GCI shares were clobbered today in another painful stock market meltdown -- falling 4.9%, and crashing through the psychologically important $20 threshold. There's no telling where it's headed next.Shares closed at $19.83 on unusally high sales volume: More than 6.1 million shares changed hands vs. the daily average of 3.7 million shares, Google Finance says. GCI stock is now down a shocking 30% in the past month vs. a much smaller 9% decline in the S&P-500 Index, a broad measure of stocks overall.
Gannett had plenty of company: Every newspaper publisher's stock fell, except for GateHouse Media's. For comparison, the S&P-500 Index fell 1.8% and the Dow Jones industrial average fell 1.5%. GCI's tumble was third worst:
- McClatchy: down 7.1%
- Journal Register Co.: down 5%
- Gannett: down 4.9%
- Lee Enterprises: down 3.7%
- E.W. Scripps: down 3.3%
- News Corp.: down 2.8%
- New York Times Co.: down 2.6%
- Washington Post Co.: down 1.1%
- Belo: down 0.3%
Imagining that 'Dear Colleague' e-mail
I know many of you are worried, and so am I. While I know a little about many things in Gannett, I am not expert enough to drill down into GCI's finances to figure out what management may be contemplating next. Those sources have not come forward, yet.
But I'm sad to say that I've lately been imagining a "Dear Colleague" e-mail that you may receive at some point. I've seen hundreds of business stories over the last 22 years, quoting this nearly identical language. You need only insert [Gannett] for the company name to see what it would read like:
Dear valued [Gannett] colleague,
Today, your board of directors took several important steps designed to carry [Gannett] into a brighter future. We have accepted the resignation of Chairman and Chief Executive Officer [Craig A. Dubow] from the company and from the board. Also, your board has engaged Goldman Sachs to examine all of [Gannett]'s strategic alternatives, including significant asset sales.
We know this news is unsettling to you. But your board is committed to maximizing share . . . (and yada, yada, yada).
Are you a financial news/stock editor or reporter? I now need help dealing with Gannett's stock price. If you could pitch in by writing something authoritative -- analysis, Q&A -- your increasingly nervous co-workers will appreciate it. E-mail me confidentially, using this link from a non-work computer; see Tipsters Anonymous Policy in the green sidebar, upper right.
[Image: Google Finance]
Who would step in to replace him?
ReplyDeleteI can't think of anyone with the courage or foresight or leadership within the Gannett camp or for that matter other media companies.
They are all burned out. Its the Wharton School types that screwed all of this up to begin with. Thanks to the lead from Curley and McCorky.
What is next? For such a long time they told us that "everything is good" then it became "we are going through some changes and we are right sizing but everything will be O.K., then they told us to work harder or else, what will they tell us next?
ReplyDeleteNext they tell you "goodbye."
ReplyDeleteThis would be wonderful for us!!! Dubow must GO!!!
ReplyDeleteWhat does he tell his investors, board, employees, clients, partners???
DUBOW MUST GO!!!!
Two types worked well within Gannett. Those with balls who still fired people at will, and those without balls who still fired people at will.
ReplyDeleteThe local publisher never had a chance to expound great local journalism.
Journalism left, and business followed. Now business is gone.
Back to zero.
Mike Coleman would fit the bill. I'm not even with Gannett anymore.
ReplyDeleteOne of the few decent people that ever graced Gannett. He retired.
Too bad. Not many like him.
Who cares which Gannettoid goes where? They are pieces on the chessboard.
ReplyDeleteThe real issue is this company is about ready to implode. There is blood in the water and the sharks are swimming.
If the stock falls much farther, we'll be lucky to even collect a paycheck and walk away with any pension money [frozen or not]
And you can kiss goodbye the new and improved 401K plan. They won't be able to fund it.
This company will be broken up into many pieces by year end. Wall Street is going to demand it.
Gannett, must really need money> Got the bill, for next payment of Newsjournal> They raise the price(no surprise), but they post dated the bill, so that you would pay the new rate, for money YOU ALREADY PAID, and subscription services you have already received.
ReplyDeleteMike Coleman would be a great choice! and this comes from someone who has had nothing but shit to say about so many others on about dozen other posts! Class act.
ReplyDeleteCut the Executive Committee in half at all papers. Let the VP's pull up their boots. Extra duty during difficult times. But instead more rank and file.
ReplyDeleteDubow will have to be forced out.
No more lunch money.
