EX-9.01 2 q22013earningsrelease.htm EXHIBIT Q2 2013 Earnings Release


FOR IMMEDIATE RELEASE
Monday, July 22, 2013


Gannett Co., Inc. Reports Non-GAAP Earnings per Diluted Share of $0.58, Increasing 4% Over Prior Year; Earnings per Diluted Share of $0.48 on GAAP basis

Highlights for the quarter include the following:

Agreement to acquire Belo Corp.

Local domestic circulation revenue up 11 percent; fifth consecutive quarter of growth

Broadcasting revenue of $212 million, 3 percent higher than prior year

Company-wide digital revenue growth of 20 percent reaching almost 30 percent of total revenue

New $300 million, two-year share repurchase program replacing current program; existing dividend program will continue


McLEAN, VA - Gannett Co., Inc. (NYSE: GCI) reported non-GAAP earnings per diluted share of $0.58 for the second quarter compared to the second quarter a year ago, an increase of 4 percent. Results were driven by higher circulation revenue reflecting the impact of the all access content subscription model as well as revenue increases in the Broadcasting and Digital segments.

During the quarter, the company also entered into a definitive merger agreement with Belo Corp. (Belo)under which Gannett will acquire all outstanding shares of Belo for $13.75 per share in cash, or approximately $1.5 billion, plus the assumption of $715 million in existing debt for an enterprise value of approximately $2.2 billion. The transaction has been unanimously approved by the boards of directors of both companies. It is expected to close by the end of 2013, subject to antitrust approval, Federal Communications Commission (FCC) approval, approval by holders of two-thirds of the voting power of Belo shares, and customary closing conditions. Belo’s directors and executive officers, who collectively own approximately 42 percent of the voting power of Belo’s outstanding shares, have entered into voting and support agreements to vote their shares in favor of the transaction with Gannett.

Gracia Martore, president and chief executive officer, said, “We are very pleased to report solid revenue growth in our Broadcasting and Digital segments as well as our fourth consecutive quarter of year-over-year circulation revenue growth overall in our Publishing segment. Earnings per share were higher in the quarter as our strategic initiatives, particularly our content subscription model and digital offerings, continued to gain momentum and positively impact our results.”

Martore added, “Our long-term strategic plan - with a focus on both investment and execution - continues to position us for success well into the future. Gannett's pending acquisition of Belo, and finding new ways to get content and offerings to the right user at the right time, are steps in our long-term strategy. We are accelerating our transformation into the 'New Gannett' every day.”

(more)









CONTINUING OPERATIONS

Operating revenues for the company totaled $1.30 billion in the second quarter, relatively unchanged from the second quarter last year. A significant increase in circulation revenue and higher revenue in the Broadcasting and Digital segments was offset by a decline in advertising revenue, a net reduction of almost $10 million in political revenues and an unfavorable exchange rate.

Net income attributable to Gannett in the second quarter was $113.6 million. Net income attributable to Gannett on a non-GAAP basis (which excludes the special items) was over 2 percent higher than the second quarter last year and totaled $135.1 million.

Special items in the second quarter of 2013 totaled $35.7 million ($21.5 million after tax or $0.10 per share) and include workforce restructuring charges and transformation costs. Results for the second quarter of 2012 included $20.3 million of special items ($0.05 per share) impacting operating income.

Earnings per diluted share, on a GAAP (generally accepted accounting principles) basis were $0.48 for the second quarter. Second quarter earnings per diluted share excluding special items were $0.58 compared to $0.56 for the same quarter in 2012, almost 4 percent higher.

The table below details second quarter results on a GAAP and non-GAAP basis.

Dollars in thousands, except per share amounts
 
GAAP Measure
 
Special Items
 
Non-GAAP Measure
 
Thirteen
weeks ended
Jun. 30, 2013
 
Workforce
restructuring
 
Transformation
costs
 
Thirteen
weeks ended
Jun. 30, 2013
Operating income
$
202,882

 
$
21,727

 
$
4,498

 
$
229,107

Total non-operating (expense) income
(36,541
)
 

 
9,479

 
(27,062
)
Income before income taxes
166,341

 
21,727

 
13,977

 
202,045

Provision for income taxes
39,600

 
8,600

 
5,600

 
53,800

Net income
126,741

 
13,127

 
8,377

 
148,245

Net income attributable to Gannett Co., Inc.
113,620

 
13,127

 
8,377

 
135,124

Net income per share - diluted
$
0.48

 
$
0.06

 
$
0.04

 
$
0.58


Additional information on the special items can be found in the “Use of Non-GAAP Information” section.

Operating income totaled $202.9 million in the quarter. On a non-GAAP basis, operating income was $229.1 million compared to $236.8 million in the second quarter a year ago. Operating cash flow in the quarter (a non-GAAP term defined as operating income plus special items, depreciation and amortization) totaled $276.9 million.

Operating expenses including special charges were $1.10 billion in the quarter less than 1 percent higher than the second quarter in 2012. Expense increases in the Digital segment associated with revenue growth as well as higher strategic initiative investments were partially offset by the impact of cost control and efficiency efforts. On a non-GAAP basis, operating expenses, which exclude special items and include the impact of the investments in strategic initiatives, were $1.07 billion, relatively unchanged from the second quarter last year. Corporate expenses on a non-GAAP basis were $2.3 million higher in the quarter reflecting an increase in stock compensation expense as well as a small asset sale gain in the second quarter last year.

