Fourth-Quarter and Full-Year 1998 Earnings
ARLINGTON, Va. — Gannett announced today that diluted earnings per share advanced 15 percent in the fourth quarter to 92 cents per share, a new record. In the year earlier quarter, diluted earnings per share were 80 cents.
For 1998, diluted earnings per share, excluding a net non-operating gain principally from the sale of several businesses, advanced 14 percent to a record $2.86. In 1997, diluted earnings per share were $2.50.
Net income advanced 12 percent in the fourth quarter to $257,735,000 from $230,422,000 in the year earlier interval. Operating revenues gained 6 percent to $1,391,182,000 from $1,318,817,000 in 1997’s fourth quarter. Operating income advanced 10 percent to $452,734,000 compared to $413,227,000 in the fourth quarter of 1997. Operating cash flow increased to $529,841,000 in the quarter from $489,923,000 in the prior year period, reflecting continued strong advertising demand at our local newspapers and at USA TODAY.
Average diluted shares outstanding in the quarter totaled 281,635,000 compared to 286,373,000 in 1997’s fourth quarter. Average diluted shares outstanding in 1998 were 285,711,000 compared to 285,610,000 in 1997. In the third quarter, the company announced an authorization to repurchase up to $250 million of company stock. That authorization was substantially used by the end of the third quarter and the Board approved an additional $500 million authorization on September 30. Approximately 2.9 million shares were repurchased in the fourth quarter. During 1998, the company repurchased a total of approximately 6 million shares of common stock.
For the year, net income, excluding the $183,607,000 net non-operating after tax gain, advanced 15 percent to $816,306,000 from $712,679,000 in 1997. Operating revenues were 8 percent higher for the year at $5,121,291,000, while operating income gained 10 percent to $1,443,502,000 from $1,316,268,000 in 1997. Operating cash flow was $1,753,708,000 compared to $1,617,341,000 in 1997.
In a statement, the company said each division reported higher earnings for the quarter and the year. Newspaper results reached a new record benefitting from strong advertising demand, record operating results at USA TODAY for both the quarter and the year, and a favorable year-to-year comparison at The Detroit News, which reported a substantially improved operating profit for the quarter and the full year. Newsprint expense rose 7 percent in the fourth quarter and 18 percent for 1998. The television group achieved record results for the quarter and the year – benefitting early in the year from Super Bowl and Olympics-related advertising and in the fourth quarter from strong political spending.
Operating cash flow from newspapers grew 10 percent in the fourth quarter to $393,007,000, and revenues were 7 percent higher than the same period last year. Pro forma advertising revenues grew 7 percent in the quarter, including a 12 percent gain in national, a 6 percent increase in classified and a 5 percent gain in local. Pro forma newspaper advertising volume increased 6 percent for the fourth quarter.
At USA TODAY, paid advertising pages increased 12 percent to 1,955 compared to 1,743 in the fourth quarter of 1997. Advertising revenues grew 20 percent. For the full year, paid advertising pages advanced 9 percent to 5,985, compared to 5,516 in 1997. Advertising revenues gained 12 percent in 1998 to $327 million.
Broadcasting cash flow rose 6 percent in the quarter to $121,795,000 from $114,597,000 as revenues gained 2 percent to $202,682,000. Our television stations benefitted from strong political advertising which offset overall softer demand for advertising in the fourth quarter. The company sold its five remaining radio stations on the first day of fiscal 1998, which had been reported in the Broadcasting business segment. The company also purchased three television stations in 1998. On a pro forma basis, giving effect to these transactions, television revenues grew 5 percent and both operating income and operating cash flow increased 11 percent for the quarter.
Cable revenues were $61,079,000 in the fourth quarter of 1998, and operating cash flow was $28,912,000 for the quarter. Prior to the sale of the assets of Multimedia Security Service, Inc. in the first quarter, 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 13 percent while cable operating cash flow grew 10 percent. Basic cable subscribers totaled 514,136 at year end, equal to 62 percent of homes passed. Pay subscribers numbered 310,091 at year end.
