McClatchy profit falls, no end to ad slump seen
NEW YORK (Reuters) - McClatchy Co (MNI.N) reported a 55 percent drop in quarterly profit on Tuesday and said it did not know when an advertising slump caused by the real estate downturn would end, setting an ominous tone for the U.S. newspaper industry.
The company, which publishes the Sacramento Bee and Miami Herald, is the first in a line of U.S. newspaper publishers expected to report weaker quarterly results this month.
McClatchy said its third-quarter income from continuing operations fell to $23.5 million, or 29 cents a share, from $52.6 million, or 65 cents a share, a year earlier.
Excluding a tax provision, earnings per share were 32 cents, beating the average analysts' estimate of 31 cents.
McClatchy said the results were preliminary and did not include an anticipated charge for writing down the value of some assets.
"They're under a terrible environment for their Florida and California papers, which isn't going to get better any time soon," Benchmark Co analyst Ed Atorino said.
Revenue from continuing operations fell 9.2 percent to $540.3 million, McClatchy said.
"It's clear the economies of (California and Florida) and perhaps the country as a whole are experiencing a greater slowdown than many had anticipated just a few months ago," Chief Executive Gary Pruitt said in a statement.
"We do not know when this downturn will end, and do not have visibility beyond the fourth quarter," Pruitt said.
On a conference call with analysts, Pruitt apologized for the company's stock performance. The share price has fallen by 55 percent since October 2006, not long after McClatchy bought former Philadelphia Inquirer publisher Knight Ridder Inc.
"We are certainly disappointed in the share price," he said. "There's no doubt about it ... We're doing everything we can, operationally, to improve our performance, and expect that to be reflected in the share price eventually."
McClatchy said cash expenses fell 8.6 percent, partly from job cuts and lower newsprint costs.
"They're getting their arms around the problem, but a lot of stuff has fallen out of the bag," Benchmark's Atorino said.
Pruitt said McClatchy is cautious about making cuts that affect the quality of the newspapers.
"We do try to operate efficiently, but we try to maintain the areas that drive quality and revenue," he said. "While there have been some staffing declines through attrition, they have been slight."
McClatchy's outlook on the fourth quarter has been tempered by the real estate downturn, and the company expects an ad revenue decline in the period similar to those in the second and third quarters.
Third-quarter ad revenue fell 9.8 percent to $457 million, and circulation revenue fell 3.7 percent to $68 million.
During the conference call, Pruitt said the company plans to keep chipping away at its debt, but McClatchy would consider whether to buy back shares.
"Paying down the debt should also build equity value, and we'll be evaluating when is an appropriate time for us to enter the market and buy back shares as well," he said.
McClatchy's shares were down 33 cents, or 1.7 percent, to $18.84 in afternoon trading on the New York Stock Exchange.
(Additional reporting by Tiffany Wu and Kenneth Li)
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