[February 20, 2018] |
|
Gannett Reports Fourth Quarter and Full-Year 2017 Results
Gannett Co., Inc. (NYSE:GCI) ("Gannett" or "company" or "we" or "our")
today reported fourth quarter and full-year 2017 financial results for
the period ended December 31, 2017. Our full-year 2017 results include
53 weeks as compared to 52 weeks in 2016, with the extra week impacting
the fourth quarter. For comparability purposes, our same store revenue
comparisons exclude the 53rd week.
"We are pleased with our financial results for the full-year 2017.
Digital revenues grew to $1.0 billion and now comprise 31.6% of total
revenues, evidence that our transformation to a next-generation media
company is well underway," said Robert J. Dickey, president and chief
executive officer. "Additionally, we delivered year-over-year revenue
growth and flat Adjusted EBITDA, despite continued secular pressures in
print advertising and circulation."
Dickey continued, "In the fourth quarter, we improved Adjusted EBITDA,
despite a more challenging print advertising environment than expected.
Strong profitability gains in our ReachLocal segment and solid overall
cost management offset print revenue pressures. Looking ahead to 2018,
we remain focused on growing our marketing solutions and consumer
businesses, while driving additional operating efficiencies."
"We are excited by the momentum in the ReachLocal North America
business, especially with the newly migrated Gannett clients," said
Sharon Rowlands, president of USA TODAY NETWORK Marketing Solutions and
chief executive officer of ReachLocal. "There is a tremendous
opportunity to increase penetration across our local markets by growing
both new digital marketing services customers and wallet share. In 2018,
we plan to capitalize on this significant opportunity with our newly
aligned sales organization, which we expect will drive revenue growth
and margin improvement."
Fourth Quarter 2017 Consolidated Results
-
Operating revenues were $854.2 million, including approximately $49.1
million from the 53rd week, compared to $867.0 million in the prior
year quarter.
-
Favorable changes in foreign currency exchange rates benefited
revenues by $4.2 million.
-
Same store operating revenues declined 8.8%, an improvement compared
to a decline of 9.4% in the third quarter of 2017, due to our
strategic subscriber pricing initiatives and the inclusion of a full
quarter of ReachLocal revenue in our same store calculation.
-
Total digital revenues increased to $272.3 million, or approximately
31.9% of total revenue.
-
GAAP net losses were $13.6 million, including a $42.8 million tax
expense from the Tax Cuts and Jobs Act of 2017 and $27.6 million of
after-tax restructuring, asset impairment charges and other costs.
-
The effective tax rate was impacted by one-time items related to
the reduction in deferred tax assets that resulted from the
decrease in the federal statutory tax rate from 35% to 21% and
valuation allowances recorded on certain deferred tax assets. The
effective tax rate for the fourth quarter without charges related
to our deferred tax assets and other adjustments was 25.7%.
-
Adjusted EBITDA (1) totaled $132.7 million compared to
$129.8 million in the prior year quarter with a 50 basis point margin
improvement year-over-year; the 53rd week contributed approximately
$3.6 million in Adjusted EBITDA.
Fourth Quarter 2017 Publishing Segment
-
Publishing segment operating revenues were $764.8 million compared to
$790.5 million in the prior year quarter.
-
Same store publishing segment operating revenues declined 10.0%
year-over-year.
-
Same store print advertising revenues declined 18.5% year-over-year,
consistent with the 18.7% decline in the third quarter of 2017.
-
Same store circulation revenues fell 6.7% from the prior year quarter
compared to a 7.6% decline in the third quarter of 2017, primarily
reflecting the positive impact from our subscriber pricing strategies.
-
Digital-only subscriber volumes grew 49.5% year-over-year and now
total approximately 341,000.
-
Digital advertising revenues increased 7.3% to $118.9 million compared
to the prior year quarter.
-
Same store digital revenues increased 0.7% with growth in areas
such as digital marketing services, audience extension, mobile and
branded content, offset in part by weaknesses in digital
classified and local desktop display.
-
Publishing segment Adjusted EBITDA was $149.2 million compared to
$145.9 million in the prior year quarter reflecting continued
operational efficiencies.
Fourth Quarter 2017 ReachLocal Segment
-
Operating revenues were $101.4 million, a 34.9% increase compared to
the prior year quarter; excluding the 53rd week, the increase was
approximately 25.6%.
