Second Quarter 1996 Earnings
ARLINGTON, Va. — Gannett announced today that second-quarter net income advanced 8 percent to $150,016,000, resulting in earnings of $1.07 per share. In the second quarter of 1995, net income was $139,423,000, and earnings were $1.00 per share. Results include the operations of Multimedia, Inc., a South Carolina-based media company purchased in December 1995.
Operating revenues gained 19 percent to $1,208,660,000, from $1,013,921,000 in the year-earlier quarter. If Gannett had owned the same complement of properties in both quarters, revenues would have increased 2 percent. Operating income increased 23 percent to $302,251,000 from $246,399,000 in
the year-earlier quarter. Operating cash flow advanced to $379,552,000 from $296,743,000 in the prior year, reflecting contributions from the new properties, robust advertising growth at USA TODAY and a healthy broadcast environment.
Average shares outstanding in the quarter totaled 140,845,000, compared with 140,117,000 in 1995’s second quarter.
For the first six months of 1996, net income grew 6 percent to $239,366,000, and earnings per share were $1.70, compared with $1.61 in the year-earlier interval. Operating income gained 24 percent to $500,162,000 from $403,566,000 in 1995. Operating cash flow was $654,875,000, compared with $504,564,000 in 1995. Operating revenues increased 20 percent to $2,312,820,000 for the six months.
In a statement, the company said that the properties acquired from Multimedia continued to boost operating cash flow, but incremental interest, taxes and goodwill amortization associated with the transaction moderated their contribution to earnings per share. The broadcasting group achieved record results for the second quarter. Newspaper earnings declined slightly and continued to reflect losses at The Detroit News and the impact of higher newsprint costs, which rose 31 percent in the quarter. In Detroit, six unions have been on strike since July 13, 1995.
Operating cash flow from newspapers was higher than last year, while revenues in the quarter grew 6 percent. If the same group of newspapers had been held in both periods, revenues would have gained 1 percent, including a 1 percent gain in pro forma advertising revenues. Gains in classified and national advertising revenue continued in the second quarter. Pro forma newspaper advertising volume declined 2 percent, reflecting lower local ad volume.
At USA TODAY, paid advertising pages jumped 20 percent to 1,253, compared with 1,044 in the second quarter of 1995. Advertising revenues soared 26 percent. For the first half, paid pages totaled 2,333, compared with 1,921 last year, and advertising revenues advanced 26 percent.
Broadcast cash flow advanced 70 percent in the quarter to $92,429,000 as revenues gained 46 percent to $176,306,000. Strong demand for television advertising propelled broadcast pro forma revenues 8 percent higher in the second quarter. Pro forma radio revenues were down slightly in the quarter.
Cable revenues were $48,038,000 in the second quarter of 1996, and operating cash flow was $24,111,000. Basic subscribers totaled 458,347 at the end of the quarter, equal to 61 percent of homes passed. Pay units numbered 335,386 at June 30, 1996.
Revenues from other businesses increased 50 percent to $115,281,000, and operating cash flow reached $33,493,000, reflecting results for outdoor, and the entertainment and alarm security businesses acquired in the Multimedia acquisition.
On July 9 Gannett announced that it had entered into an agreement to sell its Outdoor business to Outdoor Systems, Inc. for a purchase price of approximately $690 million. Closing is expected to occur as soon as regulatory approvals are obtained.
Gannett is a nationwide news and information company that publishes 92 daily newspapers, including USA TODAY, and USA WEEKEND, a newspaper magazine. Gannett also has entertainment programming, operates 15 television stations, 11 radio stations, cable television systems in five states, security systems and the largest outdoor advertising company in North America.