(more)








In addition to the agreement to acquire Belo, the company announced that it will continue its existing dividend payment program and extended its share buyback program replacing its existing remaining authorization with a new $300 million authorization expected to be used over the next two years. During the second quarter, the company purchased approximately 0.4 million shares for $8.6 million. The relatively low volume of share repurchases was due to the blackout period associated with the Belo announcement. Shares repurchased year-to-date totaled 2.1 million for $41.4 million.

PUBLISHING

Publishing segment revenues in the quarter totaled $904.2 million, a 1.7 percent decline from $920.3 million in the second quarter a year ago. On a constant currency basis, publishing segment revenues were 1.4 percent lower as a substantial increase in circulation revenue was more than offset by lower advertising revenue. Domestic publishing revenues were about flat in the second quarter compared to the second quarter last year.

The continued positive impact of the all access content subscription model resulted in a 6.0 percent increase in total circulation revenue compared to the second quarter last year. Circulation revenue growth at local domestic publishing operations was up 11.4 percent, the fifth consecutive quarter of circulation revenue growth.

Second quarter advertising revenues totaled $562.5 million, a decline of 5.3 percent compared to $594.3 million in 2012's second quarter. The relatively slow pace of the economic recoveries in the U.S. and UK as well as secular challenges continue to impact advertising demand. National advertising comparisons improved relative to the first quarter. Domestic publishing advertising year-over-year comparisons were in line with the first quarter, as national advertising comparisons improved significantly and all the major classified advertising category comparisons were better than the first quarter. A summary of the year-over-year percent change for the company's advertising categories can be found on Table 5.

Publishing segment digital revenues were 49.8 percent higher in the quarter. The all access content subscription model and digital advertising and marketing solutions all contributed to the growth. Digital revenues at all of our publishing operations were up in the quarter. Local domestic publishing operations were 56.9 percent higher, USA TODAY and its associated businesses increased 24.1 percent and Newsquest's digital revenues were up 8.1 percent, in pounds.

Publishing segment operating expenses, which include a net increase of $11.4 million in special items as well as $10.0 million in strategic initiative investment, were $819.0 million in the quarter, relatively unchanged from $816.1 million in the second quarter a year ago. Non-GAAP Publishing segment operating expenses declined 1.1 percent to $792.8 million compared to $801.3 million in the second quarter of 2012 despite the absence of $5.3 million in furlough savings that impacted prior quarter results.

Publishing segment operating income totaled $85.2 million including special items and strategic initiative investments. Publishing segment operating income on a non-GAAP basis was $111.4 million in the quarter while operating cash flow totaled $138.3 million.
BROADCASTING

Broadcasting revenues (which include Captivate) were 3.2 percent higher in the quarter and totaled $212.0 million. The increase reflects significant growth in retransmission revenue and an increase in core advertising revenue mitigated, in part, by lower political revenues.


(more)





Television revenues were $204.8 compared to $197.7 million in the second quarter last year, an increase of 3.6 percent. Retransmission revenues were 62.3 percent higher while core advertising revenues were up 1.5 percent. The percentage increase in television revenues would have been 9.1 percent excluding the net reduction of $9.9 million of political spending year-over-year, in line with guidance provided in April.

Based on current trends and reflecting the significant political and Summer Olympic revenues achieved in the third quarter last year, we expect the percentage decrease in total television revenues for the third quarter of 2013 to be in the mid-teens compared to the third quarter of 2012. Television revenues in the third quarter of 2012 benefited from approximately $75 million in political advertising and spending related to the Summer Olympics. Excluding the incremental impact of political and Olympic spending, total television revenues in the third quarter this year compared to the third quarter last year are expected to be up in the mid-teens.

Broadcasting segment operating expenses were $113.9 million in the quarter, up 2.8 percent compared to $110.8 million in the second quarter last year. The increase reflects higher costs associated with strategic initiatives. Operating income was 3.7 percent higher in the quarter and totaled $98.1 million while operating cash flow was up 3.3 percent to $105.1 million.
DIGITAL

Operating revenues in the Digital segment were $186.5 million compared to $181.3 million in the second quarter a year ago, an increase of 2.9 percent reflecting primarily solid revenue growth at CareerBuilder. Digital segment operating expenses were 4.4 percent higher and totaled $151.2 million due to an increase in CareerBuilder expenses in part reflecting new acquisitions. Operating income totaled $35.3 million while operating cash flow was $44.7 million.

Digital revenues company-wide, including the Digital segment and all digital revenues generated by the other business segments totaled $374.3 million compared to $311.6 million in the second quarter a year ago. The 20.1 percent increase reflects the positive impact of the all access content subscription model as well as digital advertising and digital marketing services revenue growth.

At the end of the quarter, Gannett had about 120 domestic web sites affiliated with its local publishing and television markets and USA TODAY. In June, Gannett's consolidated domestic Internet audience share increased approximately 17 percent to 61.2 million unique visitors reaching 27.3 percent of the Internet audience, according to comScore Media Metrix. USATODAY.com is one of the most popular news sites on the Web and the USA TODAY app is a top news app with approximately 19 million downloads including those across iPad, iPhone, Android, Windows and Kindle Fire. USA TODAY's mobile and video traffic continue to grow. Mobile visitors in June were 135 percent higher than June last year while video plays were up 335 percent. Newsquest is also an Internet leader in the UK where its network of web sites attracted 100.7 million monthly page impressions from approximately 12.5 million unique users in June 2013. CareerBuilder's unique visitors in June averaged 19.4 million.

