USA TODAY Co., Inc. (TDAY) Q1 2014 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to Gannett's First Quarter 2014 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] Our speakers for today will be Gracia Martore, President and Chief Executive Officer; and Victoria Harker, Chief Financial Officer. At this time, I would like to turn the call over to Jeff Heinz, Vice President, Investor Relations. Please go ahead.

Thanks, Kim. Good morning, and welcome to our earnings call and webcast. Today, our President and CEO, Gracia Martore; and our CFO, Victoria Harker, will review Gannett's first quarter 2014 results. After their commentary, we'll open up the call for questions. Hopefully you've had the opportunity to review this morning's press release. If you've not seen it yet, it's available at gannett.com. Before we get started, I'd like to remind you that this conference call and webcast include forward-looking statements, and our actual results may differ. Factors that might cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures to the most directly comparable GAAP measures in the press release and on the Investor Relations portion of our website. With that, let me turn the call over to Gracia.

Thanks, Jeff, and good morning, everyone, and let me join Jeff in welcoming you to our call. This morning, I will provide a high level overview of our very strong first quarter results and the terrific progress we’ve made on our strategic initiatives and on the integration of the Belo acquisition. After that, Victoria will review the financial performance of each of our segments as well as some balance sheet items. We have a good deal of positive developments to report this quarter but I would like to kick things off with the tremendous performance of our broadcast segment where we achieved record revenues of over $382 million, an increase of 20% over the first quarter of 2013 on a pro forma basis and substantially increased profitability with adjusted EBITDA 40% higher to 182 million. One of our significant accomplishments of the quarter was the exceptional ratings we achieved during the Winter Olympic Games in Sochi. KARE-TV was the number one rated station in prime, late night and weekends during the Olympics among large market TV stations. Overall Gannett NBC stations, including those we service took the top 4 spots in prime and the top 3 spots in every Olympic daypart among major market NBC stations within the most important demographic adults 25 to 54. In prime, KARE was number one, KUSA, two; KGW in Portland, three and KING in Seattle was four. We also saw extremely strong carryover from primetime to late night news, with WBIR in Knoxville achieving the gold with a household retention rating of 95% from the last quarter hour primetime to the first quarter hour of late night news. Our stations in Cleveland, St. Louis and Minneapolis all tied for the silver at an 84% retention rate. KARE and KUSA both averaged a 27 market share for their late news during the Olympics. That means of all the people watching TV at 10PM in Minneapolis and Denver, more than a quarter of them were watching our stations. That’s a staggering number in light of the number of channels available to the average viewer. The huge viewing of the Winter Olympics coupled with major weather events across the country produced some dramatic February ratings and Gannett stations of course capitalized. Overall 24 stations were ranked number one or two in the late news in their respective markets during the full month of February. These strong ratings and market share numbers helped drive improved overall results for the quarter and I should also remind you that this is the first full quarter with Belo included in our results. The tremendous results in broadcasting positively impacted the bottom and top lines in the first quarter. Earnings per share were as you saw $0.47 on a non-GAAP basis, an increase of 27% over the same quarter in 2013 and total revenue was $1.4 billion, up 13% and up 3% on a pro forma basis, in part due to the inclusion of Belo. We also achieved strong Olympic advertising demand as well as some early political ad spending and substantially higher retran fees. We kept our pro forma expenses in check as you would expect and as a result, pro forma adjusted EBITDA for the company was up 15% and free cash flow nearly quadrupled year over year. Our continuing efforts to stabilize publishing operations resulted in a solid first quarter performance for the segment with revenue down just 3% despite the impact of a tough winter on advertising sales and circulation demand in several markets, including Indianapolis, Cincinnati and the New Jersey area. Digital segment revenue increased 3% driven in part by good results at CareerBuilder. Digital revenue companywide was boosted by growth at G/O Digital, our digital marketing services product suite and at USA Today. I will talk about both CareerBuilder and G/O Digital in greater detail in a few moments. Our pro forma non-GAAP expenses were essentially unchanged year over year. Publishing segment expenses were lower as we continued to raise the bar on operating efficiency. That decline was offset by higher expenses in the broadcasting and digital segments associated with revenue increases. Turning for a moment to our ongoing integration of Belo, I’m very pleased to report that we are achieving great progress and we are very confident we will achieve our anticipated synergies of $75 million this year if not a little bit better. As you know, we completed our sale of KMOV in St. Louis to Meredith at the end of February and we expect to close on the sale of the Phoenix stations, KTVK and KASW later this year. At the end of March we announced that Classified Ventures in which Gannet owns a 27% interest agreed to sell apartments.com to CoStar Group Inc. for $585 million. The transaction closed on April 1st and our pre-tax distribution from the sale totalled approximately $155 million. Taxes associated are expected to be about $47 million. We intend to use the net proceeds from the sale for the time being to reduce debt and for other purposes consistent with our capital allocation strategy. We expect the sale to have a small impact on our publishing segment and equity income line results for the rest of the year and Victoria will discuss those in her remarks. Now, I would like to quickly comment on one issue that has been getting a lot of attention lately. There has been significant discussion around the FCC’s proposal limiting Joint Sales Agreements or JSAs. We do have JSAs in two markets, but they involve a