By David B. Wilkerson
CHICAGO (Dow Jones) -- Gannett Co., the largest U.S. newspaper
publisher, said Friday that it will take non-cash charges of as
much as $5.2 billion against financial results for the fourth
quarter, as a number of its assets have diminished in value because
of the worldwide financial crisis.
On a preliminary basis, the publisher of USA Today and owner of
23 television stations (GCI) said profit fell 36% to $158 million,
or 69 cents a share, in the quarter ended Dec. 28, compared with
net income of $245.3 million, or $1.06 a share, in the year-earlier
period.
Preliminary results for the latest three months include $24.4
million in severance and facility consolidation costs.
Gannett expects to take after-tax, non-cash charges of $4.5
billion to $5.2 billion once it completes a test to determine how
much its assets have declined in value due to recessions in the
U.S. and the U.K.
The company emphasized that the charges would not affect its
cash flow or operations in any way.
Media companies are required to note the book value of their
goodwill -- a series of intangible assets such as brand names,
mastheads, intellectual properties and subscriber lists.
Because advertising revenues and stock prices have dropped in
the wake of the economic crisis, these companies have seen the
market values of such assets decline over the past year. Companies
are required to make note of the discrepancy in book and market
values and account for the difference.
Chief Executive Craig Dubow said Friday that the outlook for
advertising sales in the first quarter at the company's newspapers
is difficult to determine at this time. "We're not seeing
checkbooks coming open, but we understand there is opportunity in
the pipeline," Dubow told analysts during a conference call.
Gannett shares were down 13.5% at $5.97 amid a broad decline in
U.S. stocks.
Addressing the issue of automotive advertising, which suffered a
severe downturn in 2008, Dubow said Gannett is "not seeing anything
that suggests any near-term upside" in the category.
Chief Financial Officer Gracia Martore said the company's board
will again examine its quarterly dividend when it meets next month
to determine whether it should be reduced or suspended.
"Every company right now is very focused on conserving cash,"
Martore told analysts during a conference call.
Another newspaper publisher, Media General (MEG), announced on
Thursday that it would suspend its dividend, and New York Times Co.
(NYT) recently made a drastic cut to its quarterly payout. Gannett
last considered the issue during a board meeting in October,
Martore said.
Reflecting the situation faced by other U.S. companies at a time
when stocks have plummeted so dramatically over the past several
months, Martore said Gannett's pension plans were underfunded by
about $575 million to $595 million. The pensions can be funded over
the next seven years, she added.
"There's no cash contribution necessary for 2009," Martore said.
"We'll look at it, monitor it, and possibly consider discretionary
contributions."
Fourth-quarter revenue at Gannett slid 8.5% to $1.74
billion.
Analysts polled by FactSet Research had expecting revenue of
$1.8 billion.
Gannett said publishing revenue fell 19% to $1.4 billion,
reflecting among other factors a 37% plunge in classified
advertising.
Ad revenue fell 23% at the company's newspapers, reflecting an
18% drop at the company's U.S. newspapers, and a 29% decline, in
British pounds, at the U.K.-based Newsquest papers.
At USA Today, ad revenue dropped 18.5%, as paid ad pages fell to
788 from 1,045 in the fourth quarter of 2007.
A shift to online consumption of news and information has eroded
print advertising for newspapers, and the subprime-mortgage crisis
and its aftermath have torpedoed real estate, help wanted and
automotive classified revenues, which had for decades been the
primary source of income for the industry.
Meanwhile, Gannett's television stations and related assets
generated fourth-quarter revenue of $212.8 million, about flat with
the year-earlier total.
At the company's digital segment -- including the CareerBuilder
help wanted site, PointRoll, ShopLocal, Planet Discover, Schedule
Star and Ripple6 -- revenue jumped sevenfold to $170 million,
driven by the consolidation of CareerBuilder, ShopLocal and
Ripple6.
Earlier this week, New York Times Co. and Media General issued
grim earnings reports.
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