USA TODAY Co., Inc. (TDAY) Q4 2014 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to Gannett’s Fourth Quarter 2014 Earnings Conference Call. This call is being recorded. Due to the large number of callers, we will limit you one question or comment, we greatly appreciate your cooperation and courtesy. Our speakers for today will be Gracia Martore, President and Chief Executive Officer and Victoria Harker, Chief Financial Officer. At this time I’d like to turn a call over to Jeff Heinz, Vice President Investor Relations. Please go ahead.

Thanks, Gayle. 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 fourth 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’ve 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. Today I’m going to start with our high level of summary of Gannett strong performance in the fourth quarter and after that Victoria will review the financial results of each of our segments provide some detail on special items and review our balance sheet. Dave Lougee, President of Broadcasting and Bob Dickey, President of U.S. Community Publishing are also here to participate in the Q&A session. Now before we turn to our results, I want to mention one other item contained in our earnings release this morning. For those of you who may not have seen it, we are reinstating our share repurchase program which is funded entirely for free cash flow from operations. Our strong operating performance as you saw this morning and you’ll hear more about in a moment combined with our strong balance sheet have enabled us to resume the program well ahead of expectations. The buyback reflects our continued commitment to returning capital to our shareholders while maintaining the flexibility to invest in our businesses. Now let's get to our earnings results. Our record setting fourth quarter caped off a watershed year for Gannett, a year in which we achieved unprecedented revenue and NIBT level in broadcasting and digital and tremendous margin growth propelled by strategic acquisition, successful growth initiatives and continued strong cost discipline. Our full year 2014 results reflect the successful execution of our plan to moving to higher growth, higher margin businesses and our fourth quarter results certainly attest to that. Overall for the fourth quarter, company revenue increased 24% driven by record revenue in both the Broadcasting and Digital segments. On a pro forma basis, revenue grew 4%. These record setting results in our Digital and Broadcasting segments also drove substantial growth in adjusted EBITDA, which increased 57% over last year’s fourth quarter to $511 million. The adjusted EBITDA margin was substantially better in the fourth quarter reaching 30% over six percentage points better than the fourth quarter last year. On a GAAP basis, earnings per diluted share were $2.92 in the quarter, non-GAAP earnings per diluted share increased 55% year-over-year to a $1.02. We also kept expenses in check and continue to find and create efficiencies. Even with our acquisition of Cars.com operating expense growth was well below revenue growth, up only about 18% on a reported basis. On a pro forma basis, non-GAAP operating expenses were actually about 3% lower than the fourth quarter in 2013. We are very pleased that even as we grow we remain as lean and efficient as possible. As I said broadcasting achieved record breaking results revenue more than doubled, this growth was driven by the addition of the Belo stations and exceptional performances at our stations during the final portion of 2014 political season. Retransmission revenue growth has continued to be strong. The Broadcasting segment had its best ever political performances in a non-Presidential year not only are there more dollars supporting political advertising ecosystem more importantly Gannett is taking a greater share of those dollars with its larger footprint and its strong focus. Gannett’s market covered the majority of key top sub-Senate and Governor Races across the country in states such as Arkansas, Colorado, Georgia, and Michigan. Our stations are also covered ten active House races in Phoenix, Denver, St. Louis, and San Antonio and others. Clearly many crucial races decided in Gannett markets and our revenue again the highest political revenue we’ve achieved in a non-Presidential year certainly shows it. We have a very strong political footprint in any political year but especially in Presidential election year so 2016 promises to be another extraordinary year for us in that category. Beyond numbers a big development in the quarter was the renewal of affiliation agreements with all Gannett ABC stations. Importantly the renewals combines our entire footprint including the stations we’ve acquired from Belo and London Broadcasting under one common long-term affiliation agreement. Also throughout our integration of these additional stations we are increasing operating efficiencies by applying our centralized services to those stations. The overall integration continues to outpace our expectations. As you recall we projected $75 million in run rate synergies within the first year. We candidly exceeded that number and are well ahead of schedule. Digital also shattered records this quarter growing revenues 77% year-over-year to $345 million primarily due to the acquisition of Cars.com but also strong organic growth at Cars as well as at CareerBuilder even on a pro forma basis Digital segment revenues were up about 10% while operating expenses decline slightly. Adjusted EBITDA margins improved significantly compare to the last year as results and increased of over 8 percentage point to just over 30% for our Digital segment. As expected Cars.com achieved dramatic growth this quarter primarily due to higher rates charged to affiliates but again also to strong organic growth, so we’re already seeing the benefits of that acquisition in major ways and we’re optimistic that revenue and profitability will stay well above pre-acquisition