CONDENSED CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Assets June 30, 1996 Dec. 31, 1995
Cash and marketable securities $ 33,325 $ 46,985
Accounts receivable, net 569,604 587,896
Inventories 105,957 111,653
Prepaid expenses and other current assets 113,955 107,550
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Total current assets 822,841 854,084
Property, plant and equipment, net 2,066,505 2,070,687
Excess of acquisition cost over the
value of assets acquired 3,337,512 3,386,600
Other assets 210,622 192,429
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Total $ 6,437,480 $ 6,503,800
========= =========
Liabilities and Shareholders' Equity
Current maturities of long-term debt $ 281 $ 90,751
Accounts payable and current portion of
film contracts payable 212,430 279,594
Accrued expenses and other current
liabilities 343,589 378,148
Dividends payable 50,781 49,208
Income taxes 57,034 15,071
--------- ---------
Total current liabilities 664,115 812,772
Deferred income taxes 319,120 327,916
Long-term debt, less current portion 2,703,891 2,767,880
Postretirement medical and life
insurance liabilities 307,729 305,700
Other long-term liabilities 140,521 143,884
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Shareholders' Equity 2,302,104 2,145,648
--------- ---------
Total $ 6,437,480 $ 6,503,800
========= =========
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Thirteen weeks ended % Inc
June 30, 1996 June 25, 1995 (Dec)
Net Operating Revenues:
Newspaper advertising $ 604,980 $ 567,134 6.7
Newspaper circulation 227,260 214,045 6.2
Broadcasting 176,306 120,880 45.9
Cable 48,038 0.0
Other 152,076 111,862 35.9
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Total 1,208,660 1,013,921 19.2
--------- --------- ----
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 640,491 542,372 18.1
Selling, general and
administrative expenses
exclusive of depreciation 188,617 174,806 7.9
Depreciation 53,058 38,983 36.1
Amortization of
intangible assets 24,243 11,361 113.4
--------- --------- ----
Total 906,409 767,522 18.1
--------- --------- ----
Operating income 302,251 246,399 22.7
--------- --------- ----
Non-operating income (expense):
Interest expense (38,403) (10,878) 253.0
Other (657) (1,198) (45.2)
--------- --------- ----
Total (39,060) (12,076) 223.5
--------- --------- ----
Income before income taxes 263,191 234,323 12.3
Provision for income taxes 113,175 94,900 19.3
--------- --------- ----
Net income $ 150,016 $ 139,423 7.6
--------- --------- ----
Net income per share $1.07 $1.00 7.0
--------- --------- ----
Dividends per share $0.35 $0.34 2.9
--------- --------- ----
CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Twenty-six weeks ended % Inc
June 30, 1996 June 25, 1995 (Dec)
Net Operating Revenues:
Newspaper advertising $ 1,161,865 $ 1,083,876 7.2
Newspaper circulation 456,677 426,009 7.2
Broadcasting 317,994 217,863 46.0
Cable 95,246 0.0
Other 281,038 199,993 40.5
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Total 2,312,820 1,927,741 20.0
--------- --------- ----
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 1,281,700 1,076,594 19.1
Selling, general and
administrative expenses
exclusive of depreciation 376,245 346,583 8.6
Depreciation 106,193 78,242 35.7
Amortization of
intangible assets 48,520 22,756 113.2
--------- --------- ----
Total 1,812,658 1,524,175 18.9
--------- --------- ----
Operating income 500,162 403,566 23.9
--------- --------- ----
Non-operating income (expense):
Interest expense (77,931) (22,610) 244.7
Other (2,240) (1,727) 29.7
--------- --------- ----
Total (80,171) (24,337) 229.4
--------- --------- ----
Income before income taxes 419,991 379,229 10.7
Provision for income taxes 180,625 153,600 17.6
--------- --------- ----
Net income $ 239,366 $ 225,629 6.1
--------- --------- ----
Net income per share $1.70 $1.61 5.6
--------- --------- ----
Dividends per share $0.70 $0.68 2.9
--------- --------- ----
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Twenty-six weeks ended
June 30, 1996 June 25, 1995
Cash flows from operating activities
Net income $239,366 $225,629
Adjustments to reconcile net income to
operating cash flows:
Depreciation 106,193 78,242
Amortization of intangibles 48,520 22,756
Deferred income taxes (8,796) (8,851)
Gain on sale of assets (405) (151)
Other, net (13,950) 29,821
Changes in other assets & liabilities,net (41,542) (76,734)
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Net cash flow from operating activities 329,386 270,712
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Cash flows from investing activities
Purchase of property, plant and equipment (106,642) (64,481)
Change in other investments (9,183) 0
Proceeds from sale of certain assets 4,720 1,782
Collection of long-term receivables 791 3,662
------- -------
Net cash used by investing activities (110,314) (59,037)
------- -------
Cash flows from financing activities
Payments of long-term debt (149,695) (153,095)
Dividends paid (96,990) (95,917)
Proceeds from issuance of common stock 13,864 5,671
------- -------
Net cash used for financing activities (232,821) (243,341)
------- -------
Effect of currency exchange rate change 89 192
------- -------
Decrease in cash and
cash equivalents (13,660) (31,474)
------- -------
Balance of cash and cash equivalents at
beginning of year 46,985 44,252
------- -------
Balance of cash and cash equivalents at
end of second quarter $33,325 $12,778
======= =======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
SALE OF OUTDOOR ADVERTISING BUSINESS
On July 9, 1996, the Company announced that it had entered into
an agreement to sell substantially all of its Outdoor advertising
business to Outdoor Systems, Inc. The purchase price is expected to
be approximately $700 million in cash. The Company will record a
gain on this sale at closing, which is expected to occur in the
third quarter, following receipt of regulatory approvals. In
addition, Outdoor Systems, Inc. has an option to purchase the
Company's remaining outdoor business in Houston, Texas, for
approximately $10 million. Proceeds from these sales will be
used to repay existing commercial paper obligations.