Institutional investors are such pussies. This is a stock that now has a price-to-earnings ratio around 4 and pays a dividend of more than 7% -- and even its forward P/E is still under 6.
ReplyDeleteYou can easily make a case that even if the company made one-third of the profit it made in the last year, the stock is still a bargain.
If Gannett can stabilize the business (no small feat, and it has less to do with the Web than it has to do with advertisers not spending any money on anything), this is getting close to screamingly-good-buy territory.
Maybe so to the financial analysts.
ReplyDeleteBut McClatchy sells for $6...the third largest company. The big time former Knight Ridder...Miami, KC, and California, etc.
The biggest, the brightest, and the best. Not looking so good for all of the millions paid to hq people.
I love American business. All of those CEO's of airlines, car manufacturers, and now newspapers.
Paid millions to lose billions.
"You can easily make a case that even if the company made one-third of the profit it made in the last year, the stock is still a bargain."
ReplyDeleteI see the point, but isn't this exactly what Avi Ifergan was writing about in Seeking Alpha when he described GCI as a "value trap."
(http://seekingalpha.com/article/52678-gannett-co-value-bargain-or-value-trap)
That is to say, it looks like a bargain on paper, but with no reasonable prospects for growth in the next year (or two or five or?), those big fat dividends look like a short-term way to hang onto shareholders, but a quick way to deplete the healthy cash flow that that keeps its credit rating at investment grade. How long can they keep wringing the sponge?
When is the next div date? If there's not a stampede for the exit the day after, I'll be surprised.
"good-buy territory" are you kidding? nice try Craig, it will continue to sink and never come back up.
ReplyDeleteCan anyone answer this question. I've been trying to get an answer for awhile:
ReplyDeleteHow safe is:
A. Pension
B. 401k
If it's fallen this low now, think what it will be on July 16th.
ReplyDeleteNothing is safe...your pension, your 401k,your job.
ReplyDeleteThey will cut the dividend and probably have the worst hit to the stock on the 16th after they release the earnings (or lack there of).
This business is declinig!!!
Dubow has done a great job screwing us all!!!
I'm the person who wrote the previous comment about the potential value of the stock price. The 'value trap' argument is a good one and an excellent rational argument against the stock, I think; everything else is just emotion, and there's often opportunity in emotion.
ReplyDeleteHaving said that, you don't see me pulling the trigger to buy shares, either.
The people I really feel for (after the people who have been laid off) are the folks with big percentages of Gannett stock in their 401Ks. What's happening here is a prime exampel of why, as so many people have said, you must sell your company 401K stock match, in good times and bad, no matter what company you work for. You never know when the trap door is going to spring open.
And finally: One of my favorite sayings is that companies get the investors they deserve. Gannett with its fat profit margins and good dividends, attracted hogs. Hogs demand to be fed -- and care about nothing else.
Hogs dislike phrases like "future investment" and even "R&D." They want their hog chow NOW, and they squeal when they don't get it.
This stock plunge will purge the company of most hogs (for now). The question is whether there will be any company left at the end of the plunge.
You must know a different Mike Coleman than I did. I wouldn't trust that man with a ten foot pole.
ReplyDeleteYour 401K is safe as long as the investments within it are safe. If the company tanks you take it with you. Best thing to do is roll it into an IRA if that happens. Hopefully you've been selling the GCI matching stock on a regular basis.
ReplyDeleteThe Pension is another matter. If you read the annual report it is underfunded... but not terribly so. If the investments in the Pension fund stop performing the underfunded portion will expand reducing the amount available for future retiree's if it is not made up. If the company goes into bankruptcy they can jetison the unfunded portion and stop making future payments. The trustees or administrators can probably make changes to the payouts in that scenario. At the end of 2007 the GCI Pension had 1.2 million shares of Gannett stock in it from which it received $1.7 million of annual income. In both cases neither amount was a significant amount given the overall size of the pension fund. If the pension fund ever reaches the point where its taken over by the PBGC (Pension Benefit Guaranty Corp) payouts typically are about 30% of normal with maximum lump sums of around $45000
By the appearance of inaction, the GCI Board soon could be considered to be in breach of its fiduciary duty. In terms of an equity freefall, this is approaching Lucent, MCI and some of the other classics. Anyone recall DrKoop.com?
ReplyDeleteValued at $1 billion. Sold on the steps for 186k.
I can't wait until the stock price is at zero. Let's root for that. Then everyone can loose their job. That would be fun to watch.
