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Gannett Announces Fourth Quarter and Full Year 2019 Results

February 27, 2020 GMT

MCLEAN, Va.--(BUSINESS WIRE)--Feb 27, 2020--

Gannett Co., Inc. (“Gannett”, “we”, “us”, “our”, or “the Company”) (NYSE: GCI) today reported its financial results for the fourth quarter and full year ended December 31, 2019. Prior to November 19, 2019, our corporate name was New Media Investment Group Inc. (“New Media” or “Legacy New Media”), and Gannett Co., Inc. (“Legacy Gannett”) was a separate publicly traded company. On November 19, 2019, New Media acquired Legacy Gannett (the “Acquisition”). In connection with the Acquisition, Legacy Gannett became a wholly owned subsidiary of New Media, and New Media changed its name to Gannett Co., Inc.

The discussion below presents “consolidated results” for the Company as a whole and “segment results” for our primary reporting segments: Publishing and Marketing Solutions. Within each of these categories, we provide (i) our actual GAAP results, which reflect a full quarter or year (as applicable) of Legacy New Media operations and six weeks of Legacy Gannett operations, (ii) same store revenue trends for Legacy Gannett and Legacy New Media, each on a stand-alone basis for the entire period, (iii) pro forma results, which reflect the consolidated operations, adjusted as if New Media had owned Legacy Gannett for the entire period presented, and (iv) Adjusted EBITDA, which is our non-GAAP measure of operating results, calculated based on actual results (with six weeks of Legacy Gannett results) and on a pro forma basis (assuming Legacy Gannett was owned for the entire period).

Financial Highlights

 

Fourth Quarter 2019

 

Full Year 2019

in thousands

Actual

 

Pro Forma

 

Actual

 

Pro Forma

GAAP operating revenue

$

699,274

 

 

$

1,054,253

 

 

$

1,867,909

 

 

$

4,182,220

 

GAAP net loss attributable to Gannett

(95,088

)

 

(115,694

)

 

(119,842

)

 

(114,983

)

Adjusted EBITDA (1) (non-GAAP)

98,821

 

 

141,208

 

 

223,871

 

 

485,452

 

Free cash flow (2) (non-GAAP)

(79,692

)

 

N/A

 

 

11,557

 

 

N/A

 

(1) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA and the reconciliation to the most comparable GAAP measure included herein.

(2) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Free cash flow and the reconciliation to the most comparable GAAP measure included herein. Free cash flow for the fourth quarter was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments. Free cash flow for the full year was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $45.4 million of integration and reorganization costs, $38.4 million of acquisition costs, and $11.3 million of other one-time adjustments.

Fourth Quarter 2019 Consolidated Results

  • Fourth quarter GAAP revenues of $699.3 million rose 68.1% as compared to the prior year quarter reflecting the Acquisition.
    • Legacy Gannett fourth quarter same store revenues decreased 10.1% year-over-year.
    • Legacy New Media fourth quarter same store revenues decreased 9.6% year-over-year.

  • Pro forma digital advertising and marketing services revenues reached $231.8 million in the fourth quarter, or 22.0% of total pro forma revenues.
  • GAAP net loss attributable to Gannett of $95.1 million in the fourth quarter reflects a one-time non-cash write-down of $100.7 million related to the revaluation of intangibles and $145.6 million one-time cash charges related to restructuring and transaction related costs.
  • Adjusted EBITDA totaled $98.8 million and represented a 14.1% margin. On a pro forma basis, Adjusted EBITDA totaled $141.2 million and represented a 13.4% margin.

Full Year 2019 Consolidated Results

  • 2019 GAAP revenues of $1.9 billion rose 22.4% as compared to the prior year reflecting the Acquisition.
    • Legacy Gannett 2019 same store revenues decreased 9.4% year-over-year.
    • Legacy New Media 2019 same store revenues decreased 8.0% year-over-year.

  • Pro forma digital advertising and marketing services revenues reached $912.5 million in 2019, or 21.8% of total pro forma revenues.
  • GAAP net loss attributable to Gannett of $119.8 million in 2019 reflects a one-time $100.7 million non-cash write-down related to the revaluation of intangibles and $182.9 million one-time cash charges related to restructuring and transaction related costs.
  • Adjusted EBITDA totaled $223.9 million and represented a 12.0% margin. On a pro forma basis, Adjusted EBITDA reached $485.5 million and represented a 11.6% margin.

“We are pleased to announce our first earnings report since completing our acquisition of Legacy Gannett in November,” said Michael Reed, Gannett Chairman and Chief Executive Officer. “Although we acquired Legacy Gannett only six weeks before the end of the quarter, we immediately began implementing our integration plan. By the end of the first quarter of 2020, we expect to have implemented measures that will result in over $60 million in annualized savings. As a result of these measures, we expect to realize $10 - $15 million of savings in the first quarter, and we expect the savings in subsequent quarters to increase as we continue to implement synergies throughout the year. We remain highly confident that we will complete the implementation of measures in 2020 corresponding to more than half of our $300 million synergy target related to the acquisition of Legacy Gannett.”

“We are also happy to report that we are ahead of schedule in paying down debt. As announced earlier in January, we paid down $35.8 million in principal on our credit facility during the fourth quarter. Subsequent to the quarter, we have paid down an additional $9.4 million. Real estate sales have driven $8.9 million of the repayments, and we anticipate an additional $100 - $125 million in real estate sales by the end of 2021.”

