By: E&P Staff
Gannett Co., the nation’s largest newspaper publisher, on Wednesday reported a 36% drop in second-quarter earnings as the newspaper industry’s woes caused a sharp decline in revenue.
The company reported that preliminary 2008 second-quarter earnings per diluted share from continuing operations were $1.02 compared with $1.24 per share in the second quarter of 2007.
Publishing segment operating revenues totaled $1.53 billion for the quarter. Advertising revenues were $1.11 billion compared to $1.28 billion in the second quarter of 2007. Retail advertising revenues declined 8.3 percent, national revenues were down 14.0 percent and classified revenues dropped 18.7 percent. Advertising revenues declined 13.6 percent in the U.S.
Craig Dubow, chairman, president and CEO said: ?The weakening economy had a dramatic impact on our results. The impairment charges reflect, in part, these challenging economic conditions and pressure on our stock price but do not affect our ability to manage our businesses or make strategic acquisitions. The difficult economic and advertising environment also should not overshadow the progress we are making on our strategic transformation as we continue to position the company for the evolving media landscape.?
?The struggling economy has put pressure on advertising demand for our publishing segment particularly classified advertising in our real estate-centric markets in the U.S. and in the UK. Broadcasting benefited from higher political advertising and positive results from Captivate which partially offset the weakness in other categories. Growth in our online revenues also contributed positively to results in the quarter. We carefully controlled our operating expenses despite higher newsprint prices, and focused on
increasing efficiencies. A significant level of severance expenses related to those efforts during the quarter will better position us for the remainder of this year and into 2009. We benefited from lower interest expense, as well.?
Here is an excerpt from the company release.
Total publishing operating expenses declined 5.7 percent to $1.23 billion, reflecting continued cost control and efficiency efforts in the U.S. and the UK, lower newsprint expenses and an allocation of part of the pension curtailment gain offset partially by severance expenses.
At USA TODAY, advertising revenues declined 16.6 percent in the second quarter compared to the year ago quarter. Paid advertising pages totaled 831 compared with 1,034 in the same quarter of 2007.
During the quarter, the company made changes to its domestic benefit plans by improving its 401(k) plan while freezing benefits under certain company sponsored pension plans. As a result, the company recognized a pre-tax curtailment gain for its domestic pension plans of approximately $46.5 million ($28.9 million after tax or $0.13 per share). However, the curtailment gain was almost totally offset by approximately $39.9 million in pre-tax severance expenses ($26.4 million after tax or $0.12 per share) related to reductions in force and efficiency efforts in the U.S. and the UK.
The preliminary results, however, do not include non-cash charges to be recorded in the quarter, which have not yet been finalized, for the impairment of goodwill, other intangible assets and certain other assets. The non-cash charges are expected to total in the range of $2.6 billion to $2.9 billion on a pre-tax basis and $2.4 billion to $2.7 billion on an after-tax basis. Earnings per share will be reduced in the quarter due to the charges but they will not impact the company?s operating cash flow.
Softening business conditions and the resulting decline in the company?s stock price required management to update its impairment testing for goodwill, intangible assets, and other long lived assets as of March 31, 2008. As a result, the company will incur non-cash impairment charges in the quarter to reduce the book value of newspaper publishing goodwill, other newspaper intangible assets including mastheads and certain newspaper property, plant and equipment. The charges will also include accelerated depreciation for certain newspaper property, plant and equipment related to restructuring initiatives. The carrying value of certain of the company?s investments in newspaper partnerships and other businesses, which are accounted for under the equity method, will also be affected. The final amount of the charges will be included in earnings and disclosed in our Form 10-Q, which we will file with the Securities and Exchange Commission on or before August 8, 2008.
Total operating revenues for the company were $1.72 billion in the second quarter compared to $1.91 billion in the second quarter of 2007, reflecting primarily the impact the weaker economy in the U.S. and the UK had on advertising demand in publishing and broadcasting.