Cost cuts help publisher McClatchy’s 3Q earnings
SAN FRANCISCO — Newspaper publisher McClatchy Co. rode a wave of traumatic cost cutting to a higher third-quarter profit, overcoming yet another jarring decline in revenue.
The owner of The Miami Herald and 29 other dailies is the first big newspaper company to report earnings for the summer period. Shares of McClatchy and other publishers leaped in the quarter as investors bet that the worst effects of the recession were over for the newspaper industry.
But Thursday’s report showed McClatchy’s main source of revenue — advertising sales — is still shriveling at an alarming rate, even as the annual comparisons are getting easier. What’s more, the Sacramento-based company said the dismal trends are continuing so far this month, and it projected another big drop in the current quarter.
McClatchy shares fell 66 cents, or 16 percent, to $3.36 in afternoon trading.
Investors are more concerned with McClatchy’s shrinking revenue than they are impressed with the publisher’s ability to shed expenses. The company said it earned $23.6 million, or 28 cents per share. That compares with $4.2 million, or 5 cents a share, a year ago.
Excluding one-time gains, McClatchy said it would have earned $11 million, or 13 cents per share. On a comparable basis, the company earned $10.4 million, also 13 cents per share, in the same period last year.
McClatchy boosted its profit by shedding payroll and other expenses more quickly than its revenue eroded.
Revenue for the three months ending Sept. 27 tumbled totaled $347 million, a drop of more than $104 million, or 23 percent, from the same time last year.
McClatchy’s operating expenses decreased even more dramatically, by $124 million, or 30 percent.
In a troubling sign for the newspaper business, McClatchy’s advertising declines did not slow much during the quarter.
After 30 percent declines in the first half of the year — similar to what other publishers reported — McClatchy’s ad sales fell 28 percent in the most recent period. Moreover, year-over-year comparisons are getting easier. McClatchy’s third-quarter ad revenue had already dropped 19 percent a year ago from 2007 levels.
“The advertising declines we’ve experienced show some signs of slowing, but the ad environment remains weak overall,” McClatchy CEO Gary Pruitt said in a statement. He added that this month’s numbers show “advertising revenue trends similar to the third quarter.”
On the positive side, online advertising reversed its decline, climbing 3 percent from a year ago.
McClatchy also managed to whittle its debt by $134.3 million from the beginning of the year. Its borrowings now stand at $1.99 billion.
The company’s lenders require McClatchy to keep its debt load from rising higher than seven times its cash flow over the prior 12 months. That ratio stood at 5.7 at the end of September, down from 5.8 at the end of June.
AP Business Writer Andrew Vanacore in New York contributed to this report.
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