“As expected, same store trends weakened in the fourth quarter, in large part reflecting the runoff of more aggressive subscriber pricing initiatives that Legacy Gannett implemented in the fourth quarter of 2018. Beyond circulation revenue, same store advertising trends were a bit weaker than expected primarily due to disruption from the Acquisition. We have already seen trends improve in the first quarter and are confident in our ability to sustain these positive trends. In the fourth quarter, we saw strong gains in digital marketing services revenues at Legacy Gannett in our local markets, and the Legacy New Media events business nearly doubled its revenues compared to the prior year period. We were pleased with the strong momentum we saw in our key growth areas, which positioned us for a solid start to 2020.”

“Our Adjusted EBITDA in the quarter was negatively impacted by both the revenue softness and higher than anticipated healthcare claims, while our Free cash flow reflects a significant amount of one-time costs related to the Acquisition. Adjusting for these one-time items, Free cash flow would have been $65.9 million. With integration efforts ongoing, we remain very optimistic about our ability to deliver on our synergy targets, pay down debt, and return capital to shareholders, while continuing to serve as a trusted source of high quality news to the communities we serve.”

Fourth Quarter 2019 Publishing Segment

  • Publishing segment revenues totaled $653.9 million in the fourth quarter; on a pro forma basis, Publishing segment revenues were $964.7 million.
  • Print advertising revenues totaled $240.9 million in the fourth quarter; on a pro forma basis, print advertising revenues were $334.1 million, reflecting continued secular pressures.
    • Same store Legacy Gannett print advertising revenues decreased 20.1% as compared to the prior year quarter.
    • Same store Legacy New Media print advertising revenue decreased 16.3%, as compared to the prior year quarter.
  • Digital advertising and marketing services revenues were $90.1 million in the fourth quarter; on a pro forma basis, digital advertising and marketing services revenues were $150.3 million.
    • Legacy Gannett same store digital advertising and marketing services revenues decreased 1.6% as compared to the prior year quarter, an improvement from the third quarter trend, reflecting improved digital marketing services results.
    • Legacy New Media same store digital advertising and marketing services revenues decreased 0.4% year-over-year.
  • Circulation revenues totaled $255.6 million in the fourth quarter; on a pro forma basis, circulation revenues were $384.4 million.
    • Legacy Gannett same store circulation revenues decreased 10.3% year-over-year, as expected, reflecting the cycling of last year’s more aggressive pricing initiatives.
    • Legacy New Media same store circulation revenues decreased 7.2% from the prior year.
  • Commercial printing and other revenues contributed $67.3 million to Publishing segment revenues in the fourth quarter.
  • Paid digital-only subscriber volumes now total approximately 812,000, up 25.3% year-over-year on a pro forma basis.
  • Publishing segment Adjusted EBITDA was $113.3 million, representing a margin of 17.3% for the quarter.

Fourth Quarter 2019 Marketing Solutions Segment

  • Marketing Solutions segment revenues were $69.3 million in the fourth quarter; on a pro forma basis, Marketing Solutions segment revenues were $122.7 million.
    • Legacy Gannett same store digital marketing services revenues increased 1.8% as compared to the prior year, similar to the 2.5% gain in the third quarter. Revenues across the Legacy Gannett local markets achieved another quarter of robust growth, driven by an increase in the number of clients.
  • Marketing Solutions segment Adjusted EBITDA was $4.0 million, representing a margin of 5.8% for the quarter.

Fourth Quarter 2019 Cash Flow

  • Cash flow from operations was negative $73.0 million compared to positive $37.6 million for the prior year quarter, as net cash used in operating activities from Legacy Gannett of $72.4 million included additional pension and postretirement contributions of $92.4 million, most of which were related to an $87.8 million pay-out of pension benefits upon change-in-control. Additionally, cash flow from operations was reduced by $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments.
  • Capital expenditures were $6.7 million, primarily for product development, technology investments, and maintenance projects.
  • The Company repaid $35.8 million in principal under its credit facility.
  • As of the end of the fourth quarter, the Company had a cash balance of $156.0 million.

2020 Dividend

We expect to resume paying a quarterly dividend with respect to the first quarter of 2020. Consistent with our past practice, any dividend declared with respect to the first quarter is expected to be announced and paid in May. We expect the amount of this dividend to be $0.19 per share.

Under the terms of the credit facility that we entered into on November 19, 2019 in connection with the Acquisition, we are prohibited from paying cash dividends until after April 2020 and thereafter will be permitted to pay cash dividends only in accordance with the limitations set forth in our credit facility. Accordingly, our Board of Directors did not declare a dividend with respect to the fourth quarter of 2019. In addition, our Board has not yet declared any dividend with respect to the first quarter of 2020 or any future quarter, and there can be no guarantee as to the amount and timing of any future dividend.

Integration Update

By the end of the first quarter of 2020, the Company expects to have implemented measures that will result in over $60 million in annualized savings. As a result of these measures, the Company expects to realize $10 - $15 million in savings in the first quarter and further savings in each subsequent quarter, as it continues to implement synergies throughout the year. Management remains highly confident in its ability to implement measures by the end of 2021 that are expected to result in $300 million in synergies, with more than half of such measures expected to be completed in 2020.

