COST) sells Mexican Coke, made the same way, by the case, and it's worth the extra cost. Now that I've had the pause that refreshes, there was another earnings release that, like Coca-Cola, I've had my eye on. As a value investor, one quarter's results typically mean very little to me. But in this case, it's a name that has garnered little respect but has managed to beat estimates often in the past three years. With each successive quarter, as the name continues to do a bit better than analysts expect on the earnings front, we get a bit closer to investors regaining some respect for the company. At least that's my hope. The company is Gannett ( GCI), best known for newspapers, and in particular for being the parent of USA Today. Therein lies the reason that investors are not enamored with the company -- the newspaper business has not been a great place to be. Advertising has been in the toilet, and some prefer to get their news on the net. While I will always be a newspaper reader, it's clear that the industry's best days are indeed behind it. But there is more to Gannett than newspapers, and furthermore, the company has been proving that it can still generate significant amounts of free cash flow, pay generous dividends and buy back shares. Second-quarter revenue, announced Monday, fell 2.1%, in line with estimates. However, earnings came in at 56 cents a share, ahead of the 52-cents consensus estimate. The publishing segment is continuing to show weakness, and revenue fell 5.8%.
Advertising revenue also suffered, falling 8.1%. While not a pretty picture, Gannett still generated more than $104 million in operating income from its publishing segment. But, as previously stated, Gannett does have other businesses that are doing quite well -- businesses of which some investors may be unaware. In broadcasting, Gannett has 23 TV stations in 15 states and the District of Columbia that reach 21 million households, or about 18% of US population. Revenue from this segment jumped 11.4% for the quarter, to $205.4 million. Despite generating just 15.7% of total revenue for the quarter, the broadcasting segment accounted for nearly 44% of operating income. The company's digital unit, which includes CareerBuilder, and 120 web sites that are associated with local publishing and television markets where Gannett has a presence, saw revenue increase 4.5% for the quarter to $181.3 million. Combined, the broadcasting and digital segments accounted for 29.6% of total company revenue, but more than 60% of operating income. There's more to Gannett than those pesky old newspapers. For the quarter, the company generated $140 million in free cash flow, and by my calculation has generated about $1.95 a share in free cash flow in the trailing twelve months. That's more than enough to support the company's 20-cents quarterly dividend, which provides a solid 5.6% yield. There's probably room to increase that dividend further. In addition, the company is also buying back shares, including 3.4 million shares during the quarter, at an average cost of about $13.38. It may take more time in order for investors to get comfortable with Gannett and with the fact that despite the challenges faced in the newspaper business, the company still generates significant operating income from that segment. As a kicker, the digital and broadcasting segments are solid. Furthermore, debt, which currently stands at $1.66 billion, and was $5.2 billion at the end of 2006, is no longer the threat it once was. I'm happy to collect the nice, fat dividend while I wait, sipping another Coke. At the time of publication, the author had a position in GCI. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage. Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit. Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.