Wednesday, May 02, 2012

Shareholder: Are directors artificially propping up GCI's stock at the expense of the company's future?

At yesterday's annual meeting, a shareholder questioned the wisdom of Corporate's decision to drain so much capital from the company through bigger dividends -- rather than reinvesting more in the business. His remarks were directed at the board of directors, including Chairman Marjorie Magner.

It's a fascinating commentary, according to a transcript provided by a Gannett Blogger, who is still searching for the speaker's name and identity. (I wasn't at the meeting.)

A few notes: The speaker's references are to CEO Gracia Martore and, I believe, Chief Financial Officer Paul Saleh. Also, the main Gannett Retirement Plan's underfunding is closer to $620 million vs. the $1 billion estimate given by the speaker.

He said he was speaking for investors with significant holdings. Following are his remarks.

They are, naturally, as shareholders, pleased with the increase in dividends, which of course they don’t quite understand from an operating point of view. As revenues have been decreasing and profits have been decreasing, the board of directors has quintupled dividends.

We have a situation where revenues are declining and profits are declining, the board of directors puts a five-times increase in dividends a couple months ago, announces an extraordinary share buyback, it bounces the stock price up -- for two days -- and it goes down to where it was. It has had no significant effect on the share price.

You’re taking a billion three hundred million dollars over a two- or three-year period out of the company when your content in USA Today and other papers has been shrunk for financial reasons down to the bare bones, which is really getting down to weak journalism, and it raises questions and some concerns. Why should I buy the product when the content is getting so de minimus? So we have a situation where the employees of the company, which Gracia very clearly pointed out up here, are so essential to the company, any company, any management, any army commander knows you that if you don’t take care of the troops, you don’t have anything.

The employees' pension fund, if I read the financial statements correctly, is something like $1 billion underfunded. When I listened in to the financial report that Gracia and Saleh gave a couple weeks ago to investors, they’re putting $4 million this first quarter and only $24 million this year into the pension fund -- a billion dollars underfunded -- and you expect these people and 30,000 others to give their lives to the company? I’m wondering if the directors, madame chairman, [are] being shortsighted in not putting more money back into the company, either through new acquisitions and content invigoration, rather than artificially try to prop the price up.

Did you hear these remarks? Can you supply the speaker's name? Please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.

[Photo: a stock ticker tape machine]


  1. Great point and well said in a language that robber baron execs understand. Well done. I would love to hear the response, if Gracia had the courage to address those serious issues.

  2. Not only did she address but she addressed the them eloquently. The problem with making accusations you know nothing about is that you get caught up in your lack of knowledge. Clearly the plan is not a billion dollars underfunded. In fact, there are billions in the plan. And yes, if everyone left today, and if they all decided to take their pension, it would be underfunded. But some of the people who have a vested benefit won't be taking that pension anytime soon. Maybe not for 25 years. Assuming everyone doesn't leave today, there will be investments that grow the money in the plan that would more than cover the expenditure. At least that's how my HR buddy explained things to me, and it made perfect sense. For instance, you have a mortgage, and you owe for 30 years. If you are five years in, you owe the majority of the balance. But if you don't leave and sell the property, you don't have to pay back for 25 years. Over those years you will presumably make money, and pay down the mortgage. The company apparently uses some of its cash flow for adding to the pension account, other money to invest in new businesses, and other money for dividends. The dividend is down from years ago, and I think (happily) they increased it which goes right into my 401k which is nice return even if the stock doesn't move up much. I love the fact the questioner used "only" as if only $50 million is chicken feed. They didn't have to add it to the pension plan, but they did. But the naysayers and doompredictors just have negativity throughout every sentence they write.

  3. 7:19: where did the questioner say "only $50 million"? That's not in the remarks.

    And, why would you think the questioner is a "naysayer" or "doompredictor" (is that a word?)?

    If s/he is an investor with significant holdings, as this implies, s/he might simply be a former Gannett exec who was hoping to enjoy retirement after helping to build a once-successful and once-respected company. It must be hard to watch one's life work so casually destroyed.

  4. 7:19 Wow Gracia, that must have really embarassed you for you to write a response like that.

    A note on humility - you shouldn't call yourself "eloquent". It's more impressive when other people do.

  5. What a great question. And calling them out on not reinvesting in content (journalism) and how important it is to value employees.

    All sentiments expressed here time and time again over the years.

  6. Wow I didn't think people with a brain and common sense was allowed to speak.

  7. I have a mancrush on whoever said this at the meeting. Unless it was a woman. Then it's just a regular crush.

  8. Gracia did not respond directly to the point about USA Today putting out 28 to 32 page papers nor his point about boosting the quality of the content. Nor did she address his point about treating employees the right way. If you think I got it wrong, go on the Gannett website and listen to the taped video of the shareholders meeting.