broadcast station and a publishing property in the same market in Louisville and Portland, Oregon, but we don’t have any JSAs between overlapping broadcast stations in the same market. So, no impact of this for us at this time. Now, let me shift gears a bit and discuss our latest innovation within our publishing segment. As you know, we have been stabilising publishing over the last two years in part through our all-access content subscription model. As we said on our last call we are building on the success of that model and using the valuable feedback we’ve received from subscribers to extend those benefits even further through our new USA Today local content editions. On average we’ve added 70 pages per week of content to the print editions and e-newspapers and these enhancements to national coverage together with new deeper local reporting features and coverage have been extremely well received. The rollout of the program in 34 of our largest publishing markets is now complete as of just a couple of weeks ago and customers are clearly seeing greater value from their subscriptions. In fact, I have to tell you in my 28 years, almost 29 years at the company, I don’t recall any initiative that has generated so much consumer enthusiasm so quickly. The testimonials we are hearing speak for themselves. A subscriber in Phoenix said the following and I quote “Wow, love it. When other newspapers are cutting back the Republic goes the other direction to add content. I love reading a real newspaper. Thank you.” Similar praise came from a News-Leader subscriber in Springfield, Missouri. “This is the best of both worlds. News-Leader can focus on local and USA Today can provide national news. Hurray! And for the Press-Gazette in Green Bay, I have never loved the Press Gazette more than I do with the changes that took place someday. The expanded edition is truly fantastic.” The success of the USA Today content editions is ahead of our projections. The program is also driving increased circulation in USA Today. In fact, we are anticipating that daily circulation for USA Today for the six months ended March 31st will be up about 1.6 million or approximately 94% when the AAM publisher statement is released. The year-over-year growth is driven by increased verified digital non-replica growth of smartphone and tablet app, tablet traffic, apps and of course the local printed editions, which contributed 40% of the growth. Our success is also reflected in better retention and fewer stops than we projected. In our pilot markets which were alive for just shy of six months at the end of the first quarter we achieved the following. Rate yield is 2 percentage points better than projected, permanent stops are 4 percentage points lower than projected which is good and new starts are 6% better than projections. Because of these better-than-expected results we are evaluating options for product enhancements that include USA Today content in additional markets as well as potential partnerships as other publishers have seen the value of what we’re doing and have expressed interest in adding USA Today content to their own publications. Now, we’re focused on bringing increased value to Gannett customers first of course but are beginning to explore smart partnerships as well. We’re also more tightly integrating USA Today’s content into our digital platforms in our 81 local publishing markets as we deploy our re-launch of our digital platforms. We’ve launched approximately 100 products in about 20 markets including Phoenix, Indianapolis and Cincinnati. And by the end of April we will have completed the re-launch across most of our top 35 markets and expect the balance of the deployment to be completed by the end of the third quarter. As we continue executing the re-launch, which includes the addition of native applications for iPads in all markets, we are already seeing very strong results from the dramatic improvement to user experience across all of our digital platforms. Page views were up 20% year-over-year, click through rates on ads up 18% year-over-year and time spent for per visit, a key measure of engagement is also up 23% on average. We are seeing greater engagement with our customers on pages deeper into the sites like individual articles and section fronts outside the home page. These improvements are clear signs that the redesign is working as expected or perhaps better than expected and that we are building stronger connections between our readers and our content. Now turning to Newsquest for a moment. They are also doing similar work to enhance content in the U.K., which is driving higher cover prices and contributing positively to our results. As well their digital revenues were up very strongly in the quarter about 18% year-over-year in pounds. : Now, this acquisition when combined with the addition of EMSI in 2012 represents the next step in CareerBuilder’s transformation positioning it as the unparalleled leader in the rapidly growing software as a service market for talent management solutions. Let me turn to G/O Digital marketing services business for a moment. Within that platform we continue to build momentum and transform local digital marketing for customers across 112 markets. Revenue from small and medium sized businesses increased 85% year-over-year in the quarter and we saw a substantial increase in our SME customer base as well. Growth has been primarily driven by search and social products. We have fully established our G/O Digital sales presence in our new Belo markets and are taking significant steps to increase brand awareness across all of our markets. During the quarter, we launched an updated version of the G/O Digital website that brings to life how we are transforming local marketing and to demonstrate how we provide one stop shopping digital marketing solutions for businesses of all sizes. As G/O Digital continues to grow in expand its scale, we are and will continue to be relentlessly focused on product excellence and ensuring that our people, processes and technology initiatives are operating as efficiently as possible. So in summary, we are very pleased with a very strong performance across the entire Gannett portfolio during the quarter. Our strong results are reflective of our relentless focus on our strategic initiatives, which have allowed us to implement innovative new digital offerings and deepen our connection with our audiences across all of our platforms solidifying our position as the largest local media company. Now with that I’m going to turn it over to Victoria to give you some more details. Victoria?

