By: Mark Fitzgerald Journal Register Co. reported Tuesday that its third-quarter profit plunged from last year's record 3Q earning, which benefited from the reversal of $54.6 million in tax accruals and other special items.
Net income fell to $11.5 million, or 28 cents per share, compared to $66.1 million, or $1.55 per share in the same period in 2004. Without the special items, 2004 3Q earnings were $12.2 million, or 29 cents per share.
Total revenues for the 2005 third quarter were $138.3 million as compared to $123.1 million for the third quarter of 2004, an increase of 12.4%.
Journal Register Chairman and CEO Robert M. Jelenic presided over the conference call with analysts Tuesday morning, his first public appearance since he took a leave of absence for unspecified health reasons this summer.
"I'm happy to report I have resumed a partial work schedule since my successful surgery in July," Jelenic said.
Jelenic said despite the "soft overall advertising revenue environment," Journal Register was generating "substantial" free cash flow. For the quarter, cash flow was $15.4 million, or 37 cents per diluted share. Year-to-date for the period ended Sept. 25 it was $53.6 million, or $1.27 per diluted share.
"Our results were driven by strong classified employment and real estate advertising revenue performance, our continued focus on tight cost controls throughout the company, earnings accretion from our Michigan acquisition and strong performance from our online operations," Jelenic said.
The Michigan acquisition, 21st Century Newspapers, contributed 2 cents per diluted share to third-quarter earnings, and 3 cents to year-to-date results, he said.
"The improvements we have made to these operations include expanded local news and sports coverage, improved layout, increased utilization of centralized news gathering, more effective cross-sell programs in advertising, new product launches, and expanded online operations," Jelenic said.
Advertising revenues, which Journal Register reported on a pro forma basis, were $107.6 million for the 2005 third quarter, compared to $108.7 million last year, a decrease of 1.0%.
Advertising revenues are down 0.3% for the year-to-date, the company said.
Retail advertising revenues decreased 1.9% from the same period last year, which Journal Register said "reflects softness in the home furnishing, entertainment and grocery/drug categories, partially offset by strength in the financial, local telecommunications, and department store categories."
Classified advertising revenues were up 0.4% on continued strength in help-wanted and real estate.
Employment classified revenues were up 10.8%, with some of its clusters showing particular strength. Classified was up 22.3% in the Capital-Saratoga, N.Y. cluster; up 14% in the Greater Cleveland cluster, up 14.0%; and up 12.5% in the Greater Philadelphia cluster.
Classified real estate advertising revenues increased 5.5% on a pro forma basis for the quarter, driven by strength in the Company's Capital-Saratoga, New York cluster, which was up 52.7%; the Mid-Hudson, New York cluster, up 20.9%; and the Central New England cluster, up 14.8%.
Classified automotive advertising revenues were down 14.9% for the quarter, reflecting continued softness in the category.
National advertising revenues were also down, 3.9%, which Journal Register said was the result of difficult comparisons with 2004.
Online ad revenues increased 50% to $2.5 million for the quarter, driven by a 181% increase in "run of web" revenues, and a 50% increase in the employment category.
On other topics, Jelenic told analysts he didn't think the competitive landscape had changed in Michigan because of the changes to the Detroit joint operating agreement (JOA).
"From our perspective it's still a JOA, you still have two papers. Gannett ran it in the past, and Gannet's running it now," he said. "We haven't seen any change, but we respect all our competitors, and we keep our eyes wide open."
In response to a question, Jelenic said the current economic environment for the newspaper industry did not remind him of the last slow period. "It's not like [2001]," he said. "In 01, it ended very quickly. It went from pretty good to pretty bad pretty quickly. It's just sort of more stagnant right now."
It may be an environment conducive to picking up more papers, he added. "We're talking to four or five people now," Jelenic said. "These would be small ones, the add-ons that we're pretty good at. ...This environment has got a lot of sellers a little more motivated."
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