Earnings Conference Call

Management will host a conference call on Thursday, February 27, 2020 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of the Company’s website, www.gannett.com. The conference call may be accessed by dialing 1-855-319-1124 (from within the U.S.) or 1-703-563-6359 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Gannett Fourth Quarter Earnings Call” or access code “6790119”. A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, March 5, 2020 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “6790119”.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to fostering the communities in our network and helping them build relationships with their local businesses. With an unmatched reach at the national and local level, Gannett touches the lives of nearly 150 million people monthly with our Pulitzer-Prize winning content, consumer experiences and benefits, and advertiser products and services. Our portfolio includes the USA TODAY, local media organizations in 47 states in the U.S. and Guam, and Newsquest, a wholly owned subsidiary with over 140 local media brands operating in the United Kingdom. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc. and runs the largest media-owned events business in the U.S., GateHouse Live. Effective November 20, 2019, following the completion of its merger with Gannett, New Media Investment Group Inc. trades on the New York Stock Exchange under Gannett Co., Inc. and its ticker symbol has changed to “GCI”. To connect with us, visit www.gannett.com.

Same Store Revenues

Same store revenues are defined as GAAP revenues excluding (1) revenues related to 2019 acquisitions from the date of the acquisition through the end of the year, (2) revenues related to 2018 acquisitions from the beginning of 2019 through the first year anniversary of their applicable acquisition date, (3) exited operations, (4) currency impacts, and (5) deferred revenue impacts related to the Acquisition. As noted above, we have provided same store revenue trends for Legacy Gannett and Legacy New Media, each on a stand-alone basis for the entire period. This information is provided on a transitional basis, and management expects to provide same store results for the consolidated company in future periods.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding measures expected to result in over $60 million in annualized savings, the timing of realizing those savings, including our expectation that $10 - $15 million will be realized in the first quarter, the potential to realize additional savings in future quarters, our ability to achieve $300 million of synergies through measures expected to be implemented by the end of 2021, our expectations, in terms of both amount and timing, with respect to debt repayment, real estate sales and debt refinancing, future revenue trends and our ability to influence trends, and the amount and timing of any future dividend, including our expectation that the Board will declare a $0.19 per share dividend with respect to the first quarter of 2020. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)

Table No. 1 (1)

 

 

 

Assets

December 31,
2019

 

December 30,
2018

Current assets

 

 

 

Cash and cash equivalents

$

156,042

 

 

$

48,651

 

Accounts receivable, net of allowance for doubtful accounts of $19,923 and $8,042 at December 31, 2019 and December 30, 2018, respectively

438,523

 

 

174,274

 

Inventories

55,090

 

 

25,022

 

Prepaid expenses and other current assets

129,460

 

 

49,662

 

Total current assets

779,115

 

 

297,609

 

Property, plant, and equipment, net of accumulated depreciation of $277,291 and $219,256 at December 31, 2019 and December 30, 2018, respectively

815,807

 

 

339,608

 

Operating lease assets

309,112

 

 

 

Goodwill

914,331

 

 

310,737

 

Intangible assets, net of accumulated amortization of $145,773 and $101,543 at December 31, 2019 and December 30, 2018, respectively

1,012,564

 

 

486,054

 

Deferred income taxes

76,297

 

 

 

Other assets

112,876

 

 

9,856

 

Total assets

$

4,020,102

 

 

$

1,443,864

 

 

 

 

 

Liabilities and equity

 

 

 

Current liabilities

 

 

 

Current portion of long-term debt

$

3,300

 

 

$

12,395

 

Accounts payable

146,995

 

 

16,612

 

Accrued expenses

306,633

 

 

109,597

 

Deferred revenue

218,823

 

 

105,187

 

Other current liabilities

42,702

 

 

4,053

 

Total current liabilities

718,453

 

 

247,844

 

Long-term debt

1,636,335

 

 

428,180

 

Convertible debt

3,300

 

 

 

Deferred income taxes

9,052

 

 

8,282

 

Pension and other postretirement benefit obligations

235,906

 

 

24,326

 

Long-term operating lease liabilities

297,662

 

 

 

Other long-term liabilities

136,188

 

 

16,462

 

Total noncurrent liabilities

2,318,443

 

 

477,250

 

Total liabilities

3,036,896

 

 

725,094

 

Redeemable noncontrolling interests

1,850

 

 

1,547

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

Equity

 

 

 

Common stock, $0.01 par value, 2,000,000,000 shares authorized; 129,386,258 shares issued and 128,991,544 shares outstanding at December 31, 2019; 60,508,249 shares issued and 60,306,286 shares outstanding at December 30, 2018

1,294

 

 

605

 

Treasury stock, at cost, 394,714 and 201,963 shares at December 31, 2019 and December 30, 2018, respectively

(2,876

)

 

(1,873

)

Additional paid-in capital

1,090,694

 

 

721,605

 

Retained earnings

(115,958

)

 

3,767

 

Accumulated other comprehensive loss (income)

8,202

 

 

(6,881

)

Total equity

981,356

 

 

717,223

 

Total liabilities and equity

$

4,020,102

 

 

$

1,443,864

 

