Gannett 4Q earns up 3 percent

Gannett Co., the nation's largest newspaper publisher, said Friday its fourth-quarter earnings rose 3 percent, as record levels of political advertising on its broadcast outlets helped offset higher newspaper costs.

Gannett reported a fourth-quarter profit of $354 million, or $1.51 per share, compared to $343 million, or $1.44 a share, in the year-ago quarter.

Wall Street analysts polled by Thomson Financial predicted earnings of $1.49 per share in accordance with guidance the company issued last month.

Quarterly revenue increased 7.5 percent from $2.05 billion in the fourth quarter of 2005 to $2.21 billion. But the fourth quarter of 2006 had an extra week compared with 2005 because of a calendar quirk.

Broadcasting revenue rose 30.3 percent to $270.6 million for the quarter, driven by the political ads from the tumultuous congressional elections in November.

The increase gave a substantial boost to the company's bottom line even though broadcasting accounts for just 12 percent of Gannett's overall revenue.

The higher broadcast revenue also reflects the addition of two new stations, KTVD-TV in Denver and WATL-TV in Atlanta, that Gannett acquired in the summer of 2006. But broadcasting revenue still would have been increased by 22 percent even if the two stations were excluded.

In the core newspaper business, higher newsprint costs helped push quarterly expenses up by 8 percent, while revenue increased by only 5 percent.

Newsprint costs increased 6 percent in the quarter, even though usage was down by 1 percent from cost-cutting measures like lightweight newsprint and smaller newspaper pages, Chief Financial Officer Gracia Martore said in a conference call with analysts.

One bright spot on the newspaper side was a strong finish at Gannett's flagship, USA Today, the nation's largest newspaper. Fourth-quarter advertising revenue at the paper increased 13 percent from a year ago. Annual ad revenue at USA Today increased 3.1 percent.

For the year, Gannett earnings dropped by 7 percent, from $1.24 billion, or $5.05 per share, in 2005 to $1.16 billion, or $4.90 in share. Profits dropped even though Gannett recorded a record $8.03 billion in annual revenue, up 6 percent from 2005 revenue of $7.60 billion.

Again, the broadcasting unit fared better than newspapers in the annual numbers. Broadcasting revenue increased 16 percent, compared to revenue increases of only 4 percent in newspaper advertising and 3 percent in newspaper circulation.

"We are pleased to report record revenues for the year, surpassing $8.0 billion for the first time. We achieved these results in a year of interesting challenges as well as opportunities," said Gannett chief executive Craig Dubow in a statement.

Martore warned analysts in the conference call that the first quarter of 2007 will be challenging. She said there will be continued weakness in real-estate advertising in many parts of the country, as well as the unfavorable comparison to the first quarter of 2006, which got a big boost from advertising related to the Olympics, a staple of sports coverage at USA Today.

Gannett shares rose $1.52, or 2.62 percent, to close at $59.46 on the New York Stock Exchange. Shares have traded in the 52-week range of $51.65 to $63.77.

Stock prices of newspaper publishers have struggled in recent years amid concerns that revenue sources for newspapers, like classified ads, have begun to migrate to the Internet.

McLean-based Gannett publishes 90 daily newspapers and operates 23 television stations in the United States.

(SUBS graf 4 to correct quarterly revenue figures.)