Third Quarter 1998 Earnings
ARLINGTON, Va. — Gannett announced today that diluted earnings per share advanced 17 percent to 62 cents per share in the third quarter, a new record. In the third quarter of 1997, diluted earnings per share were 53 cents.
Net income increased 16 percent in the third quarter to $176,519,000 from $152,460,000 in the year-earlier interval. Operating revenues gained 7 percent to $1,226,062,000 from $1,146,090,000 in 1997’s third quarter. If Gannett had owned the same complement of properties in both quarters, revenues would have increased 4 percent. Operating income advanced 10 percent to $312,666,000 from $284,701,000 in the third quarter of 1997. Operating cash flow increased to $389,666,000 from $359,580,000 in the prior-year period, reflecting continued strong advertising demand at our local newspapers.
Average diluted shares outstanding in the quarter totaled 286,923,000, compared to 285,958,000 in 1997’s third quarter. During the third quarter, Gannett announced an authorization by its Board 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 Sept. 30. Approximately 3.1 million shares were purchased by the end of the third quarter.
For the first nine months of 1998, net income, excluding a $183,607,000 net non-operating gain principally from the sale of several businesses, advanced 16 percent to $558,571,000 from $482,257,000 in the year-earlier interval. Diluted earnings per share, excluding the net non-operating after-tax gain, increased 15 percent to $1.95, compared to $1.69 in 1997. Operating cash flow was $1,223,867,000, compared to $1,127,418,000 in 1997. Operating revenues increased 9 percent to $3,730,109,000 for the nine months.
In a statement, the company said newspaper earnings advanced, reflecting strong classified advertising demand and a favorable comparison year-to-year at The Detroit News. Newsprint expense rose 15 percent for the quarter. The television group, on a pro forma basis, achieved improved revenues and operating income despite the impact of the General Motors strike which tempered advertising demand in the third quarter.
Operating cash flow from newspapers was 14 percent higher than last year and revenues in the quarter grew 10 percent. If the same group of newspapers had been held in both periods, pro forma advertising revenues would have increased 5 percent in the quarter, including a 6 percent gain in classified, a 3 percent increase in local and a 2 percent advance in national. Pro forma newspaper advertising volume increased 7 percent for the quarter.
At USA TODAY, paid advertising pages numbered 1,242 in the quarter, compared to 1,247 in the third quarter of 1997. Advertising revenues rose 4 percent. For the year-to-date, USA TODAY’s advertising revenues are up 9 percent, and paid pages totaled 4,030, compared to 3,773 last year, a 7 percent increase.
Broadcasting revenues declined 4 percent to $159,125,000 in the quarter and cash flow decreased to $81,150,000 from $86,288,000 in the year-earlier 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 earlier this year. On a pro forma basis, giving effect to these transactions, television revenues grew 1 percent and operating income also increased 1 percent for the quarter.
Cable revenues were $58,231,000 and operating cash flow was $27,641,000 for the quarter. On a pro forma basis, revenues advanced 9 percent while cable operating cash flow grew 8 percent. Pro forma results include the effects of the acquisition of approximately 128,000 cable subscribers from TCI Communications, Inc. in exchange for Multimedia Cablevision’s systems serving approximately 93,000 subscribers in suburban Chicago completed this quarter. Also, prior to the sale of the assets of Multimedia Security Services, Inc. in the first quarter, the results of this segment included both the cable and security businesses. Basic cable subscribers totaled 513,295 at the end of the quarter, equal to 64 percent of homes passed. Pay subscribers numbered 327,369 at quarter 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
Sept. 27, 1998 Sept. 28, 1997 (Dec)
Net Operating Revenues:
Newspaper advertising $ 707,347 $ 633,019 11.7
Newspaper circulation 251,534 235,439 6.8
Broadcasting 159,125 164,895 (3.5)
Cable and Security 58,231 63,502 (8.3)
Other 49,825 49,235 1.2
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Total 1,226,062 1,146,090 7.0
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Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 648,320 602,418 7.6
Selling, general and administrative
expenses, exclusive of depreciation 188,076 184,092 2.2
Depreciation 49,878 49,979 (0.2)
Amortization of intangible assets 27,122 24,900 8.9
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Total 913,396 861,389 6.0
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Operating income 312,666 284,701 9.8
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Non-operating income (expense):
Interest expense (17,190) (23,418) (26.6)
Other (877) (1,573) (44.2)
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Total (18,067) (24,991) (27.7)
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Income before income taxes 294,599 259,710 13.4
Provision for income taxes 118,080 107,250 10.1
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Net income $ 176,519 $ 152,460 15.8
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Net income per share - basic $0.62 $0.54 14.8
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Net income per share - diluted $0.62 $0.53 17.0
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Dividends per share $0.20 $0.19 5.3
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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)
Year-to-date Ended % Inc
Sept. 27, 1998 Sept. 28, 1997 (Dec)
Net Operating Revenues:
Newspaper advertising $ 2,124,016 $ 1,882,877 12.8
Newspaper circulation 758,375 701,046 8.2