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

CONSOLIDATED STATEMENTS OF OPERATIONS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)

Table No. 2 (1)

Three months ended

 

Year ended

Fiscal year ended

December 31, 2019

 

December 30,
2018

 

December 31,
2019

 

December 30,
2018

Operating revenues:

 

 

 

 

 

 

 

Advertising and marketing services

$

370,324

 

 

$

217,687

 

 

$

952,644

 

 

$

786,577

 

Circulation

255,574

 

 

154,503

 

 

704,842

 

 

574,963

 

Commercial printing and other

73,376

 

 

43,849

 

 

210,423

 

 

164,484

 

Total operating revenues

699,274

 

 

416,039

 

 

1,867,909

 

 

1,526,024

 

Operating expenses:

 

 

 

 

 

 

 

Operating costs

398,322

 

 

230,299

 

 

1,079,593

 

 

865,234

 

Selling, general and administrative expenses

227,711

 

 

136,994

 

 

606,917

 

 

502,631

 

Depreciation and amortization

43,148

 

 

20,515

 

 

111,882

 

 

84,791

 

Integration and reorganization costs

37,899

 

 

1,768

 

 

47,401

 

 

15,011

 

Acquisition costs

45,300

 

 

762

 

 

60,618

 

 

2,651

 

Impairment of long-lived assets

540

 

 

417

 

 

3,009

 

 

1,538

 

Goodwill and mastheads impairment

100,743

 

 

 

 

100,743

 

 

 

Net (gain) loss on sale or disposal of assets

1,384

 

 

80

 

 

4,723

 

 

(3,971

)

Total operating expenses

855,047

 

 

390,835

 

 

2,014,886

 

 

1,467,885

 

Operating income (loss)

(155,773

)

 

25,204

 

 

(146,977

)

 

58,139

 

Non-operating (income) expense:

 

 

 

 

 

 

 

Interest expense

33,283

 

 

9,606

 

 

63,660

 

 

36,072

 

Loss on early extinguishment of debt

6,058

 

 

2,886

 

 

6,058

 

 

2,886

 

Other (income) expense

(8,709

)

 

452

 

 

(9,511

)

 

(838

)

Non-operating expense

30,632

 

 

12,944

 

 

60,207

 

 

38,120

 

Income (loss) before income taxes

(186,405

)

 

12,260

 

 

(207,184

)

 

20,019

 

Provision (benefit) for income taxes

(90,924

)

 

(679

)

 

(85,994

)

 

1,912

 

Net income (loss)

$

(95,481

)

 

$

12,939

 

 

$

(121,190

)

 

$

18,107

 

Net loss attributable to redeemable noncontrolling interests

(393

)

 

(321

)

 

(1,348

)

 

(89

)

Net income (loss) attributable to Gannett

$

(95,088

)

 

$

13,260

 

 

$

(119,842

)

 

$

18,196

 

Earnings (loss) per share attributable to Gannett - basic

$

(1.05

)

 

$

0.22

 

 

$

(1.77

)

 

$

0.31

 

Earnings (loss) per share attributable to Gannett - diluted

$

(1.05

)

 

$

0.22

 

 

$

(1.77

)

 

$

0.31

 

Dividends declared per share

$

 

 

$

0.38

 

 

$

1.52

 

 

$

1.49

 

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

Table No. 3 (1)

Year ended

 

December 31,
2019

 

December 30,
2018

Operating activities:

 

 

 

Net income (loss)

$

(121,190

)

 

$

18,107

 

Adjustments to reconcile net income (loss) to operating cash flows:

 

 

 

Depreciation and amortization

111,882

 

 

84,791

 

Facility consolidation costs

148

 

 

 

Stock-based compensation - equity awards

11,324

 

 

3,156

 

Non-cash interest expense

3,851

 

 

1,996

 

Non-cash acquisition related costs

26,411

 

 

 

(Benefit) provision for deferred income taxes

(87,765

)

 

202

 

Net (gain) loss on sale or disposal of assets

4,723

 

 

(3,971

)

Non-cash charge to investments

 

 

505

 

Non-cash loss on early extinguishment of debt

6,058

 

 

2,886

 

Impairment of long-lived assets

3,009

 

 

1,538

 

Goodwill and mastheads impairment

100,743

 

 

 

Pension and other postretirement benefit obligations

(100,452

)

 

(2,575

)

Change in assets and liabilities:

 

 

 

Accounts receivables, net

12,608

 

 

15

 

Inventory

5,150

 

 

(4,336

)

Prepaid expenses

7,016

 

 

3,338

 

Accounts payable

3,958

 

 

(2,530

)

Accrued expenses

40,353

 

 

8,019

 

Deferred revenue

(8,326

)

 

(7,642

)

Other assets and liabilities

6,034

 

 

6,060

 

Net cash provided by operating activities

25,535

 

 

109,559

 

Investing activities:

 

 

 

Acquisitions, net of cash acquired

(796,502

)

 

(204,877

)

Purchases of property, plant, and equipment

(13,978

)

 

(11,639

)

Proceeds from sale of publications, real estate and other assets, and insurance proceeds

27,486

 

 

15,040

 

Change in other investing activities

(2,066

)

 

 

Net cash used for investing activities

(785,060

)

 