Thanks, Gracia, and good morning, everyone. As Gracia already mentioned, we are very pleased with our financial results again this quarter despite some challenging weather-related impacts to our segments as had proven to be the case for many consumer service and retail sectors. Before I dive into the details of our results for each segment, I'd like to briefly mention several onetime events, which occurred during the quarter. In terms of special items which impacted operating results, it's significant to note that our ongoing efforts to transform the business allowed us to perform with greater efficiency and effectiveness again this quarter. These initiatives drove $ 3 million in workforce restructuring expenses as well as $19 million in transformation costs related to the facility consolidation and Belo in aggressing cost during the quarter. As you might expect the integration of our recent acquisition of Belo impacted the quarter by about $5 million, including costs for software transitions, professional fees and retained employees who were temporarily supporting our integration efforts. Transformation costs also included amortization for certain Belo and tangible assets that we were required a full amortize in the first quarter. When combined all of these special items drove a $20 million impact to operating income for the quarter, or about $0.06 in earnings per share. In terms of non-operating special items impacting the quarter, we incurred a onetime $17 million early redemption expense related to the calling of our 2017 notes which will save us significant interest going forward. This had a deminimis impact in the first quarter, given the timing of the redemption, but we'll save about $18 million in interest expense over the remainder of the year. Non-operating special items also include a cost associated with gaining consent to eliminate separate reporting requirements in the future for the Belo assumed during the transaction. When combined all of these non-operating special items impact the results by about $20 million or earnings per share of $0.05 for the quarter. During the first quarter we also recognized a onetime tax expanse of $24 million, or about $0.10 earnings per share. This is relates to the sale of our interest in KMOV, VTV, which generated a tax gain due to low tax basis the assets carry over from Belo. The majority of the proceeds have been escrowed, depending light kind exchanges when they complete in the next several months. As Gracia already noted, the harsh winter conditions also impacted our publishing business by about $7 million in revenue, with around a penny or so EPS impact. As a result of cancelled or differed client adverting and some circulation delivery challenges in particularly hard hit markets. Our efficiency program such as our consolidation of printing and distribution platforms as well as our global sourcing and real estate optimization efforts continue to generate significant cost savings, helping to fund new product initiatives. As you heard earlier we also completed the roll out of USA TODAY, local content edition during the first quarter, which we're very proud of its financial performance already, which is reflecting lower than anticipated costs and the ability to generate higher than anticipated revenues, as a result of both new sales as well as retention of existing customers. Taken together, all of or transformation issues generated nearly $77 million in revenue during the quarter and $38 million in cost savings, which continue to provide fuel for new growth opportunities. With our first full quarter of performance completed, we could not be more pleased with our financial performance we've seen from the Belo television stations. While aggressively driving integration activities, all of the broadcast segment teams have continued to produce strong results. When combined with our existing broadcast business, the Belo acquisition provides us with an even greater opportunity to leverage the strength of our combined platforms and our broader purchasing power. This is already being reflected in EBITDA synergies this quarter which are right on target, trending to our previously communicated expectation of $75 million and non-GAAP EPS accretion from the transaction of about $0.43 for the year. Now operating results for the quarter, please note that in addition to reported results I will also cover relative year-over-year comparisons on a pro forma basis, which include Belo in a prior period as well. These exclude any special items that I just covered and captivate the operating results from last year. Across the enterprise, as Gracia mentioned, total company revenues of $1.4 billion were up $0.13 year-over-year on a reported basis reflecting the strength of the Belo stations when combined with our own. On a Pro forma basis year-over-year revenues were also up 3% as well. So our company expenses of about $1.2 billion, were up 10% on a reported basis before the increased revenues associated with our new broader broadcast business. On a Pro forma basis total company expenses were flat year-over-year, reflecting the strength of our ongoing efficiency efforts and reductions in publishing segment volume. Together these results drove non-GAAP EPS to $0.47 per share. During the quarter our broadcast segment had record revenues of $382 million, which were up 20% on a Pro Forma basis, an increase of 100% for the quarter on a reported basis benefitted by the Sochi Olympics, increases in political campaign advertising, as well as retransmission fees and growth in digital sales revenues. Television core revenue increased by about 6% on a Pro Forma basis, or about 88% on a reported basis. Retransmission fees continued to increase, up 66% year-over-year, or 142% on a reported basis, resulting from renegotiated agreements, annual rate increases in existing ones and the growing strength of our newly expanded broadcast business. Olympic advertising revenue of $41 million for the quarter reflected the strength of our breadth of coverage of the Sochi Winter Games. Beyond this advertising trends improved across most major categories, including auto, medical, telecom and media year-over-year. Political advertising drove $80 million additional revenue this quarter as many state and local campaigns begin to gear up for mid-term election. Digital revenue in the broadcast segment were also up 23% on a Pro Forma basis, or 173% on a reported basis compared to last year, driven by the growth of digital marketing services, all be from a lower base given the product and sales training launches earlier this year. Overall we were very pleased with our broadcast segment