NEW YORK (AP) Second-quarter earnings declined at major newspaper publishers as advertising revenues continued to slump, the companies reported Tuesday.
Earnings fell at both Gannett Co. and Knight Ridder, the nations largest and second-largest newspaper publishers, and also at Media General, a regional publisher based in Richmond, Va.
The publishers blamed a drop 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, 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 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, Gannetts chairman and chief executive, said in a statement that the slowdown was affecting advertising spending disproportionately. He also said higher newsprint expenses were affecting Gannetts 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 threat of slowing revenues and higher newsprint expense. McCorkindale said Gannett has cut its payroll by about 5 percent.
Revenues rose 12 percent 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 and Media of the United Kingdom.
Had Gannett owned the same set of assets in both periods, revenues would have declined 7 percent.
Gannett also reported that ad pages at USA Today, the nations top-selling newspaper, fell 21 percent in the quarter and year-to-date compared to the same periods a year ago. Overall ad volume at the company was off 4 percent 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 percent. Half-year revenues rose 16 percent 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.
Knight Ridders net earnings plunged 86 percent in the second quarter as deep advertising declines, rising newsprint prices and employee severance costs squeezed the nations second-largest newspaper group.
The San Jose, Calif.-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 companys 32 papers. The cuts, achieved mostly through voluntary buyouts and early retirements, came on the heels of Knight Ridders elimination of 400 jobs earlier in the year.
The 9 percent 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.
Knight Ridders 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 Ridders overall advertising revenue declined by 9 percent. The San Jose Mercury News, which circulates in the epicenter of the high-tech industry, had a 25 percent decline.
At the same time revenues are sliding, newsprint a publishers second-largest cost behind labor is becoming more expensive. Knight Ridders newsprint costs increased 22 percent in the quarter.
While describing the market conditions as challenging, Knight Ridder CEO Tony Ridder said the worst appears to be over.
The aggressive cost-cutting has raised worries that the journalism and community commitment of Knight Ridders newspapers could suffer. Jay Harris resigned as the publisher of the Mercury News earlier this year in protest of the companys financial goals.
For the first six months of the year, net income fell 79 percent to $54.2 million from $257.1 million in the same period a year ago. Revenues fell 6 percent to $1.47 billion from $1.56 billion.
Media General, a regional publisher and broadcaster based in Richmond, Va., reported a 20 percent 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.
Revenue fell 3 percent to $205.7 million from $211.3 million.
J. Stewart Bryan III, Media Generals chairman and chief executive, said the results reflected the most severe advertising downturn in 10 years.
Cost-cutting measures that took effect early this year, including a hiring freeze, partially offset the effect of lower revenues. The hiring freeze cut 580 workers, or 7 percent of the companys total work force, from what the company had budgeted.
Six-month earnings fell 54 percent to $11 million from $24 million a year ago. Revenues rose 5 percent to $404.6 million from $383.8 million.
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