Gannett’s Q2 Results Spell Good News

By: E&P Staff

Gannett Co. Inc., the first newspaper publisher to report second-quarter results, said this morning that its Publishing segment operating income, excluding special items, for Q2 was up by $31.0 million (20.8%) to $180.3 million, compared to Q2 2009. Publishing segment operating cash flow totaled $214.6 million, up 23.3% from 2009’s second quarter.

The increase reflects the impact of expense cuts in this and previous quarters, lower newsprint costs, and lower revenue declines compared with Q2 2009 — slightly offset by the absence of furlough savings of about $20 million.

The company’s net income for Q2, adjusted for special items, was $146.5 million, compared to $107.9 million in the second quarter of 2009 (an increase of 35.7%). Operating cash flow was $327 million, up from $250.9 million in the second quarter of 2009. Ganett’s 2010 second-quarter earnings per diluted share were $0.81, including a net gain from discontinued operations of $0.08 per share.

“In our Publishing segment, this quarter was the best comparison quarter for advertising revenues since mid-2007,” Chairman/Chief Executive Officer Craig A. Dubow said in a statement. “We benefited from continuing efficiency efforts company-wide as well as lower newsprint expense. As a result, we generated substantially higher profitability and operating cash flow in all of our business segments.”

During Q2, the company completed the sale of The Honolulu Advertiser and its related assets as well as a small directory publishing operation in Michigan.

In Publishing, national advertising was down 2.9% for the quarter. A double-digit increase in national advertising in U.S. Community Publishing was offset by lower results at USA Today, which saw losses in travel-related categories. The automotive, retail and packaged goods categories, however, saw gains. Paid advertising pages totaled 580, down from 602 in Q2 2009.

The USA Today parent saw a $28.7 million ($0.12 per share) net tax benefit, due mostly to the expiration of the statutes of limitations and the release of certain reserves related to the sale of a business in a previous year.

Dubow added that stronger core advertising demand and increased political spending drove growth in Broadcasting, while positive results at CareerBuilder and PointRoll contributed to gains in the Digital segment.

Ad revenues in the Publishing sector in Q2 were $692.2 million, down 5.7% compared to Q2 2009. 

Gannett also reported a $42.7 million pre-tax gain related to the company’s debt exchange ($26.1 million after-tax or $0.11 per share); $16.3 million in pre-tax costs related to workforce restructuring ($10.2 million after-tax or $0.04 per share); $47.4 million of pre-tax non-cash charges related primarily to asset impairments in the company’s publishing segment ($29.6 million after-tax or $0.13 per share); and a $28.0 million non-cash charge for asset write-downs ($24.2 million after-tax or $0.10 per share).

Diluted earnings per share from continuing operations, on a GAAP (generally accepted accounting principles) basis for the second quarter of 2010 were $0.73, compared with $0.30 for the second quarter of 2009. Earnings per share from continuing operations and excluding special items for the second quarter were $0.61, versus $0.46 in the same quarter in 2009.

Reported operating revenues for Q2 were $1.37 billion, compared to $1.39 billion in the second quarter of 2009, down 1.6% (or $22.2 million). Reported operating expenses were down slightly, at $1.1 billion compared to $1.2 billion in Q2 2009.

When asked during the company’s earnings call whether any stock repurchases were in Gannett’s forseeable future, CEO Dubow alluded to keeping the company’s “powder dry,” and that the primary focus for the time being is on growing revenue on the digital side.

Dubow also said that downloads of USA Today’s free app have exceeded 3 million, making it the No. 1 free news & information app — and that advertisers are very much on board with the mobile platform.

Gannett Co. shares were down 8.3% at $13.85 in early morning trading Friday.

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