results again this quarter and look forward to a very strong year from all of our stations. Based on current trends and including a full year, full quarter of results for the former Belo stations, we expect total television revenues for the second quarter of 2014 on a percentage basis be up in the 90s compared to the second quarter of 2013 on a reported basis. On a Pro Forma basis the percentage increase in television revenues in second quarter of 2014 is projected to be in the mid teens year-over-year. In the publishing segment total revenues of $142 million, were down approximately 3% in the range we had previously projected, driven by advertising revenue declines of 4.8%. Domestic online advertising revenue increased by 18% year-over-year, with the retail category showing good growth, up nearly 19%. This was driven by our digital marketing services business, G/O Digital, which provided many commercial customers with efficient and effective online marketing and advertising solutions again this quarter. In the U.K. Newsquest advertising revenue was down 5.2% in local currency due to a continued fragile economy there. But it was notable that Newsquest online advertising revenue grew 16% in pounds both year-over-year and sequentially driven by retail categories across the small but growing base. Overall publishing segment circulation revenue was down slightly by about 1%. This is primarily due to the cycling of the All Access Content Subscription models launched as anticipated which impacted circulation revenue nearly 3% across our local publishing operations. That said circulation revenue improved within the quarter reflecting the enthusiastic response we have seen with the launch of our USS TODAY content and our top 34 local publishing markets. We are also very pleased to report that the All Access Content Subscription model now has engaged over 1.6 million digitally activated subscribers and fully 64% of all the subscribers participate in easy pay, enabling them to easy access to content rich products with lower support costs and also drives longer retention. Not to be outdone, the USA TODAY group also continues their drive for richer content and broader appeal during the quarter, which supported single copy and home delivery price increases. This enabled them to sustain revenue at the same levels as last year, despite planned volume losses from the transition to digital platforms within their hotel partner program. Newsquest was also able to sustain similar pricing changes, driving a circulation revenue increase of almost 7% in local currency, their fourth consecutive quarter of growth. In the digital segment revenues increased almost 3% year-over-year, driven by growth again this quarter with CareerBuilder. It was another strong quarter there, delivering a 4% increase in revenue. The growth of CareerBuilder was driven by accelerating sales of human capital software solutions as well as their recent vertical acquisition of Oil and Gas Job Search and their expansion into Vietnam. Overall companywide digital revenues totalled $376 million, reflecting a 6% increase year-over-year on a Pro forma basis. Digital revenues comprised nearly 27% of all gain net revenue, driven by higher revenue associated with digital advertising and marketing solutions across all segments. Now turning to expenses for the quarter, on both the company wide and segment specific basis, once again this quarter we were very pleased to see ongoing expense reduction as a result of our efficiency efforts as I previously mentioned. On a reported basis total company expenses of $1.2 billion were up 10%, reflecting the higher revenue base generated by our larger broadcasting segment, which was up 111% on a reported basis. On a pro forma basis the broadcast segments expenses were up 5%, reflecting increased revenues as well as investments and new digital growth initiatives as well as broad based sales and marketing training for the newly combined teams. On a pro forma basis total company expenses were essentially flat to last year, reflecting our ongoing efforts to optimize our spending as well as the impact of declining publishing segment volume. The publishing segment expenses were down 2% due to efficiency gains generated by Gannett Publishing Services, sourcing and other direct cost reductions. Expenses in the digital segment were up 3%, reflecting higher cost career builder for hiring and training sales and personnel and new and existing markets as well as technology investment. Corporate expenses increased by 6% reflecting increased marketing and training efforts related to the first full quarter of Belo TV stations and a slight increase in stock based compensation. During the quarter total company adjusted EBITDA was $285 million, a year-over-year increase of %76 million with well over half of it attributable to the broadcast segments. Free cash flow for the quarter was $149 million, which nearly quadrupled from the same quarter last year, due again to the addition of Belo TV stations and Olympics revenue. Each of our segments continues to be profitable. Also during the quarter we invested $22 million in capital projects, primarily related to ongoing additional development, product enhancements and integration for the Belo sites including technology enhancement at CareerBuilder. This was in line with our projections as many of the first quarter capital investments remained in the broadcast segment projects necessary for greater automation and integration of systems as a result of the addition of the Belo station. CapEx for the quarter was in-line with our prior estimate, turning to a full year projection of $140 million to $150 million. As previously discussed during the first quarter we carried a heavier interest expense of about $70 million, largely related to the debt associated with the Belo transaction incurred in the second half of last year and historically low rate. As Gracia mentioned the sale of apartments.com close on April 1. It's important to note the sale will have a slight impact on our publishing segment going forward. We expect revenue and operating income impacts of $12 million and $ 9 million respectively through the end of the year, lowering expected second quarter operating income by about $ 3 million. In addition the balance of the year equity income will be reduced by about $ 6 million. During the quarter we acquired 1.3 million shares of Gannett stocks for $38 million, reflecting our ongoing commitment to our previously announced $300 million stock buyback program and paid $45 million in quarterly dividends. With that I'll turn the call back to Gracia for her closing remarks prior to Q&A.

