McClatchy quarterly profit rises on cost cuts
NEW YORK (Reuters) - U.S. newspaper publisher McClatchy Co reported higher quarterly income on Tuesday because of cost cuts, pushing shares up as much as 67 percent, even as advertising revenue fell by nearly a third.
McClatchy, publisher of The Miami Herald and Sacramento Bee, also said it reduced the amount of debt that it owes and sought to reassure investors that it will not violate the terms of its lending agreements.
"There has been a steady drumbeat in recent media and analyst reports about the prospects of McClatchy violating bank covenants this year," Chief Executive Gary Pruitt said. "Even if our advertising performance does not improve from its current run rate for the rest of the year, we would not breach our bank covenants."
The market welcomed the news, sending the company's battered shares up as much as 67 percent.
The company said advertising revenue decline trends are improving, echoing comments from USA Today publisher Gannett Co Inc, which reported its quarterly results last week.
Ad revenue fell 30 percent during the quarter, but each month's decline was a bit less severe than the last. Large media conglomerates such as News Corp watch how publishers such as McClatchy perform because they often compete for the same local ad dollars in the United States.
McClatchy said its second-quarter net income was $42.2 million, or 50 cents a share, compared with a profit of $19.7 million, or 24 cents a share, last year.
Excluding items, McClatchy's profit rose 43 percent from last year's quarter to 30 cents a share. Two analysts polled by Reuters Estimates had expected the company to post a loss.
McClatchy has laid off 15 percent of its workforce, or 1,600 employees, this year. It also has cut executive pay and other benefits.
Cash expenses fell 29 percent excluding layoff charges in the second quarter.
Revenue declines matched that of many other U.S. newspaper publishers, falling 25.4 percent to $365.3 million.
Despite the ad declines, McClatchy said that its more than two-dozen newspapers, which stretch from Alaska to Florida, are contributing positive cash flow.
Shares were up 48 percent to 80 cents in early trading on the New York Stock Exchange.