For USAT, more secrecy around financial health; Corporate withholds key data from new document

[Table shows revenue data now omitted from two SEC filings]

In a significant departure, Gannett has begun disclosing fewer details about USA Today's financial health, just as investors and employees are looking for more information amid growing questions about the newspaper's future, according to a new review of public documents.

For the second time in two years -- but likely far longer -- Corporate did not report USAT's advertising revenue trend in Gannett's second-quarter report, filed late yesterday afternoon with federal regulators. Instead, it just disclosed the number of paid advertising pages, a figure it had already reported in a statement released on July 16.

Page counts offer only limited information about advertising sales, however, because they don't reveal anything about revenue. That information is better reflected in ad revenue percentage changes -- the figure Corporate omitted in yesterday's SEC filing, called a form 10-Q. In this year's first quarter, for example, the paper's ad revenue dived 11% from last year.

An unusual omission

It's doubtful the omission was merely an oversight; SEC filings are legal documents written with great care, and seen by many expert eyes before they're made public. More likely, Corporate withheld the information out of new competitive concerns amid a growing rivalry with The Wall Street Journal and The New York Times. It may also have kept the revenue figures confidential to relieve public pressure on management, as Publisher Dave Hunke (above) plans a reorganization that could be announced to staff any week now.

The omission of USAT's ad revenue changes is unusual. Corporate started reporting the figures in the first quarter of 2002, I found today in a review of 10-Q filings with the SEC. I've tracked the figures every quarter over the past two years except for the fourth quarter of 2009, the only other time they weren't disclosed. (See table, above.)

It's likely revenue fell again in the second quarter; the number of paid advertising pages fell 4% from a year before, after all. Indeed, revenue appears to have fallen every quarter from the prior year for two years, SEC documents show. Coupled with a sharp, 14% decline in circulation, it's likely the ad revenue tumble spurred Hunke's June 17 disclosure of a pending reorganization.

Yesterday's 10-Q reported only the following about USAT's second-quarter results: "Domestically, national advertising revenues decreased 2% for the quarter and 3% year-to-date due to lower results at USA Today, partially offset by a double-digit increase in national advertising at U.S. Community Publishing. Advertising demand at USA Today continues to be impacted by softness in the travel-related categories. The automotive, retail and packaged goods categories improved during the quarter at USA Today while the entertainment, travel, telecommunications and pharmaceutical categories lagged last year. Paid advertising pages at USA Today totaled 580 compared with 602 in last year’s second quarter."

Now, here's the report from the first-quarter 10-Q; I've highlighted in boldface the revenue details missing from yesterday's filing:

"National advertising revenues declined 3% for the quarter. National advertising revenues increased 8% in the U.S. Community Publishing group and were up 2% in the UK in local currency for the quarter. Ad revenue at USA Today, including usatoday.com, was down 11% for the quarter. Advertising demand at USA TODAY continues to be impacted by the soft travel and lodging markets. Several categories at USA TODAY improved during the quarter including automotive, technology and retail. These revenue gains, however, were more than offset by weakness in the travel, entertainment, financial, telecommunications and pharmaceutical categories."

A secrecy precedent
It's important to note that public companies like Gannett enjoy some leeway in what they report to investors via the SEC. While basic financial data -- revenue, costs, earnings, etc. -- are mandatory, other details are optional, or may be kept secret, with the SEC's permission.

USA Today -- Gannett's marquee title, and the No. 1 print paper in the nation -- is the only individual title for which Gannett breaks out results. While other publishers, including the New York Times Co., also offer such detail on their major papers, I'm not aware of any SEC rules requiring that they do so.

There's precedent for withholding information, too. In February, Gannett revealed that the SEC had agreed to its request that it keep confidential certain targets for digital revenue. The company cited competitive reasons.

In another instance, Corporate stopped publishing monthly statistical reports in late 2008, a step that angered some Wall Street analysts. The reports, made available for many years prior, provided general figures on revenue trends for the company as a whole, giving analysts a snapshot of results between quarterly reports.

It's conceivable that Corporate will resume reports of USAT's revenue changes in future SEC filings. I'm not counting on that, however, which means investors and employees will have even less information to make smart choices about their portfolios and careers.

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