Thanks, Victoria. As you heard the first quarter was a terrific start for what we anticipate will be an exciting and strong year for Gannett. The fundamental changes we've been making to position Gannett to thrive in the digital age are meaningfully impacting our top and bottom line. Momentum continues to build around these initiatives and we continue to adjust them constantly based on the incredibly valuable feedback we receive from our audiences, which serves to ensure that we will stay abreast of the content and features that matter most to our valuable audiences. No other company has the deep local connections that we have and we'll continue to use this to our advantage to ensure we are providing the news and the information that our audiences value most via the platform that suits their need. We believe that a continued relentless focus on executing a strategy combined with our strong and flexible balance sheet and a rising cash flow that is even now stronger and more predictable thanks to the higher contribution from broadcast EBITDA will make for an incredibly productive and promising year ahead for Gannett. With that I'll open the call for questions, Kim?

(Operator Instructions) And we'll take our first question from Doug Arthur from Evercore. Douglas Arthur – Evercore: Thanks, two questions. I don't know if Dave Lougee is on the line. But I'm wondering, I mean if you look at the broadcast revenues, I mean re-trans political, Olympic, all quite strong. So I'm wondering what the crowding out effect might have been on core and if you consider sort of ferret through those numbers to sort of delineate what a pro forma core number was exclusive of the three things I just mentioned. And then on the USA TODAY content initiative, can you just elaborate on your price increase plans in those markets. You talked about higher yield. Are you intending to increase, have you and how is that going to play out, thanks?

First on your question. It's difficult for us in Olympic quarters specially and political as well to get to an extracted core number because for the reasons you mentioned, especially in February with Olympics, because the amount of inventory it takes. So your absolutely right that $41 million in Olympic is not all incremental. So we put that, you know that number varies and we can't get to an exact number. So based on what we see around the industry and what we think, we think that if probably somewhere in the range of 3 or 4 points, but it’s hard for us to put an exact number on how.

Positive on core.

That's right, that's right. Political match, the number is not high enough at this point Doug, and it's having really a crowd out effort both in the markets and where it comes pretty much distributed across our larger suite of market. So it's not really at a crowd out stage yet.

And Doug, on your second question with respect to USA TODAY content inclusion in our local many newspapers. Yes we are, as we have said, as we have increased the value of what we are providing subscribers and you heard the tremendous acceptance that our subscribers are sharing with us. We have seen this as an opportunity to appropriately gain value from those additions. I think by the end of the year we should see in the vicinity of about $15 million increase to a net increase to our operating income as a result of this in the markets that we have pulled out to date. But Rob do you have any further color on the pricing increases and the staggering of those?

Most of the increase will start to impact and benefit the second half of the year. I think Doug, the big question or the big reason for this increase that we have changed our pricing methodology and we're not doing a market wide pricing action as done in the past. This is a very strategic approach, looking at length of subscriptions and our subscribers history with us, which means about 60% to 70% of the market at any given time will be receiving price reaching as we go forward, allowed us to be more selective but also really be able to reach for a greater value from our subscriber.

And we'll take our next question from William Bird of FBR. William Bird – FBR Capital Markets: Good morning. Gracia, would you just talk about the TV, M&A environment and you goals, and really I guess the potential may be from more acquisition opportunities [indiscernible], thank you.