    Martore has got her stump speech to wall street, the media and the board down cold: the right team, the right strategy, hometown advantage, 5,000 journalists, yadayadayada.

    What she still hasn't done is convinced the rank and file that they won't be continued to be shit on and that yes, qualtity content by experienced journalists does matter.

    Employee surveys, town hall meetings, memos that are labeled "communication" and end with "best regards" mean nothing to employees whose morale and work ethic have been eroded by flavor of the month plans and buzzwords, repeated furloughs, layoffs and the ultimate downer, forced reapplying for jobs.

    1. You missed investor's larger points, Gracia.

  9. I'm surprised no one asked when USAToday will name a new editor and publisher. Since we're such an iconic, well known brand, I guess Martore thinks the place can remain rudderless for another six months.

  10. 9:01 wrote: "Go on the Gannett website and listen to the taped video of the shareholders meeting."

    Can you point to where we can find that recording?

  11. GM's memos always sound as if she is writing to people she doesn't know, or have any affinity for.

  12. It is obvious the investors are now reading this blog. Expect an increase in negative comments towards Jim and the employees from the Crystal Palace.

  13. The questioner said (of the dividend increase): "It has had no significant effect on the share price."

    This is not necessarily true, and no such statement can be made with any certainty. It is like saying that a person who is diligent about hand-washing and who keeps a bottle of hand sanitizer on his desk did absolutely nothing good for his health because he, like you and me and most everyone else, caught a cold in the past year. The fact is no one knows what was prevented. And the fact is we don’t know how low Gannett’s stock may have sunk absent the dividend hike. No, I’m not a company troll. In fact, GCI is the least favorite newspaper company (of five) that I’ve worked for. I’m just an advocate for good information and complete and truthful story telling. The writer’s arguments about uses for the money that may have been better than dividends, well, those arguments still stand and I’m not commenting on that part of the post.

  14. 9:04,
    We have been rudderless even when our current publisher was not "retired". We've had an empty suit in that position for a few years. Time to see what a vacancy can do. Worth a shot.

  15. If only we had been rudderless! Instead, we meekly followed the orders of the criminally incompetent David Hunke as he cheerfully tossed people overboard and steered USAT directly for the rocks.

  16. 10:07, our chairwoman, Marjorie (surprisingly articulate and seeminglyn on the ball) suggested the buy back and dividend hike placed a floor under the stock to prop it up. She said the dividend hike was a bit of a giveback to shareholders who had seen the dived cut from about a nick a share a few years back.

    Company line on all the loot we are spending except on our employees: we have the cash flow to spend elsewhere despite declining revenues and profits.

    The hocusocus will likely continue for a couple more years.

    What the board and Martore continue to ignore: quality content. How to maintain it and grow it.

  17. I vote for Susan Weiss.

  18. 9:01 gets my post of the day award. I hope Gracia has an eloquent retort. But then even she is smart enough to know that people will continue thinking she's a monster in high heels unless she reigns in the insanity at the Crystal Palace.

    That starts with sitting her Seven Sisters buddy down and telling her to start promoting the company on company time. Then telling the entire advertising department to start selling ads or they are gone.

    And if this company does have $800 million in free cash flow, blow a few bucks on another round of buyouts. This time at USA Today.

  19. The person may have been off on the $1-billion figure but God bless him/her for pointing out that the emperor has no clothes.

  20. I vote for Heather Frank. Shell fuck up the
    place so badly with former AOLers holding court that it will cause the mass exodus the beat counters are praying for. Plus it would fit MB's grand plan to further feminize the command structure.

    I am woman. Hear me meow.

  21. Hurrah to the speaker for his/her courageous presumptuousness. We need more voices like that from the large institutional holders. They are the ones who call the shots, but have chosen not to through their ambivalence toward all the management shenanigans. The company's continuing siphoning of profit to support an unnecessary and bloated headquarters staff have made the individual newspapers and TV stations economically unviable. More than ever, the properties need to reinvest their profit into operations and content. The first-hand accounts of skimpy and non-updated web sites, shrunken news holes and news-gathering staffs, and reliance on free reader-written content point to an enterprise headed toward oblivion. Hopefully more institutional shareholders and maybe some of the directors will come to their senses and realize that a company can't be built on nothing.

  22. "Then telling the entire advertising department to start selling ads or they are gone."

    Thank you! I've been sitting here trying to figure out how we can shake ourselves from this path to oblivion and never thought that "selling more ads" could do the trick. I will just ignore our inferior product and my client's desires NOT to buy print advertising and just plow ahead undaunted. I just didn't realize it was that easy. Now I know.

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  24. I still say Wall Street is purposely looking the other way while executives like ours chip away at the news biz. No 4th estate, no one looking over their shoulders.


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