OPERATING SUMMARY
Income from operations for the second quarter of 1996 rose $55.9
million or 23% reflecting in part earnings from Multimedia
properties acquired in December 1995. Earnings from broadcasting
rose sharply, up $34.7 million or 73%. Multimedia television
stations contributed to this growth along with significant
earnings gains from the Company's other stations as a group. The
Company's new cable business reported operating income of $10.8
million for the quarter.
Newspaper publishing earnings were down slightly for the quarter.
Incremental earnings from the Multimedia newspaper group were
offset by the effects of higher newsprint costs and a loss at The
Detroit News, where six unions have been on strike since July
1995.
Income from the Company's other businesses was $11.5 million
greater than a year ago, reflecting the results of the alarm
security and entertainment businesses acquired as part of the
Multimedia purchase.
Operating income for the first six months of 1996 rose $96.6
million or 24%.
NEWSPAPERS
Newspaper publishing revenues rose $52.8 million or 6% in the
second quarter of 1996 and $113.5 million or 7% for the year-to-date,
reflecting in part revenues reported by Multimedia newspapers. Newspaper advertising revenue rose $37.8 million or 7% in the quarter and $78 million or 7% for the first six months.
The tables below provide, on a pro forma basis, further details
of newspaper ad revenue and linage and preprint distribution for
the second quarter and year-to-date periods of 1996 and 1995:
Advertising revenue, in thousands of dollars (pro forma)
Second quarter 1996 1995 % Change
Local $207,171 $212,552 (3)
National 98,098 89,263 10
Classified 209,435 200,540 4
------- ------- --
Total Run-of-Press 514,704 502,355 2
Preprint and
other advertising 90,276 95,699 (6)
------- ------- --
Total ad revenue $604,980 $598,054 1
======= ======= ==
Advertising linage, in thousands of inches (pro forma)
Second quarter 1996 1995 % Change
Local 8,078 8,555 (6)
National 622 632 (2)
Classified 9,265 9,201 1
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Total Run-of-Press
linage 17,965 18,388 (2)
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Preprint distribution (000's) 1,549 1,648 (6)
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Advertising revenue, in thousands of dollars (pro forma)
Year-to-date 1996 1995 % Change
Local $ 397,733 $ 406,599 (2)
National 188,605 170,098 11
Classified 402,304 387,302 4
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Total Run-of-Press 988,642 963,999 3
Preprint and
other advertising 173,223 177,796 (3)
------- ------- --
Total ad revenue $1,161,865 $1,141,795 2
========= ========= ==
Advertising linage, in thousands of inches (pro forma)
Year-to-date 1996 1995 % Change
Local 15,469 16,399 (6)
National 1,154 1,160 (1)
Classified 17,655 17,594 0
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Total Run-of-Press
linage 34,278 35,153 (2)
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Preprint distribution (000's) 2,977 3,098 (4)
------ ------ --
In the pro forma presentation above, total advertising revenues
for the Company's newspapers rose 1% for the quarter and 2% for
the first six months. Local ad revenues declined for the quarter
and year-to-date periods due to the effects of the strike in
Detroit and because revenue from certain of the Company's larger
retail customers has been soft. National ad revenue rose 10% for
the quarter and 11% year-to-date, reflecting a 26% gain by USA
TODAY. Classified advertising, up 4% for the quarter and
year-to-date periods, reflects gains across the newspaper group
(except Detroit), with continued improvement in employment, auto
and real estate categories.
Reported newspaper circulation revenues rose 6% for the quarter
and 7% for the year-to-date. On a pro forma basis, circulation
revenues were up 2% for the quarter and 3% for the year-to-date.
Net paid daily circulation for the Company's local newspapers was
down 4% for the quarter and for the first six months, while
Sunday circulation declined 6% for the quarter and for the year-to-date.
The decline in local daily and Sunday circulation was
due principally to the effect of the strike in Detroit. USA
TODAY reported an average daily paid circulation of 2,113,881 in
the ABC Publisher's statement for the six months ended March 31,
1996, which, subject to audit, is a 3% increase over the
comparable period a year ago.
