Gannett Co., Inc. (NYSE: GCI) reported today that 2007 fourth quarter
earnings per diluted share from continuing operations were $1.06
compared with $1.47 per share in the fourth quarter of 2006, including
the impact of a non-cash, after-tax impairment charge related to the
value of mastheads of $50.8 million or $0.22 per diluted share.
Excluding this charge, earnings per share from continuing operations
would have been $1.28. The results for the quarter also include
approximately $38 million in pre-tax severance expenses and facility
consolidation costs related to a number of efficiency efforts in the
U.S. and the UK.
“Gannett completed 2007 with strong forward
momentum on implementing our strategic plan. That is an impressive
accomplishment given the back drop of cyclical pressures on advertising,
a softer economic environment and secular changes in the industry,”
said Craig Dubow, chairman, president and CEO of Gannett.
“In the fourth quarter, we faced a challenging
advertising environment, tough comparisons, which included an extra week
in 2006, and the relative absence of election-related advertising in
broadcasting. Our effort to align expenses with revenue opportunities
will better position us for the future although it resulted in
significant severance expenses and consolidation costs in the quarter.
Our online revenue growth contributed to our results for the quarter.
Lower newsprint costs and interest expense, and the exchange rate also
had a positive impact.” he added.
The company completed its annual impairment testing of goodwill and
other intangible assets in accordance with the Statement of Financial
Accounting Standards No. 142 as of December 30, 2007. Due to the current
business environment and expected operating results for some recent
acquisitions in the U.S. and in the UK, the company incurred a $72.0
million pre-tax, non-cash impairment charge to reduce the value of
certain mastheads. “This non-cash accounting
charge does not impact our operations or operating cash flow,”
Gannett’s fiscal year included 52 weeks
compared with 53 weeks in 2006. The fourth quarter was comprised of 13
weeks compared with 14 weeks in the same quarter of 2006. All of the
company’s results detailed below were impacted
by the extra week in 2006.
As previously reported, the company completed the divestiture of five of
its newspaper properties in May of 2007. Operating results for the year
exclude results from these properties which have been reclassified to
income from discontinued operations.
Reported results for the quarter and the year include KTVD-TV in Denver
and WATL-TV in Atlanta which the company acquired during the third
quarter of 2006.
Total operating revenues for the company were $1.9 billion in the fourth
quarter compared to $2.2 billion in the 14-week fourth quarter of 2006,
an 11.9 percent decline. The decline is due to lower newspaper
advertising resulting from cyclical pressures in our markets,
significantly lower politically related advertising demand that
positively impacted results last year and the extra week in the fourth
quarter of 2006. Excluding the extra week, total operating revenues
would have been 7.2 percent lower. Operating cash flow (defined as
operating income plus depreciation, amortization and the non-cash
charge) was $554.0 million. Net income was $245.3 million in the quarter.
Reported operating expenses were 7.1 percent lower and totaled $1.5
billion for the quarter reflecting lower newsprint expense, continued
cost containment efforts and the absence of the extra week in 2006.
Expense reductions were partially offset by severance and accelerated
depreciation expenses related to a number of efficiency efforts in the
UK and U.S. and the higher exchange rate for the British pound.
Operating expenses would have declined 11.6 percent excluding the
non-cash charge. Corporate expenses declined 17.8 percent to $17.9
million compared with the fourth quarter of 2006.
For the year, total operating revenues were $7.4 billion compared to
$7.8 billion in 2006, a 5.2 percent decline. On a comparable week basis,
pro forma operating revenues would have been down 4.2 percent reflecting
the relative absence of approximately $112 million of Olympic and
politically related ad revenues and a more challenging advertising
environment. Operating expenses were $5.8 billion, down 2.6 percent from
the prior year. Excluding the non-cash impairment charge, operating
expenses would have been 3.8 percent lower. Expense reductions for the
full year were tempered by severance and accelerated depreciation costs
of approximately $65 million related to our efficiency efforts.
