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McClatchy ad slump continues, shares fall
NEW YORK |
NEW YORK (Reuters) - McClatchy Co (MNI.N) posted a net loss on Wednesday because of plunging advertising sales hurting newspapers in some of its key markets, and said the ad slump will continue in the second quarter.
The company also said it will buy back millions of dollars of its public debt, much of which it took on in its ill-timed purchase of the Knight Ridder newspaper chain in 2006.
Its shares fell more than 9 percent to $8 in morning trading on the New York Stock Exchange, hitting a new 52-week low. McClatchy shares have fallen 73 percent in the past year.
The results add McClatchy to the list of U.S. newspaper publishers, from The New York Times Co (NYT.N) to Gannett Co Inc (GCI.N), that are suffering from a loss of ad dollars to the Internet and the lingering effects of trouble in the housing market.
McClatchy publishes the Bee newspapers in Sacramento, Fresno and Modesto, California, as well as the Miami Herald in Florida. Both states have been hard hit by the real estate crisis and are proving toxic for newspaper publishers like McClatchy, Media General Inc (MEG.N) and Tribune Co.
Those states account for a third of McClatchy's ad revenue, but were responsible for 56 percent of its decline in the quarter, Chief Executive Gary Pruitt said in a statement.
"The advertising environment continues to be weak," Pruitt said. Second-quarter ad results should be down in the low- to mid-teen range, he said, somewhat better than the first quarter.
The newspaper publisher posted a first-quarter net loss of $849,000 or 1 cent a share, compared with a year-ago net profit of $9 million or 11 cents a share.
McClatchy reported adjusted earnings from continuing operations of $1.6 million, or 2 cents a share, short of Wall Street expectations of 4 cents a share, according to Reuters Estimates.
Revenue declined 13.8 percent to $488.3 million, below analysts' expectations of $493.1 million on average.
First-quarter ad revenue fell 15.3 percent to $404 million from last year. Circulation revenue fell 5.6 percent to $67.9 million
Online advertising rose 10.6 percent in the first quarter compared with last year, Pruitt said. Excluding employment advertising, which he said has fallen nationally in print and online, Internet ad revenue grew 52.1 percent in the first quarter.
McClatchy emphasized its cost cuts, saying cash expenses fell 10.5 percent because of staff reductions and lower newsprint expense, among other things.
The company said it would buy for cash up to $250 million of its debt, and that it also is paying down debt with gross proceeds from the sale of its interest in a newsprint operation. It plans to use a tax refund related to the sale of the Minneapolis Star Tribune to pay debt.
McClatchy expects its debt balance at the end of 2008 to be about $2 billion.
McClatchy bought Knight Ridder in 2006, essentially doubling down on the newspaper business just as ad sale declines sharpened. The company has written down more than $2 billion in non-cash charges related to the acquisition as the value of those assets plummeted.
(Additional reporting by Yinka Adegoke, editing by Dave Zimmerman and Maureen Bavdek)
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