The McClatchy Co. said Friday its profits fell to $98,000 during the second quarter as it continued to wrestle with the transition to a digital media strategy and the continued slide in revenue from print.
Sacramento-based McClatchy, which owns The Sacramento Bee and 28 other newspapers, said the results are preliminary and will be adjusted downward after the company calculates a non-cash “impairment” charge to reflect declining values of its assets and the recent slump in its stock price.
McClatchy’s second-quarter results compared to net income of $89.9 million a year earlier, when the company posted big gains from the sale of its share of the Apartments.com website. Per-share earnings fell to 0 cents, from $1.02 a year ago.
Setting aside the Apartments.com gains, McClatchy’s operating income in the quarter fell to $11.5 million from $27.3 million.
Total revenue fell 7.7 percent to $269.4 million, and advertising sales fell 12.5 percent from a year earlier. “Softness in print advertising and direct marketing advertising negatively impacted total revenue performance in the quarter,” the company said. Digital ad revenue fell 1.8 percent. But digital-only ad sales, which aren’t tied to sales of print ads, rose 5 percent. Audience revenue was flat, as growth in digital subscriptions was offset by a decline in print subscriptions.
The latest results show McClatchy is still in the midst of a decadelong decline in print revenue as the newspaper industry and other traditional media cope with increased competition from the Internet and other sources.
McClatchy took a non-cash impairment charge of $1.52 billion in November 2007, about a year after the slump began. Company officials said the latest charge will be reported no later than Aug. 7 and will largely reflect McClatchy’s diminished stock market valuation.
“These non-cash charges do not reflect our view of the long-term health or value of McClatchy,” said Pat Talamantes, president and chief executive, in a conference call with investment analysts.
McClatchy in the past year has undertaken a significant reorganization in an effort to speed the progress toward a digital-first strategy, including changes in how its print papers are produced. The company says it will generate cost savings of $25 million to $30 million this year.
“We expect to manage through the digital transformation,” Talamantes said.
McClatchy shares closed at $1, down 8 cents, on the New York Stock Exchange.