Excluding a loss from the sale of its Minneapolis Star Tribune newspaper, McClatchy (NYSE:MNI) reported a quarter Tuesday that, while not in the "lights out" category, represented a clear improvement over the prior year. However, with that loss from discontinued operations factored in, the company reported a fourth-quarter loss of $279.3 million, or $3.41 per share.
The Star Tribune, which the company said in December is being sold to Avista Capital Partners for $530 million -- or less than half the $1.2 billion McClatchy paid for it almost a decade ago -- is being carried on the income statement as a discontinued operation. The sale is expected to close this quarter.
Revenues from continuing operations for the quarter, reflecting the June 2006 acquisition of 32 former Knight Ridder newspapers, of which McClatchy kept 20, increased more than threefold to $673.6 million, from $210.3 million in the same quarter of 2005. The company's earnings from continuing operations in the recent quarter were $75.5 million, or $0.92 per share, compared with $34.1 million, or $0.73 per fully diluted share, a year ago. Income from discontinued operations added another $11.3 million, or $0.24 a share, a year ago.
As with other newspaper publishing companies, McClatchy's 2006 fourth quarter contained 14 weeks, compared with 13 weeks in the 2005 quarter. The company estimates that its income from continuing operations was boosted by about $5.3 million with the extra week.
McClatchy is the third-largest U.S.-based newspaper publisher after the sale of The Star Tribune. Its properties include the Anchorage Daily News, the Fort Worth Star-Telegram, The Kansas City Star, and The Miami Herald. As have other newspaper publishers, including Gannett (NYSE:GCI), Tribune (NYSE:TRB), New York Times (NYSE:NYT), and Media General (NYSE:MEG), it has struggled in the face of softening advertising revenues and declining readership.
Indeed, in commenting on his company's fourth-quarter results, Gary Pruitt, McClatchy's chairman and CEO, said, "The overall advertising environment grew more difficult in the fourth quarter. Retail advertising softened and national and classified continued to decline."
It's difficult to envision when these withering circumstances will be reversed. Indeed, late last month, the Carnegie-Knight Task Force on the Future of Journalism Education reported the results of a survey of teachers in grades five through 12. The survey indicated that 57% of the teachers use Internet-based news in the classroom with some frequency, compared with 31% for national television news and just 28% for daily newspapers.
So the newspaper slog continues to be a difficult one. From a Foolish investor's perspective, it's difficult to counsel active ownership of the group. Fortunately, there are other areas of the media space that are more inherently attractive.
For related Foolishness:
- Scripps May Throw Papers
- Will All Newspapers Fold?
- An Opportunity for Innovation
- Fool on the Street: The Post Diversifies
New York Times is a Motley Fool Income Investor recommendation. Want to get paid to invest? Analyst James Early and other investors like you can show you how with a free trial.
Fool contributor David Lee Smith remains an avid newspaper reader, although he does not own shares in any of the companies mentioned. He welcomes your comments or questions.
