Gannett to Write Down Its Assets by More Than $2 Billion
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Tuesday, June 10, 2008
Gannett will write down its assets by about $2.5 billion to $3 billion this quarter to reflect the declining value of its operations in the United States and Britain.
At a Deutsche Bank investor conference in New York, Gannett Chief Financial Officer Gracia C. Martore said much of the write-down reflects declining value in Gannett's British newspaper operation, Newsquest Media Group. It also generally reflects "where the market perceives traditional print businesses to be," she said.
On an after-tax basis, the write-down will be in a range of $2.3 billion to $2.8 billion, she said.
Gannett shares fell yesterday by 1.1 percent, to $27.45 a share. Stock in the McLean company has lost roughly half its value in the past year as the newspaper industry has struggled with declining revenue and circulation. Gannett publishes newspapers including USA Today and owns television stations.
With about 228 million shares outstanding, the company has a market capitalization of about $6.3 billion.
Gannett acquired Newsquest in 1999. The subsidiary includes 17 dailies and nearly 300 weeklies in Britain, with a combined readership of more than 13 million. Newsquest employs about 8,500 workers.
The economic troubles that have hampered U.S. operations have hit Britain in recent months, Martore said. The real estate market in particular has taken a nose dive there, resulting in a loss of advertising revenue.
But Martore said Gannett is optimistic about the long-term prospects at Newsquest.
"I don't think it reflects that Newsquest was a bad acquisition," Martore said.
More generally, Gannett chief executive Craig A. Dubow said Wall Street is overly negative about Gannett's prospects. He said Gannett is in the midst of a transition that ultimately will allow it to do a better job of helping advertisers target consumers, with Gannett's news content as the hook.
"I believe our strengths are getting undervalued way too much," Dubow said.
Martore emphasized that the write-down is essentially an accounting issue and does not affect Gannett's day-to-day business operations. Excluding the write-down, she predicted second quarter earnings of $1.01 to $1.03 a share. Wall Street analysts surveyed by Thomson Financial expect $1.06.