-
The increase was attributable to continued solid growth in North
America and the migration of Gannett clients onto the ReachLocal
platform.
-
Adjusted EBITDA was $7.0 million, representing a 6.9% margin, up from
the 5.6% margin in the third quarter.
-
Improved profitability in the quarter was driven by solid growth
in average revenue per client due to more successful cross-selling
and the continued ramp up of Gannett clients on the ReachLocal
platform.
Fourth Quarter 2017 Cash Flow
-
Net cash flow from operating activities was approximately $72.8
million compared to $47.6 million in the prior year quarter.
-
Capital expenditures were approximately $25.4 million, primarily for
product development, technology investments, and maintenance projects.
-
The company paid dividends of $17.9 million; there were no share
repurchases.
-
The company had a cash balance of $120.6 million and a balance on its
revolving line of credit of $355.0 million, or net debt of $234.4
million.
-
Long-term pension liabilities totaled $421.9 million at year end, down
$256.1 million from the end of the third quarter 2017 primarily due to
strong asset returns during 2017.
Subsequent Event
On February 5th, we closed on the sale of one of two parcels of property
in downtown Nashville, generating net proceeds of approximately $38
million. The second parcel is planned to close in the second quarter of
2018 for an additional $6 million. We have entered into a leaseback for
the next 15 months. As a result of the sale, plus additional cash
generated during the first quarter, we have paid down an additional $50
million on our revolver in the first quarter, resulting in a revolver
balance of $305 million.
Outlook
For 2018, the company expects the following:
-
Consolidated revenues of $2.930-3.030 billion.
-
Consolidated Adjusted EBITDA of $330-340 million.
-
The slight margin compression reflects rising newsprint prices,
our continued transformation to digital and a contribution to our
charitable foundation.
-
Capital expenditures of $65-75 million, excluding real estate projects.
-
Depreciation and amortization of $140-150 million, excluding
accelerated depreciation related to facility consolidations.
-
The non-operating cost associated with our pension plans, recorded in
other non-operating items, is currently estimated to be a credit of
$5-10 million as compared to an expense of $21 million in 2017.
-
An effective tax rate between 25% and 27%.
We will be moving our reporting calendar to the Gregorian calendar in
2018 as compared to our 5-4-4 reporting calendar in 2017. From a
quarterly perspective, this change will impact our traditional print
operations as we will lose one Sunday in the first quarter of 2018 and
gain one Sunday in the third quarter. As Sundays are our most profitable
days, this change will reduce our first quarter margin and benefit our
third quarter margin. Additionally, we expect softer revenue and
Adjusted EBITDA in the first quarter as our sales transition is
implemented but do anticipate trend improvement in total advertising
revenues and Adjusted EBITDA margins as we progress throughout the year.
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1
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The company defines adjusted EBITDA as earnings before income taxes,
interest expense, equity income, other non-operating items,
restructuring costs, acquisition-related expenses, asset impairment
charges, depreciation, amortization and other items. Because of the
variability of these and other items as well as the impact of future
events on these items, management is unable to reconcile without
unreasonable effort the company's forecasted range of adjusted
EBITDA for the full year to a comparable GAAP range.
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* * * *
Conference Call Information
The company will hold a conference call at 10:00 a.m. ET today to
discuss its fourth quarter results. The call can be accessed via a live
webcast through the company's investor site, http://investors.gannett.com/,
or listen-only conference lines. U.S. callers should dial 855-462-1958
and international callers should dial 503-343-6635 at least 10 minutes
prior to the scheduled start of the call. The confirmation code for the
conference call is 1798915. A conference call replay will be available
through March 31, 2018. U.S. callers should dial (855) 859-2056 and
international callers should dial (404) 537-3406.
Forward Looking Statements
This press release contains certain forward-looking statements regarding
business strategies, market potential, future financial performance and
other matters. Forward-looking statements include all statements that
are not historical facts. The words "believe," "expect," "estimate,"
"could," "should," "intend," "may," "plan," "seek," "anticipate,"
"project" and similar expressions, among others, generally identify
forward-looking statements, which speak only as of the date the
statements were made and are not guarantees of future performance.
