Gannett Co. Inc. (GCI), the largest newspaper publisher in the U.S., recently reported third-quarter 2009 results. Despite a faltering economy and decline in print advertising revenue, the company’s earnings topped expectations, buoyed by effective cost-cutting measures, lower newsprint expense, reduction in headcount and pay cuts. Operating expenses dropped 14.4% to $1,179.6 million.

Gannett’s quarterly earnings of 44 cents a share surpassed the Zacks Consensus Estimate of 38 cents as well as the company’s expected guidance range of 39 cents to 42 cents a share. However, earnings fell 42.1% year-on-year from 76 cents reported in the prior-year quarter due to an 18.4% decline registered in the total revenue of $1,336.6 million.

On a reported basis Incorporatedluding one-time items, earnings came in at 31 cents a share, down 55.1% from 69 cents posted in the year-ago quarter.

Gannett is facing the same dramatic decline in advertising revenue as the rest of the newspaper industry. Publishing advertising revenue tumbled 28.4% to $699.6 million, after falling 32.0% in the second quarter and 34.1% in the first quarter. Publishing circulation also dipped 4.9% to $284.3 million.

Although the decline in publishing advertising revenue narrowed for the reported period compared to the previous couple of quarters, no real strength was witnessed in the advertising environment. Although murmurs about advertisers returning to the market are gaining ground, the positive effects have yet to be realized in the current financial results.

Broadcasting revenue also slipped 23.1% to $151.5 million due to the absence of Olympic and political advertising, besides sustained softness in the automobile category. The only segment to show a sharp rise was digital. Revenue soared 84.2% to $143 million due to the consolidation of CareerBuilder results.

Like Gannett, other newspaper companies such as Washington Post Company (WPO), Journal Communications (JRN), McClatchy Company (MNI) and The New York Times Company (NYT) have long been grappling with the slump in print advertising demand amid the global meltdown as advertisers are migrating to the Internet driven by increasing readership and lower ad prices online than in print.

The publisher of 84 daily newspapers in the U.S., Gannett recently raised $500 million in two $250 million tranches due 2014 and 2017 to repay outstanding debt under its revolving credit facilities and term loan. The company lowered its debt by $197 million in the quarter and $504 million year-to-date.

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