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Earnings Preview: More Gannett woes expected in 1Q

SAN FRANCISCO – Gannett Co., the largest U.S. newspaper publisher and owner of the Tucson Citizen, is scheduled to report its first-quarter results before the stock market opens Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Coming off two consecutive years of declining revenue, Gannett’s slide is believed to have accelerated in the first quarter as recession-weary advertisers trimmed their budgets and shifted more spending to less expensive online alternatives.

Unless there’s a dramatic turnaround, Barrington Research Associates analyst James Goss expects Gannett’s revenue to plunge by about 15 percent this year to $5.7 billion. Before the dramatic downturn began in 2007, Gannett’s annual revenue stood at $7.8 billion.

Most of the pain is concentrated at Gannett’s 85 daily newspapers, including USA Today. But the McLean, Va.-based company’s 23 television stations also have been pinched by the recession.

To bolster its sagging profits, Gannett saved about $20 million in the first quarter by requiring most of its 41,500 employees, including Chief Executive Craig Dubow, to take one week of unpaid leave. The furloughs are meant to avoid further layoffs after Gannett cut 4,000 jobs, or about 10 percent of its work force, last year.

Shareholders also will relinquish some of their income, with Gannett’s board deciding in February to lower the company’s dividend by 90 percent. The first dividend cut in Gannett’s history is expected to save the company about $325 million annually.

Despite the steady stream of bad news, a major shareholder — Ariel Investments LLC — recently gave Gannett a vote of confidence by more than doubling its stake in the company to 12.5 percent. Since last week’s disclosure about Ariel’s increased investment, Gannett’s depressed market value has nearly doubled.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect Gannett to earn 25 cents per share on revenue of $1.45 billion. The revenue projection represents a 14 percent drop from last year’s first quarter. Analyst estimates typically exclude one-time items.

ANALYST TAKE: Although he believes Gannett’s finances are in better shape than most newspaper publishers, Goss doubts the company will be able to engineer a turnaround without more cutbacks.

The challenges confronting Gannett are “unlike anything the company or its industry has ever faced,” Goss wrote in a recent research note. “While we feel management’s efforts are substantial, to this point they have been inadequate to restore positive momentum.”

WHAT’S AHEAD: Signaling the company’s financial woes aren’t easing, Gannett is imposing another round of unpaid furloughs during the second quarter. Many employees making at least $90,000 annually will have to take two weeks of unpaid leave before July.

Although this year already looks like another downer, there’s a glimmer of hope in early 2010. That’s because 12 of Gannett’s TV stations are NBC affiliates that should get an advertising boost from the broadcast rights to the Winter Olympics in Vancouver beginning next February.

STOCK PERFORMANCE: Gannett shares plunged 72 percent in the first quarter to finish March at $2.20. Propelled by Ariel’s show of faith in Gannett’s management, the stock price ended Monday at $4.06.

Citizen Online Archive, 2006-2009

This archive contains all the stories that appeared on the Tucson Citizen's website from mid-2006 to June 1, 2009.

In 2010, a power surge fried a server that contained all of videos linked to dozens of stories in this archive. Also, a server that contained all of the databases for dozens of stories was accidentally erased, so all of those links are broken as well. However, all of the text and photos that accompanied some stories have been preserved.

For all of the stories that were archived by the Tucson Citizen newspaper's library in a digital archive between 1993 and 2009, go to Morgue Part 2

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