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Share Name | Share Symbol | Market | Type |
---|---|---|---|
New Gannett Co Inc | NYSE:GCI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.11 | 3.59% | 3.17 | 3.2199 | 3.03 | 3.13 | 3,085,614 | 01:00:00 |
Revenue trends improved
GAAP Diluted Earnings Per Share of $0.26, Adjusted Diluted Earnings Per Share of $0.29
Higher Operating Margin and Adjusted EBITDA Margin
Gannett Co., Inc. (NYSE: GCI) ("Gannett" or "company" or "we") today reported first quarter 2016 results of operations.
Recent highlights include:
Robert J. Dickey, president and chief executive officer, said, "We are pleased to report strong first quarter results led by ongoing efforts to improve our cost position. The company was successful in accelerating certain printing and distribution improvements into the quarter, generating several million dollars in savings sooner in 2016 than were expected. With the completion of the acquisition of JMG, we are beginning to integrate these two great companies, leverage the best of each of our journalistic talents, and look for additional combined cost improvement opportunities. In addition, programs put in place to improve revenue trends are beginning to show positive results. These programs have been focused on maximizing viewability and duration of ad play for advertisers, improving circulation retention, and maximizing national digital advertising opportunities and programmatic ad sales."
Beginning with the period post-spin from the company's former parent and in conjunction with the execution of new agreements with the company's former parent and certain of its affiliates, the company began reporting wholesale fees associated with sales of certain third party (principally Cars.com and CareerBuilder) digital advertising products and services on a net basis, as a reduction of the associated digital advertising revenues, rather than in operating expenses within our consolidated statements of operations. This change has no impact on reported operating income, operating cash flows, net income or earnings per share.
Operating revenues for the quarter were $659.4 million compared to $717.4 million in the prior year, a decrease of $58.0 million or 8.1%. This decline is partially due to approximately $14.6 million related to the reporting of sales of certain third party (principally Cars.com and CareerBuilder) digital advertising products on a net basis (as described above), $5.4 million of unfavorable foreign currency exchange rate changes and $5.4 million of selected exited operations and other items. Excluding these items revenues declined $32.7 million, or 4.6%, compared to the first quarter of 2015, representing a sequential improvement from the 4.9% decline on the same basis in the fourth quarter of 2015 compared to the fourth quarter of 2014. This decline was primarily attributable to ongoing advertiser demand shifts and the impact of an unfavorable affiliate agreement change with CareerBuilder and its negative impact on classified employment revenues. These declines were partially offset by positive revenue trends in Gannett's digital products, particularly national digital advertising which increased 17.5%, as well as approximately $23.8 million of revenues from acquired businesses.
Operating income for the first quarter was $47.5 million and included $4.9 million of pre-tax restructuring, severance and other items. Adjusted EBITDA for the quarter was $77.6 million compared to $71.1 million in the prior year, an increase of $6.5 million or 9.1%. The increase in first quarter adjusted EBITDA was due principally to ongoing cost reductions and efficiency gains in operating expenses, increases in digital revenues and operating results from businesses acquired during the second quarter of 2015, partially offset by $7.3 million reduced EBITDA contribution resulting from changes to the CareerBuilder affiliate agreement in August 2015, $2.9 million of incremental pension costs, $1.3 million in unfavorable foreign exchange rate changes and overall declines in print advertising revenues.
Acquisitions and Integration
On April 8, 2016, Gannett completed its acquisition of Journal Media Group in which Gannett acquired all of the outstanding common stock of JMG for approximately $260 million, net of cash acquired. The company financed the transaction by borrowing $250 million from its revolving credit facility and available cash on hand.
In its first full year, the former JMG operations are expected to add approximately $450 million to Gannett's annual revenues and approximately $60 million in adjusted EBITDA, through a combination of their solid base business and certain quickly attainable synergies. The company expects approximately $25 million of additional synergy opportunities in the second year.
Cash Flow
Net cash flow from operating activities for the quarter was $15.8 million which was impacted by seasonally low revenues and annual incentive compensation payments. In addition, the company made its full year contribution to the Gannett Retirement Plan of $25 million. Capital expenditures were $10.2 million, primarily for technology investments and real estate efficiency projects. Also, the company paid dividends of $18.5 million. The resulting cash balance at the end of the first quarter was $190.9 million.
At the end of the first quarter of 2016, the underfunded pension liability was $549.8 million, compared to $612.4 million as of December 27, 2015, a reduction of $62.6 million or 10.2%. This reduction is principally the result of the full year cash contribution of $25 million made to the Gannett Retirement Plan and the effect of foreign exchange rate changes.
