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Section 1: 8-K (8-K)

Document
false0001579684 0001579684 2020-02-27 2020-02-27


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 27, 2020
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
Delaware
 
001-36097
 
38-3910250
(State or Other Jurisdiction of Incorporation or Organization)
 
(Commission File Number) 
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
 
7950 Jones Branch Drive,
McLean,
Virginia
 
 
 
 
22107-0910
(Address of principal executive offices)
 
 
 
 
(Zip Code)
 
 
 
 


 
 
(703)
854-6000
 
Not Applicable
(Registrant's telephone number, including area code)
 
(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share
 
GCI
 
The New York Stock Exchange
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨







Item 2.02 Results of Operations and Financial Condition.

On February 27, 2020, Gannett Co., Inc. ("the Company") issued a press release announcing its consolidated financial results for the fourth quarter ended December 31, 2019. A copy of the press release is furnished herewith as Exhibit 99.1, which is incorporated herein by reference.

The information furnished pursuant to this Current Report on Form 8-K (including the exhibit hereto) shall not be considered “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, unless the Company expressly sets forth by specific reference in such filing that such information is to be considered “filed” or incorporated by reference therein.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

The following exhibits are being filed as part of this report:
Exhibit No.
 
Description
 
 
 
 
 
 
 
99.1
 
 
 
 
 
 
104
 
Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)
 
Attached.






SIGNATURE
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
  
 
 
Gannett Co., Inc.
 
 
 
Date: February 27, 2020
By:
 /s/ Alison K. Engel
 
 
Alison K. Engel
 
 
Chief Financial Officer and Chief Accounting Officer
 





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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


403004588_gannettlogocopy.jpg

Gannett Announces Fourth Quarter and Full Year 2019 Results

Significant progress on integration; continued confidence in high-end of synergy targets
On track to implement over $60 million in annualized synergies by the end of the first quarter
Combined paid digital-only subscriptions reach over 800,000

MCLEAN, VA — February 27, 2020 — Gannett Co., Inc. ("Gannett", "we", "us", "our", or "the Company") (NYSE: GCI) today reported its financial results for the fourth quarter and full year ended December 31, 2019. Prior to November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media" or "Legacy New Media"), and Gannett Co., Inc. ("Legacy Gannett") was a separate publicly traded company. On November 19, 2019, New Media acquired Legacy Gannett (the "Acquisition"). In connection with the Acquisition, Legacy Gannett became a wholly owned subsidiary of New Media, and New Media changed its name to Gannett Co., Inc.

The discussion below presents “consolidated results” for the Company as a whole and “segment results” for our primary reporting segments: Publishing and Marketing Solutions. Within each of these categories, we provide (i) our actual GAAP results, which reflect a full quarter or year (as applicable) of Legacy New Media operations and six weeks of Legacy Gannett operations, (ii) same store revenue trends for Legacy Gannett and Legacy New Media, each on a stand-alone basis for the entire period, (iii) pro forma results, which reflect the consolidated operations, adjusted as if New Media had owned Legacy Gannett for the entire period presented, and (iv) Adjusted EBITDA, which is our non-GAAP measure of operating results, calculated based on actual results (with six weeks of Legacy Gannett results) and on a pro forma basis (assuming Legacy Gannett was owned for the entire period).

Financial Highlights
 
Fourth Quarter 2019
 
Full Year 2019
in thousands
Actual
 
Pro Forma
 
Actual
 
Pro Forma
GAAP operating revenue
$
699,274

 
$
1,054,253

 
$
1,867,909

 
$
4,182,220

GAAP net loss attributable to Gannett
(95,088
)
 
(115,694
)
 
(119,842
)
 
(114,983
)
Adjusted EBITDA(1) (non-GAAP)
98,821

 
141,208

 
223,871

 
485,452

Free cash flow(2) (non-GAAP)
(79,692
)
 
N/A

 
11,557

 
N/A

(1) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Adjusted EBITDA and the reconciliation to the most comparable GAAP measure included herein.
(2) Refer to “Use of Non-GAAP Information” below for the Company’s definition of Free cash flow and the reconciliation to the most comparable GAAP measure included herein. Free cash flow for the fourth quarter was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments. Free cash flow for the full year was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $45.4 million of integration and reorganization costs, $38.4 million of acquisition costs, and $11.3 million of other one-time adjustments.

Fourth Quarter 2019 Consolidated Results

Fourth quarter GAAP revenues of $699.3 million rose 68.1% as compared to the prior year quarter reflecting the Acquisition.
Legacy Gannett fourth quarter same store revenues decreased 10.1% year-over-year.
Legacy New Media fourth quarter same store revenues decreased 9.6% year-over-year.
Pro forma digital advertising and marketing services revenues reached $231.8 million in the fourth quarter, or 22.0% of total pro forma revenues.
GAAP net loss attributable to Gannett of $95.1 million in the fourth quarter reflects a one-time non-cash write-down of $100.7 million related to the revaluation of intangibles and $145.6 million one-time cash charges related to restructuring and transaction related costs.
Adjusted EBITDA totaled $98.8 million and represented a 14.1% margin. On a pro forma basis, Adjusted EBITDA totaled $141.2 million and represented a 13.4% margin.