Gannett is a nationwide news and information company that publishes 75 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
Dec. 27, 1998 Dec. 28, 1997 (Dec)Net Operating Revenues:
Newspaper advertising $ 818,979 $ 751,457 9.0
Newspaper circulation 251,863 247,095 1.9
Broadcasting 202,682 198,812 1.9
Cable and Security 61,079 65,852 (7.2)
Other 56,579 55,601 1.8
------------- ------------- -----
Total 1,391,182 1,318,817 5.5
------------- ------------- -----Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 655,927 623,986 5.1
Selling, general and administrative
expenses, exclusive of depreciation 205,414 204,908 0.2
Depreciation 48,410 51,363 (5.7)
Amortization of intangible assets 28,697 25,333 13.3
------------- ------------- -----
Total 938,448 905,590 3.6
------------- ------------- -----
Operating income 452,734 413,227 9.6
------------- ------------- -----Non-operating income (expense):
Interest expense (18,645) (24,423) (23.7)
Other (3,654) (1,382) ----
------------- ------------- -----
Total (22,299) (25,805) (13.6)
------------- ------------- -----Income before income taxes 430,435 387,422 11.1
Provision for income taxes 172,700 157,000 10.0
------------- ------------- -----
Net income $ 257,735 $ 230,422 11.9
============= ============= =====Net income per share - basic $0.92 $0.81 13.6
===== ===== =====Net income per share - diluted $0.92 $0.80 15.0
===== ===== =====Dividends per share $0.20 $0.19 5.3
===== ===== =====NOTE: The Company's Radio and Alarm Security businesses were sold in the
first quarter of 1998 - refer to Business Segment Information for pro forma
comparisons.CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)Fiscal Year Ended % Inc
Dec. 27, 1998 Dec. 28, 1997 (Dec)Net Operating Revenues:
Newspaper advertising $ 2,942,995 $ 2,634,334 11.7
Newspaper circulation 1,010,238 948,141 6.5
Broadcasting 721,298 703,558 2.5
Cable and Security 240,600 255,263 (5.7)
Other 206,160 188,195 9.5
------------- ------------ -----
Total 5,121,291 4,729,491 8.3
------------- ------------ -----
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 2,593,982 2,368,572 9.5
Selling, general and administrative
expenses, exclusive of depreciation 773,601 743,578 4.0
Depreciation 201,683 201,100 0.3
Amortization of intangible assets 108,523 99,973 8.6
------------- ------------ -----
Total 3,677,789 3,413,223 7.8
------------- ------------ -----
Operating income 1,443,502 1,316,268 9.7
------------- ------------ -----
Non-operating income (expense):
Interest expense (79,412) (98,242) (19.2)
Other 305,323 (9,047) ----
------------- ------------ -----
Total 225,911 (107,289) ----
------------- ------------ -----Income before income taxes 1,669,413 1,208,979 38.1
Provision for income taxes 669,500 496,300 34.9
------------- ------------ -----
Net income $ 999,913 $ 712,679 40.3
============= ============ =====Net income per share - basic $3.53 $2.52 40.1
===== ===== =====Net income per share - diluted $3.50 $2.50 40.0
===== ===== =====Dividends per share $0.78 $0.74 5.4
===== ===== =====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).Earnings Summary Excluding
1998 Net Non-operating GainFiscal Year Ended % Inc
Dec. 27, 1998 Dec. 28, 1997 (Dec)Operating income $ 1,443,502 $ 1,316,268 9.7
------------ ------------ -----Non-operating income (expense):
Interest expense (79,412) (98,242) (19.2)
Other (1,204) (9,047) (86.7)
------------ ------------ -----
Total (80,616) (107,289) (24.9)
------------ ------------ -----Income before income taxes 1,362,886 1,208,979 12.7
Provision for income taxes 546,580 496,300 10.1
------------ ------------ -----
Net income $ 816,306 712,679 14.5
============ ============ =====Net income per share - basic $2.88 $2.52 14.3
===== ===== ====Net income per share - diluted $2.86 $2.50 14.4