(201,476

)

Financing activities:

 

 

 

Payments of debt issuance costs

(121,223

)

 

(800

)

Borrowings under term loans

1,792,000

 

 

79,675

 

Borrowings under revolving credit facility

153,900

 

 

20,000

 

Repayments under term loans

(481,058

)

 

(3,093

)

Repayments under revolving credit facility

(153,900

)

 

(20,000

)

Repayments of convertible debt

(197,950

)

 

 

Payment of offering costs

 

 

(369

)

Issuance of common stock, net of underwriters' discount

 

 

111,099

 

Purchase of treasury stock

(1,002

)

 

(792

)

Repurchase of common stock

 

 

 

Payments of dividends

(91,936

)

 

(87,195

)

Change in other financing activities

82

 

 

 

Net cash provided by financing activities

898,913

 

 

98,525

 

Effect of currency exchange rate change

(3,494

)

 

 

Increase in cash, cash equivalents, and restricted cash

135,894

 

 

6,608

 

Balance of cash, cash equivalents, and restricted cash at beginning of year

52,770

 

 

46,162

 

Cash, cash equivalents, and restricted cash at end of year

$

188,664

 

 

$

52,770

 

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

Table No. 4 (1)

Three months ended

 

Year ended

 

December 31,
2019

 

December 30,
2018

 

December 31,
2019

 

December 30,
2018

Operating revenues:

 

 

 

 

 

 

 

Publishing

$

653,877

 

 

$

406,966

 

 

$

1,792,652

 

 

$

1,495,124

 

Marketing Solutions

69,336

 

 

26,878

 

 

149,242

 

 

95,871

 

Corporate and Other

2,018

 

 

675

 

 

4,554

 

 

3,118

 

Intersegment eliminations

(25,957

)

 

(18,480

)

 

(78,539

)

 

(68,089

)

Total

$

699,274

 

 

$

416,039

 

 

$

1,867,909

 

 

$

1,526,024

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

Publishing

$

113,334

 

 

$

68,132

 

 

$

268,916

 

 

$

220,415

 

Marketing Solutions

4,024

 

 

(1,896

)

 

(3,279

)

 

(6,404

)

Corporate and Other

(18,537

)

 

(10,267

)

 

(41,766

)

 

(33,718

)

Total

$

98,821

 

 

$

55,969

 

 

$

223,871

 

 

$

180,293

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

Publishing

$

37,442

 

 

$

18,787

 

 

$

101,881

 

 

$

78,075

 

Marketing Solutions

3,714

 

 

1,263

 

 

6,534

 

 

5,003

 

Corporate and Other

1,992

 

 

465

 

 

3,467

 

 

1,713

 

Total

$

43,148

 

 

$

20,515

 

 

$

111,882

 

 

$

84,791

 

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

Table No. 5

Three months ended

Legacy Gannett

December 31,

2019

 

December 31,

2018 (1)

 

% Change

 

 

 

 

 

 

 

Pro forma total revenue

$

654,132

 

 

$

751,405

 

 

(12.9

)%

Currency impact

401

 

 

 

 

***

 

Exited operations

(15

)

 

(11,157

)

 

(99.9

)%

Deferred revenue adjustment

10,791

 

 

 

 

***

 

Same store total revenue

$

665,309

 

 

$

740,248

 

 

(10.1

)%

 

 

 

 

 

 

 

Pro forma advertising and marketing services revenue

$

365,776

 

 

$

427,226

 

 

(14.4

)%

Currency impact

374

 

 

 

 

***

 

Exited operations

(15

)

 

(11,102

)

 

(99.9

)%

Deferred revenue adjustment

1,262

 

 

 

 

***

 

Same store advertising and marketing services revenue

$

367,397

 

 

$

416,124

 

 

(11.7

)%

 

 

 

 

 

 

 

Pro forma circulation revenue

$

236,128

 

 

$

273,757

 

 

(13.7

)%

Currency impact

26

 

 

 

 

***

 

Deferred revenue adjustment

9,529

 

 

 

 

***

 

Same store circulation revenue

$

245,683

 

 

$

273,757

 

 

(10.3

)%

 

 

 

 

 

 

 

Pro forma other revenue

$

52,228

 

 

$

50,422

 

 

3.6

%

Currency impact

1

 

 

 

 

***

 

Exited operations

 

 

(55

)

 

(100.0

)%

Same store other revenue

$

52,229

 

 

$

50,367

 

 

3.7

%

(1) Legacy Gannett’s fourth quarter 2018 coincided with the Gregorian calendar and ended on December 31, 2018.

SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

Table No. 5 (continued)

Year ended

Legacy Gannett

December 31,
2019

 

December 31,
2018 (1)

 

% Change

 

 

 

 

 

 

 

Pro forma total revenue

$

2,613,463

 

 

$

2,916,838

 

 

(10.4

)%

Acquired revenues

(35,779

)

 

 

 

***

 

Currency impact

14,766

 

 

 

 

***

 

Exited operations

(322

)

 

(43,712

)

 

(99.3

)%

Deferred revenue adjustment

10,791

 

 

 

 

***

 

Same store total revenue

$

2,602,919

 

 

$

2,873,126

 

 

(9.4

)%

 

 

 

 

 

 

 

Pro forma advertising and marketing services revenue

$

1,444,562

 

 

$

1,661,075

 

 

(13.0

)%

Acquired revenues

(34,578

)

 

 

 

***

 

Currency impact

10,249

 

 

 

 

***

 

Exited operations

(319

)

 

(43,640

)

 

(99.3

)%

Deferred revenue adjustment

1,262

 

 

 

 

***

 

Same store advertising and marketing services revenue

$

1,421,176

 

 

$

1,617,435

 

 

(12.1

)%

 

 

 

 

 

 

 

Pro forma circulation revenue

$

976,538

 

 

$

1,063,022

 

 

(8.1

)%

Acquired revenues

(1,130

)

 

 

 

***

 

Currency impact

3,443

 

 

 

 

***

 

Exited operations

 

 

 

 

***

 

Deferred revenue adjustment

9,529

 

 

 

 

***

 

Same store circulation revenue

$

988,380

 

 

$

1,063,022

 

 

(7.0

)%

 

 

 

 

 

 

 

Pro forma other revenue

$

192,363

 

 

$

192,741

 

 

(0.2

)%

Acquired revenues

(71

)

 

 

 

***

 

Currency impact

1,074

 

 

 

 

***

 

Exited operations

(3

)

 

(72

)

 

(95.8

)%

Same store other revenue

$

193,363

 

 

$

192,669

 

 

0.4

%

(1) Legacy Gannett’s 2018 fiscal year coincided with the Gregorian calendar and ended on December 31, 2018.

SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

Table No. 5 (continued)

Three months ended

Legacy New Media

December 31,
2019

 

December 30,
2018
(1)

 

% Change

 

 

 

 

 

 

 

As reported total revenue

$

400,121

 

 

$

416,039

 

 

(3.8

)%

Acquired revenues

(26,385

)

 

 

 

***

 

Exited operations

 

 

(2,666

)

 

(100.0

)%

Same store total revenue

$

373,736

 

 

$

413,373

 

 

(9.6

)%

 

 

 

 

 

 

 

As reported advertising and marketing services revenue

$

200,435

 

 

$

217,687

 

 

(7.9

)%

Acquired revenues

(11,622

)

 

 

 

***

 

Exited operations

 

 

(1,632

)

 

(100.0

)%

Same store advertising and marketing services revenue

$

188,813

 

 

$

216,055

 

 

(12.6

)%

 

 

 

 

 

 

 

As reported circulation revenue

$

148,248

 

 

$

154,503

 

 

(4.0

)%

Acquired revenues

(5,151

)

 

 

 

***

 

Exited operations

 

 

(291

)

 

(100.0

)%

Same store circulation revenue

$

143,097

 

 

$

154,212

 

 

(7.2

)%

 

 

 

 

 

 

 

As reported other revenue

$

51,438

 

 

$

43,849

 

 

17.3

%

Acquired revenues

(9,612

)

 

 

 

***

 

Exited operations

 

 

(743

)

 

(100.0

)%

Same store other revenue

$

41,826

 

 

$

43,106

 

 

(3.0

)%

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

Table No. 5 (continued)

Year ended

Legacy New Media

December 31,
2019

 

December 30,
2018
(1)

 

% Change

 

 

 

 

 

 

 

As reported total revenue

$

1,568,757

 

 

$

1,526,024

 

 

2.8

%

Acquired revenues

(176,870

)

 

 

 

***

 

Exited operations

 

 

(13,188

)

 

(100.0

)%

Same store total revenue

$

1,391,887

 

 

$

1,512,836

 

 

(8.0

)%

 

 

 

 

 

 

 

As reported advertising and marketing services revenue

$

782,755

 

 

$

786,577

 

 

(0.5

)%

Acquired revenues

(97,742

)

 

 

 

***

 

Exited operations

 

 

(8,282

)

 

(100.0

)%

Same store advertising and marketing services revenue

$

685,013

 

 

$

778,295

 

 

(12.0

)%

 

 

 

 

 

 

 

As reported circulation revenue

$

597,517

 

 

$

574,963

 

 

3.9

%

Acquired revenues

(59,225

)

 

 

 

***

 

Exited operations

 

 

(1,904

)

 

(100.0

)%

Same store circulation revenue

$

538,292

 

 

$

573,059

 

 

(6.1

)%

 

 

 

 

 

 

 

As reported other revenue

$

188,485

 

 

$

164,484

 

 

14.6

%

Acquired revenues

(19,903

)

 

 

 

***

 

Exited operations

 

 

(3,002

)

 

(100.0

)%

Same store other revenue

$

168,582

 

 

$

161,482

 

 

4.4

%

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

 

USE OF NON-GAAP INFORMATION

The Company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures, which may not be comparable to similarly titled measures reported by other companies, should not be considered in isolation from or as a substitute for the related GAAP measures and should be read together with financial information presented on a GAAP basis.

The Company defines its non-GAAP measures as follows:

  • Adjusted EBITDA is a non-GAAP financial performance measure the Company believes offers a useful view of the overall operation of our business. The Company defines Adjusted EBITDA as net income (loss) attributable to Gannett before (1) income tax expense (benefit), (2) interest expense, (3) gains or losses on early extinguishment of debt, (4) non-operating items, primarily pension costs, (5) depreciation and amortization, (6) integration and reorganization costs, (7) impairment of long-lived assets, (8) goodwill and intangible impairments, (9) net loss (gain) on sale or disposal of assets, (10) non-cash compensation, (11) acquisition costs, and (12) certain other non-recurring charges. The most directly comparable GAAP financial measure is net income (loss) attributable to Gannett.

