Archive for the ‘SEC documents’ Category

Documents reveal double-digit profit margins at scores of papers now on verge of massive layoffs

November 28, 2008

We’ve always heard that Gannett newspapers racked up double-digit profit margins, even as bad times engulfed the industry. But I’ve never seen actual numbers until now, because Corporate keeps the performance of individual businesses a well-guarded secret.

I’ve recently had an opportunity to review margins for most of GCI’s U.S. newspapers as of a year ago (USA Today isn’t included). They’re disclosed in an internal report, the Cost & Statistical Summary, provided to me by a Gannett Blog reader; it covers the first three quarters (periods 1-9) of 2007. The reader asked to remain anonymous, citing possible repercussions if identified. The reader did not have more current data, for 2008. And the reader requested I not share copies of the report with anyone.

Green Bay: No. 1 at 42.5%
The numbers are startling — especially now, with Gannett poised to lay off perhaps thousands of newspaper workers next week in another bid to boost the company’s flagging stock. Every newspaper except Detroit’s was profitable a year ago — although some, just barely so.

The Green Bay Press-Gazette was the star. It had the single-highest profit margin: 42.5%. In other words, Green Bay kept 43 cents of every dollar it took in. The paper’s total ad revenue over the three quarters: $25 million. The report doesn’t disclose circulation revenue for any paper. Applied only to ad revenue, then, Green Bay made around $10.6 million during the period. (Will Green Bay lay off workers next week? We’ll find out.)

Now, some readers say these are, in fact, gross profit margins — that certain costs must still be subtracted before you can get to “net” earnings. That may be true, but the reports I’ve got just say “newspaper profit margin.” (See a screenshot of one report.)

The money-losing Detroit Free Press and the formerly Gannett-owned Detroit News are published by the GCI-controlled joint operating agency there. To be sure, several barely profitable papers may have dipped into the red since this report was published. The economy went over a cliff this year when the housing bubble collapsed, throwing the nation into recession. Yet, I imagine many of the papers listed below are still enjoying very healthy margins.

The Arizona Republic vies with USA Today as the company’s biggest revenue generator. (Since USAT isn’t included in these reports, the exact rankings remain unknown.) The Republic‘s margin was a solid 25.43%, on $319 million in total ad revenue during the three quarters.

Paper-by-paper: Margins, ad sales
Following is the performance of more than 80 U.S. newspapers over the first three quarters of last year, ending about Sept. 30. Gannett’s 17-daily U.K. Newsquest chain and the TV division aren’t included. Total ad sales are provided, but not circulation revenue. (However, circulation is a fraction of the newspaper division’s revenue: just 21% so far this year, says the third-quarter earnings report.)

Note that many newspapers are tiny revenue-generators. Also, names below are those listed in the report; some Wisconsin and Ohio papers are grouped together. To get a sense of an individual paper’s profit in dollars, multiply the margin against ad sales.

