Gannett Co., Inc. (NYSE: GCI) ("Gannett" or "company" or "we")
today reported fourth quarter 2016 results of operations. Robert J.
Dickey, president and chief executive officer, said "We are pleased
to end the year on a high note with both revenues and adjusted
EBITDA meaningfully improved from the third quarter and exceeding
the company's expectations as a result of accelerating digital
revenue trends and excellent operational management. 2016 was an
important year for Gannett. We acquired and integrated businesses
with annual revenues of approximately $800 million, advanced our
efforts to drive the company towards a more digital future, and
invested in new and promising technologies for advertisers and
consumers in key areas such as VR, mobile and video."
Recent highlights include:
- Net income of $24.6 million; adjusted
EBITDA of $127.0 million, an increase of $0.7 million from the
prior year
- National digital advertising revenue up
19.1% (16.4% excluding acquisitions)
- Accelerating total digital advertising
revenue trends led by mobile (up 43%) and video (up 37%)
- USA TODAY4 organic revenue growth of
1.4% (digital growth offsetting print declines)
- Local U.S. markets reported digital
revenue growth of 7.1% (excluding acquisitions)
- Digital-only subscriptions grew 71.1%;
digital-only plus Sunday grew 62.4%, topping 200,000 for the first
time
- Repurchased 3.75 million common shares
at an average cost of $8.71 per share
Operating revenues for the fourth quarter were $867.0 million
compared to $739.3 million in the prior year fourth quarter, an
increase of $127.7 million or 17.3%. The increase in revenue was
primarily attributable to acquisitions1 and continued momentum in
national digital advertising revenues. Revenue increases were
partially offset by ongoing declines in print advertising and
circulation demand. On a same-store basis2, operating revenues
declined 7.7%. Further, adjusting for the year ago reclassification
of certain customer credits, operating revenues declined 8.8%.
Net income for the fourth quarter was $24.6 million including
$33.4 million of after-tax restructuring, acquisition, severance,
asset impairment, facility consolidation and other related costs.
Approximately $18.7 million of these charges were non-cash asset
impairments and facility consolidation charges. Adjusted EBITDA for
the quarter was $127.0 million, an increase of $0.7 million
compared to $126.3 million in the prior year. The improvement in
adjusted EBITDA was a result of contributions from acquired
businesses1, ongoing operating efficiencies, increases in national
digital advertising revenues, and the impact of approximately $8.8
million of favorable changes in certain insurance reserves. These
gains were partially offset by declines in print advertising and
$3.0 million due to unfavorable foreign currency exchange rate
changes.
Publishing Segment
Operating revenues in the publishing segment were $790.4
million, an increase of $54.8 million or 7.5% compared to the prior
year fourth quarter. Excluding $16.3 million of unfavorable foreign
currency exchange rate changes and $6.7 million of selected exited
operations, revenues increased $77.8 million, or 10.7%. This
increase primarily reflects contributions from acquisitions1, a
1.4% increase in organic USA TODAY4 revenues and improved digital
performance in local U.S. markets. These increases were partially
offset by a 15.3% reduction in print advertising in the U.S. and a
14.2% reduction in print advertising in the U.K. On a same-store
basis2, publishing segment revenues were down 7.4%. Further,
adjusting for the prior year reclassification of certain customer
credits, revenues declined 8.5%, a modest sequential improvement
from the 8.7% decline in the third quarter of 2016.
Digital advertising revenues of $110.8 million were up 14.4%
compared to the prior year quarter, due primarily to acquisitions1,
improved local performance in the U.S. and strong growth at the USA
TODAY4. Excluding acquisitions1 and the impact of a 38.7% reduction
in the employment category, digital advertising revenues increased
11.9%. The increase was driven by a 41.5% increase in combined
video and mobile display and a 21.1% increase in other sources of
digital advertising revenues such as digital marketing services and
affiliates.
Adjusted EBITDA for the quarter was $148.5 million compared to
$156.7 million in the prior year fourth quarter, a decrease of $8.2
million, including $3.0 million in unfavorable foreign currency
exchange rate changes. Pressure from declines in print advertising
and circulation revenues in the U.S. and U.K. were only partially
offset by contributions from acquired businesses1, ongoing cost
reductions and efficiency gains in operating expenses, and
increases in national digital advertising revenues.