Sure, thanks Will. With respect to T.V. M&A, we are as enthusiastic as we have ever been on our broadcast business. Obviously with the Belo acquisition a lot of folks come and visit with us about various opportunities on that front. I think we'll continue to see M&A activity being relatively strong in the broadcast sector. You know we'll have to see how folks react to the JSA rules once they go into effect. I think there's a couple of years over which they can you know do things. So obviously that will increase potentially the supply of television stations on the market. But what I would say to you is that as with any investment or acquisition, we are incredibly disciplined when we look at them. Similar to the Belo situation that was a unique opportunity. It fit the criteria we have for acquisitions on every dimension, and obviously if there were other opportunities like that, not necessarily just in the broadcast arena, then we have a wonderfully strong balance sheet and huge flexibility to opportunistically allocate capital to those kinds of situations. Thanks for the question Will.

We'll take our next question from Alexia Quadrani of JP Morgan Alexia Quadrani – JP Morgan: Thank you. My first question is on the broadcast segment. If you look at the robust retran growth you guys are benefitting from on a pro forma basis, is that a good run rate we should see for the rest of the year, and I guess on the same for the lines of topic. When you look at your reversed comp and then you guys are largely in place from paying reverse comp. [indiscernible] I guess how should we assume that expense line is trending?

Yeah, with respect to re-trans, there was a little bit of, at the end of the year and into the first quarter there's always a little bit of catch up as the audited sub-numbers come through. So there's a smidge of that in there. But you know call it a million or 2 million of that kind of noise in the first quarter. But the absent that that I think is a very good run rate for the year. We obviously have some agreements that come up at the end of the year, but those won't have any impact of any consequence this year. And on reverse re-trans, I think in the 10-K, Victoria, we included that in our line on programming expense. So that's included in the totality of the expense increase in the broadcast division and your absolutely right that with respect to Belo, they are paying reverse re-trans under their affiliation agreements to all the major networks, and obviously as we brought on, as we were able to increase their re-trans fees under our after acquired clauses, then those affiliation agreements obviously required us to pay some of that in re-trans dollars. So, but I think we've got that accounted for in that expense line.

And just a reminder in the 10-K as Gracia mentioned reverse re-trans with [indiscernible] which was obviously for the Belo stations was about $62 million, about 51 of it I think was there's. Alexia Quadrani – JP Morgan: Okay. I mean I'm sure you get this question a lot, we get it a lot, your interest in keeping the newspapers and the broadcasting [indiscernible]. I guess it might be helpful if you could just remind us what synergies or benefits you have, you know would have having those two different operations in the same parent company.

Well let me start by saying that number one, right at the moment as we said previously, the most important thing that we are focussed on is and we believe will create the most shareholder value certainly in the short term is achieving all the great synergies that we anticipate from the Belo acquisition and completing that integration to set us, ourselves up well for not only '14 but the years ahead. As a board we obviously evaluate everything regularly, from capital allocation decisions to the appropriate structure for our businesses and our company as a whole, and every permutation and combination and between. But in the short term, our time and attention is obviously on Belo, but we always look at all of those kinds of decisions through the prism of what creates sustainable shareholder value in the intermediate to long term, not just what can create shareholder value for a day or two. So those are the things that the board broadly evaluates on an ongoing basis every time we meet. That being said there are obvious benefits that we have in the local markets by having the two together at the moment. We are the local, the largest local media company in the U.S. Gannett Digital Marketing Services business that you heard is growing very dramatically and very nicely is equally as important in our publishing as well as our broadcasting markets and our ability to amortize the cost of that platform and the investment across all of those markets is obviously important to us. We've talked a lot about the sharing of content that we are doing among all of our groups, both broadcast as well as USA TODAY and US Community Publishing, and we consider that you know obviously an important advantage that we have as a company. So lot's of positive, but obviously these are the kinds of things that the board is evaluating regularly and we will as a board do whatever creates the most shareholder value on a sustainable basis going forward.

We'll take our next question from Craig Huber from Huber Research Partners Craig Huber – Huber Research Partners: Good morning, thank you. Gracia, first if I could ask, do you guys have any interest in buying in more of cars.com? Where the timing is just not right given the Belo transaction. And I have some follow-up questions.

Sure, with respect to cars.com, number one, it needs to be for sale, number two, obviously we own 27% of it. As with every asset that Gannett owns, we look to maximize a shareholder value. And so is we believe that in the intermediate to long term we maximize shareholder value by buying it at a certain price, we'll certainly consider that. If we believe we can maximize shareholder value by selling it at a different price, then that's what we will look at. So that's a hypothetical question right at this nano second. But you know we look at it as we do any other investment. Obviously it's a fantastic business, great growth characteristics. The team there has done a fantastic job of billing that business. But we look at it through the prism of our capital allocation decision going forward. Craig Huber – Huber Research Partners: On the housekeeping questions, Gracia, please, for news print, what was the consumption percent change year-over-year on an average price and also on your US Publishing Operations, USA TODAY, what was the daily and Sunday print circulation volume changes year-over-year please?