Where, in any forward-looking statement, an expectation or belief as to
future results or events is expressed, such expectation or belief is
based on the current plans and expectations of our management and
expressed in good faith and believed to have a reasonable basis, but
there can be no assurance that the expectation or belief will result or
be achieved or accomplished. Whether or not any such forward-looking
statements are in fact achieved will depend on future events, some of
which are beyond our control. The matters discussed in these
forward-looking statements are subject to a number of risks, trends,
uncertainties and other factors that could cause actual results to
differ materially from those projected, anticipated or implied in the
forward-looking statements. These factors include, among other things:
-
our ability to achieve our strategic transformation;
-
an accelerated decline in general print readership and/or advertiser
patterns as a result of competitive alternative media or other factors;
-
an inability to adapt to technological changes or grow our digital
businesses;
-
risks associated with the operation of an increasingly digital
business, such as rapid technological changes, frequent new product
introductions, declines in web traffic levels, technical failures and
proliferation of ad blocking technologies;
-
macroeconomic trends and conditions;
-
competitive pressures in the markets in which we operate;
-
increases in newsprint costs over the levels anticipated or declines
in newsprint supply;
-
potential disruption or interruption of our IT systems due to
accidents, extraordinary weather events, civil unrest, political
events, terrorism or cyber security attacks;
-
variability in the exchange rate relative to the U.S. dollar of
currencies in foreign jurisdictions in which we operate;
-
risks and uncertainties related to strategic acquisitions or
investments, including distraction of management attention, incurrence
of additional debt, integration challenges, and failure to realize
expected benefits or synergies or to operate businesses effectively
following acquisitions;
-
risks and uncertainties associated with our ReachLocal segment,
including its significant reliance on Google for media purchases, its
international operations and its ability to develop and gain market
acceptance for new products or services;
-
our ability to protect our intellectual property or defend
successfully against infringement claims;
-
our ability to attract and retain employees;
-
labor relations, including, but not limited to, labor disputes which
may cause business interruptions, revenue declines or increased labor
costs;
-
risks associated with our underfunded pension plans;
-
adverse outcomes in litigation or proceedings with governmental
authorities or administrative agencies, or changes in the regulatory
environment, any of which could encumber or impede our efforts to
improve operating results or the value of assets;
-
volatility in financial and credit markets which could affect the
value of retirement plan assets and our ability to raise funds through
debt or equity issuances and otherwise affect our ability to access
the credit and capital markets at the times and in the amounts needed
and on acceptable terms; and
-
other uncertainties relating to general economic, political, business,
industry, regulatory and market conditions.
A further description of these and other important risks, trends,
uncertainties and other factors is provided in the company's filings
with the U.S. Securities and Exchange Commission, including the
company's annual report on Form 10-K for fiscal year 2016. Any
forward-looking statements should be evaluated in light of these
important risk factors. The company is not responsible for updating or
revising any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures
This press release also contains a discussion of certain non-GAAP
financial measures that the company presents to allow investors and
analysts to measure, analyze and compare its financial condition and
results of operations in a meaningful and consistent manner. A
reconciliation of these non-GAAP financial measures to the most directly
comparable GAAP measures can be found in the tables accompanying this
press release.
About Gannett
Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused
media and marketing solutions company committed to strengthening
communities across our network. With an unmatched local-to-national
reach, Gannett touches the lives of more than 110 million people monthly
with our Pulitzer-Prize winning content, consumer experiences and
benefits, and advertiser products and services. Gannett brands include
USA TODAY NETWORK with the iconic USA TODAY and more than 100 local
media brands, digital marketing services companies ReachLocal and
SweetIQ, and U.K. media company Newsquest. To connect with us, visit www.gannett.com.
