Daily Advertiser publisher Gannett Co. reported net income of $158 million, or 69 cents per share, in the fourth quarter - a 36 percent decline from a year ago. But those profits will be washed out when the company takes pretax writedowns of about $5.9 billion to reflect the declining value of its newspapers.
In its preliminary earnings statement, Gannett, the country's biggest newspaper publisher, blamed falling advertising revenue related to the national recession. The company cut its workforce in the past several months by about 10 percent. It also is forcing employees to take unpaid vacations.
The AP reported today:
Revenue declined 8.5 percent to $1.74 billion, below expectations of $1.79 billion.
Gannett shares fell 46 cents, or 6.7 percent, to $6.44 in morning trading Friday.
The figures do not reflect the accounting writedowns, which Gannett expects to total $5.1 billion to $5.9 billion before taxes. The charges would reduce profits by $4.5 billion to $5.2 billion after taxes, the company said.
By law, companies are required to review annually the book values of their various assets and record charges against earnings if those values drop. Many newspaper companies have had to take such charges because long-term revenue prospects have declined along with the companies' stock prices. Gannett's stock fell 79 percent to $8 in 2008.
Although those writedowns do not affect Gannett's cash on hand or its day-to-day operations, a writedown of that size does reflect the company's grim assessment of itself.
Like other newspaper publishers, Gannett saw ad revenue begin to tumble over the summer as the recession compounded weaknesses from the migration of readers and advertisers to the Internet.
Gannett blamed the writedown on "the challenges facing the company's publishing businesses, including recessions in both the U.S. and the U.K. and their impact on advertising demand, and the decline generally in equity values and specifically its stock price."
Read the rest of the AP story here.