levels. Cars.com is already pursuing additional opportunities some of which we mentioned at our Digital Investor Day. In January, Cars.com launched RepairPal Certified its first program design specifically to help differentiate dealership service departments in addition the Company is testing new sale and trade products that will ultimately help dealers acquire used inventory at a lower cost, so clearly we’re extending and maximizing Cars.com’s expensive reach on an accelerated basis. As you know CareerBuilder the other significant piece of our Digital segment, CareerBuilder’s North America revenue was up again this quarter and we’re also pleased to report the CareerBuilder continues to gain market share which should positively impact our results in 2015. Now most people know CareerBuilder as a leader among job boards, but that’s only part of the story. CareerBuilder is evolving into a global leader in Human Capital solutions helping companies target and attract great talent by matching the right person to the right job at the right time. CareerBuilder has also built the only global pre-hire Software-as-a-Service platform that provides organizations with the most effective talent acquisition process. Its various software solutions distribute jobs to multiple sources, build pipelines of candidates, equip recruiters with one place to search for candidate across all sources and provide the tools to effectively track and manage applicant flow that include labor market data and help talent intelligence to inform decisions and optimize recruitment strategy. CareerBuilder’s clients find all these tools incredibly useful and the Company’s market share and revenue have been growing accordingly. To give you some additional context on where we see this business going Human Capital software solutions increased 78% during the full year 2014 compared to 2013. Three years ago CareerBuilder Software-as-a-Service business represented only about 1% of total revenues. This past quarter it accounted for 19% of total revenue. There still a huge growth opportunity there. We believe that our progress to-date is merely the tip of the iceberg. And let me switch gears for a moment to our local digital marketing services business GeoDigital which had a very tremendous quarter. Year-over-year revenue from small to medium sized businesses increase 52% in the quarter primarily bolstered by search and social products which accounted for about two to three quarters of the revenue. Baked into that revenue growth is also a 40% expansion of GeoDigital’s customer base. This cap a full year 2014 that saw small to medium size business revenue increase to 66% looking at the past two years, revenue has more than tripled and average customer spend is up 14% over that time period. More customers each spending more money equates to strong performance by G/O Digital, we’re pleased with the progress to-date but much more to come over the next 12 months to 24 months. Now the success of G/O Digital goes beyond the numbers, in 2014 Yahoo named G/O Digital a Strategic Local Ambassador based on its success in helping entrepreneurs grow their small and medium size businesses. We are also a Google premier SMB partner and earlier this year Blink media launched a first to market social marketing product Auto Lift to enable auto brands, agencies and dealers to target in market car shoppers with dynamic, localize incentives on Facebook. Our digital properties remain strong and we’re looking forward to more success in 2015. Now moving onto our Publishing segment. We continue to make key enhancements to our offerings that are helping us forge deeper connections with our audiences, our advertisers and our local communities on a broader scale. While we continue to face industry headwinds and operate in a challenging national advertising environment, we are pleased with our progress and the important enhancements we’ve made for consumers. Our USA TODAY local contents additions have been even more successful than we could have imagined. The fourth quarter was our best in 2014 in terms of incremental revenue achieve by our local content initiative and profitability has also improved as incremental expenses associated with it were lower. It is significantly beating our projections on both revenue and profitability providing a significant boost. The most exciting part of the USA TODAY local content story is that there is so much room for growth and expansion and we are exploring syndication of this content as well. The Richmond Times-Dispatch and the Arlington Heights, Daily Herald now include USA TODAY content on Sunday’s and we are having very productive conversations with other publishers as well. And just last week, we signed a deal with the publisher that will begin in early February in several markets and add approximately a 130,000 and daily circulation over the next six months. The bottom-line is that the content is compelling and the demand for it is simply enormous. We fully intend to maintain the innovation that has driven key initiatives such as the local content additions. USA TODAY sports also celebrated a number of key development this year, our For The Win social sports site grew page views by over 24% and we launched our college football fan index, which combine social media activity and fan voting to determine the ultimate college football fan base. The success of all these new ventures highlights two of the key strengths of our publishing leadership, innovation and execution. We’ve got an incredibly talented team here that is full of innovative creative ideas for leveraging the excellent journalism that is in Gannett’s DNA, equally as important once they have got a promising project on the table, they know exactly how to get it done in a way that creates value for our audiences, our advertising partners and ultimately our entire company. And with that, I’d like to turn it over to Victoria who will provide a detail review of our financial results. Victoria?