Outlook
"Without taking into consideration the impact of the JMG acquisition, the company reiterates its expectations for 2016. Specifically, we expect full year revenue trends to improve over 2015 driven largely by growth in digital. We expect advertising revenues to decline in the 5%-7% range and circulation revenues to decline in the 2%-4% range. EBITDA margins will likely stay under pressure in the short term as we continue to offset incremental public company costs, the earnings impact of declining revenues, higher non-cash pension expense, and lower contributions from CareerBuilder, with ongoing cost efficiency programs and growth in digital revenue," Dickey concluded. With the recent completion of the acquisition of JMG, the company expects to update its 2016 guidance to include JMG in connection with the reporting of second quarter results.
Additionally for the full year 2016, without the impact of the acquisition of JMG, the company expects the following:
• Capital expenditures of $50-$60 million, not including real estate transactions.
• Depreciation and amortization of approximately $110 million.
• Effective tax rate of 31-33%.
• Recurring non-cash pension expense increase of approximately $12 million.
* * * *
Conference Call Information
As previously announced, the company will hold an earnings conference call at 1:00 p.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 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 91123471.
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:
A further description of these and other important risks, trends, uncertainties and other factors are discussed 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. 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.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOMEGannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 1 Three months ended Mar. 27, 2016 Mar. 29, 2015 Operating revenues: Advertising $ 351,221 $ 397,266 Circulation 262,703 271,258 Other 45,444 48,836 Total operating revenues 659,368 717,360 Operating expenses: Cost of sales and operating expenses 419,763 479,844 Selling, general and administrative expenses 166,325 178,329 Depreciation 23,959 24,428 Amortization 1,318 3,399 Facility consolidation and asset impairment charges 544 1,549 Total operating expenses 611,909 687,549 Operating income 47,459 29,811 Non-operating income (expense): Equity income in unconsolidated investees, net 1,141 6,307 Other non-operating items (4,223 ) (1,458 ) Total non-operating income (expense) (3,082 ) 4,849 Income before income taxes 44,377 34,660 Provision for income taxes 13,085 1,413 Net income $ 31,292 $ 33,247 Earnings per share - basic $ 0.27 $ 0.29 Earnings per share - diluted $ 0.26 $ 0.29 Weighted average number of common shares outstanding: Basic 116,311 114,959 Diluted 118,656 114,959USE 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) other transformation items, (7) asset impairment charges, (8) depreciation and (9) 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) other transformation items, (3) asset impairment charges and (4) acquisition related expenses (gains). 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%. The most directly comparable GAAP financial measure is diluted EPS.
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 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 EBITDAGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 2 Three months ended Mar. 27, 2016 Mar. 29, 2015 Net income (GAAP basis) $ 31,292 $ 33,247 Provision for income taxes 13,085 1,413 Equity income in unconsolidated investees, net (1,141 ) (6,307 ) Other non-operating items 4,223 1,458 Operating income (GAAP basis) 47,459 29,811 Early retirement program 1,079 — Severance related charges 2,617 11,945 Acquisition related expenses 1,851 — Other transformation items (656 ) 1,549 Adjusted operating income (non-GAAP basis) 52,350 43,305 Depreciation 23,959 24,428 Amortization 1,318 3,399 Adjusted EBITDA (non-GAAP basis) $ 77,627 $ 71,132 NON-GAAP FINANCIAL INFORMATION ADJUSTED DILUTED EPSGannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 3 Three months ended Mar. 27, 2016 Mar. 29, 2015 Early retirement program $ 1,079 $ — Severance related charges 2,617 11,945 Acquisition related expenses 1,851 — Other transformation items (593 ) 1,549 Pretax impact 4,954 13,494 Income tax impact of above items (1,793 ) (4,739 ) Impact of items affecting comparability on net income $ 3,161 $ 8,755 Net income (GAAP basis) $ 31,292 $ 33,247 Impact of items affecting comparability on net income 3,161 8,755 Adjusted net income (non-GAAP basis) $ 34,453 $ 42,002 Earnings per share - diluted (GAAP basis) $ 0.26 $ 0.29 Impact of items affecting comparability on net income 0.03 0.08 Adjusted earnings per share - diluted (non-GAAP basis) $ 0.29 $ 0.37 Diluted weighted average number of common shares outstanding 118,656 114,959 NON-GAAP FINANCIAL INFORMATION FREE CASH FLOWGannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 4Three months endedMar. 27, 2016
Net cash flow from operating activities (GAAP basis) $ 15,839 Capital expenditures (10,153 ) Free cash flow (non-GAAP basis) $ 5,686
View source version on businesswire.com: http://www.businesswire.com/news/home/20160427005516/en/
Gannett Co., Inc.For investor inquiries, contact:Michael P. DickersonVice President, Investor Relations703-854-6185mdickerson@gannett.comorFor media inquiries, contact:Amber AllmanVice President, Corporate Communications703-854-5358aallman@gannett.com
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