Earnings Fall at Newspaper Publishers

  • by July 18, 2001
(AP) - Second-quarter earnings declined at major newspaper publishers, the companies reported Tuesday, as advertising revenues continued to slump amid an economic downturn.

Earnings fell at both Gannett Co. and Knight Ridder, the nation's largest and second-largest newspaper publishers, and also at Media General, a regional publisher based in Richmond, Va.

The publishers blamed a drop-off in advertising from the same time a year ago, when promotional spending was still high amid the tail end of the stock market and Internet boom.

Gannett Co.

Gannett, the largest newspaper publisher in the country with 98 dailies including USA Today, reported a 12 percent decline in net earnings Tuesday.

Gannett earned $233.5 million, or 88 cents per share, compared to $265.8 million, or $1.00 per share, in the same period a year ago. The earnings were in line with the expectations of analysts surveyed by Thomson Financial/First Call.

Douglas H. McCorkindale, Gannett's chairman and chief executive, said in a statement that the slowdown was affecting advertising spending "disproportionately." He also said higher newsprint expenses were impacting Gannett's earnings.

"For the rest of the year, we continue to be cautious. Our management has not seen any evidence of a recovery yet," McCorkindale told investors on a conference call.

Like other publishers, Gannett has been cutting costs to cope with the double threat of slowing revenues and higher newsprint expense. McCorkindale said Gannett has cut its payroll by about 5%.

Revenues rose 12% to $1.63 billion from $1.45 billion a year ago due to the effect of several acquisitions, including Central Newspapers Inc., 19 dailies from Thomson Newspapers Inc. and News Communications & Media of the United Kingdom.

Had Gannett owned the same set of assets in both periods, revenues would have declined 7%.

Gannett also reported that ad pages at USA Today, the nation's top-selling newspaper, fell 21% in the quarter and year-to-date compared to the same periods a year ago. Overall ad volume at the company was off 4% in the quarter.

For the first six months of the year, net income fell to $408 million from $1.22 billion a year ago, when the company had a gain of $744.7 million from the sale of cable assets. Without the one-time gain, six-month earnings were off 13%. Half-year revenues rose 16% to $3.20 billion from $2.77 billion.

Gannett, which is based in Arlington, Va., also operates 22 television stations and 300 non-daily newspapers.

Gannett's stock was off $1.38 at $66.45 in afternoon trading on the New York Stock Exchange.

Knight Ridder

Knight Ridder's net earnings plunged 86 percent in the second quarter as deep advertising declines, rising newsprint prices and employee severance costs squeezed the nation's second-largest newspaper group.

The San Jose-based company earned $13.4 million, or 16 cents per share, in the quarter ending July 1, down from $96.3 million, or $1.08 per share, in the comparable period last year.

The results included a $78.5 million charge to pay for the elimination of 1,600 jobs at the company's 32 papers. The latest cuts, achieved mostly through voluntary buyouts and early retirements, came on the heels of Knight Ridder's elimination of 400 jobs earlier in the year.

The 9% total work force reduction is expected to save Knight Ridder $100 million annually and help the company weather its worst downturn in years.

Excluding the impact of the one-time charge, Knight Ridder earned $60.5 million, or 71 cents per share, a penny above the consensus of analysts surveyed by Thomson Financial/First Call.

In afternoon trading on the New York Stock Exchange, Knight Ridder's shares fell 71 cents to $60.57.

Knight Ridder's earnings slump stems from a reversal of the technology-driven advertising boom that propelled the company to higher profits in recent years.

In the second quarter, Knight Ridder's overall advertising revenue declined by 9%. The San Jose Mercury News, which circulates in the epicenter of the high-tech industry, had a 25% decline.

At the same time revenues are sliding, newsprint - a publisher's second largest expense behind labor - is becoming more expensive. Knight Ridder's newsprint costs increased 22% in the quarter.

While describing the market conditions as "challenging," Knight Ridder CEO Tony Ridder said the worst appears to be over. "We may have seen the floor," he said in a statement.

Analysts, though, aren't convinced. "It's still too early to say," said industry analyst Brian Shipman of Robertson Stephens. "The next couple months are going to be critical to watch, even though July and August are slow months for the newspaper industry."

The aggressive cost-cutting has raised worries that the journalism and community commitment of Knight Ridder's newspapers could suffer. Jay Harris resigned as the publisher of the Mercury News earlier this year in protest of the company's financial goals.

For the first six months of the year, net income fell 79% to $54.2 million from $257.1 million in the same period a year ago. Revenues fell 6% to $1.47 billion from $1.56 billion.

Media General

Media General, a regional publisher and broadcaster based in Richmond, Va., reported a 20% decline in second-quarter earnings as advertising revenues fell.

Media General earned $7.7 million in the quarter ended July 1, or 33 cents per share, down from $9.6 million or 39 cents per share in the same period in 2000. Analysts surveyed by Thomson Financial/First Call had been expecting 30 cents per share.

The company's shares rose 43 cents to $48.11 on the American Stock Exchange.

Revenue fell 3% to $205.7 million from $211.3 million.

J. Stewart Bryan III, Media General's chairman and chief executive, said in a statement that the results reflected "the most severe advertising downturn in 10 years."

Cost-cutting measures that took effect early this year, including a companywide hiring freeze, partially offset the effect of lower revenues. The hiring freeze cut 580 workers, or 7% of the company's total work force, from what the company had budgeted.

Six-month earnings fell 54% to $11 million from $24 million a year ago. Revenues rose 5% to $404.6 million from $383.8 million.

- The Associated Press

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