News and information company Gannett Co., Inc. (GCI) on Monday reported a 53% drop in profit for the third quarter from the same period last year, hurt by higher one-time charges and an 18% decline in revenues. Excluding items, adjusted earnings per share for the quarter declined 42%, yet topped analysts' consensus estimate as cost cuts and lower newsprint expenses helped offset weak advertising sales.
Gannett, the publisher of USA Today and the owner of more than 80 daily newspapers, has been hurt by the continuing decline in revenues in its newspaper advertising, while the company's digital ads are not making up for the shortfall. Several newspapers in the U.S. have been hit hard as readers and advertisers have turned to the Internet for their needs amid the recession. Gannett had earlier reported a 33% drop in publishing advertising revenues during the first half of the year. However, the company said Monday that it is encouraged by the revenue trends during the third quarter.
Third-Quarter Results
The McLean, Virginia-based Gannet said that net income attributable to company for the third quarter was $73.75 million, or $0.31 per share, down from $158.06 million, or $0.69 per share, in the previous-year quarter.
The latest quarter's results include non-cash charges related to facility consolidations and asset impairments of $28.9 million after-tax, or $0.12 per share, and workforce restructuring charges of $1.4 million after-tax, or $0.01 per share. The year-ago quarter's results include workforce restructuring expenses of $14.4 million after-tax, or $0.07 per share.
Excluding items, adjusted net income attributable to Gannett for the latest quarter was $104.07 million, or $0.44 per share, lower than $172.43 million, or $0.76 per share, in the same quarter a year earlier. On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $0.41 per share for the quarter. Analysts' estimates typically exclude special items.
In end-September, Gannett, the largest newspaper publisher in the U.S., had forecast earnings for the third quarter above analysts' consensus estimate. The company had projected non-GAAP earnings for the third quarter in a range of $0.39-$0.42 per share, excluding special charges
Total operating revenues for the quarter fell 18.4% to $1.34 billion from $1.64 billion in the comparable period a year ago, but topped analysts' consensus revenue estimate of $1.33 billion. The company pointed out that weak economies in the U.S. and UK continued to pressure advertising demand.
Craig Dubow, chairman, president and chief executive officer of Gannett, said, "We finished the quarter on a stronger note with better than anticipated results due primarily to better trends in advertising and greater efficiencies across all of our business segments. Our results for the quarter exceeded the high end of previously announced estimate ranges for revenue, operating cash flow, and earnings per share."
Dubow added, "Although recessions in the U.S. and UK continued to temper ad demand and revenue growth during the quarter, we are encouraged by the revenue trends."
Peer Performance
Among peers, diversified media company New York Times Co. (NYT), which owns papers including The New York Times and The Boston Globe, is slated to release its financial results for the third quarter on October 22. Analysts expect the company to report a loss of $0.01 per share for the quarter on revenues of $561.60 million.
Media conglomerate News Corp. (NWS, NWSA), which owns The Wall Street Journal, is yet to report its financial results for the first quarter. Analysts expect the company to earn $0.18 per share on revenues of $7.13 billion for the quarter.
Other Metrics
Gannett's total operating expenses for the quarter declined 14.4% to $1.18 billion from $1.38 billion in the prior-year period, reflecting substantially lower newsprint expenses and cost control that was aided by workforce restructuring and facility consolidations. Last year, the company slashed more than 10% of its 41,500-person work force.
Operating income for the latest quarter dropped 39.4% to $156.96 million from $259.18 million in the same period last year.
Gannett's total debt at the end of the third quarter was about $3.31 billion, down from $3.51 billion at the end of the second quarter.
The company said it paid down $197 million in debt in the third quarter and the year-to-date debt reduction totaled $504 million despite the challenging economic environment. The company noted that it now has almost 25% of its debt maturing in the fourth quarter of 2014 or beyond.
Gannett had said in September that it intends to offer $200 million of senior notes due 2014 and $200 million of senior notes due 2017 in a private offering. The company intends to use the net proceeds from the offering to repay borrowings outstanding under its revolving credit facilities and term loan.
Segmental Results
Segment-wise, Publishing segment's operating revenues for the third quarter plunged 23.5% to $1.04 billion from $1.36 billion a year ago, reflecting the challenging advertising environment. Publishing advertising revenues dropped 28.4% year-over-year to $699.64 million, as retail declined 22.4%, national fell 25.0% and classified was down 36.9%.
Advertising revenues in the U.S. were down 26.0%, while at Newsquest, the company's operations in the UK, ad revenues dipped 28.7% in pounds. Automotive revenues plunged 32.9% in the quarter, and employment and real estate revenues declined 53.0% and 34.0%, respectively. Publishing circulation revenues for the quarter were $284.26 million, down 4.9% from $298.98 million a year ago.
In the quarter, Broadcasting revenues, including Captivate, were $151.46 million, down 23.1% from $197.00 million in the same quarter a year ago, which included about $50 million in ad demand related to the Summer Olympics and the U.S. presidential elections. A three-fold increase in retransmission revenues to $14.3 million and strong revenue growth from Captivate partially offset the absence of Olympic and election ad spending as well as continued weakness in the automobile category.
Digital operating revenues for the quarter totaled $142.96 million, up 84.2% from $77.59 million a year ago, reflecting the consolidation of CareerBuilder for the full quarter. On a pro forma basis, operating revenues declined 20.4%, reflecting the impact of weaker employment ad demand on CareerBuilder's results.
Year-To-Date Results
For the nine months, Gannett's net income attributable to the company was $221.67 million, or $0.94 per share, compared to net loss of $1.94 billion, or $8.49 per share, in the year-ago period.
Adjusted net income attributable to Gannett for the nine months was $269.55 million, or $1.15 per share, lower than $585.75 million, or $2.56 per share, in the year-ago period.
Net operating revenues for the nine-month period fell 18% to $4.13 billion from $5.03 billion in the prior-year period.
Stock Quotes
In Monday's regular trading session, GCI is currently trading at $13.30, up $0.30 or 2.31% on a volume of 1.23 million shares. In the past 52 weeks, the stock has been trading in a broad range of $1.85 - $13.77.
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