Gannett Reports U.S. Ad Revenue Drop of 28.2 Percent in First Quarter of 2009
Gannett Co. announced yesterday during a conference call that advertising revenue at its U.S. Community Newspaper division plunged 28.2 percent, including a nearly 40 percent decrease in classified advertising revenue.
Gannett reported that 2009 first quarter earnings per diluted share were $0.34 compared with $0.84 per share in the first quarter of 2008.
The results for the first quarter of 2009 include a $39.8 million pre-tax settlement gain related to one of the company’s union pension plans ($24.7 million after-tax or $0.11 per share) and $6.6 million in pre-tax severance and facility-related consolidation costs ($4.3 million after-tax or $0.02 per share). Results for the first quarter of 2008 included a $25.5 million pre-tax gain on the sale of land ($15.8 million after-tax or $0.07 per share). Excluding these one-time items, the company earned $0.25 per diluted share in 2009’s first quarter compared to $0.77 per diluted share in the first quarter a year ago.
“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 UK. 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,” said chairman, president and chief executive officer Craig Dubow. “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.”
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 United States and the United Kingdom. Digital segment revenues increased significantly because of 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 personnel 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.
Average diluted shares outstanding in the first quarter totaled 230,951,000 compared with 229,661,000 in 2008’s first quarter.
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 United Kingdom, 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 personnel 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.
Circulation is reported down across the chain about 10 percent daily and 5 percent Sundays, with USA Today down about 7 percent. Even digital ads took a 20 percent hit.