  • Alexandria, La.: 20.56% margin; $9.7 million in ad sales
  • Appleton, Wisc.: 32.47%; $22.2
  • Asbury Park, N.J.: 19.16%; $82.3
  • Asheville, N.C.: 23.49%; $20.6
  • Battle Creek, Mich.: 13.05%; $6.7
  • Binghamton, N.Y.: 32.64%; $18.1
  • Brevard, Fla.: 24.68%; $44.8
  • Bridgewater, N.J.: 10.04%; $13.3
  • Bucyrus, Ohio: 9.59%; $1.0
  • Burlington, Vt.: 36.21%; $21.3
  • Central Wisconsin: 24.25%; $16.2
  • Cherry Hill, N.J.: 9.83%; $40.7
  • Chillicothe, Ohio: 22.3%; $3.4
  • Cincinnati: 13.97%; $111.9
  • Clarksville, Tenn.: 26.01%; $8.9
  • Coshocton, Ohio: 4.67%; $0.9
  • Des Moines: 24.58%; $71.0
  • Detroit: negative 4.96%; $164.8
  • East Brunswick, N.J.: 16.07%; $19.6
  • East Wisconsin: 29.75%; $77.8
  • Elmira, N.Y.: 19.2%; $9.0
  • Fond du Lac, Wisc.: 8.02%; $3.0
  • Fort Collins, Colo.: 30.97%; $16.2
  • Fort Myers, Fla.: 29.99%; $66.3
  • Freemont, Ohio: 11.89%; $2.6
  • Great Falls, Mont.: 21.18%; $9.2
  • Green Bay, Wisc.: 42.5%; $25.0
  • Greenville, S.C.: 27.29%; $45.3
  • Guam: 40.39%; $11.2
  • Hattiesburg, Miss.: 16.44%; $7.3
  • Honolulu: 3.33%; $76.6
  • Indianapolis: 24.97%; $116.3
  • Iowa City, Iowa: 15.17%; $7.0
  • Ithaca, N.Y.: 16.01%; $5.8
  • Jackson, Miss.: 25.94%; $34.5
  • Jackson, Tenn.: 15.14%; $10.2
  • Lafayette, Ind.: 27.85%; $12.2
  • Lafayette, La.: 33.52%; $23.2
  • Lancaster, Ohio: 15.15%; $3.0
  • Lansing, Mich.: 23.22%; $26.7
  • Louisville: 19.33%; $78.5
  • Manitowoc, Wisc.: 21.12%; $4.7
  • Mansfield, Ohio: 31.39%; $8.3
  • Marion, Ohio: 26.04%; $3.0
  • Marshfield, Wisc.: 15.23%; $2.2
  • Monroe, La.: 15.09%; $10.6
  • Montgomery, Ala.: 27.83%; $22.1
  • Morristown, N.J.: 14.93%; $16.4
  • Mountain Home, Ark.: 20.25%; $3.1
  • Muncie, Ind.: 24.0%; $9.5
  • Nashville: 21.38%; $93.1
  • Newark, Ohio: 17.25%; $5.1
  • NNC Ohio: 22.09%; $37.0
  • Opelousas, La.: 33.0%; $2.6
  • Oshkosh, Wisc.: 31.15%; $6.8
  • Palm Springs, Calif.: 37.98%; $40.2
  • Pensacola, Fla.: 27.10%; $28.7
  • Phoenix: 25.43%; $319.2
  • Port Clinton, Ohio: 2.74%; $0.8
  • Port Huron, Mich.: 17.58%; $9.0
  • Poughkeepsie, N.Y.: 27.84%; $20.0
  • Reno: 34.90%; $42.8
  • Richmond, Ind.: 18.17%; $5.2
  • Rochester, N.Y.: 28.48%; $62.3
  • St. Cloud, Minn.: 28.16%; $17.2
  • St. George, Utah: 29.91%; $13.7
  • Salem, Ore.: 32.95%; $23.2
  • Salinas, Calif.: 7.44%; $8.2
  • Salisbury, Md.: 26.74%; $16.8
  • Sheboygan, Wisc.: 24.01%; $6.7
  • Shreveport, La.: 29.22%; $23.9
  • Sioux Falls, S.D.: 36.55%; $23.7
  • Springfield, Mo.: 37.50%; $28.8
  • Staunton, Va.: 25.56%; $5.4
  • Stevens Point, Wisc.: 19.81%; $2.4
  • Tallahassee: 25.55%; $24.3
  • Tucson-TNI: 28.26%; $67.7
  • Tulare, Calif.: 39.93%; $2.4
  • Vineland, N.J.: 19.15%; $7.1
  • Visalia, Calif.: 22.87%; $9.2
  • Wausau, Wis.: 32.11%; $8.7
  • Westchester, N.Y.: 14.84%; $79.1
  • Wilmington, Del.: 25.08%; $54.7
  • Wisconsin RAPI: 19.92%; $2.3
  • Zanesville, Ohio: 23.08% margin; $4.0 million in ad sales

Earlier: We’re building a paper-by-paper list of layoffs; just three papers are listed so far. Will yours be included when publishers disclose cuts next week?

Please post your thoughts in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

Ripple6, Saridakis — and those curious payments

November 14, 2008

Companies trying to bury awkward news they don’t want widely circulated often stick it at the bottom of a press release or deep inside a regulatory filing. So, for example, we found the following paragraph at the very end of Gannett’s announcement yesterday that it had bought social-network software maker Ripple6:

“As part of the transaction, the 10 percent share of Ripple6 owned by Chris Saridakis, senior vice president and chief digital officer of Gannett, was bought out completely by Gannett. He did not participate in the sale negotiations.”

