,608
3,475 7,007 6,987 Adjusted EBITDA
(non-GAAP basis) $ 97,026 $ 125,330 $ 168,158
$ 215,095
NON-GAAP FINANCIAL INFORMATION
FREE CASH FLOW
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 4 Three months endedJune 28,
2015 Six months endedJune 28, 2015 Net cash flow from (used
for) operating activities $ (51,058 ) $ 26,695 Capital expenditures
(13,959 ) (20,617 ) Free cash flow $ (65,017 ) $ 6,078
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version on businesswire.com: http://www.businesswire.com/news/home/20150729005832/en/
Gannett Co., Inc.For media inquiries, contact:Amber AllmanVice
President, Corporate
Communications703-854-5358aallman@gannett.comorFor investor
inquiries, contact:Michael P. DickersonVice President, Investor
Relations703-854-6185mdickerson@gannett.com
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