Thanks Gracia and good morning everyone. As Gracia has already mentioned, we’re very pleased with our fourth quarter financial results. 2014 was truly an unprecedented year for Gannett by any measure as we continue to make outstanding progress and a strategic transformation of our company. Before I review our financial results as well as our capital allocation efforts during the quarter, I’d like to spend a few minutes reviewing several special items which are included in our financials for the quarter to help provide additional context for our recurring performance trends. Our ongoing operational efforts to transform the business, continue to generate greater operating efficiencies and effectiveness across the portfolio again this quarter. These initiatives drove $52 million in workforce restructuring and other transformation charges across several of our businesses during the quarter. At the same time in connection within evaluation of expected future financial performance in some areas, we recognized $35 million in goodwill and intangible impairments during the quarter. These operating special items totaled $87 million with an EPS impact of $0.25 per share. From a non-operating standpoint, we recorded income of $439 million and EPS benefit of $1.13 per share primarily related to the acquisition of the remaining 73% of classified ventures during the quarter. As a result, we recorded a non-cash gains to write up the 27% we already own to market value. Additionally, our income tax for the quarter reflect a special $237 million benefit for a $1.02 per share primarily triggered by a restructuring as a portfolio which helped to offset prior gains and taxes related to fail several TV station, departments.com and other properties. Now let's briefly review the ongoing revenue results for the quarter. As a reminder, although I’ll be focusing on our non-GAAP performance results today, you can find all our reported data and comparatives in our press release. Across the portfolio as projected, total company revenues of $1.7 billion were up 4% year-over-year on a pro forma basis, primarily reflecting the strength of our Broadcasting and Digital segments. Again this quarter’s strong political advertising spending and retransmission revenues contribute significantly results. During the fourth quarter total company operating expenses of $1.3 billion on a pro forma basis excluding special items were down 3% year-over-year as a result of our continued focus on efficiencies as well as lower volume in the Publishing segment. Our efficiency programs included further consolidation of our printing and distribution platforms as well as our real estate footprint, the hubbing of our financial support organizations and streamlining of our customer service efforts. Now let's turn to a more detailed review of segment results. Pro-forma Broadcasting segment revenues were up 25% year-over-year in the fourth quarter, yet another historical high benefited by strong retransmission fees, record non-Presidential political advertising and digital revenue. Political advertising spending of about a $160 million for the full year, a historical high watermark for non-Presidential advertising revenues was even stronger than anticipated [indiscernible] with several hotly-contested campaigns. This was an increase of over a 15% compared to 2010 the most recent non-Presidential election year comparison. Retransmission fees continued to grow substantially as well by nearly 60% on a pro forma basis as a result of rate increases. That said, core advertising was lower due to displacement by significantly higher demand for political advertising particularly in the latter part of the campaigning season. Broadcasting digital revenues were up 17%, driven by the digital marketing services which continue to gain transaction not only in the original Gannett stations but also in the newly acquired stations which are now fully trained on G/O Digital products and seeing good results. Based on current trends we expect a percentage increase in total revenues for the first quarter of 2015 compared to the same quarter in 2014 to be up in the low to mid-single-digits despite challenging year-over-year comparisons. First quarter 2014 broadcast revenue benefited fully $41 million related to the winter Olympic games and approximately $10 million from politically related ad demand. The challenge of overcoming these even year revenue contributions will be partially met in the first quarter of 2015 by Super Bowl advertising on the Company’s and DC stations. During the quarter broadcast segment operating expenses were up 3% year-over-year on a pro forma basis driven by expense associated with revenue growth initiatives at our new and existing television stations as well as reverse compensation and investments in sales and marketing tools. Publishing segment advertising revenues of $544 million were impacted by secular pressure, again this quarter down approximately 8% on a pro forma basis excluding the impact of the sale of Apartments.com with the year-over-year print advertising revenue decline partly offset by digital growth of 6%. Within this segment domestic publishing advertising revenues decreased by 9% year-over-year although the auto, real-estate and employment categories have improved throughout the year. We saw the first year-over-year increase in all of these categories in December reflecting slight growth in U.S economy and the job markets. In the UK, Newsquest advertising declined by 3% year-over-year in local currency. Pro forma, domestic online advertising revenue in the Publishing segment increased 5% year-over-year with retail advertising up 4%, driven by G/O Digital with a growing base of customers seeking to diversify their marketing efforts while increasing the efficiency of their online advertising solutions. National digital revenues also improved 5%. Newsquest online advertising was up a robust 19% driven by retail and employment category advertising. Publishing segment’s circulation revenue continue to be strengthened by the all-access content subscription model local USA Today content contribution and strategic price increases in our local U.S publishing sites, which reported their second consecutive quarterly increase this year. This was offset by the cycling of cover price increases at Newsquest as well as lower USA Today group print circulation resulting in a total circulation revenue decline of 2% for the fourth quarter. Publishing segment operating expenses were below last year, down 5% due to cost reductions and efficiency gains generated by Gannett Publishing Services, and sourcing initiatives as well as lower volumes. Publishing segment operating income was a $125 million in the quarter. Within the Publishing segment changes in the Cars.com affiliate agreements and the absence of Cars.com revenue had an unfavorable impact of approximately $9 million in the quarter. During the quarter Digital segment revenue increased by 10% year-over-year on a pro forma basis, a record high driven by the addition of Cars.com up 25% and continued growth at CareerBuilder which was also up 4% year-over-year. The strong Cars.com results reflect a new affiliate agreement economics as well as organic growth in Cars.com direct market. These direct markets which account for about 80% of total revenues generated by the Cars.com direct sales force increased by 20% during the quarter. Also strongly contributing to the digital segment this quarter CareerBuilder growth continues to be driven by expanding sales of Human Capital software and solutions products. Digital segment operating expenses were down 1% on a pro forma basis reflecting lower lead acquisition cost and revenue share pay to affiliate markets at Cars.com as well as cost efficiencies at CareerBuilder which were lower by 2% year-over-year. During fourth quarter company-wide Digital revenue totaled almost $540 million reflecting an increase of 7% year-over-year on a pro forma basis. Digital revenues contributed fully 32% of total company revenues during the quarter another historical high for Gannett. Total company adjusted EBITDA on the quarter of $511 million increased by 27% on a pro forma basis with year-over-year gains driven by both Broadcast and Digital segments which generated nearly 75% of total company-wide EBITDA. Free cash flow for the quarter was $203 million, 32% higher than last year due to our strong operating results. During the quarter we invested nearly $60 million in capital projects, primarily related to several local publishing real estate initiatives and ongoing digital price development as well as product integration and enhancements at CareerBuilder and Cars.com. As projected we invested over $160 million of capital during the 2014 with the majority of our investments dedicated to development of digital products and platforms. With the completion of $675 million senior debt financing for Cars.com, our long-term debt at the end of the quarter was $4.5 billion with a $118 million of cash on the balance sheet. The ending debt balance is substantially lower than expected due to cash tax savings by previously detailed as well as strong cash from operations. During the fourth quarter interest expense was $74 million largely driven by the debt associated with the acquisition of Belo and Cars.com. During 2014, we were able to return almost $260 million to shareholders through dividends and share repurchases despite the temporary suspension of our share repurchase program. Since the time we announced the current buyback program in July 2013, we have completed over 50% of $300 million commitment with 5.6 million shares repurchase at an average price of $27.03 per share. As you’ve heard we’re looking forward to 2015 as a year of great opportunity across the variety of venues within our portfolio of businesses. We anticipate a very strong year of Cars.com results which we project to be accretive to free cash flow by approximately $0.43 a share and neutral to EPS for the year. Naturally year-over-year comparisons will be impacted by the cyclical absences of record political advertising as well as significant Olympics revenue compare to 2014 which when combined totaled $200 million. In addition in 2015, we project higher expenses related to reverse compensation under the terms of our contractual commitments. Retransmission revenues expected to be in the range of $440 million to $445 million. Capital expenditures for 2015 are expected to be in the range of $135 million to $140 million about $25 million lower than in 2014 as result of fewer remaining real estate projects. Depreciation is projected to increase to approximately $210 million to $215 million in 2015 including the impact of the Cars.com acquisition. Amortization is expected to be in the range of $135 million to $140 million also impacted by the Cars.com acquisition. As discussed in December of UBS Conference, we anticipate the new pension mortality table will negatively impact pension expense this year. We’ll continue update you as this gets refined in keeping with the prior year the 2015 cash rate is projected to be approximately 32%. Overall we’re very pleased with our continued progress reflected in our 2014 financial results. As we execute on our separation into two strong publically traded companies midyear, we continue to see significant opportunities on the horizon and look forward to sharing those with you. With that, I’ll turn the call back to Gracia for closing remarks prior to the Q&A.