NON-OPERATING ITEMS

The company's equity earnings include its share of operating results from unconsolidated investees including the California Newspapers Partnership, Texas-New Mexico Newspapers Partnership, Tucson newspaper partnership and other online/digital businesses including Classified Ventures.

Equity income in unconsolidated investees totaled $9.4 million in the quarter compared to $8.7 million in the second quarter in 2012. The 8.8 percent increase reflects improved results at Classified Ventures and the newspaper partnerships.


(more)





Interest expense totaled $36.2 million in the quarter, relatively unchanged from the second quarter last year.

Net cash flow from operating activities was $187.7 million while free cash flow (a non-GAAP measure) totaled $172.8 million in the quarter. The balance of long-term debt was $1.36 billion and total cash was $161.5 million at the end of the quarter.

* * * *

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 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.
In this earnings report, the company discusses non-GAAP financial performance measures that exclude from its reported GAAP results the impact of special items consisting of workforce restructuring charges, transformation costs, pension settlement charges, a non-cash impairment charge, a currency-related loss recognized in other non-operating items and certain credits to its income tax provision. The company believes that such expenses and credits are not indicative of normal, ongoing operations and their inclusion in results makes for more difficult comparisons between periods and with peer group companies. Workforce restructuring expenses primarily relate to incremental expenses the company has incurred to consolidate or outsource production processes and centralize other functions. These expenses include payroll and related benefit costs. Transformation costs include incremental expenses incurred by the company to execute on its transformation and growth plan. Transformation costs also include incremental expenses associated with optimizing Gannett's real estate portfolio including accelerated depreciation and charges to reduce the carrying value of assets held for sale to fair value less costs to sell. The pension settlement charges result from the acceleration of expense related to the timing of certain pension payments. Other non-operating items include a non-cash impairment charge that was recorded to reduce the book value of an investment accounted for under the equity method to fair value, as the business underlying this asset had experienced significant and sustained unfavorable operating results. It also includes a currency loss related to the weakening of the British pound associated with the downgrade of the UK sovereign credit rating. First quarter 2013 results also included credits to the income tax provision related to reserve releases as a result of federal exam resolution and lapse of a statute of limitation.
The company also discusses operating cash flow, a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. This non-GAAP measure is calculated by adding amounts associated with the special expense items described above, as well as depreciation and amortization, to operating income as reported on a GAAP basis. 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” and voluntary pension contributions, net of related tax benefit. 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

(more)





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 6 through 11 attached to this news release.

As previously announced, the company will hold an earnings conference call at 10:00 a.m. ET today. The call can be accessed via a live webcast through the company's web site, www.gannett.com, or listen-only conference lines. U.S. callers should dial 1-888-684-1259 and international callers should dial 913-312-1517 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 2627382. To access the replay, dial 1-888-203-1112 in the U.S. International callers should use the number 719-457-0820. The confirmation code for the replay is 2627382. Materials related to the call will be available through the Investor Relations section of the company's web site Monday morning.

About Gannett
Gannett Co., Inc. is an international media and marketing solutions company that informs and engages more than 100 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.

# # #


For investor inquiries, contact:
 
For media inquiries, contact:
Jeffrey Heinz
 
Jeremy Gaines
Vice President, Investor Relations
 
Vice President, Corporate Communications
703-854-6917
 
703-854-6049
jheinz@gannett.com
 
jmgaines@gannett.com







CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
 
 
 
 
 
 
 
Table No. 1
 
 
 
 
 
 
 
 
Thirteen
weeks ended
Jun. 30, 2013
 
Thirteen
weeks ended
Jun. 24, 2012
 
% Increase
(Decrease)
Net operating revenues:
 
 
 
 
 
 
Publishing advertising
 
$
562,476

 
$
594,262

 
(5.3
)
Publishing circulation
 
279,655

 
263,938

 
6.0

Broadcasting
 
211,962

 
205,381

 
3.2

Digital
 
186,506

 
181,326

 
2.9

All other
 
62,100

 
62,133

 
(0.1
)
Total
 
1,302,699

 
1,307,040

 
(0.3
)
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
Cost of sales and operating expenses, exclusive of depreciation
 
726,869

 
720,889

 
0.8

Selling, general and administrative expenses, exclusive of depreciation
 
320,615

 
316,301

 
1.4

Depreciation
 
38,467

 
40,157

 
(4.2
)
Amortization of intangible assets
 
9,368

 
8,078

 
16.0

Facility consolidation charges
 
4,498

 
5,097

 
(11.8
)
Total
 
1,099,817

 
1,090,522

 
0.9

Operating income
 
202,882

 
216,518

 
(6.3
)
 
 
 
 
 
 
 
Non-operating (expense) income:
 
 
 
 
 
 
Equity income in unconsolidated investees, net
 
9,424

 
8,663

 
8.8

Interest expense
 
(36,174
)
 
(36,142
)
 
0.1

Other non-operating items
 
(9,791
)
 
(2,280
)
 
***

Total
 
(36,541
)
 
(29,759
)
 
22.8

 
 
 
 
 
 
 
Income before income taxes
 
166,341

 
186,759

 
(10.9
)
Provision for income taxes
 
39,600

 
51,200

 
(22.7
)
Net income
 
126,741

 
135,559

 
(6.5
)
Net income attributable to noncontrolling interests
 
(13,121
)
 
(15,670
)
 
(16.3
)
Net income attributable to Gannett Co., Inc.
 