|
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands (except per share amounts)
|
|
|
|
|
|
|
|
|
|
Table No. 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Year ended
|
|
|
December 31, 2017
|
|
December 25, 2016
|
|
December 31, 2017
|
|
December 25, 2016
|
|
|
|
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
490,096
|
|
|
$
|
513,687
|
|
|
$
|
1,791,618
|
|
|
$
|
1,703,795
|
|
Circulation
|
|
299,364
|
|
|
297,804
|
|
|
1,120,739
|
|
|
1,133,676
|
|
Other
|
|
64,782
|
|
|
55,503
|
|
|
234,123
|
|
|
210,003
|
|
Total operating revenues
|
|
854,242
|
|
|
866,994
|
|
|
3,146,480
|
|
|
3,047,474
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Cost of sales and operating expenses *
|
|
507,008
|
|
|
531,024
|
|
|
1,959,638
|
|
|
1,927,895
|
|
Selling, general and administrative expenses *
|
|
216,648
|
|
|
214,134
|
|
|
836,306
|
|
|
795,548
|
|
Depreciation and amortization
|
|
43,432
|
|
|
41,114
|
|
|
191,885
|
|
|
132,964
|
|
Asset impairment charges
|
|
26,780
|
|
|
25,003
|
|
|
46,796
|
|
|
55,940
|
|
Restructuring costs
|
|
16,118
|
|
|
16,703
|
|
|
44,284
|
|
|
45,757
|
|
Total operating expenses
|
|
809,986
|
|
|
827,978
|
|
|
3,078,909
|
|
|
2,958,104
|
|
Operating income
|
|
44,256
|
|
|
39,016
|
|
|
67,571
|
|
|
89,370
|
|
|
|
|
|
|
|
|
|
|
Non-operating expenses:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(4,821
|
)
|
|
(4,282
|
)
|
|
(17,142
|
)
|
|
(12,791
|
)
|
Other non-operating items, net
|
|
423
|
|
|
(579
|
)
|
|
(9,688
|
)
|
|
(10,151
|
)
|
Total non-operating expenses
|
|
(4,398
|
)
|
|
(4,861
|
)
|
|
(26,830
|
)
|
|
(22,942
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
39,858
|
|
|
34,155
|
|
|
40,741
|
|
|
66,428
|
|
Provision for income taxes **
|
|
53,449
|
|
|
9,561
|
|
|
33,854
|
|
|
13,718
|
|
Net income (loss)
|
|
$
|
(13,591
|
)
|
|
$
|
24,594
|
|
|
$
|
6,887
|
|
|
$
|
52,710
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share - basic
|
|
$
|
(0.12
|
)
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
$
|
0.45
|
|
Earnings (loss) per share - diluted
|
|
$
|
(0.12
|
)
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
111,787
|
|
|
114,688
|
|
|
113,047
|
|
|
116,018
|
|
Diluted
|
|
111,787
|
|
|
117,053
|
|
|
115,610
|
|
|
118,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The company early adopted Financial Accounting Standards Board
("FASB") guidance requiring changes to the presentation of net
periodic pension and other postretirement benefit costs.
Specifically, this guidance requires entities to classify the
service cost component of the net benefit cost in the same income
statement line item as other employee compensation costs while all
other components of net benefit cost must be presented as
non-operating items. The guidance further requires such
classification changes to be retrospectively applied beginning in
the interim period in which the guidance is adopted. As a result of
adopting this guidance, in the fourth quarter and year ended
December 25, 2016, operating income and other non-operating expenses
increased $2.8 million and $10.3 million, respectively. Net income,
retained earnings, and earnings per share remained unchanged.
|
|
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|
**
|
|
The provision for income taxes for the fourth quarter and year ended
December 31, 2017 includes incremental tax expense of $42.8 million
as a result of the U.S. Tax Cuts and Jobs Act passed in December
2017 and tax expense of $7.7 million related to the revaluation of a
deferred tax asset associated with a deferred intercompany
transaction. Further, the tax provision for the fourth quarter and
year ended December 31, 2017 is partially offset by a benefit of
$0.9 million and $21.0 million, respectively, related to a worthless
stock and debt deduction for one of our ReachLocal international
subsidiaries.