News prints we were down about 6.3%, about 4.7% on use and 1.7% or so on price.

Yeah I see if you look on the circulation side and probably the better months to look at is March, because even though if we did have some weather impacts in March, February was a very-very difficult month. So as was January on the weather front. So looking at March, I think on US Community Publishing, on a daily basis down about on volume about 8%, on Sunday less than 2%. That's excluding USA TODAY. Now obviously USA TODAY had fantastic growth. Craig Huber – Huber Research Partners: And Gracia what was the get your own way subs in the U.S. this last quarter, I guess quarter end?

Yeah, in sort of that, well I would answer it in two ways. One is of all of our sub, 1.6 million subs have activated their digital products under our All Access Content Subscription model. So we have 1.6 million paid digital subscribers. Now they also may get the print copy on Sunday or on seven days a week or three days a week. What we have found is that and what works best, likely I think for the consumer as well as for us is Sunday only plus digital is rather than just digital only. Most of the folks that we encounter like that combination of getting the Sunday newspaper combined with the digital only. So frankly those are the metrics and the ones that frankly we continue to track. Rob why don't you add anything you like.

I would just add we intentionally made that make that focus to go after the Sunday digital package and is based on the numbers you stated there in March. We've shown some real nice improvement. It's important to us because that is a better reading combination consumer. It also helps with our current revenues which trends remain stable because of it. Craig Huber – Huber Research Partners: Just that you could ask by investors, do have the digital only numbers at roughly 100,000-125,000 in that range?

It is probably closer to the low end of that range. Craig Huber – Huber Research Partners: Okay, my last question [indiscernible] appreciate your time here, how is your April revenues trended here in the U.S. please?

Yeah, probably what I can give you a better sense of in total for publishing is that we'll probably see a little bit of a lift because as you know Easter shifted from the first quarter, March last year into April this year. So you expect to see a little bit of lift with respect to that. So I would guess we would expect total advertising should be a little bit better trend wise year-over-year, this quarter than it was in the first quarter [indiscernible] since it was sold for $585 million. So, it will be a slight negative to the publishing numbers as well as to our equity line numbers.

Thanks, Craig. We'll take our next question from Kannan Venkateshwar of Barclays. Kannan Venkateshwar – Barclays Capital: Thank you. Gracia, the Supreme Court heard the Aereo case yesterday and it looks like there is feeling with how to separate it from cloud services and so on. Have you talked the scenario where this gets close and there is no way out for the Supreme Court and probably Aereo has a win? What you do in that case from a business model perspective? And the second question is in the last year you had mentioned some real estate sales that you had been doing for sometime. We haven’t heard about that over the last two or three quarters. So, I just wanted to see where you are in that process.

Well let me start with real estate sales since that’s easy. We are constant – we don’t mention them because they are just simply part of our D&A to do them. We even just start this a couple of years ago. We have been looking at optimising our real estate portfolio for at least the last several years and every quarter there is – you can’t time real estate sales. So, sometimes they get bunched off in one quarter and you don’t do any for a couple of quarters. So, it really is episodic, but what I can tell you is that we are laser focused on optimising our real estate portfolio. We can fight lots of examples where we have taken what was on old building, a couple of 100,000 square feet sold it, rented new space that might be 70,000 square feet. So, those are just constantly part and partial of the things that we do around expense management on a regular basis. Now getting to probably the more important question, which is Aereo, what I can tell you is that I’m not a lawyer but I’ve listened to all the pandits who paid attention yesterday and we have looked to all the arguments. And we believe along as we said before that the copyrights laws of the United States will be upheld. I think that Chief Justice Roberts summarized it the best yesterday when he said that Aereo’s technology model is based solely on circumventing legal prohibitions that you simply don’t want to comply with. I don’t think I can say it any better. I think that’s what this case is all about and we await the [final word].

We'll take our next question from Michael Kapinski of Nobelson [ph].

: :

Yeah. They are gird [ph] schedule because KMOV closed Victoria in March. So, we have several months with respect to that one, but the Phoenix stations, which are a meaningful piece of that transaction have not closed yet. I can’t give you any precise timing better questioned for the folks at Meredith, but then we would have several months from then to deploy that part. Yes, it is like kind exchanges so you would have to match it up with like kind assets and on average in about six months. So, it’s briefly we have a fairly good timeframe in order to transact.

Okay. And then when you made a discussion on the publishing work at a different way given that the publishing group seems to have moderated the revenue trends that could be on the customer returning [ph] revenues getting pretty close to that, and the fact that appears to be uniquely positioned with local are now boosted national content with USA Today. Does it make sense for the company to look at newspapers for possible acquisitions given the fact the valuations of the newspaper group are so low and are still thrown out from some significant cash flow and could be [indiscernible] group maybe a little turn in revenues?

