Gannett reports lowered 4Q earnings on weak ads

Gannett reports lowered 4Q earnings, expects up to $5.9B in writedowns on value of newspapers

• By Anick Jesdanun, AP Business Writer
• On 10:15 am EST, Friday January 30, 2009

NEW YORK (AP) -- USA Today publisher Gannett Co. reported lower preliminary fourth-quarter earnings Friday, but even those profits will be wiped out once the company takes pretax writedowns of as much as $5.9 billion to reflect the declining value of its newspapers.

Gannett, the largest U.S. newspaper publisher, said preliminary net income fell to $158 million, or 69 cents per share, in the fourth quarter, down 36 percent from a year ago, as advertising revenue continues to take a beating because of the recession.

To realign costs with reduced revenue, Gannett slashed the work force at most of its U.S. newspapers by 10 percent and cut newsroom jobs at USA Today by about 5 percent late last year. Those moves, which preceded a one-week unpaid furlough that Gannett is imposing in the first quarter of 2009, resulted in pre-tax charges of $56 million.

Excluding severance charges, earnings were 85 cents a share, slightly above the 81 cents a share expected by analysts.

Revenue declined 8.5 percent to $1.74 billion, below expectations of $1.79 billion.

Gannett shares fell 46 cents, or 6.7 percent, to $6.44 in morning trading Friday.

The figures do not reflect the accounting writedowns, which Gannett expects to total $5.1 billion to $5.9 billion before taxes. The charges would reduce profits by $4.5 billion to $5.2 billion after taxes, the company said.

By law, companies are required to review annually the book values of their various assets and record charges against earnings if those values drop. Many newspaper companies have had to take such charges because long-term revenue prospects have declined along with the companies' stock prices. Gannett's stock fell 79 percent to $8 in 2008.

Although those writedowns do not affect Gannett's cash on hand or its day-to-day operations, a writedown of that size does reflect the company's grim assessment of itself.

Like other newspaper publishers, Gannett saw ad revenue begin to tumble over the summer as the recession compounded weaknesses from the migration of readers and advertisers to the Internet.

Gannett blamed the writedown on "the challenges facing the company's publishing businesses, including recessions in both the U.S. and the U.K. and their impact on advertising demand, and the decline generally in equity values and specifically its stock price."

Gannett said fourth-quarter advertising revenue in publishing fell 22.7 percent overall and 18.5 percent at USA Today, the nation's top-selling newspaper. Revenue from Gannett-owned television stations was about even, only because political ads early in the quarter offset softness in automobile, retail and elsewhere.

"Our results for the quarter reflect the unprecedented turmoil in the economies of both the U.S. and the UK and in the financial markets," Gannett Chief Executive Craig Dubow said. "The ongoing weakness in advertising demand had a significant impact on our results in both publishing and broadcasting this quarter."

For the full year, Gannett reported a net loss of $1.78 billion, or $7.81 per share, compared with profit of $1.06 billion, or $4.52 per share, in 2007. The 2008 loss, which does not include the expected fourth-quarter writedown for assets, largely reflected similar writedowns Gannett took in earlier quarters. Revenue dropped 9 percent to $6.77 billion.

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