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SEGMENT INFORMATION
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands
|
|
|
|
|
|
|
|
|
|
Table No. 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Year ended
|
|
|
December 31, 2017
|
|
December 25, 2016
|
|
December 31, 2017
|
|
December 25, 2016
|
|
|
|
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
Publishing
|
|
$
|
764,801
|
|
|
$
|
790,474
|
|
|
$
|
2,812,243
|
|
|
$
|
2,933,095
|
|
ReachLocal
|
|
101,420
|
|
|
75,167
|
|
|
358,728
|
|
|
110,144
|
|
Corporate and Other
|
|
1,488
|
|
|
1,353
|
|
|
4,835
|
|
|
4,235
|
|
Intersegment eliminations
|
|
(13,467
|
)
|
|
-
|
|
|
(29,326
|
)
|
|
-
|
|
Total
|
|
$
|
854,242
|
|
|
$
|
866,994
|
|
|
$
|
3,146,480
|
|
|
$
|
3,047,474
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
Publishing
|
|
$
|
149,184
|
|
|
$
|
145,947
|
|
|
$
|
432,420
|
|
|
$
|
444,108
|
|
ReachLocal
|
|
6,961
|
|
|
892
|
|
|
16,553
|
|
|
(5,852
|
)
|
Corporate and Other
|
|
(23,401
|
)
|
|
(16,994
|
)
|
|
(89,040
|
)
|
|
(78,361
|
)
|
Total
|
|
$
|
132,744
|
|
|
$
|
129,845
|
|
|
$
|
359,933
|
|
|
$
|
359,895
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
Publishing
|
|
$
|
29,098
|
|
|
$
|
28,583
|
|
|
$
|
135,214
|
|
|
$
|
105,102
|
|
ReachLocal
|
|
8,398
|
|
|
8,312
|
|
|
33,902
|
|
|
12,236
|
|
Corporate and Other
|
|
5,936
|
|
|
4,219
|
|
|
22,769
|
|
|
15,626
|
|
Total
|
|
$
|
43,432
|
|
|
$
|
41,114
|
|
|
$
|
191,885
|
|
|
$
|
132,964
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Publishing
|
|
$
|
12,116
|
|
|
$
|
9,234
|
|
|
$
|
35,702
|
|
|
$
|
34,324
|
|
ReachLocal
|
|
3,967
|
|
|
2,927
|
|
|
16,871
|
|
|
4,123
|
|
Corporate and Other
|
|
9,358
|
|
|
2,886
|
|
|
19,752
|
|
|
21,601
|
|
Total
|
|
$
|
25,441
|
|
|
$
|
15,047
|
|
|
$
|
72,325
|
|
|
$
|
60,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE DETAIL
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands
|
|
|
|
|
|
|
|
Table No. 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
December 31, 2017
|
|
December 25, 2016
|
|
% Change
|
|
|
|
|
|
|
|
Reported revenue
|
|
$
|
854,242
|
|
|
$
|
866,994
|
|
|
(1.5
|
%)
|
Acquired revenue
|
|
(9,937
|
)
|
|
-
|
|
|
***
|
Currency impact
|
|
(4,232
|
)
|
|
-
|
|
|
***
|
Exited operations
|
|
-
|
|
|
587
|
|
|
***
|
53rd week
|
|
(49,074
|
)
|
|
-
|
|
|
***
|
Same store revenue
|
|
$
|
790,999
|
|
|
$
|
867,581
|
|
|
(8.8
|
%)
|
|
|
|
|
|
|
|
Reported advertising revenue
|
|
$
|
490,096
|
|
|
$
|
513,687
|
|
|
(4.6
|
%)
|
Acquired revenue
|
|
(5,012
|
)
|
|
-
|
|
|
***
|
Currency impact
|
|
(2,648
|
)
|
|
-
|
|
|
***
|
53rd week
|
|
(26,826
|
)
|
|
-
|
|
|
***
|
Same store advertising revenue
|
|
$
|
455,610
|
|
|
$
|
513,687
|
|
|
(11.3
|
%)
|
|
|
|
|
|
|
|
Reported circulation revenue
|
|
$
|
299,364
|
|
|
$
|
297,804
|
|
|
0.5
|
%
|
Acquired revenue
|
|
(982
|
)
|
|
-
|
|
|
***
|
Currency impact
|
|
(1,209
|
)
|
|
-
|
|
|
***
|
53rd week
|
|
(19,329
|
)
|
|
-
|
|
|
***
|
Same store circulation revenue
|
|
$
|
277,844
|
|
|
$
|
297,804
|
|
|
(6.7
|
%)
|
|
|
|
|
|
|
|
Table No. 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
December 31, 2017
|
|
December 25, 2016
|
|
% Change
|
|
|
|
|
|
|
|
Publishing revenue detail
|
|
|
|
|
|
|
Print advertising
|
|
$
|
293,606
|
|
|
$
|
334,414
|
|
|
(12.2
|
%)
|
Digital advertising:
|
|
|
|
|
|
|
External sales
|
|
106,831
|
|
|
110,832
|
|
|
(3.6
|
%)
|
Intersegment sales
|
|
12,085
|
|
|
-
|
|
|
***
|
Total digital advertising
|
|
118,916
|
|
|
110,832
|
|
|
7.3
|
%
|
Total advertising
|
|
412,522
|
|
|
445,246
|
|
|
(7.3
|
%)
|
|
|
|
|
|
|
|
Circulation
|
|
299,364
|
|
|
297,804
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
External sales
|
|
51,533
|
|
|
47,424
|
|
|
8.7
|
%
|
Intersegment sales
|
|
1,382
|
|
|
-
|
|
|
***
|
Total other
|
|
52,915
|
|
|
47,424
|
|
|
11.6
|
%
|
|
|
|
|
|
|
|
Total Publishing revenue
|
|
$
|
764,801
|
|
|
$
|
790,474
|
|
|
(3.2
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
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
that the company believes offers a useful view of the overall
operation of our business. The company defines adjusted EBITDA as net
income before (1) income taxes, (2) interest expense, (3) equity
income, (4) other non-operating items, (5) restructuring costs, (6)
acquisition-related expenses (including certain integration expenses),
(7) asset impairment charges, (8) other items (including certain
business transformation costs, litigation expenses, multi-employer
pension withdrawals, and gains or losses on certain investments), (9)
depreciation, and (10) amortization. The most directly comparable GAAP
financial measure is net income.