Full Year 2019 Consolidated Results

2019 GAAP revenues of $1.9 billion rose 22.4% as compared to the prior year reflecting the Acquisition.
Legacy Gannett 2019 same store revenues decreased 9.4% year-over-year.
Legacy New Media 2019 same store revenues decreased 8.0% year-over-year.




Pro forma digital advertising and marketing services revenues reached $912.5 million in 2019, or 21.8% of total pro forma revenues.
GAAP net loss attributable to Gannett of $119.8 million in 2019 reflects a one-time $100.7 million non-cash write-down related to the revaluation of intangibles and $182.9 million one-time cash charges related to restructuring and transaction related costs.
Adjusted EBITDA totaled $223.9 million and represented a 12.0% margin. On a pro forma basis, Adjusted EBITDA reached $485.5 million and represented a 11.6% margin.

"We are pleased to announce our first earnings report since completing our acquisition of Legacy Gannett in November," said Michael Reed, Gannett Chairman and Chief Executive Officer. "Although we acquired Legacy Gannett only six weeks before the end of the quarter, we immediately began implementing our integration plan. By the end of the first quarter of 2020, we expect to have implemented measures that will result in over $60 million in annualized savings. As a result of these measures, we expect to realize $10 - $15 million of savings in the first quarter, and we expect the savings in subsequent quarters to increase as we continue to implement synergies throughout the year. We remain highly confident that we will complete the implementation of measures in 2020 corresponding to more than half of our $300 million synergy target related to the acquisition of Legacy Gannett."

"We are also happy to report that we are ahead of schedule in paying down debt. As announced earlier in January, we paid down $35.8 million in principal on our credit facility during the fourth quarter. Subsequent to the quarter, we have paid down an additional $9.4 million. Real estate sales have driven $8.9 million of the repayments, and we anticipate an additional $100 - $125 million in real estate sales by the end of 2021."

"As expected, same store trends weakened in the fourth quarter, in large part reflecting the runoff of more aggressive subscriber pricing initiatives that Legacy Gannett implemented in the fourth quarter of 2018. Beyond circulation revenue, same store advertising trends were a bit weaker than expected primarily due to disruption from the Acquisition. We have already seen trends improve in the first quarter and are confident in our ability to sustain these positive trends. In the fourth quarter, we saw strong gains in digital marketing services revenues at Legacy Gannett in our local markets, and the Legacy New Media events business nearly doubled its revenues compared to the prior year period. We were pleased with the strong momentum we saw in our key growth areas, which positioned us for a solid start to 2020."

"Our Adjusted EBITDA in the quarter was negatively impacted by both the revenue softness and higher than anticipated healthcare claims, while our Free cash flow reflects a significant amount of one-time costs related to the Acquisition. Adjusting for these one-time items, Free cash flow would have been $65.9 million. With integration efforts ongoing, we remain very optimistic about our ability to deliver on our synergy targets, pay down debt, and return capital to shareholders, while continuing to serve as a trusted source of high quality news to the communities we serve."

Fourth Quarter 2019 Publishing Segment

Publishing segment revenues totaled $653.9 million in the fourth quarter; on a pro forma basis, Publishing segment revenues were $964.7 million.
Print advertising revenues totaled $240.9 million in the fourth quarter; on a pro forma basis, print advertising revenues were $334.1 million, reflecting continued secular pressures.
Same store Legacy Gannett print advertising revenues decreased 20.1% as compared to the prior year quarter.
Same store Legacy New Media print advertising revenue decreased 16.3%, as compared to the prior year quarter.
Digital advertising and marketing services revenues were $90.1 million in the fourth quarter; on a pro forma basis, digital advertising and marketing services revenues were $150.3 million.
Legacy Gannett same store digital advertising and marketing services revenues decreased 1.6% as compared to the prior year quarter, an improvement from the third quarter trend, reflecting improved digital marketing services results.
Legacy New Media same store digital advertising and marketing services revenues decreased 0.4% year-over-year.
Circulation revenues totaled $255.6 million in the fourth quarter; on a pro forma basis, circulation revenues were $384.4 million.
Legacy Gannett same store circulation revenues decreased 10.3% year-over-year, as expected, reflecting the cycling of last year's more aggressive pricing initiatives.
Legacy New Media same store circulation revenues decreased 7.2% from the prior year.
Commercial printing and other revenues contributed $67.3 million to Publishing segment revenues in the fourth quarter.
Paid digital-only subscriber volumes now total approximately 812,000, up 25.3% year-over-year on a pro forma basis.
Publishing segment Adjusted EBITDA was $113.3 million, representing a margin of 17.3% for the quarter.





Fourth Quarter 2019 Marketing Solutions Segment

Marketing Solutions segment revenues were $69.3 million in the fourth quarter; on a pro forma basis, Marketing Solutions segment revenues were $122.7 million.
Legacy Gannett same store digital marketing services revenues increased 1.8% as compared to the prior year, similar to the 2.5% gain in the third quarter. Revenues across the Legacy Gannett local markets achieved another quarter of robust growth, driven by an increase in the number of clients.
Marketing Solutions segment Adjusted EBITDA was $4.0 million, representing a margin of 5.8% for the quarter.

