Gannett Co., Inc. Reports Third Quarter Results

Business Wire, Oct 24, 2008

MCLEAN, Va. -- Gannett Co., Inc. (NYSE:GCI) reported today that 2008 third quarter earnings per diluted share from continuing operations were $0.69 compared with $1.01 per share in the third quarter of 2007. The results for the quarter include $23.0 million in pre-tax severance expenses ($14.4 million after tax or $0.07 per share) related to reductions in force and efficiency efforts in the U.S. and the UK. Absent severance expenses in the quarter, the company would have earned $0.76 per share.

As previously reported, the company acquired all of its partners' ownership stakes in ShopLocal LLC on June 30, 2008. In addition, the company acquired an additional 10 percent stake in CareerBuilder increasing its ownership to 50.8 percent on September 3, 2008. The results for ShopLocal and CareerBuilder were fully consolidated beginning in the seventh and ninth periods, respectively. Prior to these acquisitions the company's equity share of CareerBuilder and ShopLocal results was reported as equity earnings. Beginning with the third quarter, a new "Digital" business segment is being reported which includes CareerBuilder and ShopLocal results from the date of full consolidation as well as PointRoll, Planet Discover and Schedule Star. Prior period results for PointRoll, Planet Discover and Schedule Star have been reclassified from the publishing segment to the digital segment.

"While our results this quarter reflect the difficult and volatile economy both here and in the UK, they also highlight our determination to move forward with our strategic plan," said Chairman, President and Chief Executive Officer Craig Dubow.

"Our positive online results confirm, for instance, the importance of digital to our plan going forward. We also were delighted to complete, this quarter, the acquisition of an additional 10 percent stake in CareerBuilder, the largest online job site in the U.S., and the remainder of ShopLocal.

"Within our core operations, revenues from Olympics advertising reflected the strength of our NBC affiliated stations. Political advertising is strong and continues to surge as we move toward November. Meanwhile, we continue to transform our cost structure and create efficiencies as we manage through this economic downturn.

"And there were some headwinds in addition to the weakening economic conditions which impacted ad spending across the board," Dubow said. "We faced significantly higher newsprint prices and an unfavorable exchange rate."

Total reported operating revenues for the company were $1.64 billion in the third quarter compared to $1.80 billion in the same quarter a year ago. The decline was due to softer publishing advertising demand resulting primarily from weak economic conditions in the U.S. and the UK, offset partially by Olympic and political ad spending in Broadcasting and revenues from the consolidation of CareerBuilder and ShopLocal. On a pro forma basis, assuming Gannett owned the same complement of properties in the third quarters of 2008 and 2007, operating revenues would have been 10.2 percent lower.

Reported operating expenses declined 2.2 percent in the quarter to $1.38 billion from $1.41 billion in the third quarter of 2007. The decline was driven by continued cost containment and efficiency efforts and lower newsprint expense, reduced, in part, by severance expenses, the consolidation of CareerBuilder and ShopLocal expenses and our accelerated ramp up of our digital initiatives. On a pro forma basis and excluding severance costs, operating expenses declined 5.3 percent for the quarter. Corporate expenses were $14.3 million, 19.2 percent lower than the year ago quarter driven by cost control efforts offset slightly by buyout expenses. Operating cash flow (defined as operating income plus depreciation and amortization) was $324.0 million. Net income in the quarter was $158.1 million.

Average diluted shares outstanding in the third quarter totaled 228,331,000 compared with 232,698,000 in 2007's third quarter.

PUBLISHING

Publishing segment operating revenues were $1.36 billion for the quarter, a 14.4 percent decline from the third quarter of 2007. Advertising revenues were $977.1 million compared to $1.19 billion in the third quarter of 2007. On a pro forma basis, advertising revenues were 17.6 percent lower. Pro forma advertising revenues declined 14.9 percent in the U.S. and 23.6 percent, in pounds, at Newsquest, our operations in the UK. On a pro forma basis for the publishing segment, retail advertising revenues were 10.1 percent lower, national revenues declined 7.8 percent and classified revenues were down 28.5 percent. For comparison purposes, the exchange rate of the British pound in the quarter declined compared to last year. If the exchange rate had remained constant year-over-year total pro forma advertising revenues would have been 16.5 percent lower including declines of 9.5 percent in retail, 7.3 percent in national and 27.0 percent in classified.

Lower pro forma classified revenues were driven by declines of 41.5 percent in real estate, 34.0 percent in employment and 21.4 percent in automotive. For U.S. Community Publishing classified revenues were down 26.5 percent comprised of declines of 33.4 percent in real estate, 36.5 percent in employment and 18.7 percent in automotive. In the UK, classified revenues were 29.1 percent lower, in pounds, reflecting declines of 51.3 percent in real estate, 25.2 percent in employment and 25.3 percent in automotive.