-
Adjusted net income is a non-GAAP financial performance measure
that the company uses for calculating adjusted earnings per share
("EPS"). Adjusted net income is defined as net income before the
adjustments we apply in calculating adjusted EPS, as described below.
We believe presenting adjusted net income is useful to enable
investors to understand how we calculate adjusted EPS, which provides
a useful view of the overall operation of the company's business. The
most directly comparable GAAP financial measure is net income.
-
Adjusted diluted EPS is a non-GAAP financial performance
measure that the company believes offers a useful view of the overall
operation of our business. The company defines adjusted EPS as EPS
before tax-effected (1) restructuring costs, (2) asset impairment
charges, (3) acquisition-related expenses (including certain
integration expenses), (4) non-operating (gains) losses, and (5) other
items (including certain business transformation expenses, litigation
expenses, multi-employer pension withdrawals and gains or losses on
certain investments). The tax impact on these non-GAAP tax deductible
adjustments is based on the estimated statutory tax rates for the
United Kingdom of 19.25% and the United States of 38.7%. In addition,
tax is adjusted for the impact of non-deductible acquisition costs, a
tax benefit related to a worthless stock and debt deduction, tax
expense associated with new tax rates in the U.S. Tax Cuts and Jobs
Act, and revaluation of a deferred tax asset associated with a
deferred intercompany transaction. The most directly comparable GAAP
financial measure is diluted EPS.
-
Free cash flow is a non-GAAP liquidity measure that adjusts our
reported GAAP results for items that we believe are critical to the
ongoing success of our business. The company defines free cash flow as
cash flow from 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.
The company uses non-GAAP financial measures for purposes of evaluating
its performance and liquidity. Therefore, the company believes that each
of the non-GAAP measures presented provides useful information to
investors by allowing them to view our businesses through the eyes of
our management and Board of Directors, facilitating comparison of
results across historical periods, and providing a focus on the
underlying ongoing operating performance of our business. Many of our
peer group companies present similar non-GAAP measures to better
facilitate industry comparisons.