Smart Gannett Blog readers noticed that curious passage, and wondered, understandably, why GCI is doing big business with one of its own officers. Worse still, the announcement says: “Terms were not disclosed.” That’s a fancy-schmancy way of saying Gannett would not reveal the price paid for Ripple6 — or the method of payment. (Gannett stock? Unlikely. Cash? Probably.)

One unhappy reader summed it up last night in a comment: “A horrible economy. A stock that dives from $90 to $8.50. In the middle of it all, an acquisition that benefits — more than GCI stakeholders — one of its new division heads.”

Saridakis beats odds — twice!
Gannett will use Ripple6 to create and power online communities, including its most successful ones to date: the recently rebranded sites.

Now, there are thousands of software companies in the world to buy. What are the odds GCI would choose one co-owned by one of its highest-ranking officers? Better yet, what are the odds Gannett would make that kind of deal twice? Quite good, it turns out.

Just eight months ago, GCI paid $4.6 million to Saridakis (left), for the remaining shares he owned in PointRoll — the advertising services company Gannett bought in 2005. Saridakis, 40, was its CEO at the time, and so a significant stockholder.

That $4.6 million payment raised eyebrows, when it was disclosed last spring in a shareholders proxy report filing with the U.S. Securities and Exchange Commission. Moreover, the payment was disclosed way back on page 50, where many investors might not have seen it. By then, of course, Saridakis had pole-vaulted onto the powerful Gannett Management Committee, chaired by CEO Craig Dubow. Saridakis was the young technologist, suddenly in line to succeed Dubow.

Document reveals $2.2 million contract
The same proxy report also says: “In March 2008, we entered into contracts with Ripple6, Inc., an entity in which Mr. Saridakis holds a 10% interest, pursuant to which Ripple6 will provide approximately $2.2 million of computer programming services related to strategic plan initiatives. As our senior management was aware of his indirect interest, Mr. Saridakis did not participate in the negotiation of these contracts. Due to the immaterial amounts involved, the contracts were approved by senior management.”

That $2.2 million is the gross amount, of course; I’d like to know how much of it was profit split among Saridakis and his partners — and how big a cut Saridakis got.

Please post your replies in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

In quarterly SEC report, a retirement plan warning

November 6, 2008

I’ve just breezed through Gannett’s third-quarter 10-Q report, filed earlier today with the U.S. Securities and Exchange Commission. Two items jumped out; I’m repeating the text word for word:

  • For 2009, the company’s expenses for its qualified retirement plans may increase substantially as the market value of plan assets has declined as a direct consequence of the recent financial market disruption. The impact of changes in plan asset values will not be precisely known, however, until the end of 2008.
  • The company has further plans to significantly reduce company wide expense levels in the face of these economic factors and the competitive pressures facing its businesses.

SEC 101
Gannett and other companies whose stock is owned by the public must file a 10-Q to formally report quarterly revenue and earnings; the company already made its informal disclosure last month.

What did I miss? Please post replies in the comments section, below. E-mail confidentially via gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

Calling all SEC experts; this one’s got me stumped

November 1, 2008

Why is the Gannett 401(k) Savings Plan registering 25 million shares of common stock with the U.S. Securities and Exchange Commission?

Briefs: Online ad sales fall; Newsquest staying put?

October 25, 2008

Odds ‘n’ ends left over from yesterday’s third-quarter earnings report, and Wall Street teleconference.

Online revenues down
In what may be a first — and not a good one — online advertising sales in the 84-daily community newspaper division have fallen.

Such sales fell about 7% in the third quarter from a year ago, CEO Craig Dubow (left) told Wall Street stock analysts. In contrast, he said, U.K. newspaper division Newsquest was up about 10%, in British pounds Sterling. Broadcasting rose about 15%. (These figures are in the teleconference transcript; I can’t find the same dataset in the earnings release, however.)

Dubow’s breakdown for domestic and U.K. is the first I’ve seen in a year; earlier 10-Q filings with the U.S. Securities and Exchange Commission gave one figure for all of GCI’s papers. Indeed, the last time Gannett reported a separate figure for U.S. papers — in 2007’s third quarter 10-Q — domestic online revenue rose 11% from a year before. So, the U.S. papers have gone from 11% quarterly growth to a 7% decline. This is not a good thing.

