McClatchy 4Q Earnings Down 42 Pct On Revenue Drop

NEW YORK (AP) - Newspaper publisher McClatchy Co. reported a 42 percent drop in fourth-quarter earnings Tuesday and warned that ad spending appears to be falling at an even quicker pace than before.

The newspaper business is four years into a steep decline, sagging under the pressure of a recession and the rise of Web-based competitors. McClatchy's results came after the companies that put out The New York Times, USA Today and dozens of other newspapers have all said that declines in print advertising - the industry's lifeblood - got worse during the last three months of 2010. It's a reversal from the past few quarters, in which publishers have pointed to consistently smaller quarterly declines as an indication that business was beginning to stabilize.

McClatchy, publisher of The Sacramento (Calif.) Bee, The Miami Herald and other dailies, said that its ad revenue dropped 10 percent in January from the same month a year ago. That compares with a 7 percent decline for the fourth quarter and a 6 percent decline in the third. Advertising still accounts for more than three quarters of McClatchy's revenue.

After the results came out, shares of McClatchy fell 61 cents, or 12 percent, to close Thursday at $4.38.

McClatchy CEO Gary Pruitt acknowledged that McClatchy's problems run deeper than a poor economy. "Advertising revenues certainly are shifting more toward digital and somewhat away from print," Pruitt said on a conference call with analysts.

Competition for ad dollars on the Web is cutthroat. Along with other news sources, McClatchy's daily newspapers have been hurt by online destinations such as Craigslist, Facebook and Google.

McClatchy reported earnings of $14.9 million, or 17 cents per share, in the quarter that ended Dec. 26, down from $25.8 million, or 30 cents per share, in the same quarter a year earlier.

Although McClatchy's digital ad revenue climbed 5 percent in the fourth quarter, it was not enough to offset a 9 percent decline on the print side. Meanwhile, revenue from newsstand sales and subscriptions fell 3 percent. That made for an overall decline of 6 percent to $370 million from $393 million.

Higher interest expenses on debt cut into McClatchy's earnings. The company reached a deal with lenders in January 2010 to push back deadlines for repaying debt in return for higher interest payments. Interest expenses climbed to $43.4 million in the fourth quarter, up 77 percent from the same quarter of 2009.

Pruitt said the company is moving quickly to pay off its loans and bring down operating expenses, with newspapers making cuts depending on individual performance. He did not specifically mention layoffs, but the company has cut more than 7,000 full and part-time jobs, or about 43 percent of the total, over the past four years.