Fourth Quarter 2019 Cash Flow

Cash flow from operations was negative $73.0 million compared to positive $37.6 million for the prior year quarter, as net cash used in operating activities from Legacy Gannett of $72.4 million included additional pension and postretirement contributions of $92.4 million, most of which were related to an $87.8 million pay-out of pension benefits upon change-in-control. Additionally, cash flow from operations was reduced by $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments.
Capital expenditures were $6.7 million, primarily for product development, technology investments, and maintenance projects.
The Company repaid $35.8 million in principal under its credit facility.
As of the end of the fourth quarter, the Company had a cash balance of $156.0 million.

2020 Dividend

We expect to resume paying a quarterly dividend with respect to the first quarter of 2020. Consistent with our past practice, any dividend declared with respect to the first quarter is expected to be announced and paid in May. We expect the amount of this dividend to be $0.19 per share.

Under the terms of the credit facility that we entered into on November 19, 2019 in connection with the Acquisition, we are prohibited from paying cash dividends until after April 2020 and thereafter will be permitted to pay cash dividends only in accordance with the limitations set forth in our credit facility. Accordingly, our Board of Directors did not declare a dividend with respect to the fourth quarter of 2019. In addition, our Board has not yet declared any dividend with respect to the first quarter of 2020 or any future quarter, and there can be no guarantee as to the amount and timing of any future dividend.

Integration Update

By the end of the first quarter of 2020, the Company expects to have implemented measures that will result in over $60 million in annualized savings. As a result of these measures, the Company expects to realize $10 - $15 million in savings in the first quarter and further savings in each subsequent quarter, as it continues to implement synergies throughout the year. Management remains highly confident in its ability to implement measures by the end of 2021 that are expected to result in $300 million in synergies, with more than half of such measures expected to be completed in 2020.

Earnings Conference Call

Management will host a conference call on Thursday, February 27, 2020 at 8:30 A.M. Eastern Time. A copy of the earnings release will be posted to the Investor Relations section of the Company's website, www.gannett.com. The conference call may be accessed by dialing 1-855-319-1124 (from within the U.S.) or 1-703-563-6359 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “Gannett Fourth Quarter Earnings Call” or access code “6790119”. A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.gannett.com. Please allow extra time prior to the call to visit the website and download any necessary software required to listen to the internet broadcast. A telephonic replay of the conference call will also be available approximately two hours following the call’s completion through 11:59 P.M. Eastern Time on Thursday, March 5, 2020 by dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference access code “6790119”.

About Gannett

Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused media and marketing solutions company committed to fostering the communities in our network and helping them build relationships with their local businesses. With an unmatched reach at the national and local level, Gannett touches the lives of nearly 150 million people monthly with our Pulitzer-Prize winning content, consumer experiences and benefits, and advertiser products and services. Our portfolio includes the USA TODAY, local media




organizations in 47 states in the U.S. and Guam, and Newsquest, a wholly owned subsidiary with over 140 local media brands operating in the United Kingdom. Gannett also owns the digital marketing services companies ReachLocal, Inc., UpCurve, Inc., and WordStream, Inc. and runs the largest media-owned events business in the U.S., GateHouse Live. Effective November 20, 2019, following the completion of its merger with Gannett, New Media Investment Group Inc. trades on the New York Stock Exchange under Gannett Co., Inc. and its ticker symbol has changed to “GCI”. To connect with us, visit www.gannett.com.

Same Store Revenues

Same store revenues are defined as GAAP revenues excluding (1) revenues related to 2019 acquisitions from the date of the acquisition through the end of the year, (2) revenues related to 2018 acquisitions from the beginning of 2019 through the first year anniversary of their applicable acquisition date, (3) exited operations, (4) currency impacts, and (5) deferred revenue impacts related to the Acquisition. As noted above, we have provided same store revenue trends for Legacy Gannett and Legacy New Media, each on a stand-alone basis for the entire period. This information is provided on a transitional basis, and management expects to provide same store results for the consolidated company in future periods.

Cautionary Statement Regarding Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding measures expected to result in over $60 million in annualized savings, the timing of realizing those savings, including our expectation that $10 - $15 million will be realized in the first quarter, the potential to realize additional savings in future quarters, our ability to achieve $300 million of synergies through measures expected to be implemented by the end of 2021, our expectations, in terms of both amount and timing, with respect to debt repayment, real estate sales and debt refinancing, future revenue trends and our ability to influence trends, and the amount and timing of any future dividend, including our expectation that the Board will declare a $0.19 per share dividend with respect to the first quarter of 2020. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. These and other risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond our control. The Company can give no assurance its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

* * * *

For investor inquiries, contact:
 
For media inquiries, contact:
Ashley Higgins and Stacy Cunningham
 
Stephanie Tackach
Investor Relations
 
Director, Public Relations
212-479-3160
 
212-715-5490
 

# # #




CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 1 (1)
 
 
 
Assets
December 31, 2019
 
December 30, 2018
Current assets
 
 
 