Four-state squeeze
Arizona, California, Florida, and Nevada have had much larger declines in classified advertising relative to the rest of Gannett’s markets, and that continued again in the third quarter. Properties in those states produced about 23% of the community newspaper division’s ad revenue — but they drove 36% of the ad revenue decline.

Here’s what this boils down to: The Arizona Republic and four Florida newspapers pumped up Gannett’s revenue during the housing bubble. They had booming real estate markets — and all the ad sales that came with a boom. But when the bust hit, advertising withered, and they contributed more than a third of the 18% dive in third-quarter newspaper ad sales.

Newsquest stays put?
Responding to a question from a stock analyst, Dubow didn’t sound like he’s interested in selling Gannett’s troubled U.K. division — despite published speculation to the contrary. “We have been very proud of what the Newsquest folks have done for us for a number of years and we are very, very aware of the impacts that have occurred because of the economy. . . . They are a bit behind us. I think it is quite clear when you take a look at it, maybe six to nine months or so in what we are seeing that’s already occurred here in the U.S.”

Please post your replies in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

[Image: today’s Republic, Newseum]

By the numbers: GCI gains Web share from ’07

October 24, 2008

Spotlighting digital growth, Gannett’s websites attracted 21% more unique visitors last month than in September 2007, the just-released third-quarter earnings report shows.

The company’s consolidated domestic Internet audience share, according to Nielsen//NetRatings data cited in earnings reports:

  • September 2008: 25.4 million unique visitors reaching 15.6% of the Internet audience
  • September 2007: 21.0 million unique visitors, reaching 13.4% of the audience
(Why unique visitors is a tricky metric.)

In new disclosure, digital less than 5% of total sales

October 24, 2008

Gannett began breaking out its digital revenue with today’s third-quarter earnings report — and the results are eye-opening.

Revenue from jobs site CareerBuilder, ad services division PointRoll, and other digital subsidiaries totaled $77.6 million — 4.7% of the $1.64 billion in operating revenue during the period. That’s way up from $17.2 million a year ago, although it remains just a tiny fraction of Gannett’s overall operations — underlining the challenge ahead, given digital’s importance in the future.

In a fresh comment, a reader says: “It’s only sort of correct that digital division revenue is 4.7% — Q3 only included 1 month of CareerBuilder revenue. By Q4 the division will be 11% or more of GCI revenue. Chief Financial Officer Gracia Martore said:

‘Revenue in the digital segment was about $78 million this quarter …. On a pro forma basis, assuming we owned CareerBuilder and Shop Local for the entire third quarter in 2008, digital revenue would have been in the range of $175 million to $185 million …'”

Bye-bye, monthly stats
The digital breakout came in lieu of the familiar monthly statistical report, which Gannett said today it had discontinued, citing big fluctuations in digital revenue. Yet, media stock analysts told Corporate in an earnings teleconference that they still wanted the monthly report. “You guys don’t stop printing a newspaper when the news is really bad,” said Craig Huber of Barclays Capital. “Why is this being stopped now? I mean, you guys have been doing this for well over 15 years.”

Chief Financial Officer Gracia Martore rushed to correct that impression, however, saying the report wasn’t significant because GCI isn’t run on a month-to-month basis. Still, sensing dissatisfaction on the conference call, she suggested the report could return. “At a point, we may re-institute it,” she said. (Conference transcript.)

It sure seems like an odd move. The trend among publicly traded companies like Gannett has been toward more disclosure, more “transparency.” Discontinuing the monthly report now, when there’s so much uncertainty, only sows suspicions about ulterior motives. “This is like the very worst time you could possibly pull it,” Huber said.

Please post your replies in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

Breaking: Gannett’s third-quarter profits dive 32%; ad revenue slide worsens; dividend remains safe

October 24, 2008

Gannett said third-quarter earnings plunged 32% on a worsening decline in newspaper advertising sales, spurring more job cuts by year’s end — and encouraging the once-unthinkable: slashing the company’s unusually generous dividend.

