TEGNA reports first earnings following spin-off of Gannett newspaper properties
Gannett will report its first earnings as an independent company on July 29
The company once known as Gannett, reported earnings this morning. Because the spin-off of the newspaper properties, which retained the Gannett name, occurred on the first day of the third quarter, TEGNA, the name of the new broadcast company, included the newspaper results from the first two quarters in its earnings statement.
What one sees is that the newspaper side of the company will be in real trouble going forward as TEGNA will get to report digital growth for the next few quarters. The reason for that growth is less about real organic growth and more about the fact that the new company bought out the partners on Cars.com and other sites and now gets to report all the revenue. This won’t last, but it will make management’s decision to spin-off the newspaper properties look good.
And that is what these spin-offs are all about anyway, right, make more for the executives and shareholders. Meanwhile, the new Gannett will be reporting its earnings on the 29th.
MCLEAN, Va. – July 21, 2015 — TEGNA Inc., formerly Gannett Co., Inc., today reported non-GAAP earnings per diluted share of $0.65 for the second quarter of 2015 compared to $0.67 for the second quarter of 2014. Strong results in the Digital Segment, reflecting primarily the acquisition of and strong organic growth at Cars.com, and the Broadcasting Segment, despite the absence of $14 million in political spending that benefited the second quarter last year, were partially offset by lower results in our Publishing Segment.
Gracia Martore, president and chief executive officer, said, “We are thrilled to have capped off such a strong quarter with the very successful completion of our separation into two more sharply focused public companies. This milestone is the result of three and a half years of unflagging dedication and diligence on the part of employees across all of our businesses, and it marks the beginning of an exciting new chapter for TEGNA. TEGNA is a leader in its respective industries with impressive scale, deep local connections, and experienced leadership teams. We are incredibly excited about the new opportunities that lie ahead in the second half of 2015 and beyond as a result of the increased financial and regulatory flexibility and greater strategic focus afforded by the separation.”
On the first day of our fiscal third quarter, we completed the spin-off of our publishing businesses. The publishing company has retained the name Gannett Co., Inc. and now trades on the New York Stock Exchange under the symbol GCI. TEGNA Inc. trades on the New York Stock Exchange under the symbol TGNA. Second quarter and year-to-date results presented in this release, and the accompanying tables, are for the former consolidated Gannett Co., Inc. TEGNA will report publishing as a discontinued operation beginning in the third quarter of 2015. The new Gannett management team will be hosting a call on July 29th to review results for new Gannett.
On June 1, 2015, the publishing company completed the acquisition of the remaining 59.4 percent interest in the Texas-New Mexico Newspapers Partnership that it did not own through the assignment of its 19.5 percent interest in the California Newspapers Partnership and additional cash consideration. As a result, they acquired 100 percent of the Texas-New Mexico Newspapers Partnership and no longer have any ownership interest in California Newspapers Partnership. On October 1, 2014, we completed the acquisition of the 73 percent interest we did not already own in Classified Ventures LLC, which owns Cars.com. On December 29, 2014, we announced that we sold Gannett Healthcare Group. We also ceased operations of USA Weekend during the fourth quarter of 2014. Results for the thirteen weeks and twenty-six weeks ended June 28, 2015 include the impact of all of these transactions.
Total operating revenues were 4.2 percent higher in the second quarter compared to the second quarter in 2014 and totaled $1.5 billion. The increase was driven by revenue growth in the Digital and Broadcasting Segments of 74 percent and approximately 5 percent, respectively. The strong Digital Segment revenue growth reflects the acquisition of and organic growth at Cars.com. Broadcasting Segment revenues were higher as growth in retransmission revenue and digital revenue more than offset the absence of political spending that benefited the second quarter in 2014.
Net income attributable to Parent on a non-GAAP basis was $150.2 million in the quarter. Operating income on the same basis was $306.1 million, an increase of 4.1 percent compared to the second quarter in 2014. The increase was driven by substantially higher profitability in the Digital Segment. Adjusted EBITDA (a non-GAAP term detailed in Table 5) was 9.9 percent higher in the quarter and totaled $388.4 million. The Adjusted EBITDA margin in the second quarter was 25.5 percent, an increase of 130 basis points compared to the second quarter last year.
Special items in the second quarter of 2015 resulted in a pre-tax charge of $44.3 million ($0.15 per share). Special items impacting operating income include non-cash asset impairments of $4.5 million ($0.01 per share), workforce restructuring costs of $17.0 million ($0.05 per share) and other transformation items of $16.3 million ($0.04 per share). Special items impacting non-operating income relate primarily to the gain associated with the newspaper partnerships exchange offset by spin-related costs that resulted in a pre-tax charge of $6.5 million ($0.02 per share). Charges associated with items related to taxes totaled $6.9 million ($0.03 per share). Special items in the second quarter of 2014 included: operating charges of $51.7 million ($0.16 per share) representing primarily workforce restructuring, other transformation costs and asset impairments; non-operating income of $143.5 million ($0.39 per share) reflecting principally the pre-tax gain from the sale of Apartments.com.