Thanks, Victoria. The success we’ve achieved over the last few years has been built upon a strong foundation of our purpose, disciplined financials stewardship, shareholder focus and Board and management accountability. As we iron out the specifics of the two independent Companies following the separation, we are committed to instilling the same kind of strong foundation as both industry leading Companies ensuring that they’re each best positioned in every way for future growth and success. And while we’re on the topic of the separation and before we open up the call for questions, I would like to comment briefly on the letter we received last month from Carl Icahn stating his intention to nominate two candidates for election to our Board and to submit nonbinding corporate governance proposals at Gannett and at post spin publishing company. Mr. Icahn’s attempt to dictate corporate governance at Gannett let alone a new Company that has not yet been established and whose governance profile has yet to be determined frankly is overreaching. We have an experienced Board that has been a driving force behind the successful execution of our strategy. Our corporate governance is shareholder friendly today at Gannett and there is no reason to think it won’t be at the new publishing company. The Board of course will evaluate Mr. Icahn’s governance proposals and his director nominees to the lens of what is best for all of our shareholders and that’s all I’ll say about this today. The spinoff is on track and we expect to file our Form-10 from time in March with that, why don’t we turn it over to Kylia for questions. Thank you.

Thank you. [Operator Instructions] We’ll take our first from John Janedis with Jefferies.

Thanks for the color on the cost controls, I just wanted to ask were there any one-time events and is there a reason why that doesn’t continue for the next quarter that you’ve given the timing of the workforce reductions? And then just on the buyback is the goal to go back to the entire pace in the near-term or do you keep maybe a more modest pace until you complete the spin? Thank you.

