First Quarter 1999 Earnings
ARLINGTON, Va. — Gannett announced today that diluted earnings per share advanced 14 percent to 64 cents per share, a new record. In the first quarter of 1998, diluted earnings per share, excluding a net non-operating gain principally from the sale of several businesses, were 56 cents.
Net income increased 12 percent in the first quarter to $178,893,000. In the year-earlier quarter, net income, excluding the $183,607,000 net non-operating after-tax gain, was $159,243,000. Operating revenues gained 4 percent to $1,248,065,000 from $1,199,910,000 in the year-earlier interval. Operating income advanced 8 percent to $311,917,000 compared to $288,243,000 in the first quarter of 1998. Operating cash flow increased to $390,825,000 in the quarter from $367,724,000 in the prior year period.
Average diluted shares outstanding in the quarter totaled 281,677,000, compared to 286,874,000 in 1998’s first quarter. In the last half of 1998, Gannett repurchased approximately 6 million shares of common stock.
In a statement, the company said that the newspaper segment posted record operating results for the quarter. Newspaper profitability benefited from strong advertising demand, particularly in national and classified, very strong operating results at USA TODAY and USA WEEKEND, and a favorable comparison year-over-year at The Detroit News. Newsprint expense rose 3 percent for the quarter. Television segment results were impacted by the absence of advertising related to the broadcast of the Super Bowl on our NBC-affiliated stations and the Winter Olympics on our CBS stations, which buoyed results in the first quarter of 1998.
Operating income from newspapers grew 10 percent in the first quarter to $247,675,000, and revenues were 5 percent higher than the same period last year. If the same group of newspapers had been held in both periods, pro forma advertising revenues would have increased 7 percent in the quarter, including a 16 percent gain in national, a 5 percent increase in classified and a 3 percent gain in local. Pro forma newspaper advertising volume advanced 6 percent for the quarter.
At USA TODAY, paid advertising pages increased 11 percent to 1,439, compared to 1,294 in the first quarter of 1998. Advertising revenues grew 16 percent.
Television cash flow rose 1 percent to $81,425,000 and revenues were $161,194,000 in the first quarter. The company purchased a television station in Columbia, S.C., in May 1998. On a pro forma basis, giving effect to this transaction, television revenues, operating income and operating cash flow all declined approximately 1 percent, again reflecting the absence of Super Bowl and Winter Olympics-related advertising.
Cable revenues were $62,126,000 in the first quarter of 1999, and operating cash flow was $28,604,000 for the quarter. Prior to the sale of the assets of Multimedia Security Service, Inc. in the first quarter of 1998, the results of this segment included both the cable and security businesses. On a pro forma basis, giving effect to the sale of the alarm security business, revenues advanced 12 percent while operating cash flow grew 8 percent. Basic cable subscribers totaled 517,339 at the end of the quarter, equal to 63 percent of homes passed. Pay subscribers numbered 306,692 at quarter end.
The company announced on February 25 that it had entered into an agreement to acquire KXTV-TV, the ABC affiliate in Sacramento/Stockton/Modesto, Calif., plus other consideration in exchange for KVUE-TV, its ABC affiliate in Austin, Texas. Closing is expected to occur after regulatory approvals are obtained.
Gannett is a nationwide news and information company that publishes 74 daily newspapers, including USA TODAY and USA WEEKEND, a newspaper magazine. Gannett also operates 21 television stations and cable television systems in major U.S. markets.