Cash and cash equivalents
$
156,042

 
$
48,651

Accounts receivable, net of allowance for doubtful accounts of $19,923 and $8,042 at December 31, 2019 and December 30, 2018, respectively
438,523

 
174,274

Inventories
55,090

 
25,022

Prepaid expenses and other current assets
129,460

 
49,662

Total current assets
779,115

 
297,609

Property, plant, and equipment, net of accumulated depreciation of $277,291 and $219,256 at December 31, 2019 and December 30, 2018, respectively
815,807

 
339,608

Operating lease assets
309,112

 

Goodwill
914,331

 
310,737

Intangible assets, net of accumulated amortization of $145,773 and $101,543 at December 31, 2019 and December 30, 2018, respectively
1,012,564

 
486,054

Deferred income taxes
76,297

 

Other assets
112,876

 
9,856

Total assets
$
4,020,102

 
$
1,443,864

 
 
 
 
Liabilities and equity
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
3,300

 
$
12,395

Accounts payable
146,995

 
16,612

Accrued expenses
306,633

 
109,597

Deferred revenue
218,823

 
105,187

Other current liabilities
42,702

 
4,053

Total current liabilities
718,453

 
247,844

Long-term debt
1,636,335

 
428,180

Convertible debt
3,300

 

Deferred income taxes
9,052

 
8,282

Pension and other postretirement benefit obligations
235,906

 
24,326

Long-term operating lease liabilities
297,662

 

Other long-term liabilities
136,188

 
16,462

Total noncurrent liabilities
2,318,443

 
477,250

Total liabilities
3,036,896

 
725,094

Redeemable noncontrolling interests
1,850

 
1,547

Commitments and contingent liabilities
 
 
 
 
 
 
 
Equity
 
 
 
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 129,386,258 shares issued and 128,991,544 shares outstanding at December 31, 2019; 60,508,249 shares issued and 60,306,286 shares outstanding at December 30, 2018
1,294

 
605

Treasury stock, at cost, 394,714 and 201,963 shares at December 31, 2019 and December 30, 2018, respectively
(2,876
)
 
(1,873
)
Additional paid-in capital
1,090,694

 
721,605

Retained earnings
(115,958
)
 
3,767

Accumulated other comprehensive loss (income)
8,202

 
(6,881
)
Total equity
981,356

 
717,223

Total liabilities and equity
$
4,020,102

 
$
1,443,864

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.




CONSOLIDATED STATEMENTS OF OPERATIONS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 2 (1)
Three months ended
 
Year ended
Fiscal year ended
December 31, 2019
 
December 30, 2018
 
December 31, 2019
 
December 30, 2018
Operating revenues:
 
 
 
 
 
 
 
Advertising and marketing services
$
370,324

 
$
217,687

 
$
952,644

 
$
786,577

Circulation
255,574

 
154,503

 
704,842

 
574,963

Commercial printing and other
73,376

 
43,849

 
210,423

 
164,484

Total operating revenues
699,274

 
416,039

 
1,867,909

 
1,526,024

Operating expenses:
 
 
 
 
 
 
 
Operating costs
398,322

 
230,299

 
1,079,593

 
865,234

Selling, general and administrative expenses
227,711

 
136,994

 
606,917

 
502,631

Depreciation and amortization
43,148

 
20,515

 
111,882

 
84,791

Integration and reorganization costs
37,899

 
1,768

 
47,401

 
15,011

Acquisition costs
45,300

 
762

 
60,618

 
2,651

Impairment of long-lived assets
540

 
417

 
3,009

 
1,538

Goodwill and mastheads impairment
100,743

 

 
100,743

 

Net (gain) loss on sale or disposal of assets
1,384

 
80

 
4,723

 
(3,971
)
Total operating expenses
855,047

 
390,835

 
2,014,886

 
1,467,885

Operating income (loss)
(155,773
)
 
25,204

 
(146,977
)
 
58,139

Non-operating (income) expense:
 
 
 
 
 
 
 
Interest expense
33,283

 
9,606

 
63,660

 
36,072

Loss on early extinguishment of debt
6,058

 
2,886

 
6,058

 
2,886

Other (income) expense
(8,709
)
 
452

 
(9,511
)
 
(838
)
Non-operating expense
30,632

 
12,944

 
60,207

 
38,120

Income (loss) before income taxes
(186,405
)
 
12,260

 
(207,184
)
 
20,019

Provision (benefit) for income taxes
(90,924
)
 
(679
)
 
(85,994
)
 
1,912

Net income (loss)
$
(95,481
)
 
$
12,939

 
$
(121,190
)
 
$
18,107

Net loss attributable to redeemable noncontrolling interests
(393
)
 
(321
)
 
(1,348
)
 
(89
)
Net income (loss) attributable to Gannett
$
(95,088
)
 
$
13,260

 
$
(119,842
)
 
$
18,196

Earnings (loss) per share attributable to Gannett - basic
$
(1.05
)
 
$
0.22

 
$
(1.77
)
 
$
0.31

Earnings (loss) per share attributable to Gannett - diluted
$
(1.05
)
 
$
0.22

 
$
(1.77
)
 
$
0.31

Dividends declared per share
$

 
$
0.38

 
$
1.52

 
$
1.49

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.




CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 3 (1)
Year ended
 
December 31, 2019
 
December 30, 2018
Operating activities:
 
 
 
Net income (loss)
$
(121,190
)
 
$
18,107

Adjustments to reconcile net income (loss) to operating cash flows:
 
 
 
Depreciation and amortization
111,882

 
84,791

Facility consolidation costs
148

 

Stock-based compensation - equity awards
11,324

 
3,156

Non-cash interest expense
3,851

 
1,996

Non-cash acquisition related costs
26,411

 

(Benefit) provision for deferred income taxes
(87,765
)
 
202

Net (gain) loss on sale or disposal of assets
4,723

 
(3,971
)
Non-cash charge to investments

 
505

Non-cash loss on early extinguishment of debt
6,058

 
2,886

Impairment of long-lived assets
3,009

 
1,538

Goodwill and mastheads impairment
100,743

 

Pension and other postretirement benefit obligations
(100,452
)
 
(2,575
)
Change in assets and liabilities:
 
 
 
Accounts receivables, net
12,608

 
15

Inventory
5,150

 
(4,336
)
Prepaid expenses
7,016

 
3,338

Accounts payable
3,958

 
(2,530
)
Accrued expenses
40,353

 
8,019

Deferred revenue
(8,326
)
 
(7,642
)
Other assets and liabilities
6,034

 
6,060

Net cash provided by operating activities
25,535


109,559

Investing activities:
 
 
 
Acquisitions, net of cash acquired
(796,502
)
 
(204,877
)
Purchases of property, plant, and equipment
(13,978
)
 
(11,639
)
Proceeds from sale of publications, real estate and other assets, and insurance proceeds
27,486

 
15,040

Change in other investing activities
(2,066
)
 

Net cash used for investing activities
(785,060
)

(201,476
)
Financing activities:
 
 
 
Payments of debt issuance costs
(121,223
)
 
(800
)
Borrowings under term loans
1,792,000

 
79,675

Borrowings under revolving credit facility
153,900

 
20,000

Repayments under term loans
(481,058
)
 
(3,093
)
Repayments under revolving credit facility
(153,900
)
 
(20,000
)
Repayments of convertible debt
(197,950
)
 

Payment of offering costs

 
(369
)
Issuance of common stock, net of underwriters' discount

 
111,099

Purchase of treasury stock
(1,002
)
 
(792
)
Repurchase of common stock

 

Payments of dividends
(91,936
)
 
(87,195
)
 Change in other financing activities
82

 

Net cash provided by financing activities
898,913


98,525

Effect of currency exchange rate change
(3,494
)
 

Increase in cash, cash equivalents, and restricted cash
135,894


6,608

Balance of cash, cash equivalents, and restricted cash at beginning of year
52,770

 
46,162

Cash, cash equivalents, and restricted cash at end of year
$
188,664


$
52,770

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.




SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 4 (1)
Three months ended
 
Year ended
 
December 31, 2019
 
December 30, 2018
 
December 31, 2019
 
December 30, 2018
Operating revenues:
 
 
 
 
 
 
 
Publishing
$
653,877

 
$
406,966

 
$
1,792,652

 
$
1,495,124

Marketing Solutions
69,336

 
26,878

 
149,242

 
95,871

Corporate and Other
2,018

 
675

 
4,554

 
3,118

Intersegment eliminations
(25,957
)
 
(18,480
)
 
(78,539
)
 
(68,089
)
Total
$
699,274

 
$
416,039

 
$
1,867,909

 
$
1,526,024

 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
Publishing
$
113,334

 
$
68,132

 
$
268,916

 
$
220,415

Marketing Solutions
4,024

 
(1,896
)
 
(3,279
)
 
(6,404
)
Corporate and Other
(18,537
)
 
(10,267
)
 
(41,766
)
 
(33,718
)
Total
$
98,821

 
$
55,969

 
$
223,871

 
$
180,293

 
 
 
 
 
 
 
 
Depreciation and amortization:
 
 
 
 
 
 
 
Publishing
$
37,442

 
$
18,787

 
$
101,881

 
$
78,075

Marketing Solutions
3,714

 
1,263

 
6,534

 
5,003

Corporate and Other
1,992

 
465

 
3,467

 
1,713

Total
$
43,148

 
$
20,515

 
$
111,882

 
$
84,791

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.




SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5
Three months ended
Legacy Gannett
December 31, 2019
 
December 31, 2018 (1)
 
% Change
 
 
 
 
 
 
Pro forma total revenue
$
654,132

 
$
751,405

 
(12.9
)%
Currency impact
401

 

 
***

Exited operations
(15
)
 
(11,157
)
 
(99.9
)%
Deferred revenue adjustment
10,791

 

 
***

Same store total revenue
$
665,309

 
$
740,248

 
(10.1
)%
 
 
 
 
 


Pro forma advertising and marketing services revenue
$
365,776

 
$
427,226

 
(14.4
)%
Currency impact
374

 

 
***

Exited operations
(15
)
 
(11,102
)
 
(99.9
)%
Deferred revenue adjustment
1,262

 

 
***

Same store advertising and marketing services revenue
$
367,397

 
$
416,124

 
(11.7
)%
 
 
 
 
 


Pro forma circulation revenue
$
236,128

 
$
273,757

 
(13.7
)%
Currency impact
26

 

 
***

Deferred revenue adjustment
9,529

 

 
***

Same store circulation revenue
$
245,683

 
$
273,757

 
(10.3
)%
 
 
 
 
 


Pro forma other revenue
$
52,228

 
$
50,422

 
3.6
 %
Currency impact
1

 

 
***

Exited operations

 
(55
)
 
(100.0
)%
Same store other revenue
$
52,229

 
$
50,367

 
3.7
 %
(1) Legacy Gannett's fourth quarter 2018 coincided with the Gregorian calendar and ended on December 31, 2018.




SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5 (continued)
Year ended
Legacy Gannett
December 31, 2019
 
December 31, 2018 (1)
 
% Change
 
 
 
 
 
 
Pro forma total revenue
$
2,613,463

 
$
2,916,838

 
(10.4
)%
Acquired revenues
(35,779
)
 

 
***

Currency impact
14,766

 

 
***

Exited operations
(322
)
 
(43,712
)
 
(99.3
)%
Deferred revenue adjustment
10,791

 

 
***

Same store total revenue
$
2,602,919

 
$
2,873,126

 
(9.4
)%
 
 
 
 
 


Pro forma advertising and marketing services revenue
$
1,444,562

 
$
1,661,075

 
(13.0
)%
Acquired revenues
(34,578
)
 

 
***

Currency impact
10,249

 

 
***

Exited operations
(319
)
 
(43,640
)
 
(99.3
)%
Deferred revenue adjustment
1,262

 

 
***

Same store advertising and marketing services revenue
$
1,421,176

 
$
1,617,435

 
(12.1
)%
 
 
 
 
 


Pro forma circulation revenue
$
976,538

 
$
1,063,022

 
(8.1
)%
Acquired revenues
(1,130
)
 

 
***

Currency impact
3,443

 

 
***

Exited operations

 

 
***

Deferred revenue adjustment
9,529

 

 
***

Same store circulation revenue
$
988,380

 
$
1,063,022

 
(7.0
)%
 
 
 
 
 


Pro forma other revenue
$
192,363

 
$
192,741

 
(0.2
)%
Acquired revenues
(71
)
 

 
***

Currency impact
1,074

 

 
***

Exited operations
(3
)
 
(72
)
 
(95.8
)%
Same store other revenue
$
193,363

 
$
192,669

 
0.4
 %
(1) Legacy Gannett's 2018 fiscal year coincided with the Gregorian calendar and ended on December 31, 2018.




SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5 (continued)
Three months ended
Legacy New Media
December 31, 2019
 
December 30, 2018 (1)
 
% Change
 
 
 
 
 
 
As reported total revenue
$
400,121

 
$
416,039

 
(3.8
)%
Acquired revenues
(26,385
)
 

 
***

Exited operations

 
(2,666
)
 
(100.0
)%
Same store total revenue
$
373,736

 
$
413,373

 
(9.6
)%
 
 
 
 
 


As reported advertising and marketing services revenue
$
200,435

 
$
217,687

 
(7.9
)%
Acquired revenues
(11,622
)
 

 
***

Exited operations

 
(1,632
)
 
(100.0
)%
Same store advertising and marketing services revenue
$
188,813

 
$
216,055

 
(12.6
)%
 
 
 
 
 


As reported circulation revenue
$
148,248

 
$
154,503

 
(4.0
)%
Acquired revenues
(5,151
)
 

 
***

Exited operations

 
(291
)
 
(100.0
)%
Same store circulation revenue
$
143,097

 
$
154,212

 
(7.2
)%
 
 
 
 
 


As reported other revenue
$
51,438

 
$
43,849

 
17.3
 %
Acquired revenues
(9,612
)
 

 
***

Exited operations

 
(743
)
 
(100.0
)%
Same store other revenue
$
41,826

 
$
43,106

 
(3.0
)%
(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.





SAME STORE REVENUES
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
Table No. 5 (continued)
Year ended
Legacy New Media
December 31, 2019
 
December 30, 2018 (1)
 
% Change
 
 
 
 
 
 
As reported total revenue
$
1,568,757

 
$
1,526,024

 
2.8
 %
Acquired revenues
(176,870
)
 

 
***

Exited operations

 
(13,188
)
 
(100.0
)%
Same store total revenue
$
1,391,887

 
$
1,512,836

 
(8.0
)%
 
 
 
 
 
 
As reported advertising and marketing services revenue
$
782,755

 
$
786,577

 
(0.5
)%
Acquired revenues
(97,742
)
 

 
***

Exited operations

 
(8,282
)
 
(100.0
)%
Same store advertising and marketing services revenue
$
685,013

 
$
778,295

 
(12.0
)%
 
 
 
 
 
 
As reported circulation revenue
$
597,517

 
$
574,963

 
3.9
 %
Acquired revenues
(59,225
)
 

 
***

Exited operations

 
(1,904
)
 
(100.0
)%
Same store circulation revenue
$
538,292

 
$
573,059

 
(6.1
)%
 
 
 
 
 
 
As reported other revenue
$
188,485

 
$
164,484

 
14.6
 %
Acquired revenues
(19,903
)
 

 
***

Exited operations

 
(3,002
)
 
(100.0
)%
Same store other revenue
$
168,582

 
$
161,482

 
4.4
 %
(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.