The first of your question relative to cost control, the pieces that we’ll have ongoing recurring benefit on a go forward basis in terms of the special items that it pulled out those were related to workforce restructuring severance and things like that, so that would be one-time. But the ongoing benefit of the things that we did for example, in terms of the back office restructuring, in terms of the sales and the reductions and of course obviously we’ll have a benefit as to the property -- the footprint of our real estate properties have on-going reductions to our least cost. So the one-time things I pulled out those are not recurring and then we have ongoing efficiencies as a result of those.

John with respect to the share repurchase program, we would expect that the pace that we had before we put the program on hold will be the pace at which we will act under the program until the spin then we obviously -- then we’ll have two separate capital policies.

We’ll take our next question from Bill Bird with FBR.

Just from your initial work on a separation, do you have a feel for any potential dissynergies? And from modelling purposes, can you give us any help with reverse comp and what that might represent as a percent of re-trends? Thank you.

With respect to dissynergy Bill, we are extremely focused on making sure that we minimize to the greatest degree possibly any dissynergies as a result of the spin. So for instance, I mentioned earlier our G/O Digital business which has been growing very nicely and obviously benefits from having an enormous amount of scale which is provided by the 81 market that are in our community publishing group and in the 46 stations that are in our broadcasting group. What we will be doing with G/O Digital is while it will reside in the broadcasting and digital company, we will have a commercial agreement with our publishing company to provide those services so that they will have the same advantages of scale et cetera that we have across it today. We will also be looking at transition service agreement in a variety of areas that will provide opportunities to continue the same effective pricing and other things that we enjoy that will extend across both companies for a period of time. So, obviously on the flip side there is another CEO, another CFO, a corporate sign, new board, so a corporate structure that obviously has to be supported, but I think our goal frankly -- one of the goals -- the ancillary goals this whole process is it enables us to relook at a lot of the things that we’re doing and where there are opportunities to actually find even more efficiencies sometimes in certain areas, those are actually things that we are as focused on as well. So, we are hoping bottom-line to have a very, very nominal dissynergies as a result of the spin.

We’ll take our next question from Craig Huber with Huber Research Partners.

And I am sorry Craig, before you go, I know that there is a second part of Bill’s question that we need to answer and that’s with respect to reverse re-trends and Dave, do you want to say anything on that?

This is the operator, we are unable to hear you. Yes, that is better.

The guidance we gave them before was that, our our affiliation must have come up over a time, but we’ve got some up in ’15 and we’re up some to ’19, but what we said before on the stations that are paying reverse re-trends that that percentage in account your 2015 will be 45% for the station that are paying.

To the amount of re-trends that those stations are getting.

To the amount of re-trends that those stations are getting.

So we apologies Craig and if you want to go to your question.

Just can you give a little bit more clarity please on what your TV Advertising pay [schemes] are looking like for the first quarter and maybe if you could somehow pull apart some of the [heat] over your issues with political and Olympic and also I’m curious if you could touch how auto was doing for television for the first quarter and also how does it do in the fourth quarter maybe particularly post the elections? Thank you.

Yes. let me start with sort of an overview and the Dave can jump in with more specifics. But the first quarter is going to be a little tricky because as you may recall we have $41 million of Olympic revenue that we achieved last February that simply will mark the presence this February, so as you can appreciate. And then there is the Super Bowl -- there was the Super Bowl and so there is some -- and then there was about $10 million of political in the first quarter of last year that simply won't repeat. I think the Super Bowl probably cancels out the political, so you are still dealing with that $41 million of Olympics which makes pacing's during the quarter pretty tricky but as we I think look out to March I think we feel good about what we're seeing so far but it's really early in the quarter for us to be really giving any specific numbers yet, but Dave.

Yes I will just amplify what Gracia said I think again we do have a lot of noise, we have got the Super Bowl here in January, so we have a lot of numbers to compare against. But I think what we're seeing is some marginal improvement from January over December. And as Gracia says as more money goes into consumer's pockets with the impact of these gas prices I think we're starting to see signs that will still continue to marginal improvement going through the quarter, February is very difficult for us on a comparative basis because of the Olympics last year.

And auto.

Yes the question on auto. Auto was flat to little bit down in December but looking better in the first quarter.

And if I could just ask when you guys talk with the marginal improvement you are seeing in the TV pay scenes to make some recent adjustments you are talking about. In your mind does that take into account I guess a year ago how bad the first quarter was, a year ago with the weather which certainly seems like was much more severe a year ago than this year, when you make that comment?

I think a good question. In our particulars markets in broadcast it really had no impact on us last year.

Yes, it was obviously an impact in publishing were we couldn't get a lot of papers delivered, we had late cancellations with respect to that, I think we didn't talk of that any significant impact on the broadcasting markets.

. :

Sorry just to clarify that do you -- is the guide for the first quarter TV pay seems to be up low single-digit inclusive of that very difficult comp of 41 million or excluding that comp, sorry I didn't quite get your answer?

Well the guidance that we give in the press release which is low to mid single digit is for all revenue.

