Earnings analysis: Newspaper companies looking up from the bottom

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Newspaper advertising appears to be ready for an upturn in the second half, but the recovery is still unsteady, according to executives from major newspaper companies reporting second-quarter earnings last week.

All showed double-digit drops in help-wanted advertising, but declines were smaller than the previous quarter; automotive and real estate classifieds continue to recover. National advertising is weak but improving, and retail advertising is up. Entertainment and political advertising are showing strength.

"If you connect all the dots ... you can see the arrow pointing upward," said Russell T. Lewis, president-CEO of New York Times Co. The company posted $772.2 million in revenue, up 1.6%, and net income of $78.8 million, far below $265.5 million a year ago. But income from continuing operations rose 225% after factoring out a $241.3 million gain from the sale of its magazine group in 2001.

Tribune Co. reported improvements credited to cost-cutting and a slight gain in ad revenue. Net income rose 57.3% to $114.2 million from $72.6 million in 2001. After factoring out accounting changes, income dropped 7.4% from $123.3 million in 2001. Revenue was relatively flat, up 0.7% to $1.38 billion from $1.37 billion.

Washington Post. Co. reported a 7% increase in revenue to $647.7 million, thanks to strong results in cable and education divisions and growth in its TV unit. Magazine publishing was down and newspaper revenue flat. Second-quarter net income rose to $51.1 million from $14.5 million in 2001. After factoring out accounting items, it rose to $56 million from $33.1 million.

Second-quarter numbers suggest a newspaper bottom, but an uneven recovery, said Douglas McCorkindale, Gannett Co.'s chairman-president-CEO. Gannett reported net income of $303.9 million, up 30.2% on flat revenue of $1.62 billion, thanks to cost-cutting efforts and strong results from its TV station group.


At Knight Ridder, net income of $76.8 million was nearly six times year-ago income of $13.4 million. Year-ago results were depressed by accounting changes and one-time charges. Revenue was off 3.2% to $715.1 million. Chairman-CEO Tony Ridder warned revenue would likely be down about 0.5% for the full year. Second-quarter ad revenue remained stressed, falling 3.5% year-over-year.

"We continue to think we are coming out of the recent recession much as we did in `90 and `91," Mr. Ridder said. "That is, steadily and surely, but frustratingly slowly." Pressed to cite signs of ad strengthening other than easier comparisons to 2001, Mr. Ridder pointed to local auto and real estate advertising and said retail "seems to be doing OK."

"It's not as if everything is in the tank, by any means," he said.

contributing: jon fine

Fast Facts

Reporting this week:

July 22: Anheuser-Busch

July 23: Yum Brands

July 24: AOL Time Warner, USA Interactive, McDonald's

July 25: Adolph Coors, Wendy's International

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