$
113,620

 
$
119,889

 
(5.2
)
 
 
 
 
 
 
 
Net income per share - basic
 
$
0.50

 
$
0.51

 
(2.0
)
Net income per share - diluted
 
$
0.48

 
$
0.51

 
(5.9
)
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
Basic
 
228,837

 
233,334

 
(1.9
)
Diluted
 
234,636

 
237,136

 
(1.1
)
 
 
 
 
 
 
 
Dividends declared per share
 
$
0.20

 
$
0.20

 







CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
 
 
 
 
 
 
 
Table No. 2
 
 
 
 
 
 
 
 
Twenty-six
weeks ended
Jun. 30, 2013
 
Twenty-six
weeks ended
Jun. 24, 2012
 
% Increase
(Decrease)
Net operating revenues:
 
 
 
 
 
 
Publishing advertising
 
$
1,088,975

 
$
1,145,700

 
(5.0
)
Publishing circulation
 
565,627

 
527,274

 
7.3

Broadcasting
 
403,542

 
381,554

 
5.8

Digital
 
361,428

 
349,678

 
3.4

All other
 
120,862

 
121,421

 
(0.5
)
Total
 
2,540,434

 
2,525,627

 
0.6

 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
Cost of sales and operating expenses, exclusive of depreciation
 
1,446,593

 
1,443,129

 
0.2

Selling, general and administrative expenses, exclusive of depreciation
 
634,730

 
624,620

 
1.6

Depreciation
 
77,393

 
79,860

 
(3.1
)
Amortization of intangible assets
 
18,496

 
15,957

 
15.9

Facility consolidation charges
 
9,283

 
9,885

 
(6.1
)
Total
 
2,186,495

 
2,173,451

 
0.6

Operating income
 
353,939

 
352,176

 
0.5

 
 
 
 
 
 
 
Non-operating (expense) income:
 
 
 
 
 
 
Equity income in unconsolidated investees, net
 
17,218

 
12,975

 
32.7

Interest expense
 
(71,579
)
 
(75,713
)
 
(5.5
)
Other non-operating items
 
(11,374
)
 
(245
)
 
***

Total
 
(65,735
)
 
(62,983
)
 
4.4

 
 
 
 
 
 
 
Income before income taxes
 
288,204

 
289,193

 
(0.3
)
Provision for income taxes
 
45,000

 
77,800

 
(42.2
)
Net income
 
243,204

 
211,393

 
15.0

Net income attributable to noncontrolling interests
 
(25,019
)
 
(23,281
)
 
7.5

Net income attributable to Gannett Co., Inc.
 
$
218,185

 
$
188,112

 
16.0

 
 
 
 
 
 
 
Net income per share - basic
 
$
0.95

 
$
0.80

 
18.8

Net income per share - diluted
 
$
0.93

 
$
0.79

 
17.7

 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
Basic
 
229,116

 
234,807

 
(2.4
)
Diluted
 
234,866

 
238,774

 
(1.6
)
 
 
 
 
 
 
 
Dividends declared per share
 
$
0.40

 
$
0.40

 







BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
 
 
 
 
 
 
 
Table No. 3
 
 
 
 
 
 
 
 
Thirteen
weeks ended
Jun. 30, 2013
 
Thirteen
weeks ended
Jun. 24, 2012
 
% Increase
(Decrease)
Net operating revenues:
 
 
 
 
 
 
Publishing
 
$
904,231

 
$
920,333

 
(1.7
)
Broadcasting
 
211,962

 
205,381

 
3.2

Digital
 
186,506

 
181,326

 
2.9

Total
 
$
1,302,699

 
$
1,307,040

 
(0.3
)
 
 
 
 
 
 
 
Operating income (net of depreciation, amortization and facility consolidation charges):
 
 
 
 
 
 
Publishing
 
$
85,192

 
$
104,211

 
(18.3
)
Broadcasting
 
98,092

 
94,586

 
3.7

Digital
 
35,277

 
36,531

 
(3.4
)
Corporate
 
(15,679
)
 
(18,810
)
 
(16.6
)
Total
 
$
202,882

 
$
216,518

 
(6.3
)
 
 
 
 
 
 
 
Depreciation, amortization and facility consolidation charges:
 
 
 
 
Publishing
 
$
31,415

 
$
33,736

 
(6.9
)
Broadcasting
 
6,974

 
7,124

 
(2.1
)
Digital
 
9,383

 
8,330

 
12.6

Corporate
 
4,561

 
4,142

 
10.1

Total
 
$
52,333

 
$
53,332

 
(1.9
)
 
 
 
 
 
 
 
Operating cash flow:
 
 
 
 
 
 
Publishing
 
$
116,607

 
$
137,947

 
(15.5
)
Broadcasting
 
105,066

 
101,710

 
3.3

Digital
 
44,660

 
44,861

 
(0.4
)
Corporate
 
(11,118
)
 
(14,668
)
 
(24.2
)
Total
 
$
255,215

 
$
269,850

 
(5.4
)

Operating cash flow represents operating income from each of the company's business segments plus related depreciation, amortization and facility consolidation charges. See Table No. 10 for reconciliation of amounts to the Condensed Consolidated Statements of Income.






BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
 
 
 
 
 
 
 
Table No. 4
 
 
 
 
 
 
 
 
Twenty-six
weeks ended
Jun. 30, 2013
 
Twenty-six
weeks ended
Jun. 24, 2012
 
% Increase
(Decrease)
Net operating revenues:
 
 
 
 
 
 
Publishing
 
$
1,775,464

 
$
1,794,395

 
(1.1
)
Broadcasting
 
403,542

 
381,554

 
5.8

Digital
 
361,428

 
349,678

 
3.4

Total
 
$
2,540,434

 
$
2,525,627

 
0.6

 
 
 
 
 
 
 
Operating income (net of depreciation, amortization and facility consolidation charges):
 
 
 
 
 
 
Publishing
 
$
145,329

 
$
166,251

 
(12.6
)
Broadcasting
 
181,768

 
167,201

 
8.7

Digital
 
58,881

 
52,794

 
11.5

Corporate
 
(32,039
)
 
(34,070
)
 
(6.0
)
Total
 
$
353,939

 
$
352,176

 
0.5

 
 
 
 
 
 
 
Depreciation, amortization and facility consolidation charges:
 
 
 
 
Publishing
 
$
63,651

 
$
66,950

 
(4.9
)
Broadcasting
 
13,909

 
14,234

 
(2.3
)
Digital
 
18,490

 
16,235

 
13.9

Corporate
 
9,122

 
8,283

 
10.1

Total
 
$
105,172

 
$
105,702

 
(0.5
)
 
 
 
 
 
 
 
Operating cash flow:
 
 
 
 
 
 
Publishing
 
$
208,980

 
$
233,201

 
(10.4
)
Broadcasting
 
195,677

 
181,435

 
7.8

Digital
 
77,371

 
69,029

 
12.1

Corporate
 
(22,917
)
 
(25,787
)
 
(11.1
)
Total
 
$
459,111

 
$
457,878

 
0.3


Operating cash flow represents operating income from each of the company's business segments plus related depreciation, amortization and facility consolidation charges. See Table No. 10 for reconciliation of amounts to the Condensed Consolidated Statements of Income.






PUBLISHING SEGMENT REVENUE COMPARISONS
Gannett Co., Inc. and Subsidiaries
Unaudited
 
 
 
 
 
 
 
 
Table No. 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The percentage changes for the Publishing segment advertising and classified revenue categories were as follows:
 
 
 
 
 
 
 
 
Second quarter 2013 year-over-year advertising comparisons:
 
 
 
 




U.S.
Publishing
(including USA TODAY)
 
Newsquest
(in pounds)
 
Total
Publishing
segment
(constant currency)
 
Total
Publishing
segment
 
 
 
 
 
 
 
 
Retail
(5.3%)
 
(7.5%)
 
(5.5%)
 
(5.8%)
National
2.1%
 
(31.1%)
 
(0.7%)
 
(1.0%)
Classified
(5.2%)
 
(8.9%)
 
(6.1%)
 
(6.8%)
Total advertising
(4.0%)
 
(10.5%)
 
(4.9%)
 
(5.3%)
 
 
 
 
 
 
 
 
Year-to-date 2013 year-over-year advertising comparisons:
 
 
 
 




U.S.
Publishing
(including USA TODAY)
 
Newsquest
(in pounds)
 
Total
Publishing
segment
(constant currency)
 
Total
Publishing
segment
 
 
 
 
 
 
 
 
Retail
(4.4%)
 
(4.8%)
 
(4.5%)
 
(4.7%)
National
(1.4%)
 
(19.5%)
 
(3.0%)
 
(3.1%)
Classified
(5.3%)
 
(7.4%)
 
(5.8%)
 
(6.3%)
Total advertising
(4.2%)
 
(7.7%)
 
(4.7%)
 
(5.0%)
 
 
 
 
 
 
 
 
Second quarter 2013 year-over-year classified comparisons:
 
 
 
 




U.S.
Publishing
(including USA TODAY)
 
Newsquest
(in pounds)
 
Total
Publishing
segment
(constant currency)
 
Total
Publishing
segment
 
 
 
 
 
 
 
 
Automotive
(0.8%)
 
(9.6%)
 
(1.9%)
 
(2.3%)
Employment
(8.6%)
 
(5.9%)
 
(7.8%)
 
(8.6%)
Real Estate
(3.2%)
 
(9.5%)
 
(5.6%)
 
(6.7%)
Legal
(7.9%)
 
—%
 
(7.9%)
 
(7.9%)
Other
(5.9%)
 
(10.4%)
 
(7.3%)
 
(8.3%)
Total classified
(5.2%)
 
(8.9%)
 
(6.1%)
 
(6.8%)
 
 
 
 
 
 
 
 
Year-to-date 2013 year-over-year classified comparisons:
 
 
 
 




U.S.
Publishing
(including USA TODAY)
 
Newsquest
(in pounds)
 
Total
Publishing
segment
(constant currency)
 
Total
Publishing
segment
 
 
 
 
 
 
 
 
Automotive
(1.9%)
 
(10.9%)
 
(3.1%)
 
(3.3%)
Employment
(8.7%)
 
(3.6%)
 
(7.2%)
 
(7.8%)
Real Estate
(3.9%)
 
(8.2%)
 
(5.5%)
 
(6.3%)
Legal
(8.4%)
 
—%
 
(8.4%)
 
(8.4%)
Other
(4.8%)
 
(8.5%)
 
(6.0%)
 
(6.7%)
Total classified
(5.3%)
 
(7.4%)
 
(5.8%)
 
(6.3%)







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. 6 through No. 11 reconcile these non-GAAP measures to the most directly comparable GAAP measure.
 