Okay. So the advertising revenues seem to be -- looks now it's trending better in January, but you have got a very difficult comp there?

If you look at the comp we have I mean we're the victim of our own incredible success. We had a fantastic Olympics and we continue to do a great job I believe across the company as the special events like Olympics, like Super Bowl, like other things political come up. Not only is it just we happen to be in good markets but we're actually maximizing every opportunity doing a great job on inventory management and taking market share, so punching above our weight in many cases. So it's tough when you have that kind of success then the next quarter to have to compare against that. But we’d rather have the great success and then have to deal with the comparison.

And just staying on the re-trend choice again, I know there is a lot of focus on reverse comp renewals with the affiliate. But if you are looking on the gross re-trends which looks like giving your guide this could remain very, very healthy, is it -- you have more knowledge than we do given the timing of your renewals with your distributors can we expect I guess similar sort of healthy growth in gross re-trends in 2016?

Yes we have been on it and I will have Dave to tell you how.

Yes I think the good news for us is that the expirations of our agreements are pretty well diversified to the calendar years in terms of percentage of subs so it's nicely diversified at the end of each calendar year. And we continue to have a situation where the good news is as I have said before the market is continuing to appropriately align itself between audience and subscriber revenues and now I think it's interesting you are seeing the attention on cable bills frankly return to sports fees where there is actually a disproportion of relationship, so I think from the broadcast side you will continue to see an appropriate realignment.

And we have got a couple of situations coming up towards the end of the year which won't have any real impact on '15 but obviously will be very beneficial to '16.

We will go next to Marci Ryvicker with Wells Fargo.

Thanks. Sorry to hop on the guidance comments but Victoria I just want to make sure I understand you said in your prepared remarks total company revenue is expected to be up low single-digit to mid single-digit and then the press release said total TV revenue expected to be up low single digit to mid single digit, so I just want make sure that that is the case? It’s the first question and then the second question is, typically we’ve heard that Olympic revenue is about two-thirds incremental would you say that that’s for your [indiscernible]?

Relative to broadcast we’re talking total revenue relative to being up low to mid single digits; we gave no guidance on total company revenue.

Okay.

Total Gannett company revenue, we give no guidance but what we do give as you saw in the press release is guidance with respect to the total revenue for broadcast.

Got it and then in terms of. Yes, go ahead.

In terms your Olympics question, it’s actually a little less than that because we’ve got the reverse impact on our non-NBC stations of that sort of unwired money that comes into the market and in terms of share basis on those stations, so overall for the division it’s not -- it’s not two-thirds it’s somewhat lower than that.

Okay and just one follow-up, do you have any expectations for political this year?

Not high ones, sort of traditional off your numbers.

We’ll go next to Doug Arthur with Evercore ISI.

Two questions, Gracia, if you go back to the guidance for pro forma 2014 when you announced the Cars.com acquisition I think your revenue guidance was 538 at the time, you adjusted that into December, what is -- how is your view of kind of the near term growth of Cars.com 2015, 2016 change since the August timeframe? And then I have a one follow-up on newspaper advertising.

Well, actually I don’t think the guidance really has changed. I think we talked about 20 sort of low to mid 20 percentage range growth in revenue and I think in the fourth quarter it was about 25%. As I look into the first quarter of this year 2015 that number looks like it is right in the sweet spot could be a percentage point higher or so, so we feel very good about the guidance that we gave back in August and if anything we’re very comfortable with it and hopefully we’ll see a point or two better.

So when you the say sweet spot you’re talking low to mid 20s?

Yes.

Okay, all right. And the secondly, I think that in December Bob Dickey threw out a sort of broad guide on local publishing advertising being positive in 2015, it was down 7 plus percentage in the fourth quarter is that still the working principle there?

Yes, Doug, this is Bob. As we look at local controllable I mentioned that’s about 75% to 77% of total advertising, so our focus is really worked in the local market share and our plans still calls for us to be positive in 2015 on the local controllable numbers.

And that’s a subset of the local number you see in the numbers that we give as an attachment to the pro forma numbers we give as an attachment to the press release because that local number would include, at least for Gannett big department stores other kinds of things. So what Bob is referring to is that those small medium-sized businesses that are the bread and butter of those local communities where we really have control over it. It’s not controlled by somebody out there that’s deciding to let flash spending by 10% across the Broad across every market in America. So we feel very good about as Bob said what we can control we’re seeing good signs there and he feels very confident about ‘15 on that front obviously national advertising large retailers that has been I think the challenge for just about everyone that I talk to and that we see who have reported and I think we’ll report.

That’s part of our program during the year. We’ve really focused on various initiatives they’re starting to show traction total auto revenues for us were positive in December, total recruitment revenues were positive, and total real estate revenues were flat. So to go to Gracia’s point those are local sales efforts talking with local realtors cars dealers et cetera, so we were very comfortable with that traction right now.

