Jun 11, 2008

"Accounting event"

Gannett Chairman Craig Dubow turns to the soothing language of accountant-speak to reassure employees that a more than $2 billion write-down of assets is no cause for alarm.

Here's the memo he sent to employees earlier this week:

Dear co-workers:

Today we announced Gannett would record non-cash impairment charges of an estimated $2.3 billion to $2.8 billion to after-tax earnings at the end of the second quarter. This is an accounting event - and I stress accounting event - that I believe needs explaining.

Let me begin by assuring you that the company remains healthy. This charge will not hold us back in any way: We can pay our dividends and our debts, make strategic acquisitions and investments, and repurchase shares of our stock. There is no impact on our strong cash flow.

Most importantly, we are continuing to move aggressively forward with our strategic plan. As I told Wall Street analysts this morning, I believe we are leading the transformation of the media industry.

Basically, this charge is a result of the challenging business environment and worsening economic conditions in the U.S. and UK. As I'm sure you know, these conditions have had a significant impact on our stock price. Under current accounting rules, this requires us to take a non-cash impairment charge to reflect the change in stock value.

Again, it's an accounting event. Nothing about our company or its prospects changes as a result of this non-cash charge. Plus, I can't state strongly enough my belief that our current stock price does not accurately reflect the true value of our company or its potential.

I am confident we have a great future ahead of us. So thank you for your loyalty and hard work. As always, I deeply appreciate all you are doing for Gannett.


The write-down appears to be related to Gannett's holdings in the UK, where a crumbling real estate market has starved papers there of classified ads.

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