MediaNews Swings to 1Q Profit on Acquisitions

By: Mark Fitzgerald MediaNews Group Inc. swung to a profit in its first quarter driven by a more than 50% increase in revenues from the half-dozen metro dailies it has acquired since early last year.

Without those papers -- including the former Knight Ridder California papers the San Jose Mercury News and Contra Costa Times bought last summer -- Denver-based MediaNews would be reporting the same slumping first-quarter results as most newspaper chains. In a filing with the U.S. Securities and Exchange Commission (SEC), MediaNews said excluding the new papers, its advertising revenues decreased 8.7% for the three months ended March 31 compared to the year-ago quarter. For the nine months ended March 31, it added, ad revenues would have been down 4.5%.

First-quarter net income swung to a profit of $4.3 million from a loss in the year-ago period of $3.6 million.

Revenues swelled 52.7% to $317 million with the addition of the new properties, compared to $208.4 million for the first quarter of 2006.

"All the newspaper advertising revenue categories suffered declines, except Internet advertising revenue, which grew 9.9% and 9.6% for the three and nine months ended March 31, 2007, respectively," MediaNews said in its filing.

It added that within classified all categories were down for the first quarter, but that for the nine months a gain in real estate was offset by decreases in automotive and help-wanted.

Circulation revenues also surged as a result of the new properties, up $21.9 million for the quarter, and $62.4 million for the last nine months. Without the new papers, MediaNews said, circ revenues would have been down 7.6% for the quarter, and 5.0% for the nine-month period. Home delivery discounting accounted for most of the decrease, the company said.

Expenses increased with the arrival of new properties, MediaNews reported. Its "cost of sales" rose by $45.2 million in the first-quarter, and by $133.8 million for the nine-month period. But the company noted excluding the new properties, expenses decreased by 7.8% in the quarter, and 4.4% for the nine months ended March 31.

Most of the decrease was related to a cuts in newsprint use that more than offset a 4% price rise for the quarter, and 8% increase for the nine months.

MediaNews said the joint operating agreement (JOA) partnership between its flagship Denver Post and E.W. Scripps' Rocky Mountain News lost $3.9 million on first-quarter revenues of $85.7 million. A year-ago, the JOA was profitable with an income of $2.3 million on revenues of $98.3 million.