Fourth quarter grim news for ADN parent, other media companies

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Posted: February 5, 2009 - 1:58 pm

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By ANICK JESDANUN
The Associated Press

NEW YORK — Four media companies reported quarterly losses Thursday, weighed down by the declining value of their properties.

The biggest write-down happened at Rupert Murdoch's News Corp., which owns The Wall Street Journal publisher Dow Jones & Co., movie studio 20th Century Fox and the Fox broadcast network. After writing down the assets on its books by $8.4 billion, News Corp. said it lost $6.4 billion in its most recent quarter.

Similar factors hurt the results at McClatchy Co. (owner of the Anchorage Daily News), Belo Corp. and Scripps Networks Interactive Inc.

Excluding charges, earnings at News Corp. amounted to $320 million, or 12 cents per share. That was short of the 19 cents per share expected by analysts. Revenue fell 8.4 percent to $7.87 billion, also missing analyst targets for $8.39 billion.

"We are doing everything we possibly can to position ourselves to emerge stronger when the economy returns to some semblance of normalcy," Murdoch said.

In addition to reporting a $21.7 million loss, McClatchy said it plans cost cuts of $100 million to $110 million this year. The company wouldn't say how much, if any, would come from layoffs at its newspapers, which include The Miami Herald and The Sacramento (Calif.) Bee.

McClatchy said it would freeze pension plans and suspend matches to its 401(k) retirement plans beginning March 31. This followed an earlier announcement of a companywide wage freeze through September. A new retirement plan was being developed to tie contributions partly to the company's cash flow performance.

The Sacramento-based company took a $59.6 million pretax charge to account for the reduced value of its newspapers. Their revenue prospects have declined as the recession compounds losses resulting from the migration of readers and advertisers to the Internet.

The loss amounted to 26 cents a share for the quarter, narrower than the loss of $1.43 billion, or $17.46 per share, in a year-ago period that also included accounting charges for newspapers' valuations.

Companies are required to annually review the values of their assets and record charges against earnings if those values drop. Such write-downs do not affect cash on hand or day-to-day operations. But they do alter valuations of assets and shareholder equity on balance sheets, which can affect whether companies are in compliance with loan covenants.

Excluding its charges, McClatchy earned 26 cents a share in the latest quarter, short of the 30 cents a share expected by analysts polled by Thomson Reuters. Revenue fell 18 percent to $471 million, in line with analysts' estimates.

"The economy remains mired in recession and our industry is still in a period of transition," Chief Executive Gary Pruitt said.

Belo, a Dallas-based television company, posted a wider loss for the fourth quarter on falling sales and impairment charges. The company lost $359 million, or $3.51 per share, compared with a loss of $333 million, or $3.23 per share, in the year-ago quarter.

Excluding charges related to the declining value of its TV stations and the spinoff of its newspaper properties into A.H. Belo Corp., earnings totaled 28 cents per share, beating analyst estimates of 26 cents.

Revenue fell 9 percent to $199 million, largely in line with analyst expectations.

Belo Chief Executive Dunia Shive said strong revenue from political ads and Internet operations was not enough to offset an overall decline in advertising. The company has responded by cutting costs, freezing open positions and reducing staff.

Cincinnati-based Scripps Networks Interactive, operator of the Food Network, other cable TV channels and shopping Web sites, reported a narrower fourth-quarter loss of $154 million, or 94 cents per share, compared with a loss of $299 million, or $1.83 per share, in the year-ago period.

Excluding impairment charges for the declining value of its Shopzilla comparison-shopping site, Scripps said earnings came to 55 cents per share, beating the average estimate of 51 cents.

Sales climbed 3.5 percent to $412 million, slightly missing analysts' forecasts of $417 million.

In recent weeks, The New York Times Co., USA Today owner Gannett Co. and St. Louis Post-Dispatch publisher Lee Enterprises Inc. reported lower profits for the October-December quarter. Gannett's profits will be erased after it completes an accounting write-down of its newspaper values, akin to what McClatchy did. Lee also is weighing a write-down for the recent quarter.

The current year doesn't look better. The Wall Street Journal said Thursday it is cutting about two dozen newsroom positions.

At Belo, Shive said first-quarter local and national ad sales were on pace with the fourth quarter, when the company saw 26 percent reductions from the same period in 2007.

Early indications at McClatchy show advertising sales in January to be slower than the fourth quarter, when ad revenue dipped 21 percent.

Online advertising revenue at McClatchy grew 10 percent during the October-December quarter, but it accounted for only 11 percent of total ad revenue, not enough to offset the losses in print.

McClatchy already went through two rounds of job cuts last year, with each round slicing about 10 percent of the work force, to produce an estimated $200 million in annual savings. It also plans to suspend dividend payments after April 1 to conserve cash.

Debt at McClatchy stood at $2.04 billion at year's end, down from $2.07 billion at the end of September.

Belo's debt stood at $1.09 billion, down from $1.14 billion at the start of the quarter. The decline in revenue has put the company in danger of missing some lender-imposed financial targets, and Belo expects to have a new agreement in place this quarter. Companies that win such flexibility typically have to pay higher interest rates.

Shares in McClatchy gained 5 cents, or 7.6 percent, to 71 cents Thursday. Belo lost 3 cents, or 2.1 percent, to $1.40, and Scripps Networks gained 68 cents, or 3.3 percent, to $21.43.

News Corp. rose 20 cents, 2.8 percent, to $7.45 before its earnings report.

AP Business Writers Andrew Vanacore and Ryan Nakashima contributed to this story.

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