Operating cash flow totaled $2.0 billion and net income was $975.6
million for the year.
Average diluted shares outstanding in the fourth quarter totaled
231,877,000 compared with 234,790,000 in 2006’s
fourth quarter. Average diluted shares outstanding for all of 2007 were
233,740,000 versus 236,756,000 in 2006. Shares repurchased totaled
approximately 2.0 million in the fourth quarter and 4.8 million
Newspaper segment operating revenues were $1.7 billion for the quarter.
Advertising revenues totaled $1.2 billion compared to $1.4 billion in
the fourth quarter a year ago. Pro forma advertising revenues excluding
the extra week would have declined 7.7 percent. On the same basis, local
advertising revenues would have been 3.3 percent lower, national ad
revenues would have declined 11.6 percent and classified revenues would
have been down 11.4 percent. Advertising revenues at our domestic
newspaper properties would have been 9.3 percent lower on a comparable
week basis. At Newsquest in the UK, advertising revenues on a constant
currency basis were 6.5 percent lower excluding the extra week in 2006.
Operating cash flow for the total newspaper segment, which includes USA
TODAY and our UK properties, was $468.2 million in the fourth quarter.
Total newspaper operating expenses were 6.5 percent lower for the
quarter reflecting lower newsprint expense, cost control and the extra
week in last year’s quarter partially offset
by approximately $38 million in severance and facility consolidation
costs and the non-cash charge. Newspaper operating expenses would have
been 11.5 percent lower excluding the impairment charge. Reported
newsprint expense declined 25.3 percent for the quarter due to usage
prices that were 8 percent lower and almost 19 percent lower volume,
reflecting generally reduced consumption and the effect of the extra
week in 2006.
At USA TODAY, advertising revenues were 16.7 percent lower in the fourth
quarter compared with the same quarter a year ago due in part to the
extra week in 2006. On a comparable week basis USA TODAY’s
advertising revenues would have been down 12.7 percent. Paid advertising
pages totaled 1,045 compared with 1,348 in the year-ago quarter and
1,285 based on a 13-week quarter in 2006.
Broadcasting segment results for the quarter and year include WATL-TV
(acquired in August 2006) and KTVD-TV (acquired in June 2006).
Broadcasting revenues (which include Captivate) totaled $212.0 million
for the quarter, a 21.7 percent decline due primarily to the relative
lack of politically related ad demand that totaled almost $58 million
last year as well as the extra week in the fourth quarter in 2006.
Broadcasting revenues excluding the extra week would have been 18.0
percent lower. Online revenues were 18.0 percent higher in the quarter
compared to the same period a year ago. The growth rate of online
revenue was tempered by the absence of the extra week in the quarter.
Reported broadcasting expenses were 11.3 percent lower. Operating cash
flow was $99.9 million.
Revenues for television operations were $202.2 million for the quarter.
Reported television expenses totaled $113.0 million compared to $128.5
million for the same period a year ago, a 12.1 percent decline.
Beginning with this report, the company’s
equity share of operating results from its newspaper partnerships,
including Tucson, which participates in a joint operating agency, the
California Newspapers Partnership and the Texas-New Mexico Newspapers
Partnership, have been reclassified from “Other”
revenue and are now reflected as “Equity
income in unconsolidated investees, net” in
the non-operating section of the Consolidated Statements of Income. This
line also includes equity income and losses from online/new technology
businesses which were previously classified in “Other”
non-operating items. “Other”
revenue is now comprised principally of commercial printing revenues and
revenue from PointRoll.
All prior periods presented reflect these reclassifications. A schedule
detailing the impact of the reclassifications for the last two years on
a quarterly basis has been included in the press release.
The decline in equity income in unconsolidated investees for the fourth
quarter in 2007 reflects lower newspaper partnership earnings and
operating results from a new Internet partnership.
Interest expense for the fourth quarter was $57.5 million, a 29.0
percent decline compared to $80.9 million for the year-ago quarter. The
decline was due to lower average balances and lower interest rates.
