Gannett Company Inc.
) opened fiscal 2014 on a strong note with first-quarter 2014
earnings of 47 cents a share rising 27% year over year buoyed by
the splendid performance of its Broadcasting segment that gained
from the acquisition of Belo Corp. as well as profitable results
at the Digital and Publishing segments. Moreover, the company's
earnings came a penny ahead of the Zacks Consensus Estimate of 46
Including one-time items, earnings came in at 25 cents a share,
down 43.2% from the prior-year quarter earnings of 44 cents per
The company reported total revenue of $1,404.1 million, down
13.4% from the prior-year quarter, and also fell short of the
Zacks Consensus Estimate of $1,416 million. Revenue growth during
the quarter primarily stemmed from an improvement in Broadcasting
and Digital revenues, offset in part by a decline in Publishing
revenues. However, on a proforma basis, the company recorded
revenue growth of 2.8%.
Behind the Headline
Gannett stated that the
revenue rose 2.8% to $179.7 million due to robust revenue growth
at CareerBuilder. Digital segment operating income came in at
$23.8 million, a marginal 0.9% increase from the year-ago
Company-wide proforma digital revenue, taking into account the
Digital segment and all digital revenues coming from the other
business segments, augmented 6% to $375.6 million. The upside was
driven by revenue gains at digital advertising and marketing
services at all segments.
revenue, which primarily gained from the Belo acquisition, surged
almost two-fold (or 99.5%) to $382.3 million. Further, the
company's revenue during the quarter benefited from significant
advertising demand related to the Winter Olympic Games and
political spending along with a notable rise in retransmission
revenue. Adjusted Broadcasting operating income soared 96.4% to
On a proforma basis, Broadcasting segment revenue surged 19.6%,
driven by a 6% rise in core revenues, 66.4% growth in
retransmission revenue and an increase of 22.9% in television
station digital revenue. Meanwhile, political advertising demand
totaled $10.0 million compared to $1.9 million in the prior-year
Management now expects second-quarter 2014 television revenue
growth in the 90% range considering the current trends and taking
into account the full quarter contribution from the Belo stations
acquisition. However, on a pro forma basis, television revenue is
forecasted to jump in the mid-teens.
revenue declined 3.3% to $842.1 million primarily due to the
perils of an untoward winter weather that weighed on advertising
as well as circulation demand. An additional factor contributing
to the decline was the shift of Easter to the second quarter this
year offset by a substantial rise in digital advertising.
Publishing Advertising revenue fell 4.8% to $501.3 million, while
Publishing Circulation revenue dropped 1.4% to $282.1 million.
Total Publishing segment's adjusted operating income slipped 1.9%
to $786.1 million.
Publishing segment digital revenue rose 7.6% attributable to
increased digital advertising and marketing solutions revenue.
Classified advertising at domestic publishing operations
decreased 5.9% during the quarter under review. Within
classified, softness persisted in all operating categories with
employment (down 8.4%), real estate (down 3.3%), automotive (down
1.5%) and legal (down 7.2%). Retail and national advertising
revenue categories at domestic publishing operations declined
7.1% and 1.5%, respectively.
The current economic situation does not seem promising for
publishing companies, which are bearing the brunt of waning
advertising demand, and Gannett, a Zacks Rank #4 (Sell) stock, is
no exception. Other publishing companies such as
Journal Communications Inc.
The E.W. Scripps Co.
) are also encountering similar headwinds.
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 its portfolio.
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
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.
The New York Times Co.
) 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.
Further, Gannett in Dec 2013 completed the acquisition of
television-station operator, Belo Corp. The deal will serve as a
game changer for the company as it will solidify its foothold in
the rapidly growing broadcast media business. 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.
Other Financial Aspects
Gannett ended the quarter with total cash of $293.0 million and
long-term debt of $3.45 billion.
The company generated net cash flow from operating activities of
$166.0 million and free cash flow of $148.9 million in the
quarter. The company, during the reported quarter, repurchased
approximately 1.3 million shares aggregating $37.9 million.
Additionally, Classified Ventures LLC, a joint venture of Gannett
and 4 other companies, successfully sold Apartments.com to CoStar
Group Inc. for a total of $585 million. Gannett plans to use its
portion of the sale proceeds, which sums to $155 million owing to
a 26.9% stake in the JV, towards debt reduction as well as to
fulfill other capital requirements.
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