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Lack Of Real Estate Ads Pushes Gannett Quarterly Earnings 10.5% Lower

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By MATTHEW BARAKAT The Associated Press

Published: October 18, 2007

McLEAN, Va. - Gannett Co., the largest newspaper publisher in the country and owner of USA Today, said Wednesday that third-quarter earnings fell 10.5 percent, the result, in part, of slumping real estate ads and a tough comparison to year-ago results boosted by heavy political advertising.

Net income dropped to $234 million, or $1.01 a share, in the three months that ended Sept. 30 from $261.4 million, or $1.11 a share, in the year-ago period. The latest quarter included a charge of $14.5 million for restructuring costs, mostly from severance costs including a consolidation of Gannett's circulation call centers.

Revenue fell 4 percent to $1.81 billion from $1.88 billion last year. Newspaper advertising revenue fell 6 percent to $1.19 billion. The revenue figures suffered not only from the loss of political advertising compared with 2006 but also from the divestiture of five of Gannett's 90 daily newspapers, including the sale of four dailies in May to New York-based GateHouse Media.

Revenue from classified ads was down 7.7 percent compared with the year-ago period. In a conference call with investors, Gannett chairman and Chief Executive Officer Craig Dubow said the slumping real estate market hit Gannett particularly hard. The company has multiple newspapers in Florida, California, Nevada and Arizona - markets where the real estate slump has been pronounced and resulted in significantly reduced advertising.

Dubow said the company expects the real estate slump to continue into 2008.

Generally, newspapers across the country have seen revenue dwindle from classified ads due in part to competition from Web sites offering free classified ads.

Advertising at USA Today fell 6.6 percent from quarter to quarter, reflecting what Dubow called 'a choppy national advertising market.'

Gannett subsidiary Newsquest, which publishes 18 daily newspapers and nearly 300 titles overall in the United Kingdom, outperformed U.S. operations, the company said.

Several analysts asked Dubow whether Gannett, which owns and operates 23 television stations across the United States in addition to its publishing titles, is considering spinning off its newspaper division from the rest of the company. Two newspaper publishers, E.W. Scripps Co. and Belo Corp., announced plans to spin off their newspaper units into separate companies in the past two weeks. Dubow said Gannett had no such plans.

Broadcasting revenue fell 3.4 percent to $189.5 million.

Gannett shares rose 5 cents to close at $43.55 Wednesday.

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