NEWSPAPER EARNINGS IMPROVE IN SECOND QUARTER

But Publishers Caution That Recovery Remains Elusive

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NEW YORK (AdAge.com) -- Three newspaper companies reported encouraging second-quarter results yesterday, but all warned the advertising recovery remains elusive and uneven.

"Things are moving up a little bit better, but [there are] no great positive upticks," said Douglas McCorkindale, chairman-CEO of Gannett Co. The parent company of the national daily newspaper USA Today posted net income of $324.3 million for the quarter, up 6.7% from the year-ago period, on a 5.7% increase in revenue to $1.71 billion.

Monthly improvement
Overall, second-quarter results were

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affected by the war in Iraq and the outbreak of severe acute respiratory syndrome, or SARS, in Asia, but the effects lessened as the quarter progressed. Leonard P. Forman, chief financial officer of The New York Times Co., said ad revenues for the company's newspaper group -- which includes the New York Times and Boston Globe -- were down 0.7% in April, then rose 1.8% in May and 4.6% in June. New York Times Co. posted $72.8 million in net income, down 7.5% from a year ago, on revenues of $801.9 million, up 3.8%.

The newspaper companies reported continued strength in auto, retail and consumer goods advertising, with improvement in the financial advertising categories and weakness in travel advertising due to the effects of the war and SARS.

'Signs of life'
Indeed, financial advertising has been showing "intermittent signs of life" during the quarter, especially in mutual fund advertising, said Christopher Vieth, chief financial officer of Dow Jones & Co. But he added corporate advertising remained weak. He said it was too early to call a turnaround or an end to the business-to-business ad recession.

Dow Jones, parent of The Wall Street Journal, posted $30.8 million in net income, down 43% from a year ago; after adjusting for an insurance payoff and asset sales in 2002, net income was down 3.7%. Revenues dropped 5.6% to $393.6 million, led by a 7.9% drop in ad lineage at the Journal.

Optimistic for next quarter
The companies had modestly optimistic third-quarter forecasts, all tempered by warnings about a "jobless recovery" with some sectors improving faster than others.

"It's not a steady linear progression," said Janet Robinson, president and general manager of the Times. In the meantime, advertisers are saying they have money to spend, but are reluctant to spend it until they get a better read on the recovery, Mr. McCorkindale said.

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