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Gannett is the latest media company to take a huge write-down reflecting impaired goodwill.
Stephen Taub, CFO.com | US
June 9, 2008
The contraction of the newspaper business is not reflected just by declining readership, profits, and employment. It's also shrinking balance sheets.
The latest one to deliver bad news: Gannett. The company announced it will take non-cash charges of $2.5 billion to $3 billion for the quarter ending June 29, 2008 for the impairment of goodwill and other intangibles and assets. That works out to $2.3 billion to $2.8 billion on an after-tax basis.
The impairment charge reflects "the challenging business conditions" and a decline in the company’s stock price, Gannett said.
"The impairments are non-cash charges to GAAP earnings and do not in any way impact our ability to operate our businesses, make strategic investments and acquisitions, reduce debt, pay dividends, or progress with our strategic efforts as we position the company for the changing media landscape and a more favorable economic environment," said CFO Gracia Martore in a press release.
At an investor conference in New York, Martore said much of the write-down reflects a declining value in Gannett's United Kingdom operation, Newsquest, according to USA Today, which is owned by Gannett. It also generally reveals "where the market perceives traditional print businesses to be," she said, the Associated Press reported.
Gannett acquired Newsquest in 1999. The operation includes 17 dailies and nearly 300 weeklies in the United Kingdom with a combined readership of more than 13 million.
Another large publisher, Lee Enterprises, took a $772 million goodwill impairment charge in May. Lee also reduced the carrying value of its stake in an agreement, under which its Arizona Daily Star and Gannett's Tucson Citizen are jointly operated, by $90.4 million.
Earlier this year, The McClatchy Co. reported a $1.43 billion after-tax fourth-quarter loss from continuing operations, which included $1.47 billion in impairment charges for goodwill and mastheads.
"The recessionary outlook, coupled with the continued decline in our stock price since the end of the third quarter, resulted in additional impairment charges in the fourth quarter," said Gary Pruitt, McClatchy's chairman and CEO. "It's important to understand that this non-cash charge does not reflect our view of the long-term health of the newspaper industry or the value of McClatchy. However, when completing the goodwill impairment assessment, GAAP required that we reconcile the sum of the fair values of our reporting units to our current market capitalization."