ReachLocal Segment
Operating revenues for the quarter were $75.2 million and
adjusted EBITDA was $0.9 million. Revenues and adjusted EBITDA were
reduced by the $2.1 million estimated fair value adjustment to
deferred revenue obligations required by U.S. GAAP. Excluding this
adjustment, ReachLocal continues to perform in line with our
expectations. ReachLocal is planning its entry into several Gannett
markets, which should begin during the second quarter. ReachLocal's
differentiated service model continues to drive strong customer
retention rates, in fact in the fourth quarter ReachLocal
experienced a 76% quarter over quarter growth rate in the company's
Facebook-focused media solution called ReachSocialTM Ads.
Cash Flow
Net cash flow from operating activities for the quarter was
approximately $53.0 million. Capital expenditures were
approximately $15.0 million, primarily for capacity maintenance,
technology investments and real estate projects. During the
quarter, the company paid dividends of $18.1 million and
repurchased 3.75 million common shares at an average cost of
approximately $8.71 per share.
At the end of the fourth quarter of 2016, the company had a cash
balance of $114.3 million and a balance on its revolving line of
credit of $400.0 million, or net debt of $285.7 million. The
company's revolving line of credit was reduced by $15 million
shortly after the end of the fiscal year 2016. The company's
underfunded pension liabilities were $739.3 million, compared to
$612.4 million as of December 27, 2015, an increase of $126.9
million. This increase is primarily a result of the decrease in
discount rate applied to the U.S. and U.K. plan liabilities.
Outlook
The company is currently in the process of finalizing its 2017
budget. Preliminarily, for 2017, the company expects a mid-single
digit increase in reported revenues and a slight decrease in
adjusted EBITDA margins, however we expect to be able to provide a
more detailed outlook for 2017 sometime during the first
quarter.
1 Acquired businesses in the last twelve months include Journal
Media Group, Inc. ("JMG"), and North Jersey Media Group ("NJMG"),
(both part of the Publishing segment) and ReachLocal, Inc.
("ReachLocal")
2 Same store revenues exclude the impact of acquisitions,
foreign currency exchange rate changes, and selected exited
operations
3 Estimated fair value adjustment to deferred revenue related to
the acquisition of ReachLocal as required by U.S. GAAP
4 USA TODAY publication and its digital affiliates
* * * *
Conference Call Information
The company will hold a conference call at 10:00 a.m. ET today
to discuss these results. 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 855-462-1958 and
international callers should dial 503-343-6635 at least 10 minutes
prior to the scheduled start of the call. The confirmation code for
the conference call is 51933520.
Forward Looking Statements
This press release contains certain forward-looking statements
regarding business strategies, market potential, future financial
performance and other matters. Forward-looking statements include
all statements that are not historical facts. 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 and are not guarantees
of future performance. Where, in any forward-looking statement, an
expectation or belief as to future results or events is expressed,
such expectation or belief is based on the current plans and
expectations of our management and expressed in good faith and
believed to have a reasonable basis, but there can be no assurance
that the expectation or belief will result or be achieved or
accomplished. Whether or not any such forward-looking statements
are in fact achieved will depend on future events, some of which
are beyond our control.
The matters discussed in these forward-looking statements are
subject to a number of risks, trends, uncertainties and other
factors that could cause actual results to differ materially from
those projected, anticipated or implied in the forward-looking
statements. These factors include, among other things:
- macroeconomic trends and
conditions;
- an accelerated decline in general print
readership and/or advertiser patterns as a result of competitive
alternative media or other factors;
- an inability to adapt to technological
changes or grow our digital businesses;
- risks associated with the operation of
an increasingly digital business, such as rapid technological
changes, frequent new product introductions, declines in web
traffic levels, technical failures and proliferation of ad blocking
technologies;
- competitive pressures in the markets in
which we operate;
- an increase in newsprint costs over the
levels anticipated;
- potential disruption or interruption of
our IT systems due to accidents, extraordinary weather events,
civil unrest, political events, terrorism or cyber security
attacks;
- variability in the exchange rate
relative to the U.S. dollar of currencies in foreign jurisdictions
in which we operate;
- risks and uncertainties related to
strategic acquisitions or investments, including distraction of
management attention, incurrence of additional debt, integration
challenges, and failure to realize expected benefits or synergies
or to operate businesses effectively following acquisitions;
- risks and uncertainties associated with
our ReachLocal segment, including its significant reliance on
Google for media purchases, its international operations and its
ability to develop and gain market acceptance for new products or
services;
- our ability to protect our intellectual
property or defend successfully against infringement claims;
- our ability to attract and retain
employees;
- labor relations, including, but not
limited to, labor disputes which may cause business interruptions,
revenue declines or increased labor costs;
- risks associated with our underfunded
pension plans;
- adverse outcomes in litigation or
proceedings with governmental authorities or administrative
agencies, or changes in the regulatory environment, any of which
could encumber or impede our efforts to improve operating results
or the value of assets;
- our inability to engage in certain
corporate transactions following the separation;
- volatility in financial and credit
markets which could affect the value of retirement plan assets and
our ability to raise funds through debt or equity issuances and
otherwise affect our ability to access the credit and capital
markets at the times and in the amounts needed and on acceptable
terms; and
- other uncertainties relating to general
economic, political, business, industry, regulatory and market
conditions.