|
NON-GAAP FINANCIAL INFORMATION
|
ADJUSTED EBITDA
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands
|
|
|
|
|
|
|
|
|
|
Table No. 5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2017
|
|
|
Publishing
|
|
ReachLocal
|
|
Corporate and Other
|
|
Consolidated Total
|
|
|
|
|
|
|
|
|
|
Net loss (GAAP basis)
|
|
|
|
|
|
|
|
$
|
(13,591
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
|
53,449
|
|
Interest expense
|
|
|
|
|
|
|
|
4,821
|
|
Other non-operating items, net
|
|
|
|
|
|
|
|
(423
|
)
|
Operating income (loss) (GAAP basis)
|
|
$
|
80,313
|
|
|
$
|
(2,071
|
)
|
|
$
|
(33,986
|
)
|
|
$
|
44,256
|
|
Depreciation and amortization
|
|
29,098
|
|
|
8,398
|
|
|
5,936
|
|
|
43,432
|
|
Asset impairment charges
|
|
26,780
|
|
|
-
|
|
|
-
|
|
|
26,780
|
|
Restructuring costs
|
|
13,411
|
|
|
466
|
|
|
2,241
|
|
|
16,118
|
|
Acquisition-related items
|
|
45
|
|
|
-
|
|
|
505
|
|
|
550
|
|
Other items
|
|
(463
|
)
|
|
168
|
|
|
1,903
|
|
|
1,608
|
|
Adjusted EBITDA (non-GAAP basis)
|
|
$
|
149,184
|
|
|
$
|
6,961
|
|
|
$
|
(23,401
|
)
|
|
$
|
132,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 25, 2016
|
|
|
Publishing
|
|
ReachLocal
|
|
Corporate and Other
|
|
Consolidated Total
|
|
|
|
|
|
|
|
|
|
Net income (GAAP basis)
|
|
|
|
|
|
|
|
$
|
24,594
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
9,561
|
|
Interest expense
|
|
|
|
|
|
|
|
4,282
|
|
Other non-operating items, net
|
|
|
|
|
|
|
|
579
|
|
Operating income (loss) (GAAP basis)
|
|
$
|
72,121
|
|
|
$
|
(7,498
|
)
|
|
$
|
(25,607
|
)
|
|
$
|
39,016
|
|
Depreciation and amortization
|
|
28,583
|
|
|
8,312
|
|
|
4,219
|
|
|
41,114
|
|
Asset impairment charges
|
|
25,003
|
|
|
-
|
|
|
-
|
|
|
25,003
|
|
Restructuring costs
|
|
16,539
|
|
|
78
|
|
|
86
|
|
|
16,703
|
|
Acquisition-related items
|
|
641
|
|
|
-
|
|
|
2,987
|
|
|
3,628
|
|
Other items
|
|
3,060
|
|
|
-
|
|
|
1,321
|
|
|
4,381
|
|
Adjusted EBITDA (non-GAAP basis)
|
|
$
|
145,947
|
|
|
$
|
892
|
|
|
$
|
(16,994
|
)
|
|
$
|
129,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL INFORMATION
|
ADJUSTED EBITDA
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands
|
|
|
|
|
|
|
|
|
|
Table No. 5 (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
Publishing
|
|
ReachLocal
|
|
Corporate and Other
|
|
Consolidated Total
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP basis)
|
|
|
|
|
|
|
|
$
|
6,887
|
Provision for income taxes
|
|
|
|
|
|
|
|
33,854
|
Interest expense
|
|
|
|
|
|
|
|
17,142
|
Other non-operating items, net
|
|
|
|
|
|
|
|
9,688
|
Operating income (loss) (GAAP basis)
|
|
$
|
219,677
|
|
|
$
|
(18,939
|
)
|
|
$
|
(133,167
|
)
|
|
$
|
67,571
|
Depreciation and amortization
|
|
135,214
|
|
|
33,902
|
|
|
22,769
|
|
|
191,885
|
Asset impairment charges
|
|
46,796
|
|
|
-
|
|
|
-
|
|
|
46,796
|
Restructuring costs
|
|
37,376
|
|
|
980
|
|
|
5,928
|
|
|
44,284
|
Acquisition-related items
|
|
375
|
|
|
43
|
|
|
4,784
|
|
|
5,202
|
Other items
|
|
(7,018
|
)
|
|
567
|
|
|
10,646
|
|
|
4,195
|
Adjusted EBITDA (non-GAAP basis)
|
|
$
|
432,420
|
|
|
$
|
16,553
|
|
|
$
|
(89,040
|
)
|
|
$
|
359,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 25, 2016
|
|
|
Publishing
|
|
ReachLocal
|
|
Corporate and Other
|
|
Consolidated Total
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP basis)
|
|
|
|
|
|
|
|
$
|
52,710
|
Provision for income taxes
|
|
|
|
|
|
|
|
13,718
|
Interest expense
|
|
|
|
|
|
|
|
12,791