  • Free cash flow is a non-GAAP liquidity measure that adjusts our reported GAAP results for items we believe are critical to the ongoing success of our business. The Company defines Free cash flow as net cash provided by operating activities as reported on the statement of cash flows less capital expenditures, which results in a figure representing Free cash flow available for use in operations, additional investments, debt obligations, and returns to shareholders. The most directly comparable GAAP financial measure is net cash from operating activities.

Management’s Use of Non-GAAP Measures

Adjusted EBITDA and Free cash flow are not measurements of financial performance under GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), cash flow from continuing operating activities, or any other measure of performance or liquidity derived in accordance with GAAP. We believe our non-GAAP measures as we have defined them are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance.

Adjusted EBITDA provides us with a measure of financial performance, independent of items that are beyond the control of management in the short-term such as depreciation and amortization, taxation, non-cash impairments, and interest expense associated with our capital structure. This metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one of the metrics we use to review the financial performance of our business on a monthly basis.

We use Adjusted EBITDA as a measure of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results. We consider the unrealized (gain) loss on derivative instruments and the (gain) loss on early extinguishment of debt to be financing related costs associated with interest expense or amortization of financing fees. Accordingly, we exclude financing related costs such as the early extinguishment of debt because they represent the write-off of deferred financing costs, and we believe these non-cash write-offs are similar to interest expense and amortization of financing fees, which by definition are excluded from Adjusted EBITDA. Additionally, the non-cash gains (losses) on derivative contracts, which are related to interest rate swap agreements to manage interest rate risk, are financing costs associated with interest expense. Such charges are incidental to, but not reflective of, our day-to-day operating performance, and it is appropriate to exclude charges related to financing activities such as the early extinguishment of debt and the unrealized (gain) loss on derivative instruments which, depending on the nature of the financing arrangement, would have otherwise been amortized over the period of the related agreement and does not require a current cash settlement. Such charges are incidental to, but not reflective of our day-to-day operating performance of the business that management can impact in the short term.

Limitations of Non-GAAP Measures

Each of our non-GAAP measures has limitations as an analytical tool. They should not be viewed in isolation or as a substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) include: the cash portion of interest / financing expense, income tax (benefit) provision, and charges related to impairment of long-lived assets, which may significantly affect our financial results.

A reader of our financial statements may find this item important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA and Free cash flow are not alternatives to net income, income from operations, or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. Readers of our financial statements should not rely on Adjusted EBITDA or Free cash flow as a substitute for any such GAAP financial measure. We strongly urge readers of our financial statements to review the reconciliation of income (loss) from continuing operations to Adjusted EBITDA and the reconciliation of net cash from operating activities to Free cash flow, along with our consolidated financial statements included elsewhere in this report. We also strongly urge readers of our financial statements to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA and Free cash flow are not measures of financial performance under GAAP and are susceptible to varying calculations, the Adjusted EBITDA and Free cash flow measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.

NON-GAAP FINANCIAL INFORMATION
ADJUSTED EBITDA
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

 

 

 

 

 

 

 

 

Table No. 6 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2019

 

Publishing

 

Marketing
Solutions

 

Corporate and
Other

 

Consolidated
Total

 

 

 

 

 

 

 

 

Net income (loss) attributable to Gannett

$

(52,036

)

 

$

(1,392

)

 

$

(41,660

)

 

$

(95,088

)

Income tax expense (benefit)

 

 

 

 

(90,924

)

 

(90,924

)

Interest expense

24

 

 

 

 

33,259

 

 

33,283

 

Loss on early extinguishment of debt

 

 

 

 

6,058

 

 

6,058

 

Other non-operating items, net

(6

)

 

(775

)

 

(7,928

)

 

(8,709

)

Depreciation and amortization

37,442

 

 

3,714

 

 

1,992

 

 

43,148

 

Integration and reorganization costs

13,777

 

 

950

 

 

23,172

 

 

37,899

 

Acquisition costs

 

 

 

 

45,300

 

 

45,300

 

Impairment of long-lived assets

540

 

 

 

 

 

 

540

 

Goodwill and mastheads impairment

100,743

 

 

 

 

 

 

100,743

 

Net (gain) loss on sale or disposal of assets

1,289

 

 

(8

)

 

103

 

 

1,384

 

Non-cash compensation

 

 

 

 

8,790

 

 

8,790

 

Other items

11,561

 

 

1,535

 

 

3,301

 

 

16,397

 

Adjusted EBITDA (non-GAAP basis)

$

113,334

 

 

$

4,024

 

 

$

(18,537

)

 

$

98,821

 

 

 

 

 

 

 

 

 

 

Three months ended December 30, 2018

 

Publishing

 

Marketing
Solutions

 

Corporate and
Other

 

Consolidated
Total

 

 

 

 

 

 

 

 

Net income (loss) attributable to Gannett

$

45,631

 

 

$

(3,866

)

 

$

(28,505

)

 

$

13,260

 