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 the Company believes offers a useful view of the overall operation of our business. The Company defines Adjusted EBITDA as net income (loss) attributable to Gannett before (1) income tax expense (benefit), (2) interest expense, (3) gains or losses on early extinguishment of debt, (4) non-operating items, primarily pension costs, (5) depreciation and amortization, (6) integration and reorganization costs, (7) impairment of long-lived assets, (8) goodwill and intangible impairments, (9) net loss (gain) on sale or disposal of assets, (10) non-cash compensation, (11) acquisition costs, and (12) certain other non-recurring charges. The most directly comparable GAAP financial measure is net income (loss) attributable to Gannett.

Free cash flow is a non-GAAP liquidity measure that adjusts our reported GAAP results for items we believe are critical to the ongoing success of our business. The Company defines Free cash flow as net cash provided by 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.

Management’s Use of Non-GAAP Measures

Adjusted EBITDA and Free cash flow are not measurements of financial performance under GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), cash flow from continuing operating activities, or any other measure of performance or liquidity derived in accordance with GAAP. We believe our non-GAAP measures as we have defined them are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of controllable expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance.

Adjusted EBITDA provides us with a measure of financial performance, independent of items that are beyond the control of management in the short-term such as depreciation and amortization, taxation, non-cash impairments, and interest expense associated with our capital structure. This metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one of the metrics we use to review the financial performance of our business on a monthly basis.

We use Adjusted EBITDA as a measure of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results. We consider the unrealized (gain) loss on derivative instruments and the (gain) loss on early extinguishment of debt to be financing related costs associated with interest expense or amortization of financing fees. Accordingly, we exclude financing related costs such as the early extinguishment of debt because they represent the write-off of deferred financing costs, and we believe these non-cash write-offs are similar to interest expense and amortization of financing fees, which by definition are excluded from Adjusted EBITDA. Additionally, the non-cash gains (losses) on derivative contracts, which are related to interest rate swap agreements to manage interest rate risk, are financing costs associated with interest expense. Such charges are incidental to, but not reflective of, our day-to-day operating performance, and it is appropriate to exclude charges related to financing activities such as the early extinguishment of debt and the unrealized (gain) loss on derivative instruments which, depending on the nature of the financing arrangement, would have otherwise been amortized over the period of the related agreement and does not require a current cash settlement. Such charges are incidental to, but not reflective of our day-to-day operating performance of the business that management can impact in the short term.

Limitations of Non-GAAP Measures

Each of our non-GAAP measures has limitations as an analytical tool. They should not be viewed in isolation or as a substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) include: the




cash portion of interest / financing expense, income tax (benefit) provision, and charges related to impairment of long-lived assets, which may significantly affect our financial results.

A reader of our financial statements may find this item important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA and Free cash flow are not alternatives to net income, income from operations, or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. Readers of our financial statements should not rely on Adjusted EBITDA or Free cash flow as a substitute for any such GAAP financial measure. We strongly urge readers of our financial statements to review the reconciliation of income (loss) from continuing operations to Adjusted EBITDA and the reconciliation of net cash from operating activities to Free cash flow, along with our consolidated financial statements included elsewhere in this report. We also strongly urge readers of our financial statements to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA and Free cash flow are not measures of financial performance under GAAP and are susceptible to varying calculations, the Adjusted EBITDA and Free cash flow measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.






    
NON-GAAP FINANCIAL INFORMATION
ADJUSTED EBITDA
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
 
 
 
 
 
 
 
 
Table No. 6 (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended December 31, 2019
 
Publishing
 
Marketing Solutions
 
Corporate and Other
 
Consolidated Total
 
 
 
 
 
 
 
 
Net income (loss) attributable to Gannett
$
(52,036
)
 
$
(1,392
)
 
$
(41,660
)
 
$
(95,088
)
Income tax expense (benefit)

 

 
(90,924
)
 
(90,924
)
Interest expense
24

 

 
33,259

 
33,283

Loss on early extinguishment of debt

 

 
6,058

 
6,058

Other non-operating items, net
(6
)
 
(775
)
 
(7,928
)
 
(8,709
)
Depreciation and amortization
37,442

 
3,714

 
1,992

 
43,148

Integration and reorganization costs
13,777

 
950

 
23,172

 
37,899

Acquisition costs

 

 
45,300

 
45,300

Impairment of long-lived assets
540

 

 

 
540

Goodwill and mastheads impairment
100,743

 

 

 
100,743

Net (gain) loss on sale or disposal of assets
1,289

 
(8
)
 
103

 
1,384

Non-cash compensation

 

 
8,790

 
8,790

Other items
11,561

 
1,535

 
3,301

 
16,397

Adjusted EBITDA (non-GAAP basis)
$
113,334

 
$
4,024

 
$
(18,537
)
 