|
Other non-operating items, net
|
|
|
|
|
|
|
|
10,151
|
Operating income (loss) (GAAP basis)
|
|
$
|
235,398
|
|
|
$
|
(18,728
|
)
|
|
$
|
(127,300
|
)
|
|
$
|
89,370
|
Depreciation and amortization
|
|
105,102
|
|
|
12,236
|
|
|
15,626
|
|
|
132,964
|
Asset impairment charges
|
|
55,940
|
|
|
-
|
|
|
-
|
|
|
55,940
|
Restructuring costs
|
|
45,031
|
|
|
640
|
|
|
86
|
|
|
45,757
|
Acquisition-related items
|
|
777
|
|
|
-
|
|
|
31,906
|
|
|
32,683
|
Other items
|
|
1,860
|
|
|
-
|
|
|
1,321
|
|
|
3,181
|
Adjusted EBITDA (non-GAAP basis)
|
|
$
|
444,108
|
|
|
$
|
(5,852
|
)
|
|
$
|
(78,361
|
)
|
|
$
|
359,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL INFORMATION
|
ADJUSTED DILUTED EPS
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands (except per share amounts)
|
|
|
|
|
|
|
|
|
|
Table No. 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Year ended
|
|
|
December 31, 2017
|
|
December 25, 2016
|
|
December 31, 2017
|
|
December 25, 2016
|
|
|
|
|
|
|
|
|
|
Asset impairment charges
|
|
$
|
26,780
|
|
|
$
|
25,003
|
|
|
$
|
46,796
|
|
|
$
|
55,940
|
|
Restructuring costs (including accelerated depreciation)
|
|
22,534
|
|
|
19,921
|
|
|
88,331
|
|
|
48,975
|
|
Acquisition-related items
|
|
550
|
|
|
3,628
|
|
|
5,202
|
|
|
32,683
|
|
Non-operating (gains) losses
|
|
(5,725
|
)
|
|
1,964
|
|
|
(4,710
|
)
|
|
3,115
|
|
Other items
|
|
(97
|
)
|
|
3,060
|
|
|
(3,276
|
)
|
|
1,860
|
|
Pretax impact
|
|
44,042
|
|
|
53,576
|
|
|
132,343
|
|
|
142,573
|
|
Income tax impact of above items
|
|
(16,450
|
)
|
|
(20,196
|
)
|
|
(50,826
|
)
|
|
(50,609
|
)
|
Estimated effect of U.S. statutory tax rate change
|
|
42,776
|
|
|
-
|
|
|
42,776
|
|
|
-
|
|
Other tax-related items
|
|
6,834
|
|
|
-
|
|
|
(12,169
|
)
|
|
-
|
|
Impact of items affecting comparability on net income
|
|
$
|
77,202
|
|
|
$
|
33,380
|
|
|
$
|
112,124
|
|
|
$
|
91,964
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (GAAP basis)
|
|
$
|
(13,591
|
)
|
|
$
|
24,594
|
|
|
$
|
6,887
|
|
|
$
|
52,710
|
|
Impact of items affecting comparability on net income (loss)
|
|
77,202
|
|
|
33,380
|
|
|
112,124
|
|
|
91,964
|
|
Adjusted net income (non-GAAP basis)
|
|
$
|
63,611
|
|
|
$
|
57,974
|
|
|
$
|
119,011
|
|
|
$
|
144,674
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share - diluted (GAAP basis)
|
|
$
|
(0.12
|
)
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
$
|
0.44
|
|
Impact of items affecting comparability on net income (loss)
|
|
0.67
|
|
|
0.29
|
|
|
0.97
|
|
|
0.78
|
|
Adjusted earnings per share - diluted (non-GAAP basis)
|
|
$
|
0.55
|
|
|
$
|
0.50
|
|
|
$
|
1.03
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding (GAAP
basis)
|
|
111,787
|
|
|
117,053
|
|
|
115,610
|
|
|
118,625
|
|
Diluted weighted average number of common shares outstanding
(non-GAAP basis)
|
|
115,477
|
|
|
117,053
|
|
|
115,610
|
|
|
118,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL INFORMATION
|
FREE CASH FLOW
|
Gannett Co., Inc. and Subsidiaries
|
Unaudited, in thousands
|
|
|
|
|
|
Table No. 7
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2017
|
|
Year ended December 31, 2017
|
|
|
|
|
|
Net cash flow from operating activities (GAAP basis)
|
|
$
|
72,777
|
|
|
$
|
236,468
|
|
Capital expenditures
|
|
(25,441
|
)
|
|
(72,325
|
)
|
Free cash flow (non-GAAP basis)
|
|
$
|
47,336
|
|
|
$
|
164,143
|
|
|
|
|
|
|
|
|
|
|
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