By: Michael Liedtke, AP Business Writer
(AP) Newspaper publishers Knight Ridder and Belo reported higher first-quarter profits Wednesday that outpaced analysts’ expectations, with cost-cutting moves helping to offset continued weak advertising sales.
Knight Ridder, whose aggressive job cuts last year drew fueled debate in the industry, said its cost control moves helped boost its net income for the quarter by 27%. Belo also credited cost-cutting moves for earnings of 15 cents per share, up from 11 cents in the same period a year ago.
The nation’s second-largest newspaper group earned $51.8 million, or 60 cents per share, up from $40.7 million, or 47 cents per share, during last year’s opening quarter.
The results were a penny better than the consensus estimate of analysts polled by Thomson Financial/First Call.
Knight Ridder said last year’s first quarter profit would have been larger than this year’s, if not for a few special accounting charges. Excluding those items, the San Jose, Calif.-based company said last year’s first-quarter profit would have been $61.7 million, or 72 cents per share.
The 16% drop in Knight Ridder’s operating profit stemmed from an advertising malaise that has tormented publishers for more than a year.
Knight Ridder collected $520 million in ad revenue during the first quarter, a 9% decline from $573.2 million last year. The company’s total first-quarter revenue dipped 7% to $678.2 million.
To shore up the company’s profits during the recession, Knight Ridder last year eliminated 2,200 jobs, or about 11% of its work force. The cuts provoked an industry debate about whether Knight Ridder was diminishing its papers’ newsgathering operations to satisfy Wall Street’s profit demands.
CEO Tony Ridder has consistently defended the job cuts as the right thing to do. On Wednesday he credited the measures for helping to reduce the company’s first-quarter expenses by nearly 8%, excluding the special charges taken last year. “As has been the case for several quarters, cost control was superb,” Ridder said. He also hailed “the sustained excellence of our coverage in Central Asia and the Middle East.”
Ridder has won high marks from investors for his management during the recession. Knight Ridder’s shares gained 75 cents to $68.70 in midday trading Wednesday on the New York Stock Exchange. The company’s shares have climbed by 20% since the end of 2000.
Continuing a trend from last year, Knight Ridder suffered its greatest financial pain during the first quarter in its own back yard at the San Jose Mercury News. The Silicon Valley paper’s ad revenue plunged 26.5% from last year, part of the fallout from mass layoffs and budget cuts in the battered high-tech industry.
Knight Ridder’s first-quarter bright spots included the Fort Worth (Texas) Star-Telegram, where general advertising improved 5%, and California’s Contra Costa Times, where retail advertising increased 4%.
Revenues at the company’s online division rose for the first time since the final quarter of 2000. The online operations lost $3.9 million on first-quarter revenue of $12.9 million compared with a loss of $11.1 million on revenue of $10.4 million a year ago.
Knight Ridder expects the online division to break even by the end of this year.
Belo, owner of The Dallas Morning News and three other daily newspapers, earned $16.8 million, or 15 cents per share, compared with $623,000, or a penny per share, in the year-ago quarter. The year-ago quarter was lowered by 10 cents per share to reflect a change in accounting.
The current results include a gain of $2.4 million, 2 cents per share, on the sale of Belo’s interest in the Dallas Mavericks basketball team and the American Airlines Center. That beat the 10-cent forecast of analysts surveyed by Thomson Financial/First Call.
The company, which has imposed layoffs, a hiring freeze, and other measures recently, cut operating costs by 11%, to $266.9 million from $299.7 million a year earlier.
Revenue fell to $319.9 million from $331.5 million.
Belo’s daily newspapers saw revenue decline 5.4% — the drop would have been 8.2% except that this year’s first quarter contained one more Sunday than last year, which boosted sales. The decline was primarily due to classified employment ads, which fell 49% from a year ago.
Television-station revenue fell 2%, but the company saw an increase in political advertising and a boost from the Winter Olympics on NBC affiliates.
Belo Chairman, President, and Chief Executive Robert W. Decherd said the company is encouraged by signs of better business conditions in the second quarter. He said first-quarter newspaper revenue was higher than expected.
Chief Financial Officer Dunia A. Shive said the decline in newspaper revenue would slow in the second quarter, and television spot revenues would be flat to up 1% in April.
The company plans to give further details about its outlook when it meets with analysts May 14 in New York.
In afternoon trading Wednesday, Belo shares rose 42 cents to $24.10 on the NYSE.
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