 
 
 
 
 
 
 
 
 
Table No. 6
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
 
 
Thirteen
weeks ended
Jun. 30, 2013
 
Workforce
restructuring
 
Transformation costs
 
Thirteen
weeks ended
Jun. 30, 2013
 
 
Cost of sales and operating expenses, exclusive of depreciation
$
726,869

 
$
(18,039
)
 
$

 
$
708,830

 


Selling, general and administrative expenses, exclusive of depreciation
320,615

 
(3,688
)
 

 
316,927

 


Facility consolidation charges
4,498

 

 
(4,498
)
 

 


Operating expenses
1,099,817

 
(21,727
)
 
(4,498
)
 
1,073,592

 


Operating income
202,882

 
21,727

 
4,498

 
229,107

 


Other non-operating items
(9,791
)
 

 
9,479

 
(312
)
 


Total non-operating (expense) income
(36,541
)
 

 
9,479

 
(27,062
)
 


Income before income taxes
166,341

 
21,727

 
13,977

 
202,045

 


Provision for income taxes
39,600

 
8,600

 
5,600

 
53,800

 


Net income
126,741

 
13,127

 
8,377

 
148,245

 


Net income attributable to Gannett Co., Inc.
113,620

 
13,127

 
8,377

 
135,124

 


Net income per share - diluted
$
0.48

 
$
0.06

 
$
0.04

 
$
0.58

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
Thirteen
weeks ended
Jun. 24, 2012
 
Workforce
restructuring
 
Transformation costs
 
Pension settlement charges
 
Thirteen
weeks ended
Jun. 24, 2012
Cost of sales and operating expenses, exclusive of depreciation
$
720,889

 
$
(8,156
)

$

 
$

 
$
712,733

Selling, general and administrative expenses, exclusive of depreciation
316,301

 
(1,580
)
 

 
(5,423
)
 
309,298

Facility consolidation charges
5,097

 

 
(5,097
)
 

 

Operating expenses
1,090,522

 
(9,736
)
 
(5,097
)
 
(5,423
)
 
1,070,266

Operating income
216,518

 
9,736

 
5,097

 
5,423

 
236,774

Income before income taxes
186,759

 
9,736

 
5,097

 
5,423

 
207,015

Provision for income taxes
51,200

 
3,900

 
2,000

 
2,200

 
59,300

Net income
135,559

 
5,836

 
3,097

 
3,223

 
147,715

Net income attributable to Gannett Co., Inc.
119,889

 
5,836

 
3,097

 
3,223

 
132,045

Net income per share - diluted (a)
$
0.51

 
$
0.02

 
$
0.01

 
$
0.01

 
$
0.56

 
 
 
 
 
 
 
 
 
 
(a) Total per share amount does not sum due to rounding.






NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
Table No. 7
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
Twenty-six
weeks ended
Jun. 30, 2013
 
Workforce
restructuring
 
Transformation costs
 
Other non-operating items
 
Special tax benefits
 
Twenty-six
weeks ended
Jun. 30, 2013
Cost of sales and operating expenses, exclusive of depreciation
$
1,446,593

 
$
(22,530
)
 
$

 
$

 
$

 
$
1,424,063

Selling, general and administrative expenses, exclusive of depreciation
634,730

 
(4,563
)
 

 

 

 
630,167

Facility consolidation charges
9,283

 

 
(9,283
)
 

 

 

Operating expenses
2,186,495

 
(27,093
)
 
(9,283
)
 

 

 
2,150,119

Operating income
353,939

 
27,093

 
9,283

 

 

 
390,315

Equity income in unconsolidated investees, net
17,218

 

 

 
731

 

 
17,949

Other non-operating items
(11,374
)
 

 
10,399

 
2,077

 

 
1,102

Total non-operating (expense) income
(65,735
)
 

 
10,399

 
2,808

 

 
(52,528
)
Income before income taxes
288,204

 
27,093

 
19,682

 
2,808

 

 
337,787

Provision for income taxes
45,000

 
10,700

 
7,800

 
300

 
27,800

 
91,600

Net income
243,204

 
16,393

 
11,882

 
2,508

 
(27,800
)
 
246,187

Net income attributable to Gannett Co., Inc.
218,185

 
16,393

 
11,882

 
2,508

 
(27,800
)
 
221,168

Net income per share - diluted
$
0.93

 
$
0.07

 
$
0.05

 
$
0.01

 
$
(0.12
)
 
$
0.94

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
 
Non-GAAP
Measure
 
 
 
Twenty-six
weeks ended
Jun. 24, 2012
 
Workforce
restructuring
 
Transformation costs
 
Pension settlement charges
 
Twenty-six
weeks ended
Jun. 24, 2012
 
 
Cost of sales and operating expenses, exclusive of depreciation
$
1,443,129

 
$
(22,064
)
 
$

 
$

 
$
1,421,065

 
 