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Quarter Ended %Inc Mar. 28, 1999 Mar. 29, 1998 (Dec)
------------- ------------- ----
Net Operating Revenues:
Newspaper advertising $ 720,551 $ 669,994 7.5
Newspaper circulation 253,357 254,079 (0.3)
Television 161,194 160,692 0.3
Cable and Security 62,126 64,062 (3.0)
Other 50,837 51,083 (0.5)
--------- --------- ----
Total 1,248,065 1,199,910 4.0
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 661,354 642,980 2.9
Selling, general and administrative
expenses, exclusive of depreciation 195,886 189,206 3.5
Depreciation 51,102 53,030 (3.6)
Amortization of intangible assets 27,806 26,451 5.1
Total 936,148 911,667 2.7
--------- --------- -----
Operating income 311,917 288,243 8.2
Non-operating income (expense):
Interest expense (16,592) (23,229) (28.6)
Other 2,368 307,356 ****
--------- --------- -----
Total (14,224) 284,127 ****
Income before income taxes 297,693 572,370 (48.0)
Provision for income taxes 118,800 229,520 (48.2)
--------- --------- -----
Net income $ 178,893 $ 342,850 (47.8)
========= ========= =====
Net income per share - basic $0.64 $1.21 (47.1)
===== ===== =====
Net income per share - diluted $0.64 $1.20 (46.7)
===== ===== =====
Dividends per share $0.20 $0.19 5.3
===== ===== =====
Earnings Summary Excluding
1998 Net Non-operating Gain
Quarter Ended %Inc
Mar. 28, 1999 Mar. 29, 1998 (Dec)
------------- ------------- -----
Operating income $ 311,917 $ 288,243 8.2
Non-operating income (expense):
Interest expense (16,592) (23,229) (28.6)
Other 2,368 829 ****
--------- --------- -----
Total (14,224) (22,400) (36.5)
Income before income taxes 297,693 265,843 12.0
Provision for income taxes 118,800 106,600 11.4
--------- --------- -----
Net income $ 178,893 $ 159,243 12.3
========= ========= =====
Net income per share - basic $0.64 $0.56 14.3
===== ===== =====
Net income per share - diluted $0.64 $0.56 14.3
===== ===== =====
Dividends per share $0.20 $0.19 5.3
===== ===== =====
NOTE: 1998 results include a net non-operating gain principally from the
disposition of several businesses including Radio and Alarm Security
totaling $307 million pre-tax and $184 million on an after-tax basis
($.65 per share-basic and $.64 per share-diluted).
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Quarter Ended % Inc
March 28, 1999 March 29, 1998 (Dec)Operating Revenues:
Newspaper publishing $1,024,745 $975,156 5.1
Television 161,194 160,692 0.3
Cable and Security 62,126 64,062 (3.0)
---------- ---------- -----
Total $1,248,065 $1,199,910 4.0
========== ========== =====Operating Income (net of depreciation
and amortization):
Newspaper publishing $247,675 $225,919 9.6
Television 65,717 65,967 (0.4)
Cable and Security 15,325 13,916 10.1
Corporate (16,800) (17,559) 4.3
---------- ---------- -----
Total $311,917 $288,243 8.2
========== ========== =====Depreciation and Amortization:
Newspaper publishing $47,697 $46,157 3.3
Television 15,708 14,955 5.0
Cable and Security 13,279 16,154 (17.8)
Corporate 2,224 2,215 0.4
---------- ---------- -----
Total $78,908 $79,481 (0.7)
========== ========== =====Operating Cash Flow:
Newspaper publishing $295,372 $272,076 8.6
Television 81,425 80,922 0.6
Cable and Security 28,604 30,070 (4.9)
Corporate (14,576) (15,344) 5.0
---------- ---------- -----
Total $390,825 $367,724 6.3
========== ========== =====NOTES:
Operating Cash Flow represents operating income for each of the
Company's business segments plus related depreciation and
amortization expense.In the first quarter of 1998, the Company sold its Alarm Security
Business, which had been reported in the Cable and Security business
segment. On a pro forma basis for the first quarter, giving effect
to the sale of the Alarm Security Business, cable operations reported
gains in revenues of 12%, operating income of 15% and operating cash
flow of 8%.In May 1998, the Company purchased a television station in Columbia,
South Carolina. On a pro forma basis for the first quarter, giving
effect to this purchase, television operations reported a 1% decline
in revenues, operating income and operating cash flow.