The results were largely in line with Wall Street’s expectations. But CEO Craig Dubow and other top executives failed to rally influential Wall Street stock analysts during an occasionally contentious teleconference on the quarterly results.

Chief Financial Officer Gracia Martore (left) ruled out an immediate dividend cut. But she said management and the board of directors continue to study how best to allocate capital. She said directors are scheduled to meet next week, although she didn’t disclose their agenda. “We’ll continue to discuss it with the board,” Martore said.

She also indicated severance expenses would rise in the current quarter — reflecting Dubow’s warning last week that more layoffs are in the works. Martore didn’t offer any details, however, including any target for job cuts, or a timetable.

Some analysts were unhappy with Gannett’s disclosure today that it had stopped reporting revenue through the familiar monthly statistical reports. They also questioned GCI’s failure to more aggressively buy back shares, now down 78% from a year ago. (Conference transcript.)

Gannett Blog reader reaction came fast. “I love it,” one said. “A newspaper-media company withholding news. In the conference call, they disclosed they will no longer publish the monthly ad revenue figures, but will only put them out quarterly. Stock analysts didn’t like this . . . and Corporate had some lame response about monthly not fully counting digital revenues, etc. The other ominous thing I got out of the conference call was that Corporate has no interest at buying back GCI stock, even at this low level.”

Ad revenue collapse accelerates
For the quarter, Gannett reported net income of $158 million, or 69 cents a share, on revenue of $1.64 billion — down from $234 million, or $1.01 per share, a year before.

Revenue exceeded the $1.61 billion forecast by analysts, but was nonetheless 9% lower than a year ago. Excluding severance costs for a big newspaper division layoff in August, Gannett would have earned 76 cents a share, a penny above what analysts expected.

Newspaper ad revenue plunged about 18% from last year’s third quarter — the steepest year-over-year decline since revenue began falling early last year. The revised newspaper division ad revenue trend:

Flagship USA Today‘s ad sales fell 7.1% in the third quarter vs. a year ago, the company said. Paid ad pages totaled 713 vs. 803 last year.

Stock closes down
shares closed at $9.47, down about 2%, after recovering from an earlier low of $8.61. Still, GCI’s dividend yield has soared to nearly 17%, spurring speculation that the company would move today to cut the payout — a step considered by industry rivals. In its third-quarter earnings report yesterday, the New York Times Co. said it was considering a reduction in its dividend.

Please post your replies in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

[Image: today’s USAT front page, Newseum]

First edition: Today’s earnings, your reaction

October 24, 2008

Gannett discloses third-quarter earnings this morning in a statement that should hit news wires by about 8:30 a.m. ET. East Coast readers will probably see it before I do, since I’m on the West Coast.

So, please post details — including text from the earnings statement itself — in the comments section, below. And don’t be shy about flagging the most interesting stuff you find; that’ll give me a running start. (Yes, it’s crowdsourcing!)

I’m pretty sure Gannett will move the statement on PR Newswire. You might also check Business Wire. Eventually, it will show up in the online investor relations section.

Wall Street has forecast sharp declines for the quarter. If Gannett doesn’t at least meet these already marked-down third-quarter figures, the company’s beleaguered stock could fall further:

  • Profit: 75 cents a share vs. $1.01 a year ago
  • Sales: $1.62 billion vs. $1.81 billion
In a comment, a reader warned today’s teleconference with Wall Street analysts could be “absolutely brutal. It’s certainly not coincidental that the note announcing Corporate buyouts came out the day before.”

I plan to monitor that 10 a.m. ET listen-only conference call, where top GCI executives will answer questions from media stock analysts. The call will be webcast, and is open to the public, although only analysts get to pose questions. (Webcast details.)

What Dubow, three others would get in severance

October 22, 2008

$79 million

That’s the scheduled payout for CEO Craig Dubow (left) and three other top executives, if they lose their jobs within two years of what’s called a “change in control,” public documents show; Dubow would get nearly half the total: $36.3 million. (Details on the other three execs, plus more, in Golden parachutes? The answer is: $79 million

With Gannett’s market value falling dangerously low amid the stock’s latest plunge, a reader suggested I remind you of these payouts. The lower its market value, the more vulnerable GCI becomes to the sort of takeover that would spur those seven-figure golden parachutes.