McClatchy 2Q Profit Tops Expectations

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Newspaper publisher McClatchy Co. reported second-quarter earnings Thursday that beat Wall Street expectations but didn’t include results from its recently closed acquisition of Knight Ridder Inc.

McClatchy, which is based in Sacramento, Calif., earned $44.1 million, or 94 cents per share, in the quarter ended June 25, compared with $44.2 million in the year ago period, also 94 cents per share.

The results came in well ahead of the 88 cents per share that analysts polled by Thomson Financial had been expecting. McClatchy’s shares rose 43 cents, or 1.1 percent, to $40.99 in late morning trading on the New York Stock Exchange, despite an overall decline in the stock market and in the shares of most other newspaper companies.

The most recent results include two cents per share in stock-based compensation, which companies began recording at the beginning of the year according to new accounting rules.

Revenues edged up 0.5 percent to $304.2 million from $302.8 million in the comparable period a year ago.

McClatchy closed on its acquisition of Knight Ridder on June 27, two days into its second fiscal quarter. McClatchy said it would begin reporting consolidated results with the new newspapers beginning in the third quarter.

Looking to the third quarter, McClatchy expects advertising results at all of its newspapers to be largely in line with those of the first half of the year, CEO Gary Pruitt said in a statement.

Pruitt said he was “encouraged” by a rebound in retail advertising, but noted that comparisons will get tougher in the real estate category — an area that has been strong across the industry due to the housing boom, which is now showing signs of softening.

Also, Pruitt said that employment advertising, another strong spot for many newspaper publishers, “shows some signs of weakening.” He also said the company expected more “strong growth” in online and direct marketing advertising, and easier comparisons versus the year-ago period in the fourth quarter.

Knight Ridder put itself up for sale last year under pressure from several large shareholders. McClatchy agreed to buy the company, but is selling 12 of Knight Ridder’s 32 newspapers, keeping the other 20. Most of the newspapers didn’t meet McClatchy’s criteria of being located in rapidly growing markets.

With the purchase, McClatchy becomes the second-largest newspaper publisher in the country in terms of circulation, behind Gannett Co.

While it didn’t provide overall financial results for the newly combined company, McClatchy said that on a combined basis the 32 newspapers it is keeping posted a gain in advertising revenues of 1.8 percent in the year to date, versus a gain of 1.3 percent for the 12 newspapers already held by McClatchy.

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