ReplyDeleteIs the pension underfunded? We were told that Gannett would not have been able to freeze the pension if it was underfunded because the feds would not allow it. Reportedly, only fully funded pensions can be frozen. Can anyone validate this?
ReplyDeleteFunded with a stock that has dropped by 60% and heading southward.
ReplyDeleteI don't pretend to know all the rules about Pension Funds but do know that once in Bankruptcy anything goes. To be fair the underfunded portion has shrunk the last several years.
ReplyDeleteThe Pension Fund has only $48million of its assets as GCI stock compared to total Assets of $3.3 Billion at the end of 2007, not that big an issue in the grand scheme of things. The 1.2 million shares of GCI stock are now worth approx $24mil @ $20/share. Read the 2007 annual report around page 48 for more details.
http://www.gannett.com/07GCIAnnualReport.pdf
I know you'll love the opening on page 1
2007 Annual Report • Become the digital destination for local news and
information in all our markets. • Create new business opportunities in
the digital space through internal innovation, acquisitions or affiliations. •
Maintain strong financial discipline throughout our operations. • Strengthen
the foundation of the company by finding, developing and retaining the
best and brightest employees through a robust Leadership and Diversity
program.
Horseshit. What a crock.
ReplyDeleteI'm out... I don't want to lose what little money is in there...
ReplyDelete"then everybody will loose their job"??? it's lose...you looser!
ReplyDeleteHey Jim,
ReplyDeleteThat would be a question I would like to ASK TARA.... What the true makeup of our Pension really is. Is it fully funded, partially funded? If you ask the local HR... they're clueless... I called the 1800 number we were given and the operator put me on hold and then came back and told me it was fully guaranteed... Do I believe her? no... It really would be nice to have an answer from someone responsible....
It's pretty clear if you read the annual report. It doesn't cut and paste well here but the important parts are (for December 2007). All numbers are in 1000's
ReplyDeleteBenefit Obligations at end of year
$3,519,996
Fair Value of Fund Assets at end of year
$3,376,268
Funded Status at end of year.
($143,728)
For those of you who aren't familiar with accounting conventions, brackets are the way you identify negative numbers.
Here's the table from the 2007 annual report.It shows 2007 and 2006
The following table provides a reconciliation of pension benefit
obligations (on a Projected Benefit Obligation measurement
basis), plan assets and funded status of company-sponsored retirement
plans, along with the related amounts that are recognized in
the Consolidated Balance Sheets.
In thousands of dollars
Dec. 30, 2007 Dec. 31, 2006
Change in benefit obligations
Benefit obligations at beginning
of year . . . . . . . . . . . . . . . . . . . . . . . . $ 3,527,523 $ 3,333,710
Service cost . . . . . . . . . . . . . . . . . . . . 100,213 107,644
Interest cost . . . . . . . . . . . . . . . . . . . . 199,714 183,637
Plan participants’ contributions . . . . . 13,212 13,026
Plan amendments . . . . . . . . . . . . . . . (7,077) 14,757
Actuarial gains . . . . . . . . . . . . . . . . . (98,764) (117,047)
Foreign currency translation . . . . . . . 14,551 82,036
Gross benefits paid . . . . . . . . . . . . . . (229,376) (201,615)
Acquisitions . . . . . . . . . . . . . . . . . . . . — 111,375
Benefit obligations at end of year . . . $ 3,519,996 $ 3,527,523
Change in plan assets
Fair value of plan assets at
beginning of year . . . . . . . . . . . . . . . . $ 3,291,675 $ 2,963,897
Actual return on plan assets . . . . . . . 251,731 361,128
Plan participants’ contributions . . . . . 13,212 13,026
Employer contributions . . . . . . . . . . . 34,225 10,659
Gross benefits paid . . . . . . . . . . . . . . (229,376) (201,615)
Foreign currency translation . . . . . . . 14,801 77,980
Acquisitions . . . . . . . . . . . . . . . . . . . . — 66,600
Fair value of plan assets at
end of year . . . . . . . . . . . . . . . . . . . . . $ 3,376,268 $ 3,291,675
Funded status at end of year . . . . . . . $ (143,728) $ (235,848)
I'm wondering why Gannett's IRS form 5500 isn't showing up on that free erisa site. The last pension 5500 I see is for 2005. I found the 2006 health benefits, 401K, employee assistance and others, but not the main pension one.
ReplyDelete