A further description of these and other important risks,
trends, uncertainties and other factors is provided in the
company’s filings with the U.S. Securities and Exchange Commission,
including the company’s annual report on Form 10-K for fiscal year
2015 and subsequent quarterly reports on Form 10-Q. 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 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 more than 100 million people
monthly. With more than 120 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.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share
amounts)
Table No. 1 Three months
ended Twelve months ended Dec. 25, 2016 Dec. 27, 2015 Dec. 25, 2016
Dec. 27, 2015
Operating revenues: Advertising $
513,687 $ 419,543 $ 1,703,795 $ 1,611,445 Circulation 297,804
257,729 1,133,676 1,060,118 Other 55,503 62,072
210,003 213,449
Total operating revenues
866,994 739,344 3,047,474 2,885,012
Operating expenses: Cost of sales and operating
expenses 546,302 471,996 1,969,853 1,866,729 Selling, general and
administrative expenses 218,381 178,774 807,398 707,022
Depreciation 34,203 22,239 118,092 95,916 Amortization 6,911 1,533
14,872 11,636 Facility consolidation and asset impairment charges
25,011 26,289 58,171 34,278
Total
operating expenses 830,808 700,831 2,968,386
2,715,581
Operating income 36,186
38,513 79,088 169,431
Non-operating
income (expense): Equity income in unconsolidated investees,
net 675 570 1,519 11,981 Interest expense (4,282 ) (2,802 ) (12,791
) (4,562 ) Other non-operating items 1,576 (2,657 ) (1,388 )
17,125
Total non-operating income (expense) (2,031 )
(4,889 ) (12,660 ) 24,544
Income before income
taxes 34,155 33,624 66,428 193,975 Provision for income taxes
9,561 13,273 13,718 47,884
Net
income $ 24,594 $ 20,351 $ 52,710 $
146,091
Earnings per share - basic $ 0.21 $
0.18 $ 0.45 $ 1.27
Earnings per share - diluted $ 0.21 $
0.17 $ 0.44 $ 1.25
Weighted average number of common
shares outstanding: Basic 114,688 115,555 116,018 115,165
Diluted 117,053 118,694 118,625 116,695
SEGMENT
INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 2 Three months
ended Twelve months ended Dec. 25, 2016 Dec. 27, 2015 Dec. 25, 2016
Dec. 27, 2015
Operating revenues: Publishing $
790,474 $ 735,588 $ 2,933,095 $ 2,881,218 ReachLocal 75,167 —
110,144 — Corporate and Other 1,353 3,756 4,235
3,794 Total $ 866,994 $ 739,344 $
3,047,474 $ 2,885,012
Adjusted EBITDA:
Publishing $ 148,540 $ 156,660 $ 449,769 $ 468,999 ReachLocal 892 —
(5,852 ) — Corporate and Other (22,417 ) (30,313 ) (94,304 )
(77,484 ) Total $ 127,015 $ 126,347 $ 349,613
$ 391,515
Depreciation and amortization:
Publishing $ 28,583 $ 22,032 $ 105,102 $ 103,184 ReachLocal 8,312 —
12,236 — Corporate and Other 4,219 1,740 15,626
4,368 Total $ 41,114 $ 23,772 $ 132,964
$ 107,552
Capital expenditures:
Publishing $ 9,234 $ 19,169 $ 34,324 $ 43,650 ReachLocal 2,927 —
4,123 — Corporate and Other 2,886 3,865 21,601
10,329 Total $ 15,047 $ 23,034 $ 60,048
$ 53,979
REVENUE DETAIL
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 3 Three
months ended Dec. 25, 2016 Dec. 27, 2015 % Change
Reported revenue $ 866,994 $ 739,344 17.3 % Acquired revenue
(207,271 ) — Currency impact 16,334 — Exited operations —
(6,657 )
Same store revenue $ 676,057 $
732,687 (7.7 %)
Reported advertising revenue $
513,687 $ 419,543 22.4 % Acquired revenue (147,752 ) — Currency
impact 10,465 —
Same store advertising
revenue $ 376,400 $ 419,543 (10.3 %)
Reported circulation revenue $ 297,804 $ 257,729 15.5 %
Acquired revenue (43,616 ) — Currency impact 4,309 —
Same store circulation revenue $ 258,497 $
257,729 0.3 %
Table No. 4
Three months ended Dec. 25, 2016 Dec. 27, 2015 % Change
Publishing revenue detail Print advertising $ 334,414 $
322,682 3.6 % Digital advertising 110,832 96,861 14.4
% Total advertising 445,246 419,543 6.1 % Circulation 297,804