===== ===== ====Dividends per share $0.78 $0.74 5.4
===== ===== ====BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollarsQuarter Ended % Inc
Dec. 27, 1998 Dec. 28, 1997 (Dec)Operating Revenues:
Newspaper publishing $ 1,127,421 $ 1,054,153 7.0
Broadcasting 202,682 198,812 1.9
Cable and Security 61,079 65,852 (7.2)
------------- ------------- -----
Total $ 1,391,182 $ 1,318,817 5.5
============= ============= =====
Operating Income (net of
depreciation and amortization):
Newspaper publishing $ 346,945 $ 313,396 10.7
Broadcasting 106,408 102,036 4.3
Cable and Security 15,326 14,453 6.0
Corporate (15,945) (16,658) 4.3
------------- ------------- -----
Total $ 452,734 $ 413,227 9.6
============= ============= =====
Depreciation and Amortization:
Newspaper publishing $ 46,062 $ 44,949 2.5
Broadcasting 15,387 12,561 22.5
Cable and Security 13,586 17,020 (20.2)
Corporate 2,072 2,166 (4.3)
------------- ------------- -----
Total $ 77,107 $ 76,696 0.5
============= ============= =====
Operating Cash Flow:
Newspaper publishing $ 393,007 $ 358,345 9.7
Broadcasting 121,795 114,597 6.3
Cable and Security 28,912 31,473 (8.1)
Corporate (13,873) (14,492) 4.3
------------- ------------- -----
Total $ 529,841 $ 489,923 8.1
============= ============= =====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. In the third quarter of 1998, the Company exchanged certain of its cable operations, resulting in increased subscribers. On a pro forma basis for the fourth quarter, giving effect to the sale of the Alarm Security Business, cable operations reported gains in revenue of 13%, operating income of 13% and operating cash flow of 10%. On a year-to-date basis, pro forma cable operations reflect an 11% revenue gain, a 17% improvement in operating income and a 9% gain in operating cash flow.
On the first day of fiscal 1998, the Company sold its five remaining radio stations, which had been reported in the Broadcasting business segment. The Company also purchased two television stations in Maine in early fiscal 1998
and a television station in Columbia, South Carolina, in May 1998. On a pro
forma basis for the fourth quarter, giving effect to these transactions,
television operations reported gains in revenue of 5%, operating income of
11% and operating cash flow of 11%. On a year-to-date basis, pro forma
television operations reflect a 6% revenue gain, a 12% improvement in
operating income and a 10% gain in operating cash flow.BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollarsFiscal Year Ended % Inc
Dec. 27, 1998 Dec. 28, 1997 (Dec)Operating Revenues:
Newspaper publishing $ 4,159,393 $ 3,770,670 10.3
Broadcasting 721,298 703,558 2.5
Cable and Security 240,600 255,263 (5.7)
-------------- ------------- -----
Total $ 5,121,291 $ 4,729,491 8.3
============== ============= =====Operating Income (net of
depreciation and amortization):
Newspaper publishing $ 1,109,221 $ 1,001,965 10.7
Broadcasting 343,512 328,311 4.6
Cable and Security 57,688 54,026 6.8
Corporate (66,919) (68,034) 1.6
-------------- ------------- -----
Total $ 1,443,502 $ 1,316,268 9.7
============== ============= =====Depreciation and Amortization:
Newspaper publishing $ 184,718 $ 168,526 9.6
Broadcasting 60,023 56,459 6.3
Cable and Security 56,743 67,368 (15.8)
Corporate 8,722 8,720 0.0
-------------- ------------- -----
Total $ 310,206 $ 301,073 3.0
============== ============= =====Operating Cash Flow:
Newspaper publishing $ 1,293,939 $ 1,170,491 10.5
Broadcasting 403,535 384,770 4.9
Cable and Security 114,431 121,394 (5.7)
Corporate (58,197) (59,314) 1.9
-------------- ------------- -----
Total $ 1,753,708 $ 1,617,341 8.4
============== ============= =====Please refer to notes on Quarter Ended Business Segment Information.