Gannett Q2 Earnings Poor as Huge Write-Off Looms
After-tax write-down on value of its newspapers drags down second-quarter numbers for newspaper, TV-broadcasting media conglomerate.
By Robert Marich -- Broadcasting & Cable, 7/16/2008 7:23:00 AM
Newspaper and TV-broadcasting media conglomerate Gannett added a new twist to the cavalcade of poor earnings Wednesday.
In announcing a 36.4% decline in second-quarter profit, the publisher of USA Today also said it will take a $2.4 billion-$2.7 billion noncash after-tax write-down on the value of its newspapers. Those earnings were “preliminary” from McLean, Va.-based Gannett and will be weighed down by the large newspaper write-down once finalized.
Such write-offs on asset book values recognize that the earnings power of the properties (including equipment such as printing presses) materially declined, but the charge doesn’t impact results from actual operations.
In preliminary earnings for its 23-station TV group, revenue fell 5.9% to $193 million while operating cash flow slid 6.8% to $89.4 million in broadcasting (which is less severe than the 24.7% operating-cash-flow dive in Gannett’s larger publishing segment). Political TV advertising was strong but other categories were weak, especially automotive. Within the broadcasting segment, online-advertising revenue climbed 17.1%.
“The impairment charges reflect, in part, these challenging economic conditions and pressure on our stock price, but they do not affect our ability to manage our businesses or make strategic acquisitions,” chairman, president and CEO Craig Dubow said in a statement. “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.”
Dubow said political advertising helped broadcasting, adding that lower interest expenses -- which fell to $44 million in the quarter versus $66.4 million a year ago -- will benefit future corporate earnings.
In overall Gannett preliminary second-quarter earnings, without the impact of the upcoming newspaper write-down, the company reported profit of $233 million, or $1.02 per share, compared with $366 million ($1.56) in the year-ago quarter. Corporate revenue fell 10% to $1.72 billion for the quarter, which ended June 29. The company held an analysts’ conference call after announcing the preliminary results.
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