257,729 15.5 % Other 47,424 58,316 (18.7 %) Total
Publishing revenue $ 790,474 $ 735,588 7.5 %
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 defines adjusted EBITDA, which may not
be comparable to a similarly titled measure reported by other
companies, as net income before (1) income taxes, (2) interest
expense, (3) equity income, (4) other non-operating
items, (5) severance related charges (including early
retirement programs), (6) acquisition related expenses (gains)
(7) facility consolidation and asset impairment charges, (8)
other items (including certain litigation expenses and
multi-employer pension withdrawals) (9) depreciation and
(10) amortization. The most directly comparable GAAP financial
measure is net income.
Adjusted diluted earnings per share ("EPS") is a non-GAAP
financial performance measure that the company believes offers a
useful view of the overall operation of our business. The company
defines adjusted EPS, which may not be comparable to a similarly
titled measure reported by other companies, as EPS before
tax-effected (1) severance related charges (including early
retirement programs), (2) facility consolidation
and asset impairment charges (3) acquisition related
expenses (gains) and (4) other items (including certain litigation
expenses and multi-employer pension withdrawals). The tax impact on
these non-GAAP tax deductible adjustments is based on the estimated
statutory tax rate for the United Kingdom of 20% and the United
States of 38.7%. In addition, tax is adjusted for the impact of
nondeductible acquisition costs. The most directly comparable GAAP
financial measure is diluted EPS.
Adjusted net income is a non-GAAP financial performance measure
that the company uses for the purpose of calculating adjusted EPS.
Adjusted net income is defined as net income before the adjustments
we apply in calculating adjusted EPS, as described above. We
believe that presenting adjusted net income is useful to enable
investors to understand how we calculate adjusted EPS, which
provides a useful view of the overall operation of the company's
business. 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. The company defines free cash
flow, which may not be comparable to a similarly titled measure
reported by other companies, as net cash flow from (used for)
operating activities as reported on the statement of cash flows
less capital expenditures, which results in a figure representing
free cash flow available for use in operations, additional
investments and returns to shareholders. The most directly
comparable GAAP financial measure is net cash from operating
activities.
The company uses non-GAAP financial measures for purposes of
evaluating its 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
Table No. 5 Three months
ended Dec. 25, 2016 Publishing ReachLocal
Corporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 24,594 Provision for income taxes
9,561 Equity income in unconsolidated investees, net (675 )
Interest expense 4,282 Other non-operating items (1,576 ) Operating
income (loss) (GAAP basis) $ 74,714 $ (7,498 ) $ (31,030 ) $ 36,186
Severance related charges 16,531 78 86 16,695 Acquisition related
items 641 — 2,987 3,628 Facility consolidation and asset impairment
charges 25,011 — — 25,011 Other items 3,060 — 1,321 4,381
Depreciation 27,283 2,701 4,219 34,203 Amortization 1,300
5,611 — 6,911 Adjusted EBITDA (non-GAAP basis)
$ 148,540 $ 892 $ (22,417 ) $ 127,015
Three months ended Dec. 27, 2015 Publishing
ReachLocal
Corporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 20,351 Provision for income taxes
13,273 Equity income in unconsolidated investees, net (570 )
Interest expense 2,802 Other non-operating items 2,657
Operating income (loss) (GAAP basis) $ 74,125 $ — $ (35,612 ) $
38,513 Early retirement program 20,149 — 3,559 23,708 Severance