So just to be clear the 75% to 77% you’re talking about is a sort of hybrid local retail, local classified number?

Yes.

And that’s a subset of what you actually report?

Correct.

We’ll go to Jim Goss with Barrington Research.

Staying on the topic of the publishing ad revenues, you definitely had better experience in classified and is this -- are we getting any sort of stabilization area where it will be up and down, but not just continued pressure, the response has usually been Cars.com or CareerBuilder to try to pick up what you're losing, but is that a better environment going forward right now, National you have the [debt] minus 20.8% number I assume that was probably a U.S. TODAY number but actually could explain that a little bit? And then talk about the strategy maybe early glimpse of the strategy beyond the split and overcoming some of these air pressures and the context of more limited platform that the new company would provide?

As it relates to classified you're correct, that’s an area where we believe the slightly improving economy in many of our markets that consumer confidence level is getting better, we start to see that perhaps some spending in the market to as retailers are providing for market-share, auto dealers et cetera. Believe the real estate market was low rate, so in our key real estate market sites we’ll continue to be an opportunity for us as we feel strong about recruitment in auto. So yes to classified, we think we’re starting to see sone stabilization as it relates to that particular segment of our business.

Yes, I think with respect to USA TODAY and national advertising in general as we’ve all talk a lot about I think what you -- it's pretty volatile and I think what we saw in the fourth quarter particularly at USA TODAY we are -- there a great platform for instance for new car launches or product changes, some of those were deferred into the first quarter and I think that that led to a bit of an exacerbation of the national numbers that we saw at USA TODAY. I think what we’re looking at as I look into the first quarter, we’ve got an early, early blush on what we think things are looking at, we should see improvement on the national advertising side, because I think we’ll start to see some of that auto advertising that was delayed in the fourth quarter actually staring to pick up, we had a lovely wrap on USA TODAY yesterday from [Jeep Chrysler], so pleased to see that obviously. I would say over all on the publishing side -- again early, but what we’re looking at looks like it will be total revenue for publishing probably better by a percentage point or so in the first quarter and it looks like total advertising revenues will be better by potentially a couple of percentage points in the first quarter. So, I think just had some interesting things going on in the fourth quarter that at least early in the first quarter we are seeing expectations of improvement over.

We’ll go next to Edward Atorino with Benchmark.

Some of the broadcast companies have been I want to say dabbling, maybe that’s the wrong word -- into programing instead of just buying programing and getting it to various stages of production, is that on your blackboard somewhere or it's just too early to talk about that?

It's definitely been on our blackboard and with 46 TV stations that cover almost a third of the households in the country, we think we are in some ways very uniquely positioned to be able to do something in that area. We can’t talk specifics with you today, but there is quite a bit on the drawing board, Dave if you want to add anything?

No, I just said the question is really spot on and we have been given the profile stations we have not just 31% reach, but also lot of them really being beach front real estate for programing. We think -- as to your question as I suggest that we want to be in it ourselves and so both ourselves and with other broadcast peer groups we are in some good discussions about that very future-ish, we see this as an opportunity not just frankly in terms of platforms and programing for our core TV stations, but also in the OTT space as well.

And is that the cost of programing these days is significantly lower than -- when you and I used to talk about this 10 or 15 years ago.

We’ll go next to Michael Kupinski with Noble Financial.

In terms of the first quarter broadcast, you kind of drop down a couple of things here, just looking at the sheer dollar amount of variance in that first quarter pacing. I would have to imagine that national advertising is coming back pretty strongly, I was wondering if you can just talk about the pacing between local and national? And then secondly, are the categories all consumer base and if that’s what’s really driving the lower gas price is really driving that or is there an effect of network inventory that I have seen that hiding towards the national advertising for you?

Yes, so the answer -- some of our muddies are little muddy for the reasons we discussed earlier because of super bowl and others, but yes national has come back some this quarter but I think it's a combination of the reasons you outlined but I think that fundamentals are better and are getting better as we go through the quarter because of the consumer but local is also improving. So from a category standpoint it is consumer categories that are looking strong for the quarter, retail and auto are improving so I do to your question yes I do think there is a cause and effect.

Just to go back some broadcasters last couple of quarters were indicating that network inventory and pricing was kind of influencing national advertising for them. Did you see any effect from that or is it are you seeing any changes on network inventory and pricing is influencing the quarter as well?

Yes, you never have exactly the perfect intelligence on that particular marketplace to be honest with you but I do think that yes I think there is some positive impact on that in first quarter, I am less clear on what that impact for us was in the fourth quarter because again with all the political that we had was a little tough to understand our own fundamentals on national.

And then finally couple of years ago the company identified an initiative to build its sports franchises which included the support of USA Today. I was just wondering does the company does the company still plan to build upon its sports franchise or has that goal been kind of redefined by the spin of the newspapers?