Income tax expense (benefit)

 

 

 

 

(679

)

 

(679

)

Interest expense

56

 

 

 

 

9,549

 

 

9,605

 

Loss on early extinguishment of debt

 

 

 

 

2,886

 

 

2,886

 

Other non-operating items, net

(467

)

 

 

 

580

 

 

113

 

Depreciation and amortization

18,787

 

 

1,263

 

 

465

 

 

20,515

 

Integration and reorganization costs

1,541

 

 

 

 

227

 

 

1,768

 

Acquisition costs

 

 

15

 

 

747

 

 

762

 

Impairment of long-lived assets

417

 

 

 

 

 

 

417

 

Goodwill and mastheads impairment

 

 

 

 

 

 

 

Net (gain) loss on sale or disposal of assets

51

 

 

 

 

29

 

 

80

 

Non-cash compensation

 

 

 

 

657

 

 

657

 

Other items

2,116

 

 

692

 

 

3,777

 

 

6,585

 

Adjusted EBITDA (non-GAAP basis)

$

68,132

 

 

$

(1,896

)

 

$

(10,267

)

 

$

55,969

 

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

NON-GAAP FINANCIAL INFORMATION
ADJUSTED EBITDA
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

 

 

 

 

 

 

 

 

Table No. 6 (continued) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2019

 

Publishing

 

Marketing
Solutions

 

Corporate and
Other

 

Consolidated
Total

 

 

 

 

 

 

 

 

Net income (loss) attributable to Gannett

$

22,523

 

 

$

(14,006

)

 

$

(128,359

)

 

$

(119,842

)

Income tax expense (benefit)

 

 

 

 

(85,994

)

 

(85,994

)

Interest expense

123

 

 

 

 

63,537

 

 

63,660

 

Loss on early extinguishment of debt

 

 

 

 

6,058

 

 

6,058

 

Other non-operating items, net

(969

)

 

(775

)

 

(7,767

)

 

(9,511

)

Depreciation and amortization

101,881

 

 

6,534

 

 

3,467

 

 

111,882

 

Integration and reorganization costs

21,336

 

 

1,937

 

 

24,128

 

 

47,401

 

Acquisition costs

 

 

(38

)

 

60,656

 

 

60,618

 

Impairment of long-lived assets

3,009

 

 

 

 

 

 

3,009

 

Goodwill and mastheads impairment

100,743

 

 

 

 

 

 

100,743

 

Net (gain) loss on sale or disposal of assets

4,036

 

 

(5

)

 

692

 

 

4,723

 

Non-cash compensation

 

 

 

 

11,324

 

 

11,324

 

Other items

16,234

 

 

3,074

 

 

10,492

 

 

29,800

 

Adjusted EBITDA (non-GAAP basis)

$

268,916

 

 

$

(3,279

)

 

$

(41,766

)

 

$

223,871

 

 

 

Year ended December 30, 2018

 

Publishing

 

Marketing
Solutions

 

Corporate and
Other

 

Consolidated
Total

 

 

 

 

 

 

 

 

Net income (loss) attributable to Gannett

$

122,392

 

 

$

(14,047

)

 

$

(90,149

)

 

$

18,196

 

Income tax expense (benefit)

 

 

 

 

1,912

 

 

1,912

 

Interest expense

400

 

 

 

 

35,672

 

 

36,072

 

Loss on early extinguishment of debt

 

 

 

 

2,886

 

 

2,886

 

Other non-operating items, net

(1,554

)

 

 

 

 

 

(1,554

)

Depreciation and amortization

78,075

 

 

5,003

 

 

1,713

 

 

84,791

 

Integration and reorganization costs

14,487

 

 

 

 

524

 

 

15,011

 

Acquisition costs

 

 

85

 

 

2,566

 

 

2,651

 

Impairment of long-lived assets

1,538

 

 

 

 

 

 

1,538

 

Goodwill and mastheads impairment

 

 

 

 

 

 

 

Net (gain) loss on sale or disposal of assets

(3,109

)

 

34

 

 

(896

)

 

(3,971

)

Non-cash compensation

 

 

 

 

3,156

 

 

3,156

 

Other items

8,186

 

 

2,521

 

 

8,898

 

 

19,605

 

Adjusted EBITDA (non-GAAP basis)

$

220,415

 

 

$

(6,404

)

 

$

(33,718

)

 

$

180,293

 

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.

NON-GAAP FINANCIAL INFORMATION
FREE CASH FLOW
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands

 

 

 

 

Table No. 7

 

 

 

 

 

 

 

 

Three months
ended December
31, 2019

 

Year ended
December 31,
2019

 

 

 

 

Net cash flow provided by operating activities (GAAP basis)

$

(72,995

)

 

$

25,535

 

Capital expenditures

(6,697

)

 

(13,978

)

Free cash flow (non-GAAP basis) (1)

$

(79,692

)

 

$

11,557

 

(1) Free cash flow for the fourth quarter was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments. Free cash flow for the full year was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $45.4 million of integration and reorganization costs, $38.4 million of acquisition costs, and $11.3 million of other one-time adjustments.

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PUB: 02/27/2020 06:45 AM/DISC: 02/27/2020 06:45 AM

http://www.businesswire.com/news/home/20200227005303/en