You know, Michael, we believe strongly in what we – the transformation that we have been undergoing at the Gannett company in really looking to stabilize our publishing operations and I’m incredibly proud of the work that Bob Dickey has done in U.S. community publishing, Larry Kremer has done at USA Today and our folks at Newsquest have done in the U.K. and so obviously we would never say never to anything. The thing obviously we have to focus on is creating shareholder value and if we felt under the appropriate circumstances we could do that, then certainly we would look at those opportunities. But you’re absolutely right. The work done by this team in stabilizing publishing has been simply fantastic.

: Barry Lucas – Gabelli & Company: Thanks very much and good morning. Staying with the newspaper segments just for a second Gracia you provided a lot of information on the incremental benefit from the new initiatives as well as highlighting the consequence [ph]. Would it be possible to since the top line is really tough to talk a little bit about goals or targets of total expense reduction on an adjusted basis for the full year in publishing?

Yeah. I think overall we just are incredibly focused on continuing to align our expenses with revenues. There are a number of initiatives that we have from recent announcements on outsourcing printing where we can variablize cost that we think are an important part of that equation. I know that we continue to, as we said earlier, look at real estate, look at opportunities really to use technology to drive additional efficiencies in our operations. But I think – what I can say to you see is that we’ll continue to do the very strong job that we’ve always done in aligning expenses with revenues, and I think in the second quarter there is something that we will see the benefit of in the second quarter that will probably help us a little bit more even on the expense side. So, it’s a little hard to just kind of give an annual rate because quite frankly every quarter we’re just always looking at Victoria’s leading the charge always looking at opportunities to rationalize our expense structure. So, we just continue to make progress on it.

Just a little more color on that, what was already successfully implemented in terms of printing and distribution related to our shares platform, we’re doing now on a number of different support areas across publishing more broadly, and I think that will bear fruit at the latter half of this year and into 2015 and beyond. So, I think that we’ve seen a successful model implemented and that will benefit us even as we start to see other new initiatives that need funding as well. Barry Lucas – Gabelli & Company: Great. Thanks Victoria for that color. Two quick things maybe on television, body language certainly said the synergies are coming through perhaps better with the Belo stations and $75 million looking good for this year. Any change to the 175 total and/or the timing, number one and then number two, given the political activity we saw in Florida and Virginia, any conclusions or highlights that you can draw about the political thing, the later part of 2014 one should be a little bit more material?

I’ll speak for Dave on synergies because I know he would be very modest, but he and his team have obviously done a fantastic job so far of really giving us clear line of sight to the synergies that we had expected this year and a bit more. I think it’s probably a little early for us to declare anything more than $175 million annualised run rate in 36 months, but we certainly will keep you posted. What I can only tell you is that fortunately all the surprises that you normally get in a transaction like this so far have been positive surprises, which I think is accustomed to the great job that the Belo management team and the folks at Belo did in running those stations. So, so far only positive surprises, which is always good and I will keep Dave off the hook and just say stay tuned and if there is updating to be done on the 175, we’ll do when we have a clearer line of sight of it.

:

And we’ll take that question from Dan Jenkins of the State of Wisconsin. Dan Jenkins – State of Wisconsin: Hi. Good morning. You mentioned that you had a redemption of some high coupon debt there and I was wondering you have a couple other high coupon issues that are either matured or callable later this year. I just want to know how you think about managing the balance sheet and lowering your interest expense. Would you did the payloads down or refinance them or what was the plan?

I think we had talked in our interview about we do have another trans that will come up in the third quarter kind of timeframe. At this point, we haven’t made any decisions relative to that but there would be benefit in either paying down or refinancing to spending out on our cash needs at that point. We do have the agents recorders that are due 11/15, which obviously we will repay to kind of people we hired [ph]. Dan Jenkins – State of Wisconsin: Okay. Then secondly I was wondering on the – as we think about the retransmission on a pro forma basis that was still pretty strong at 66%. How should we think about that going forward as kind of a normal type of growth rate around those retransmission revenues?

Yeah. I think as we said earlier our line of sight for this year is that in first quarter it is a little adjustment but that run rate absent $1 million or $2 million is good for, I think, the remainder of the year. We have some contracts that will come up at the end of the year and we’ll have to see where the market is at that point, but we always feel good about the fact that we don’t believe that the value of what we provide has yet been reflected fully in retransmission fees. So obviously, we would expect to increase that value at the end of the year. But as we get towards the end of the year and we have better clarity on that, we’ll share what the good news is for 2015. Dan Jenkins – State of Wisconsin: Okay. Thank you.

Thank you Dan. Okay, I want to thank you all for joining us today. Appreciate all your time. And if you have any questions, you can reach Jeff Heinz at (703) 854-6917. Have a terrific day. Thank you for joining us.