Operating costs in total for the newspaper segment rose $54.8
million or 9% for the quarter and $118.9 million or 10% for the
year-to-date, reflecting added costs from the Multimedia
newspapers. Higher newsprint prices continued to have a
significant effect on costs. In total, reported newsprint
expense rose 31% for the quarter and 40% for the year-to-date.
Consumption was slightly above 1995 levels for both the quarter
and the year-to-date periods, including added usage of Multimedia
newspapers. Pro forma consumption was down 3% for the quarter
and for the year-to-date. Newsprint prices have softened in
recent months and are expected to decline further in coming
months. However, because of the carryover effect of price
increases over the last year, newsprint expense comparisons with
1995 are likely to be adversely affected at least through the
third quarter of 1996.
Newspaper operating income declined $2 million or 1% for the
quarter and $5.4 million or 2% for the first six months,
reflecting higher newsprint costs and the impact of the strike in
Detroit.
BROADCASTING
Broadcast revenues increased $55.4 million or 46% for the second
quarter and $100.1 million or 46% for the first six months, while
operating costs were up $20.7 million or 28% for the quarter and
$41.6 million or 29% for the year-to-date. Results for the 1996
quarter and year-to-date periods include the Multimedia
television and radio stations. On a pro forma basis, broadcast
revenues increased 8% for the quarter and year-to-date,
reflecting strong demand for television advertising.
Pro forma local television ad revenues grew 11% for the quarter
and for the year-to-date, while national revenues increased 9%
for the quarter and 10% for the first six months. Pro forma radio
revenues were down slightly for the quarter and for the first six
months.
Operating income rose $34.7 million or 73% for the quarter and
$58.5 million or 80% for the year-to-date, reflecting earnings
from the new Multimedia stations as well as improved results from
most of the Company's other television stations. The Company's
nine NBC affiliates reported substantial year-over-year gains for
the quarter and first six months of 1996. Operating income from
the radio group was also significantly higher for the quarter and
year-to-date periods.
In May 1996, the Company sold two Macon, Ga., radio stations
which were acquired as part of the Multimedia purchase in
December 1995. This transaction does not significantly affect
broadcast operating results comparisons for 1996.
CABLE
Cable television revenues were $48 million in the second quarter
of 1996 and $95.2 million for the first six months. On a pro
forma basis, cable revenues increased 10% for the quarter and 11%
for the year-to-date. Basic subscribers totaled approximately
458,000 at the end of the quarter, equal to 61% of homes passed.
Pay subscribers totaled approximately 335,000 at June 30, 1996.
Operating income from cable totaled $10.8 million for the quarter
and $21.7 million for the year-to-date, and operating cash flow
was $24.1 million for the quarter and $48.1 million for the first
six months.
OTHER BUSINESSES
The principal businesses included in this segment are outdoor
advertising, and the television entertainment programming and
alarm security businesses acquired in the Multimedia purchase.
Earnings from outdoor advertising were higher for the quarter and
the year-to-date. As mentioned earlier, the Company reached an
agreement to sell its outdoor advertising business.
The entertainment programming and alarm security businesses were
both profitable for the quarter and for the year-to-date. The
revenue and earnings for the alarm security business are growing,
however, competition in the entertainment business continues to
adversely affect its earnings.
NON-OPERATING INCOME AND EXPENSE
Interest expense rose $27.5 million or 253% for the quarter and
$55.3 million or 245% for the year-to-date, reflecting interest
on commercial paper borrowings to finance the Multimedia
acquisition in December 1995.
PROVISION FOR INCOME TAXES
The Company's effective income tax rate was 43% for the quarter
and for the year-to-date. The increase in the effective rate for
1996 is attributable to amortization of non-deductible intangible
assets recorded in connection with the Multimedia acquisition.
NET INCOME
Net income rose $10.6 million or 8% for the quarter and $13.7
million or 6% for the first six months. Net income per share
rose to $1.07 from $1.00 for the quarter, an increase of 7%. For
the year-to-date, net income per share increased 6% to $1.70 from
$1.61 in 1995. The weighted average number of shares outstanding
totaled 140,845,000 for the second quarter of 1996, compared to
140,117,000 for the second quarter of 1995. Average shares
outstanding for the year-to-date totaled 140,763,000 for 1996 and
140,065,000 for 1995. The increase in the number of shares
outstanding for the quarter and year-to-date periods is due
mainly to the exercise of stock options.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities as reported in the
accompanying Consolidated Statements of Cash Flow, totaled $329
million for the first half of 1996, compared with $271 million a
year ago. The increase is due principally to operating cash flow
from Multimedia properties acquired in December. Principal uses
of cash flow in 1996 were capital expenditures, reduction of debt
and dividends.
