Gannett's Q4 lifted by political ads

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McLEAN, Va. -- Gannett Co., the nation's largest newspaper publisher, said Friday its fourth-quarter earnings rose 3%, 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% 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% 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% 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% even if the two stations were excluded.

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

Newsprint costs increased 6% in the quarter, even though usage was down by 1% 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% from a year ago. Annual ad revenue at USA Today increased 3.1%.

For the year, Gannett earnings dropped by 7%, 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% from 2005 revenue of $7.60 billion.

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



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