Gannett Profit Beats Expectations Even as Revenue Falls

McLean-based Gannett -- the nation's largest publisher of newspapers, including USA Today -- said yesterday that it posted a $70.5 million profit in the second quarter, compared with a loss last year, despite a continue slide in advertising revenue.

The results were better than analysts had expected and sent Gannett stock soaring; it closed up 29 percent, to $4.50 per share.

The profit came from cost-cutting, not growth. And the company predicted that revenue would continue to dip in its broadcast unit next quarter.

"The decline in our operating expenses reflects our efforts to achieve efficiencies and further consolidations company-wide, furloughs in the current quarter and significantly lower newsprint expense," chief financial officer Gracia Martore said in a statement.

For the second quarter of this year, Gannett reported net income of $70.5 million (30 cents per share) on $1.4 billion in revenue, compared with a net loss of $2.3 billion ($10.03) on $1.7 billion in revenue in the second quarter of 2008.

Gannett's big second-quarter loss in 2008 was driven by a $2.8 billion write-down in the value of assets the company recorded because of the declining value of newspapers.

The turnaround in the second quarter was driven by cost-cutting. Excluding the big write-down last year, Gannett managed to cut costs 19.7 percent between the second quarter of this year and last.

Gannett said earlier this month that it would cut about 1,400 jobs across the company's 84 daily papers, less than a year after it cut 10 percent of its workforce. The company also has imposed furloughs and wage freezes.

Also in the second quarter, Gannett shut down the print operations of its Tucson Citizen newspaper to save money.

"I suspect what the stock market is reflecting is some kind of belief that 'Gee, Gannett's still profitable,' " newspaper analyst John Morton said of yesterday's stock spike. "But the problems that have [recently] driven revenues down . . . show no sign they're going to go away anytime soon."

For the year, shares of Gannett are down 55 percent.

Broken down by segment, Gannett's more than 80 newspapers had the worst quarter. Publishing revenue was down 25.8 percent compared with the corresponding quarter last year, as advertising plummeted 32 percent. At USA Today, paid ad pages dropped from 831 in the second quarter of 2008 to 602 in the second quarter of this year. If there was any consolation for Gannett's U.S. properties, it came from the company's British papers, where revenue was down even more.

At Gannett's 23 television stations, second-quarter revenue was down 19.7 percent compared with last year. "Based on current trends, we would expect the percentage decline in television revenues to be in the mid-twenties for the third quarter of 2009 compared to the third quarter of 2009," the company said, largely from the lack of Olympic and political advertising that aired last year.

Gannett's digital unit, which includes its CareerBuilder job-search site, was the lone growth story in the earnings. The unit reported $142 million in revenue in the second quarter, up from $20 million in the comparable period last year.