Capital expenditures for the year-to-date totaled $107 million in
1996, compared to $64 million in 1995. The increase reflects
capital spending for the newly acquired Multimedia businesses,
particularly cable and alarm security.
The Company's long-term debt was reduced by $150 million from
operating cash flow in the first half of 1996. The Company's
regular quarterly dividend of $0.35 per share was declared in the
first and second quarter and totaled $98.6 million.
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Thirteen weeks ended % Inc
June 30, 1996 June 25, 1995 (Dec)
Operating Revenues:
Newspaper publishing $ 869,035 $ 816,259 6.5
Broadcasting 176,306 120,880 45.9
Cable 48,038 0 0.0
Other businesses 115,281 76,782 50.1
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Total $ 1,208,660 $ 1,013,921 19.2
========= ========= ====
Operating Income (net of
depreciation and amortization):
Newspaper publishing $ 203,111 $ 205,164
(1.0)
Broadcasting 82,109 47,366 73.4
Cable 10,814 0 0.0
Other businesses 22,803 11,297 101.9
Corporate (16,586) (17,428) 4.8
--------- --------- ----
Total $ 302,251 $ 246,399 22.7
========= ========= ====
Depreciation and Amortization:
Newspaper publishing $ 40,438 $ 36,411 11.1
Broadcasting 10,320 7,006 47.3
Cable 13,297 0 0.0
Other businesses 10,690 4,510 137.0
Corporate 2,556 2,417 5.8
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Total $ 77,301 $ 50,344 53.5
========= ========= ====
Operating Cash Flow:
Newspaper publishing $ 243,549 $ 241,575 0.8
Broadcasting 92,429 54,372 70.0
Cable 24,111 0 0.0
Other businesses 33,493 15,807 111.9
Corporate (14,030) (15,011) 6.5
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Total $ 379,552 $ 296,743 27.9
========= ========= ====
BUSINESS SEGMENT INFORMATION
Unaudited, in thousands of dollars
Twenty-six weeks ended % Inc
June 30, 1996 June 25, 1995 (Dec)
Operating Revenues:
Newspaper publishing $ 1,689,407 $ 1,575,895 7.2
Broadcasting 317,994 217,863 46.0
Cable 95,246 0 0.0
Other businesses 210,173 133,983 56.9
--------- --------- ----
Total $ 2,312,820 $ 1,927,741 20.0
========= ========= ====
Operating Income (net of
depreciation and amortization):
Newspaper publishing $ 350,662 $ 356,020 (1.5)
Broadcasting 132,148 73,606 79.5
Cable 21,723 0 0.0
Other businesses 28,633 8,354 242.7
Corporate (33,004) (34,414) 4.1
--------- --------- ----
Total $ 500,162 $ 403,566 23.9
========= ========= ====
Depreciation and Amortization:
Newspaper publishing $ 80,976 $ 72,861 11.1
Broadcasting 26,018 14,070 84.9
Cable 26,351 0 0.0
Other businesses 16,256 8,989 80.8
Corporate 5,112 5,078 0.7
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Total $ 154,713 $ 100,998 53.2
========= ========= ====
Operating Cash Flow:
Newspaper publishing $ 431,638 $ 428,881 0.6
Broadcasting 158,166 87,676 80.4
Cable 48,074 0 0.0
Other businesses 44,889 17,343 158.8
Corporate (27,892) (29,336) 4.9
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Total $ 654,875 $ 504,564 29.8
========= ========= ====
NOTES:
(1) For financial reporting purposes, at the end of 1995, the Company
established four separate segments: newspapers, broadcasting (television
and radio); cable television; and a segment for all other business operations.
Previously, the Company’s operations were reported in three segments:
newspapers; broadcasting; and outdoor advertising. Upon the completion of
the Multimedia acquisition, the Company established a separate business
segment for the acquired cable television division. At the same time,
the Company elected to group its outdoor advertising business along with
the security alarm and entertainment businesses acquired from
Multimedia in its fourth “Other Businesses” reporting segment. Additionally,
certain businesses previously reported in the newspaper segment are now
reflected in the “Other Businesses” segment. Prior year segment
data has been restated to reflect this reporting change.
(2) Operating Cash Flow represents operating income for each of the Company’s
business segments plus related depreciation and amortization expense.