Selling, general and administrative expenses, exclusive of depreciation
624,620

 
(3,961
)
 

 
(5,423
)
 
615,236

 
 
Facility consolidation charges
9,885

 

 
(9,885
)
 

 

 
 
Operating expenses
2,173,451

 
(26,025
)
 
(9,885
)
 
(5,423
)
 
2,132,118

 
 
Operating income
352,176

 
26,025

 
9,885

 
5,423

 
393,509

 
 
Income before income taxes
289,193

 
26,025

 
9,885

 
5,423

 
330,526

 
 
Provision for income taxes
77,800

 
10,500

 
3,900

 
2,200

 
94,400

 
 
Net income
211,393

 
15,525

 
5,985

 
3,223

 
236,126

 
 
Net income attributable to Gannett Co., Inc.
188,112

 
15,525

 
5,985

 
3,223

 
212,845

 
 
Net income per share - diluted (a)
$
0.79

 
$
0.07

 
$
0.03

 
$
0.01

 
$
0.89

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Total per share amount does not sum due to rounding.






NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
 
 
 
 
 
 
 
 
 
 
Table No. 8
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
 
 
Thirteen
weeks ended
Jun. 30, 2013
 
Workforce
restructuring
 
Transformation
costs
 
Thirteen
weeks ended
Jun. 30, 2013
 
 
Operating income:
 
 
 
 
 
 
 
 
 
Publishing
$
85,192

 
$
21,727

 
$
4,498

 
$
111,417

 
 
Broadcasting
98,092

 

 

 
98,092

 
 
Digital
35,277

 

 

 
35,277

 
 
Corporate
(15,679
)
 

 

 
(15,679
)
 
 
Total
$
202,882

 
$
21,727

 
$
4,498

 
$
229,107

 
 
 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and facility consolidation charges:
 
 
 
 
 
 
 
 
Publishing
$
31,415

 
$

 
$
(4,498
)
 
$
26,917

 
 
Broadcasting
6,974

 

 

 
6,974

 
 
Digital
9,383

 

 

 
9,383

 
 
Corporate
4,561

 

 

 
4,561

 
 
Total
$
52,333

 
$

 
$
(4,498
)
 
$
47,835

 
 
 
 
 
 
 
 
 
 
 
 
Operating cash flow (a):
 
 
 
 
 
 
 
 
 
Publishing
$
116,607

 
$
21,727

 
$

 
$
138,334

 
 
Broadcasting
105,066

 

 

 
105,066

 
 
Digital
44,660

 

 

 
44,660

 
 
Corporate
(11,118
)
 

 

 
(11,118
)
 
 
Total
$
255,215

 
$
21,727

 
$

 
$
276,942

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
Thirteen
weeks ended
Jun. 24, 2012
 
Workforce
restructuring
 
Transformation
costs
 
Pension settlement charges
 
Thirteen
weeks ended
Jun. 24, 2012
Operating income:
 
 
 
 
 
 
 
 
 
Publishing
$
104,211

 
$
9,736

 
$
5,097

 
$

 
$
119,044

Broadcasting
94,586

 

 

 

 
94,586

Digital
36,531

 

 

 

 
36,531

Corporate
(18,810
)
 

 

 
5,423

 
(13,387
)
Total
$
216,518

 
$
9,736

 
$
5,097

 
$
5,423

 
$
236,774

 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and facility consolidation charges:
 
 
 
 
 
 
 
 
Publishing
$
33,736

 
$

 
$
(5,097
)
 
$

 
$
28,639

Broadcasting
7,124

 

 

 

 
7,124

Digital
8,330

 

 

 

 
8,330

Corporate
4,142

 

 

 

 
4,142

Total
$
53,332

 
$

 
$
(5,097
)
 
$

 
$
48,235

 
 
 
 
 
 
 
 
 
 
Operating cash flow (a):
 
 
 
 
 
 
 
 
 
Publishing
$
137,947

 
$
9,736

 
$

 
$

 
$
147,683

Broadcasting
101,710

 

 

 

 
101,710

Digital
44,861

 

 

 

 
44,861

Corporate
(14,668
)
 

 

 
5,423

 
(9,245
)
Total
$
269,850

 
$
9,736

 
$

 
$
5,423

 
$
285,009

 
 
 
 
 
 
 
 
 
 
(a) Refer to Table No. 10
 
 






NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
 
 
 
 
 
 
 
 
 
 
Table No. 9
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
 
 
Twenty-six
weeks ended
Jun. 30, 2013
 
Workforce
restructuring
 
Transformation
costs
 
Twenty-six
weeks ended
Jun. 30, 2013
 
 
Operating income:
 
 
 
 
 
 
 
 
 
Publishing
$
145,329

 
$
27,093

 
$
9,283

 
$
181,705

 
 
Broadcasting
181,768

 

 

 
181,768

 
 
Digital
58,881

 

 

 
58,881

 
 
Corporate
(32,039
)
 

 

 
(32,039
)
 
 
Total
$
353,939

 
$
27,093

 
$
9,283

 
$
390,315

 
 
 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and facility consolidation charges:
 
 
 
 
 
 
 
 
Publishing
$
63,651

 
$

 
$
(9,283
)
 
$
54,368

 
 
Broadcasting
13,909

 

 

 
13,909

 
 
Digital
18,490

 

 

 
18,490

 
 
