In the first of the major newspaper earnings reports for the 1Q, Gannett Co., Inc. reported today that 2009 first quarter earnings per diluted share were $0.34 compared with $0.84 per share in the first quarter of 2008.
In the publishing sector, ad revenues were off just over 28 percent, and 33.5 percent at flagship USA Today. Overall revenue decline for newspapers was 26.9 percent vs. 2008.
Circulation revenue climbed 1 percent based on single copy price increases.
“Although business conditions remain very challenging, we continue to transform all facets of the company as we position it for a more favorable economic environment and the opportunities we see in the changing media landscape,” Craig Dubow, the CEO and chairman, said in a statement.
“While revenue in the quarter benefited from growth in our digital segment and significantly higher retransmission fees for our television stations, our results reflect the pressure on advertising demand across all of our business segments due to continuing recessions in the U.S. and the U.K. Our results, however, highlight the positive impact of the company’s efforts to operate its businesses as cost efficiently as possible in light of the revenue realities we are facing in this extraordinary time."
An excerpt from the Gannett release follows:
Total reported operating revenues for the company were $1.4 billion in the first quarter compared to $1.7 billion in the first quarter of 2008. The revenue decline reflects primarily the impact on advertising demand of the ongoing weakness in the economies of both the U.S. and the U.K. Digital segment revenues increased significantly due to the consolidation of CareerBuilder and ShopLocal for the full quarter in 2009.
Reported operating expenses were $1.2 billion, a 10.2 percent decline from $1.3 billion in the first quarter of 2008, reflecting cost containment efforts including the impact of headcount reductions in previous periods, furloughs in the current quarter and the pension settlement gain. The effect of these cost savings initiatives was offset partially by restructuring expense. As well, the full consolidation of CareerBuilder and ShopLocal impacted reported expenses. Excluding one time items in both years, pro forma operating expenses were 17.7 percent lower for the quarter. Corporate expenses declined 11.4 percent during the quarter compared to the first quarter in 2008.
Reported operating cash flow (defined as operating income plus depreciation and amortization) was $230.1 million for the quarter and net income was $77.4 million.
Publishing segment operating revenues were $1.1 billion for the quarter, a 26.9 percent decline from the same quarter a year ago. Advertising revenues were $722.8 million or 34.1 percent lower than the first quarter of 2008. Advertising revenues in the U.S. were 28.2 percent lower while at Newsquest, our operations in the UK, ad revenues declined 38.7 percent, in pounds. The retail, national and classified categories for the publishing segment were 23.4 percent, 30.8 percent and 46.5 percent lower, respectively. The exchange rate of the British pound declined over 27 percent year-over-year. Excluding the impact of the exchange rate, total advertising revenues would have been 29.8 percent lower including declines of 20.9 percent in retail, 29.2 percent in national and 40.7 percent in classified. Circulation revenue was 3.1 percent lower in the quarter.
Domestic circulation revenue increased 1.0 percent reflecting recent single copy and home delivery price increases in several markets and at USA Today.
Lower classified revenues reflect declines of 50.6 percent in real estate, 62.0 percent in employment and 39.2 percent in automotive. On a constant currency basis, real estate, employment, and automotive would have been down 44.3 percent, 57.2 percent and 34.8 percent, respectively. For U.S. Community Publishing, classified revenues were 39.0 percent lower reflecting declines of 36.6 percent in real estate, 60.2 percent in employment and 32.8 percent in automotive. In the UK, classified revenues were down 45.1 percent, in pounds, comprised of declines of 60.0 percent in real estate, 51.4 percent in employment and 43.2 percent in automotive.
At USA Today, advertising revenues were 33.5 percent lower in the first quarter compared to the first quarter in 2008. Paid advertising pages totaled 527 compared with 826 in the same quarter of 2008. The telecommunications, pharmaceutical, and advocacy categories grew but the gains were more than offset by losses in the entertainment, travel and financial categories.
Total publishing operating expenses declined 20.9 percent in the quarter to $954.7 million from $1.21 billion in the first quarter of 2008. The decline was driven by continued cost containment efforts including the impact of headcount reductions in previous periods, furloughs in the current quarter and the pension settlement gain. These savings were offset, in part, by higher severance and facility-related consolidation costs. Publishing expenses, excluding severance expenses and facility consolidation costs as well as the pension settlement gain, were 18.1 percent lower. Newsprint expenses were down 15.6 percent for the quarter reflecting an increase in usage prices of 20.4 percent which was more than offset by a 29.9 percent decline in consumption. Operating cash flow in the first quarter for the publishing segment, which includes USA TODAY and Newsquest, was $179.3 million.
The digital segment for the quarter includes results for CareerBuilder, PointRoll, ShopLocal, Planet Discover, Schedule Star and Ripple6. Results for CareerBuilder and ShopLocal were initially consolidated in the third quarter of 2008 when the company acquired controlling interest. Ripple6 was acquired in November 2008. Results for PointRoll, Planet Discover and Schedule Star, which had been previously included in the publishing segment, have been reclassified to the digital segment for the prior period.
Digital operating revenues totaled $143.2 million in the quarter compared with $13.9 million in 2008, reflecting primarily the consolidation of CareerBuilder and ShopLocal. Operating expenses were $144.4 million. Operating cash flow was $7.9 million reflecting positive results for CareerBuilder, PointRoll and ShopLocal, partially offset by investment in other digital properties. On a pro forma basis, operating revenues were 13.1 percent lower but operating expenses were down 21.5 percent resulting in a $20.0 million increase in operating cash flow.
The company’s equity earnings include its share of operating results from unconsolidated investees including the California Newspapers Partnership, Texas-New Mexico Newspapers Partnership, Tucson newspaper partnership and other online/new technology businesses. These amounts included the company’s equity share of results for CareerBuilder and ShopLocal for the first quarter of 2008 which was before the company acquired controlling interests in these businesses.
The equity loss in unconsolidated investees for the first quarter of 2009 was $2.7 million compared to $11.8 million for the first quarter of 2008. This improvement reflects primarily the absence of the company’s equity share of losses related to CareerBuilder and ShopLocal which are now consolidated, partially offset by lower results from our newspaper publishing partnerships.
The $21.7 million decline in other non-operating items to $2.5 million in the first quarter of 2009 was due primarily to the $25.5 million pre-tax gain on the sale of land reported in the first quarter of 2008.
Interest expense for the first quarter was $48.9 million, a slight increase from $48.5 million in the first quarter last year reflecting lower average debt balances offset by slightly higher interest rates.