TEGNA-Gannett's Q2 operating income rises 11% on higher revenues

TEGNA, the media company that was called Gannett until it recently spun off its publishing division, said Tuesday its second quarter operating income rose 11% from a year ago to $268.4 million as its broadcasting and digital units' higher revenues helped offset sinking print advertising sales.

Because it was the first quarterly earnings report since TEGNA was formally created by the company split on June 29, TEGNA chose to consolidate the earnings result to include its publishing division’s performance. The publishing division, which owns USA TODAY, 92 other newspapers and their affiliated digital media businesses, kept the corporate name Gannett once it became an independent, publicly traded company after the spin-off.

Excluding certain items, earnings per diluted share totaled 65 cents vs. 50 cents estimated by analysts.

Net income attributable to TEGNA/Gannett totaled $115.9 million, compared to $208.5 million a year ago. The bottom line was hampered by higher expenses, including severance costs related to layoffs and buyouts, spin-off related costs, taxes and other “transformation items,” the company said. The year-over-year comparison was also affected by a one-time gain of $143.5 million a year ago stemming from the sale of Apartments.com.

TEGNA-Gannett’s revenues grew 4.2% during the second quarter to $1.52 billion, driven largely by a 74% revenue jump reported by its digital unit. The unit's holdings include Cars.com and CareerBuilder.com.

“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,” said TEGNA CEO Gracia Martore in a statement.

TEGNA also said Tuesday it has agreed to sell its McLean, Va.-based headquarters to investment firm Tamares for $270 million. The deal is expected to close "late in the third quarter or early in the fourth quarter of this year," TEGNA said. As part of the deal, TEGNA will rent a portion of the building for 18 months.

The new Gannett, which shares the headquarters with TEGNA, has a 12-year lease agreement with TEGNA for a portion of the building. The lease agreement will be transferred to Tamares. But Gannett says it plans to remain in the building.

The broadcasting segment’s revenue rose 4.8% to $417.4 million as retransmission revenue – fees paid by pay-TV providers to carry TEGNA’s local TV stations – continues to rise. Retransmission revenue increased by 23.4%, totaling $109.4 million. Local and national advertising revenue climbed 3% to $268.8 million.

With the third quarter of 2014 benefiting from $40 million of politically related advertising, TEGNA expects “the percentage decrease in total television revenues for the third quarter of 2015 to be in the low to mid-single digits,” it said.

The publishing division -- which is now part of the new Gannett -- reported a 11.4% drop in advertising sales to $469.8 million. Publishing circulation revenue fell 3.7% to $267.7 million.

The digital unit was once again the company’s performance standout for the quarter, with revenue rising 74% year-over-year to $338.1 million. In August, 2014, the company bought the remaining stake of Cars.com it didn’t already own at the time. Cars.com’s revenue grew by “mid-twenties percentage,” it said. Revenue at its other main digital property, CareerBuilder, fell by “a low-single percentage,” it said.