Corporate
9,122

 

 

 
9,122

 
 
Total
$
105,172

 
$

 
$
(9,283
)
 
$
95,889

 
 
 
 
 
 
 
 
 
 
 
 
Operating cash flow (a):
 
 
 
 
 
 
 
 
 
Publishing
$
208,980

 
$
27,093

 
$

 
$
236,073

 
 
Broadcasting
195,677

 

 

 
195,677

 
 
Digital
77,371

 

 

 
77,371

 
 
Corporate
(22,917
)
 

 

 
(22,917
)
 
 
Total
$
459,111

 
$
27,093

 
$

 
$
486,204

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
Measure
 
Special Items
 
Non-GAAP
Measure
 
Twenty-six
weeks ended
Jun. 24, 2012
 
Workforce
restructuring
 
Transformation
costs
 
Pension settlement charges
 
Twenty-six
weeks ended
Jun. 24, 2012
Operating income:
 
 
 
 
 
 
 
 
 
Publishing
$
166,251

 
$
27,681

 
$
9,885

 
$

 
$
203,817

Broadcasting
167,201

 

 

 

 
167,201

Digital
52,794

 

 

 

 
52,794

Corporate
(34,070
)
 
(1,656
)
 

 
5,423

 
(30,303
)
Total
$
352,176

 
$
26,025

 
$
9,885

 
$
5,423

 
$
393,509

 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and facility consolidation charges:
 
 
 
 
 
 
 
 
Publishing
$
66,950

 
$

 
$
(9,885
)
 
$

 
$
57,065

Broadcasting
14,234

 

 

 

 
14,234

Digital
16,235

 

 

 

 
16,235

Corporate
8,283

 

 

 

 
8,283

Total
$
105,702

 
$

 
$
(9,885
)
 
$

 
$
95,817

 
 
 
 
 
 
 
 
 
 
Operating cash flow (a):
 
 
 
 
 
 
 
 
 
Publishing
$
233,201

 
$
27,681

 
$

 
$

 
$
260,882

Broadcasting
181,435

 

 

 

 
181,435

Digital
69,029

 

 

 

 
69,029

Corporate
(25,787
)
 
(1,656
)
 

 
5,423

 
(22,020
)
Total
$
457,878

 
$
26,025

 
$

 
$
5,423

 
$
489,326

 
 
 
 
 
 
 
 
 
 
(a) Refer to Table No. 10
 
 






NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
 
 
 
 
 
 
 
 
 
 
Table No. 10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
"Operating cash flow", a non-GAAP measure, is defined as operating income plus depreciation, amortization and facility consolidation charges. 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 these non-GAAP amounts to the company's operating income, which the company believes is 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 Jun. 30, 2013:
 
 
 
 
 
 
 
 
 
 
Publishing
 
Broadcasting
 
Digital
 
Corporate
 
Consolidated
Total
 
 
 
 
 
 
 
 
 
 
Operating cash flow
$
116,607

 
$
105,066

 
$
44,660

 
$
(11,118
)
 
$
255,215

Less:
 
 
 
 
 
 
 
 
 
Depreciation
(22,776
)
 
(6,793
)
 
(4,337
)
 
(4,561
)
 
(38,467
)
Amortization
(4,141
)
 
(181
)
 
(5,046
)
 

 
(9,368
)
Facility consolidation charges
(4,498
)
 

 

 

 
(4,498
)
Operating income as reported (GAAP basis)
$
85,192

 
$
98,092

 
$
35,277

 
$
(15,679
)
 
$
202,882

 
 
 
 
 
 
 
 
 
 
Thirteen weeks ended Jun. 24, 2012:
 
 
 
 
 
 
 
 
 
 
Publishing
 
Broadcasting
 
Digital
 
Corporate
 
Consolidated
Total
 
 
 
 
 
 
 
 
 
 
Operating cash flow
$
137,947

 
$
101,710

 
$
44,861

 
$
(14,668
)
 
$
269,850

Less:
 
 
 
 
 
 
 
 
 
Depreciation
(24,869
)
 
(6,943
)
 
(4,203
)
 
(4,142
)
 
(40,157
)
Amortization
(3,770
)
 
(181
)
 
(4,127
)
 

 
(8,078
)
Facility consolidation charges
(5,097
)
 

 

 

 
(5,097
)
Operating income as reported (GAAP basis)
$
104,211

 
$
94,586

 
$
36,531

 
$
(18,810
)
 
$
216,518

 
 
 
 
 
 
 
 
 
 
Twenty-six weeks ended Jun. 30, 2013:
 
 
 
 
 
 
 
 
 
 
Publishing
 
Broadcasting
 
Digital
 
Corporate
 
Consolidated
Total
 
 
 
 
 
 
 
 
 
 
Operating cash flow
$
208,980

 
$
195,677

 
$
77,371

 
$
(22,917
)
 
$
459,111

Less:
 
 
 
 
 
 
 
 
 
Depreciation
(46,001
)
 
(13,547
)
 
(8,723
)
 
(9,122
)
 
(77,393
)
Amortization
(8,367
)
 
(362
)
 
(9,767
)
 

 
(18,496
)
Facility consolidation charges
(9,283
)
 

 

 

 
(9,283
)
Operating income as reported (GAAP basis)
$
145,329

 
$
181,768

 
$
58,881

 
$
(32,039
)
 
$
353,939