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Gannett Company, Inc. (GCI - Analyst Report) posted better-than-expected fourth-quarter 2012 results. The quarterly earnings of 89 cents a share came a penny ahead of the Zacks Consensus Estimate, and jumped 23.6% year over year, reflecting growth in revenue and margin expansion.
Including one-time items, earnings came in at 44 cents a share compared with 49 cents in the comparable prior-year quarter.
Behind the Headline
Gannett's total revenue climbed 9.4% year over year to $1,518.3 million during the quarter under review due to increase in revenues across Broadcasting and Digital segments. Total revenue also came ahead of the Zacks Consensus Estimate of $1,507 million.
Gannett stated that total Broadcasting revenues, including Captivate, surged 43.9% to $287.5 million buoyed by robust television advertising demand and retransmission revenues. Excluding the impact of an extra week, total revenues in the Broadcasting division jumped 39%.
Television revenues soared 45.7% to $280.2 million primarily driven by a significant rise in political advertising. Retransmission revenues increased 38.7% to $29.6 million during the quarter. Broadcasting adjusted operating income grew 76% to $157.9 million.
Management now expects television revenues to rise in the high-single digits in the first quarter of 2013 compared with the prior-year quarter. Moreover, management stated that the revenues for first quarter fiscal 2013 will be negatively impacted by the absence of political revenues and the shift of the Super Bowl to CBS Corporation (CBS - Analyst Report) from NBC.
Digital revenue rose 3.2% to $187.2 million due to robust revenue growth at CareerBuilder. Digital segments adjusted operating income came in at $39 million compared with $38.7 million in the year-ago quarter.
Company-wide total digital revenues augmented 29.4% to $375.6 million, driven by improved digital advertising and marketing solutions as well as sustained rollout of the all-access content subscription model and includes 87.1% growth registered in publishing digital revenue and an 4% increase in television station digital revenues. Excluding the impact of an extra week, company-wide total digital revenues increased 26.7%.
Total Publishing revenues increased 3.7% year over year to $1.04 billion. Publishing Advertising revenues fell 2% to $657.5 million. Publishing Circulation revenues portrayed a substantial improvement, increasing 16.8% to $313.1 million on the back of a subscription based model. Total Publishing segment's operating income slipped 13.1% to $153.2 million.
Tepid recovery in the economy along with weakness in advertising demand in the U.S. and U.K. impacted the results. Advertising revenue dipped 5.6% in October, 7.4% in November and 6.7% in December. The downturn in the publishing industry came in the wake of declining print readership as more readers opt for free online news, thereby making the print-advertising model increasingly irrelevant.
Advertising, which remains a significant source of revenue for the company, depends upon the global financial health. Gannett is taking initiatives to diversify its business model, shielding itself against any economic onslaught by adding new revenue streams. The company is also adapting to the changing face of the multi-platform media universe, which currently includes Internet, mobile, social media networks and outdoor video advertising in its portfolio.
In an effort to restrict declining revenue and shrinking market share, publishers are scrambling to slash costs. Gannett has been realigning its cost structure and streamlining its operations to increase efficiencies.
To curb shrinking advertising revenue and seek new revenue avenues, the publishing companies contemplated charging readers for online content. Despite glitches in the economy, it still promises revenue generation.
News International, the subsidiary of News Corporation (NWSA - Analyst Report) started charging readers for the online content of The Times of London and Sunday Times of London from Jun 2010. The New York Times Company (NYT - Analyst Report), another diversified media conglomerate, launched a pay-and-read model on Mar 28, 2011.
Gannett initiated a subscription based model, commenced Digital Marketing Services in top markets, and refurbished its iconic brand, USA Today to generate new advertising and marketing revenue sources.
Other Financial Aspects
Gannett lowered its interest expense during the quarter to $38.9 million compared with $40.8 million in the prior-year quarter, reflecting lower average debt balances. Long-term debt at the end of the quarter was $1.43 billion.
The company generated net cash flow from operating activities of $258 million and free cash flow of $248.1 million in the quarter. Cash at the end of the quarter totaled $175 million.
The company, during the reported quarter, repurchased approximately 2.1 million shares aggregating $37.4 million. Year-to-date, Gannett has bought back 10.3 million shares worth $153.9 million.
Currently, shares of Gannett hold a Zacks Rank #3 (Hold).