Gannett Company, Inc
) posted second-quarter 2013 earnings of 58 cents a share that
missed the Zacks Consensus Estimate by a penny, but jumped 4%
from 56 cents earned in the year-ago quarter. The year-over-year
growth was primarily driven by its all access content
subscription model coupled with sturdy performance of its
Broadcasting and Digital segments. However, soft advertising
demand remains a drag in the quarter.
Including one-time items, earnings came in at 48 cents a share
compared with 51 cents in the prior-year quarter.
The company reported total revenue of $1,302.7 million, down
0.3% from the prior-year quarter, and also fell short of the
Zacks Consensus Estimate of $1,332 million.
Behind the Headline
Gannett stated that total Broadcasting revenue, including
Captivate, increased 3.2% to $212 million, buoyed by robust
growth of 62.3% in retransmission revenue and a jump of 1.5% in
core advertising revenue, partially offset by fall in political
Television revenue increased 3.6% to $204.8 million.
Broadcasting operating income grew 3.7% to $98.1 million.
Management now expects third-quarter television revenue to
decline in the mid-teens on account of strong political and
Summer Olympic revenue attained in the year-ago quarter.
Digital revenue rose 2.9% to $186.5 million due to robust
revenue growth at CareerBuilder. Digital segment operating income
came in at $35.3 million, down 3.4% year-over-year.
Company-wide total digital revenue augmented 20.1% to $374.3
million, driven by revenue gains at digital advertising and
marketing services well as sustained rollout of the all-access
content subscription model.
Total Publishing revenue declined 1.7% to $904.2 million.
Publishing Advertising revenue fell 5.3% to $562.5 million.
Publishing Circulation revenue portrayed a substantial
improvement, increasing 6% to $279.7 million on the back of a
subscription based model. Local domestic circulation revenue
jumped 11.4%. Total Publishing segment's adjusted operating
income slipped 6.4% to $111.4 million.
Classified advertising at domestic publishing operations
decreased 5.2% during the quarter under review. Within
classified, softness persisted in every category with employment
(down 8.6%), real estate (down 3.2%), automotive (down 0.8%) and
legal (down 7.9%). Total retail and national advertising revenue
categories declined 5.8% and 1%, respectively.
Advertising, which remains a significant source of revenue for
the company, depends upon the global financial health. Gannett is
taking initiatives to diversify its business model, shielding
itself against any economic onslaught by adding new revenue
streams. The company is also adapting to the changing face of the
multi-platform media universe, which currently includes Internet,
mobile, social media networks and outdoor video advertising in
In an effort to restrict declining revenue and shrinking
market share, publishers are scrambling to slash costs. Gannett
has been realigning its cost structure and streamlining its
operations to increase efficiencies.
To curb shrinking advertising revenue and seek new revenue
avenues, the publishing companies contemplated charging readers
for online content. Despite glitches in the economy, it still
promises revenue generation.
News International, the subsidiary of
) started charging readers for the online content of
The Times of London
Sunday Times of London
from Jun 2010.
The New York Times Company
), the diversified media conglomerate, launched a pay-and-read
model on Mar 28, 2011.
Gannett also initiated a subscription based model, commenced
Digital Marketing Services in top markets, and refurbished its
iconic brand, USA Today, to generate new advertising and
marketing revenue sources.
Gannett recently announced the acquisition of
television-station operator, Belo Corp. The company will purchase
all outstanding shares of Belo for $13.75 per share, bringing the
estimated value to $1.5 billion in cash. Taking into account
Belo's existing $715 million debt, the total transaction value
amounts to $2.2 billion. The company expects to close the
transaction by the end of 2013.
The deal will serve as a game changer for Gannett as it will
solidify its foothold in the rapidly growing broadcast media
business by almost doubling its existing broadcast portfolio from
23 to 43 stations. Alongside, this major acquisition makes it the
fourth-largest owner of major network affiliates in the U.S.
Moreover, this deal is a perfect fit for the company as it
will transform Gannett's business model, which was largely
focused on low margins newspapers to a high-margin multi-media
business and position it as the top affiliate for
Other Financial Aspects
Gannett ended the quarter with total cash of $161.5 million
and long-term debt of $1.36 billion.
The company generated net cash flow from operating activities
of $187.7 million and free cash flow of $172.8 million in the
quarter. The company, during the reported quarter, repurchased
approximately 0.4 million shares aggregating $8.6 million.
Year-to-date, the company had bought back 2.1 million shares for
$41.4 million. The company also replaced its existing remaining
buyback program with a new $300 million share repurchase
authorization to be exhausted over the next 2 years.
Currently, Gannett hold a Zacks Rank #2 (Buy).
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