Broadcasting 518,616 504,746 2.7
Cable and Security 179,521 189,411 (5.2)
Other 149,581 132,594 12.8
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Total 3,730,109 3,410,674 9.4
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Operating Expenses:
Cost of sales and operating
expenses, exclusive of depreciation 1,938,055 1,744,586 11.1
Selling, general and administrative
expenses, exclusive of depreciation 568,187 538,670 5.5
Depreciation 153,273 149,737 2.4
Amortization of intangible assets 79,826 74,640 6.9
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Total 2,739,341 2,507,633 9.2
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Operating income 990,768 903,041 9.7
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Non-operating income (expense):
Interest expense (60,767) (73,819) (17.7)
Other 308,977 (7,665) ----
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Total 248,210 (81,484) ----
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Income before income taxes 1,238,978 821,557 50.8
Provision for income taxes 496,800 339,300 46.4
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Net income $ 742,178 $ 482,257 53.9
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Net income per share - basic $2.61 $1.70 53.5
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Net income per share - diluted $2.59 $1.69 53.3
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Dividends per share $0.58 $0.55 5.5
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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 Gain
Year-to-date Ended % Inc
Sept. 27, 1998 Sept. 28, 1997 (Dec)
Operating income $ 990,768 $ 903,041 9.7
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Non-operating income (expense):
Interest expense (60,767) (73,819) (17.7)
Other 2,450 (7,665) ----
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Total (58,317) (81,484) (28.4)
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Income before income taxes 932,451 821,557 13.5
Provision for income taxes 373,880 339,300 10.2
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Net income $ 558,571 $ 482,257 15.8
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Net income per share - basic $1.96 $1.70 15.5
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Net income per share - diluted $1.95 $1.69 15.1
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Dividends per share $0.58 $0.55 5.5
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BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Quarter Ended % Inc
Sept. 27, 1998 Sept. 28, 1997 (Dec)
Operating Revenues:
Newspaper publishing $ 1,008,706 $ 917,693 9.9
Broadcasting 159,125 164,895 (3.5)
Cable and Security 58,231 63,502 (8.3)
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Total $ 1,226,062 $ 1,146,090 7.0
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Operating Income
(net of depreciation
and amortization):
Newspaper publishing $ 248,787 $ 217,793 14.2
Broadcasting 66,507 71,884 (7.5)
Cable and Security 13,883 12,323 12.7
Corporate (16,511) (17,299) 4.6
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Total $ 312,666 $ 284,701 9.8
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Depreciation and Amortization:
Newspaper publishing $ 46,386 $ 41,065 13.0
Broadcasting 14,643 14,404 1.7
Cable and Security 13,758 17,196 (20.0)
Corporate 2,213 2,214 (0.0)
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Total $ 77,000 $ 74,879 2.8
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Operating Cash Flow:
Newspaper publishing $ 295,173 $ 258,858 14.0
Broadcasting 81,150 86,288 (6.0)
Cable and Security 27,641 29,519 (6.4)
Corporate (14,298) (15,085) 5.2
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Total $ 389,666 $ 359,580 8.4
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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 third
quarter, giving effect to these transactions, cable operations reported gains
in revenue of 9%, operating income of 17% and operating cash flow of 8%.
On a year-to-date basis, pro forma cable operations reflect an 8% revenue gain,
an 11% improvement in operating income and a 6% 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 third quarter, giving effect to these
transactions, television operations reported gains in revenue of 1%,
operating income of 1% and even operating cash flow. On a year-to-date basis,
pro forma television operations reflect a 7% revenue gain, a 12% improvement
in operating income and a 9% gain in operating cash flow.
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollarsYear-to-date Ended % Inc
Sept. 27, 1998 Sept. 28, 1997 (Dec)
Operating Revenues:
Newspaper publishing $ 3,031,972 $ 2,716,517 11.6
Broadcasting 518,616 504,746 2.7
Cable and Security 179,521 189,411 (5.2)
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Total $ 3,730,109 $ 3,410,674 9.4
=============== ============== =======Operating Income
(net of depreciation
and amortization):
Newspaper publishing $ 762,276 $ 688,569 10.7
Broadcasting 237,104 226,275 4.8
Cable and Security 42,362 39,573 7.0
Corporate (50,974) (51,376) 0.8
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Total $ 990,768 $ 903,041 9.7
=============== ============== =======Depreciation and Amortization:
Newspaper publishing $ 138,656 $ 123,577 12.2
Broadcasting 44,636 43,898 1.7
Cable and Security 43,157 50,348 (14.3)
Corporate 6,650 6,554 1.5
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Total $ 233,099 $ 224,377 3.9
=============== ============== =======Operating Cash Flow:
Newspaper publishing $ 900,932 $ 812,146 10.9
Broadcasting 281,740 270,173 4.3
Cable and Security 85,519 89,921 (4.9)
Corporate (44,324) (44,822) 1.1
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Total $ 1,223,867 $ 1,127,418 8.6
=============== ============== =======Please refer to notes on Quarter Ended Business Segment Information.