Other non-operating income was $2.7 million for the quarter compared to
$10.9 million in the same quarter a year ago due primarily to the
absence of gains on the sale of some Internet investments in the fourth
quarter of 2006.
At the end of the quarter, Gannett had more than 100 domestic publishing
Web sites, including USATODAY.com, one of the most popular newspaper
sites on the Web. The company also had Web sites in all of its 19
television markets. In December, Gannett’s
consolidated domestic Internet audience share was 23.9 million unique
visitors reaching 14.5 percent of the Internet audience according to
Nielsen//NetRatings. Newsquest is also an Internet leader in the UK
where its network of Web sites attracted more than 62 million monthly
page impressions from approximately 4.8 million unique users.
All references in this release to “comparable”
revenue results and “operating cash flow”
are to non-GAAP financial measures. Management believes that this use
allows management and investors to analyze and compare the Company’s
results in a more meaningful and consistent manner. A reconciliation of
the non-GAAP operating cash flow amounts to the Company’s
consolidated statements of income is attached.
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 Investor Relations section of the company’s
Web site, www.gannett.com, or
listen-only conference lines. U.S. callers should dial 1-888-663-2240
and international callers should dial 913-312-1487 at least 10 minutes
prior to the scheduled start of the call. The confirmation code for the
conference call is 2106604. 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 2106604. Materials related to the
call will be available through the Investor Relations section of the
company’s Web site Friday morning.
Gannett Co., Inc. is a leading international news and information
company that publishes 85 daily newspapers in the USA, including USA
TODAY, the nation's largest-selling daily newspaper. The company also
owns nearly 1,000 non-daily publications in the USA and USA WEEKEND, a
weekly newspaper magazine. Gannett subsidiary Newsquest is the United
Kingdom’s second largest regional newspaper
company. Newsquest publishes nearly 300 titles, including 18 daily
newspapers, and a network of prize-winning Web sites. Gannett also
operates 23 television stations in the United States and is an Internet
leader with sites sponsored by its TV stations and newspapers including
USATODAY.com, one of the most popular news sites on the Web.
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
Beginning with this report, the company's equity share of
operating results from its newspaper partnerships, including
Tucson, which participates in a joint operating agency, the
California Newspapers Partnership and the Texas-New Mexico
Newspapers Partnership, have been reclassified from "Other
revenue" above and are reflected in a separate line in the
Non-Operating section of the Statements of Income titled "Equity
income in unconsolidated investees, net." Reclassifications have
been made for all prior periods presented. Other revenue is now
comprised principally of commercial printing revenues and revenue
Equity income in unconsolidated investees, net includes earnings
from newspaper partnerships, as discussed above, and equity income
and losses from online/new technology businesses which were
previously classified in "Other" non-operating items.
Thirteen weeks endedDecember 30, 2007
Fourteen weeks endedDecember 31, 2006
Fifty-two weeks endedDecember 30, 2007
Fifty-three weeks endedDecember 31, 2006
In addition to the results reported in accordance with accounting
principles generally accepted in the United States ("GAAP") included in
this press release, the company has provided information regarding
diluted earnings per share ("EPS") from continuing operations excluding
the impairment charge. Management believes EPS excluding the impairment
charge better reflects the ongoing performance of the company and
enables management and investors to meaningfully trend, analyze and
benchmark the performance of the company's operations. This measure is
also more comparable to financial measures reported by our competitors.
EPS excluding the impairment charge should not be considered a
substitute for EPS calculated in accordance with GAAP.
The table below reconciles earnings per share prepared in accordance
with GAAP to earnings per share excluding the impairment charge:
Thirteen weeks ended Dec. 30, 2007
Fourteen weeks ended Dec. 31, 2006
Equity earnings in Newspaper partnerships reclassified from "Net
operating revenues - all other"
Equity earnings and losses from online/new technology businesses
reclassified from "Non-operating income (expense) - other"