related charges 4,799 — — 4,799 Facility consolidation and asset
impairment charges 26,289 — — 26,289 Other items 9,266 — — 9,266
Depreciation 20,499 — 1,740 22,239 Amortization 1,533 —
— 1,533 Adjusted EBITDA (non-GAAP basis) $
156,660 $ — $ (30,313 ) $ 126,347
NON-GAAP FINANCIAL INFORMATION ADJUSTED EBITDA
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5 (continued)
Twelve months ended Dec. 25, 2016 Publishing ReachLocal
Corporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 52,710 Provision for income taxes
13,718 Equity income in unconsolidated investees, net (1,519 )
Interest expense 12,791 Other non-operating items 1,388
Operating income (loss) (GAAP basis) $ 241,059 $ (18,728 ) $
(143,243 ) $ 79,088 Early retirement program 837 — — 837 Severance
related charges 41,963 640 86 42,689 Acquisition related items 777
— 31,906 32,683 Facility consolidation and asset impairment charges
58,171 — — 58,171 Other items 1,860 — 1,321 3,181 Depreciation
99,004 3,462 15,626 118,092 Amortization 6,098 8,774
— 14,872 Adjusted EBITDA (non-GAAP basis) $ 449,769
$ (5,852 ) $ (94,304 ) $ 349,613
Twelve months ended Dec. 27, 2015 Publishing ReachLocal
Corporate andOther
ConsolidatedTotal
Net income (GAAP basis) $ 146,091 Provision for income taxes
47,884 Equity income in unconsolidated investees, net (11,981 )
Interest expense 4,562 Other non-operating items (17,125 )
Operating income (loss) (GAAP basis) $ 256,592 $ — $ (87,161 ) $
169,431 Early retirement program 36,772 — 5,309 42,081 Severance
related charges 30,185 — — 30,185 Facility consolidation and asset
impairment charges 34,278 — — 34,278 Other items 7,988 — — 7,988
Depreciation 91,548 — 4,368 95,916 Amortization 11,636 —
— 11,636 Adjusted EBITDA (non-GAAP basis) $
468,999 $ — $ (77,484 ) $ 391,515
NON-GAAP FINANCIAL INFORMATION ADJUSTED DILUTED EPS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share
amounts)
Table No. 6 Three months
ended Twelve months ended Dec. 25, 2016 Dec. 27, 2015 Dec. 25, 2016
Dec. 27, 2015 Early retirement program $ — $ 24,808 $ 837 $
43,181 Severance related charges 16,695 4,799 42,689 30,185
Acquisition related items 3,628 1,628 32,683 (17,971 ) Facility
consolidation and asset impairment charges 30,193 26,197 64,504
34,186 Other items 3,060 9,266 1,860 7,988
Pretax impact 53,576 66,698 142,573 97,569 Income tax impact
of above items (20,196 ) (24,236 ) (50,609 ) (34,573 ) Impact of
items affecting comparability on net income $ 33,380 $
42,462 $ 91,964 $ 62,996 Net income
(GAAP basis) $ 24,594 $ 20,351 $ 52,710 $ 146,091 Impact of items
affecting comparability on net income 33,380 42,462
91,964 62,996 Adjusted net income (non-GAAP basis) $
57,974 $ 62,813 $ 144,674 $ 209,087
Earnings per share - diluted (GAAP basis) $ 0.21 $ 0.17 $
0.44 $ 1.25 Impact of items affecting comparability on net income
0.29 0.36 0.78 0.54 Adjusted earnings
per share - diluted (non-GAAP basis) $ 0.50 $ 0.53 $
1.22 $ 1.79 Diluted weighted average number of
common shares outstanding 117,053 118,694 118,625 116,695
NON-GAAP FINANCIAL INFORMATION FREE CASH FLOW
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 7
Three months endedDec. 25, 2016
Twelve months endedDec. 25, 2016 Net cash flow from
operating activities (GAAP basis) $ 53,005 $ 158,221 Capital
expenditures (15,047 ) (60,048 ) Free cash flow (non-GAAP basis) $
37,958 $ 98,173
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170209005486/en/
Gannett Co., Inc.For investor inquiries, contact:Michael P.
DickersonVice President, Investor Relations and Real
Estate703-854-6185mdickerson@gannett.comorFor media inquiries,
contact:Amber AllmanVice President, Corporate Events &
Communications703-854-5358aallman@gannett.com
New Gannett (NYSE:GCI)
Historical Stock Chart
From Aug 2024 to Sep 2024
New Gannett (NYSE:GCI)
Historical Stock Chart
From Sep 2023 to Sep 2024