$
98,821

 
 
 
 
 
 
 
 
 
Three months ended December 30, 2018
 
Publishing
 
Marketing Solutions
 
Corporate and Other
 
Consolidated Total
 
 
 
 
 
 
 
 
Net income (loss) attributable to Gannett
$
45,631

 
$
(3,866
)
 
$
(28,505
)
 
$
13,260

Income tax expense (benefit)

 

 
(679
)
 
(679
)
Interest expense
56

 

 
9,549

 
9,605

Loss on early extinguishment of debt

 

 
2,886

 
2,886

Other non-operating items, net
(467
)
 

 
580

 
113

Depreciation and amortization
18,787

 
1,263

 
465

 
20,515

Integration and reorganization costs
1,541

 

 
227

 
1,768

Acquisition costs

 
15

 
747

 
762

Impairment of long-lived assets
417

 

 

 
417

Goodwill and mastheads impairment

 

 

 

Net (gain) loss on sale or disposal of assets
51

 

 
29

 
80

Non-cash compensation

 

 
657

 
657

Other items
2,116

 
692

 
3,777

 
6,585

Adjusted EBITDA (non-GAAP basis)
$
68,132

 
$
(1,896
)
 
$
(10,267
)
 
$
55,969

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.









NON-GAAP FINANCIAL INFORMATION
ADJUSTED EBITDA
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
 
 
 
 
 
 
 
 
Table No. 6 (continued) (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2019
 
Publishing
 
Marketing Solutions
 
Corporate and Other
 
Consolidated Total
 
 
 
 
 
 
 
 
Net income (loss) attributable to Gannett
$
22,523

 
$
(14,006
)
 
$
(128,359
)
 
$
(119,842
)
Income tax expense (benefit)

 

 
(85,994
)
 
(85,994
)
Interest expense
123

 

 
63,537

 
63,660

Loss on early extinguishment of debt

 

 
6,058

 
6,058

Other non-operating items, net
(969
)
 
(775
)
 
(7,767
)
 
(9,511
)
Depreciation and amortization
101,881

 
6,534

 
3,467

 
111,882

Integration and reorganization costs
21,336

 
1,937

 
24,128

 
47,401

Acquisition costs

 
(38
)
 
60,656

 
60,618

Impairment of long-lived assets
3,009

 

 

 
3,009

Goodwill and mastheads impairment
100,743

 

 

 
100,743

Net (gain) loss on sale or disposal of assets
4,036

 
(5
)
 
692

 
4,723

Non-cash compensation

 

 
11,324

 
11,324

Other items
16,234

 
3,074

 
10,492

 
29,800

Adjusted EBITDA (non-GAAP basis)
$
268,916


$
(3,279
)

$
(41,766
)

$
223,871

 
 
Year ended December 30, 2018
 
Publishing
 
Marketing Solutions
 
Corporate and Other
 
Consolidated Total
 
 
 
 
 
 
 
 
Net income (loss) attributable to Gannett
$
122,392

 
$
(14,047
)
 
$
(90,149
)
 
$
18,196

Income tax expense (benefit)

 

 
1,912

 
1,912

Interest expense
400

 

 
35,672

 
36,072

Loss on early extinguishment of debt

 

 
2,886

 
2,886

Other non-operating items, net
(1,554
)
 

 

 
(1,554
)
Depreciation and amortization
78,075

 
5,003

 
1,713

 
84,791

Integration and reorganization costs
14,487

 

 
524

 
15,011

Acquisition costs

 
85

 
2,566

 
2,651

Impairment of long-lived assets
1,538

 

 

 
1,538

Goodwill and mastheads impairment

 

 

 

Net (gain) loss on sale or disposal of assets
(3,109
)
 
34

 
(896
)
 
(3,971
)
Non-cash compensation

 

 
3,156

 
3,156

Other items
8,186

 
2,521

 
8,898

 
19,605

Adjusted EBITDA (non-GAAP basis)
$
220,415

 
$
(6,404
)
 
$
(33,718
)
 
$
180,293

(1) Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal year coincides with the Gregorian calendar. In 2018, our fiscal year ended on the last Sunday of the calendar year. Our fiscal year for 2018 was a 52-week year ending on December 30, 2018.





NON-GAAP FINANCIAL INFORMATION
FREE CASH FLOW
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands
 
 
 
 
Table No. 7
 
 
 
 
Three months ended December 31, 2019
 
Year ended December 31, 2019
 
 
 
 
Net cash flow provided by operating activities (GAAP basis)
$
(72,995
)
 
$
25,535

Capital expenditures
(6,697
)
 
(13,978
)
Free cash flow (non-GAAP basis)(1)
$
(79,692
)
 
$
11,557

(1) Free cash flow for the fourth quarter was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $35.9 million of integration and reorganization costs, $19.3 million of acquisition costs, and $2.5 million of other one-time adjustments. Free cash flow for the full year was negatively impacted by $87.8 million of pension benefits paid as a result of the Acquisition, $45.4 million of integration and reorganization costs, $38.4 million of acquisition costs, and $11.3 million of other one-time adjustments.


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