Gannett Turns A Profit In 4Q, Ad Sales Still Dropping
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Gannett Co. posted its largest profit of the year in the fourth quarter as cost-cutting efforts were aided by a lessening decline in advertising sales. But shares of the biggest U.S. newspaper publisher tumbled after company executives didn't offer any hope for an upturn in newspaper advertising this year.
The report released Monday showed that newspaper and magazine ad revenue plummeted by almost $1.2 billion, or 28 percent, from 2008. Print advertising remains Gannett's biggest source of revenue despite efforts to bring in more money from the Internet and other media.
Fourth-quarter ad revenue at Gannett's publications, which include USA Today and more than 80 other daily newspapers, fell 18 percent, or more than $172 million. That followed year-over-year declines of 32 percent to 34 percent in each of the first three quarters.
Newspaper ad sales have been deteriorating for several years, but the erosion widened dramatically beginning in the summer of 2008 as the economy headed into its worst financial crisis since the Great Depression.
The fallout has driven at least 14 U.S. newspaper publishers into bankruptcy protection. Although Gannett isn't among them, questions about the company's financial stability caused its stock to fall as low as $1.85 early last year. Those worries have faded now that the ad slump isn't getting any worse.
McClatchy Co., another major newspaper publisher, also reported that fourth-quarter ad sales declined more slowly than in previous quarters, and both The New York Times Co. and The Washington Post Co. are expected to mirror the trend when they release their earnings this month.
Sidoti & Co. analyst Christopher Walling said the company's cautious guidance about a possible ad upturn appeared to be the main reason that Gannett's stock price fell $1.13, or 7 percent, to close Monday at $15.02.
Gannett shares had surged 62 percent in the two months leading up to Monday's sell-off. That led another analyst to raise the possibility that some investors wanted to lock in their gains rather than gamble on an eventual upturn in newspaper advertising.
"Newspapers are doing better, but the (ad) numbers are still negative," said Benchmark Co. analyst Edward Atorino. "Gannett looks like it will be a survivor and will probably lead a turnaround – if there is a turnaround."
Gannett earned $133.6 million, or 56 cents per share, in the fourth quarter compared with a loss of $4.7 billion, or $20.65 per share, a year earlier when it booked charges to account for the falling value of its newspapers. Third-quarter earnings, the previous best for the year, totaled $85 million.
Total revenue dropped 14 percent to $1.49 billion, largely in line with the average forecast of $1.46 billion.
Gannett, which is based in McLean, Va., offset the fourth-quarter erosion in newspaper advertising with an 18 percent reduction in its publishing division's operating expenses, excluding some one-time costs, according to the company. The streamlining included shedding 1,400 jobs, or about 3 percent of the payroll, last year.
"We are a leaner, stronger company as we move into 2010," Gannett CEO Craig Dubow said during a conference call with analysts.
Gannett is requiring an unspecified number of workers in its administrative offices, digital division and daily newspapers to take one week of unpaid leave during the first three months of this year. This year's mandatory furloughs so far haven't been as extensive as last year's, although management didn't rule out taking more drastic action in the second quarter should the economy flag again.
"We believe the economy, while on the mend clearly, is still tenuous," Gracia Martore, Gannett's chief financial officer, told analysts.
Martore, 58, was promoted Monday to the newly created position of president and chief operating officer. She ran the company for four months last year while Dubow, 55, was recovering from back surgery.
Gannett's executives sounded far more optimistic about this year's outlook for the company's 23 television stations than its newspapers. Television advertising is expected to get a boost from this month's Winter Olympics and increased spending political ads ahead of the fall congressional elections.
Broadcast revenue fell 14 percent from a year earlier to $183 million in the fourth quarter, largely because of the absence on political ads.
For all of 2009, Gannett earned $355.3 million, or $1.51 per share, compared with a loss of $6.65 billion, or $29.11 per share, in 2008. Revenue was down 17 percent to $5.61 billion.
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AP Business Writer Andrew Vanacore contributed to this report.
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MICHAEL LIEDTKE 02/ 1/10 07:07 PM ET Associated Press