Huffpost Media

Gannett Profit Down 53%, But Beats Estimates

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NEW YORK — Net income at Gannett Co. fell 53 percent in the third quarter as the nation's largest newspaper publisher endured another big decline in ad revenue.

The earnings report, released Monday, was the latest to show how newspaper companies have been using cost cutting to stave off losses even as their main source of revenue withers. The results were good enough to send Gannett shares up $1.06, more than 8 percent, to close at $14.06.

Advertising revenue in the publishing division of Gannett, which includes USA Today and more than 80 other newspapers, dropped 28 percent from a year ago. That follows a 32 percent decline in the second quarter and a 34 percent decline in the first.

Gannett highlighted those moderating declines. "We see revenue trends moving in the right direction in our publishing segment," CEO Craig Dubow said on a conference call with analysts.

But comparisons to year-ago figures have been getting easier. By this time in 2008, publishers were already seeing ad declines deepen as the recession intensified.

USA Today sold 493 ad pages compared with 713 in the same quarter a year ago, contributing to a 37 percent fall in revenue at the newspaper. Its circulation also dropped, because the decline in travel cut into USA Today's sales in hotels and airports. Figures to be released next week by the Audit Bureau of Circulations are expected to show that USA Today was supplanted by The Wall Street Journal as the top-selling daily in the U.S. over the six months that ended in September.

Gannett's revenue from its TV stations fell 23 percent to $151.5 million. The drop came largely because of the absence of advertising tied to the Olympics and political campaigns, which contributed $50 million in the same quarter last year.

Overall revenue fell 18 percent to $1.34 billion.

Gannett has been slashing its payroll costs. It eliminated 1,400 positions this summer, 3 percent of the work force, less than a year after a 10 percent cut. The company also has frozen wages, and it imposed unpaid furloughs for most of its U.S. workers earlier in the year.

These moves and falling newsprint costs helped the company earn $73.8 million, or 31 cents per share, in the most recent quarter. That was down from $158.1 million, or 69 cents per share, a year earlier.

Excluding unusual charges for severance and the declining value of certain assets, Gannett said it would have earned 44 cents per share. On that basis, analysts expected 41 cents, according to Thomson Reuters. On Sept. 29, Gannett guided analysts to expect 39 cents to 42 cents per share.

In one positive sign for the company's finances, Gannett raised $500 million selling bonds at the beginning of the month. It will pay fairly high interest: 8.75 percent for $250 million due in 2014 and 9.375 percent for $250 million due in 2017. But analysts said the rates would have been even higher earlier in the year, indicating that credit markets are now more optimistic about Gannett's prospects. Gannett originally intended to raise $400 million before deciding to seek more.

Although Gannett still has about $3.3 billion of debt outstanding, the recent sale helped pay off some notes that were maturing in 2011 and 2012. Gannett says 25 percent of its debt now doesn't come due for at least five years.

Gannett has promised lenders it will keep its debt load below 3.5 times its earnings before income taxes, depreciation and amortization. Gannett's ratio stood at 3.03 at the end of September. That was up slightly from the end of June, but the company said it expects the ratio to decline again in the fourth quarter.