Well it will be a little bit redefined as a result of the spin. But I know that there continues to be a lot of work done and we continue to be very bullish on the opportunity for us to make a significant mark on the sports media aspect because of the strong brand that USA Today simply has in that arena. And so I think that we will continue to -- certainly Bob you should jump in here continue to see that as a real opportunity at the publishing side for sure.

I think we have proven that there is definitely some opportunity on our lease properties segment around, to Gracia's point the brand resonates the Leagues have been they are partners with us and we will continue to certainly explore every opportunity with them. So I guess right now it is still important part of what we plan to do going forward.

And I think there is a huge success with For The Win I think that's probably the leading sports property in itself tremendous consumer resonance.

Its real success story for our traffic and audience growth there is no question along with some of the other niche sites that have joined the network as well. And we believe that there is still lot of upside to both to all of that business.

I guess just a follow-up on so the initiative on the sports franchisee would largely go to the newspaper side and not the broadcast side, is that right?

I think certainly primarily because of the USA Today branding et cetera. But I suspect that as we're going to do everywhere we will continue to share content and there maybe opportunities particularly yes for instance the Super Bowl is in Phoenix, we have a great television station as well as a great publishing property there. But I think there will continue to be sharing of content that we will do because there is lots of opportunities to do that and we all know each other.

I mean the fact is that if you look at league properties there is nothing there that has to be only in publishing side, we would certainly talk to our friends on the broadcasting side as well.

And we just executed a companywide initiative for a large client for the Super Bowl that cut across all divisions because of all those assets meant something to the client and there is every reason for us to do that continuing forward after the spin.

We will take our next question from Barry Lucas with Gabelli and Company.

Gracia I was hoping you could talk a little bit prospective M&A for the two new companies going forward, you have fair amount of room under the cap for television stations and the publishing will come out debt free among the new group of other players for doing publishing, general media group, et cetera so I was hoping that you could talk a little bit about that topic?

Barry I think what always -- as you know we're always incredibly disciplined about the acquisitions we do but one of the benefits of -- after the spin we will have two companies that will have fantastic balance sheet. Publishing will have virtually no debt, broadcasting even levered the way we anticipate with all the debt going there as you saw our debt level was lower year-end by a couple of 100 million than we thought. So we generated an enormous amount of free cash flow we will be able to pay down that et cetera. So we still have a lot of opportunity there to do great opportunistic acquisitions. We have an appetite to expand where we can on a very disciplined basis and I think the Belo transaction, the Cars transaction are great testaments to the fact that when we see an opportunity where we believe that we can bring a lot of value and realize that value very directly then we are prepared to act in a meaningful way. So I think that we're very open to opportunities -- further tuck in opportunities certainly at least on the broadcast side. Also on the digital side as Cars.com continues to evolve its product suite and continues to meet the needs of its clients to the extent that there are opportunities to look at some fill-ins or some expanding of some of the things there -- we’re doing there and that’s obviously something that we will pay a lot of good attention too. I know Bob is -- I think we’re also blessed with not only having fantastic balance sheets but we also have some of the best operators, if not the best operators in both of those companies. And so Bob’s ability to bring the incredible innovation that his team and he have brought around revenue as well as the strong cost discipline that we have there I think leads us to believe that there may be opportunities obviously to consolidate some of the properties there. But again always being very cheerful and making sure that what we’re going to do is create shareholder value with any opportunity that we look at, but I think you’re absolutely right there are going to be lots of opportunities for companies and we will be very careful stewards of our capital and make sure that in both companies there is a direct return of some capital but there is also other opportunities to invest in, growth opportunities.

Thanks Gracia.

And I think we’ve got time for one more question.

We’ll take our finals from Liang Feng with Morningstar.

You mentioned that Gannett executed 75 million in first year synergy target and could you describe the main drivers of this delta in a bit more detail, namely how much of performance was driven by revenue gains such as re-trans versus cost savings? And if it cost savings does that mean that Gannett is achieving the cost savings even faster than originally planned or is primarily because you’ve identified incremental opportunities beyond the initial estimates?

It’s all of the above. I think on the re-trans side we’re always very careful when we acquired Belo we are always careful that’s a number that we put out for synergies, is a number that we are highly, highly confident we can achieve. So we’ll bake in some conservative estimates I think we certainly did better on the re-trans side than we were expecting. I think we identified additional opportunities with respect to digital revenue side other opportunities on just a basic blocking in capital tacking of procurement of our track consolidating traffic systems all of those kinds of things. And then some additional things, so we did better I think in probably in each and every one of the categories and then found a couple of new categories as well on the digital marketing services side. There is still some really good opportunities there with respect to the Belo stations as well as the London Broadcasting station that we brought on obviously later last year, so just kind of an all-around effort as you would expect.

Thank you and given what you’ve seen far is there anything that you can under the three targets?

We remain highly confident.

Thanks very much for joining us today. We appreciate all your time. If you have any further questions, please don’t hesitate to call Jeff at 703-854-6917. Have a wonderful day.