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CHICAGO (AFX) - Newspaper publisher Knight Ridder on Monday reported a sharp drop in first-quarter earnings from those of a year ago on higher interest expense, fees related to its exploration of strategic options, the expensing of stock-based compensation and the absence of certain publications that were sold during 2005.
San Jose, Calif.-based Knight Ridder agreed in March to be sold to McClatchy Co. for $6.5 billion.
"The quarter was challenging," said Tony Ridder, Knight Ridder's chairman, in a statement. "With total ad revenue up only 1%, and with the persistence of the soft revenue patterns across the industry for many months now (employment and real estate excepted), we continue to look to the second half for improvement."
Knight Ridder said it earned $28.4 million, or 42 cents a share, compared with a year-ago profit of $60.5 million, or 79 cents a share.
The figure in the latest three months includes 6 cents a share in expenses related to the company's exploration of strategic alternatives, which culminated in the sale to McClatchy, as well as 5 cents a share in expenses related to stock-based compensation.
Excluding these items, the company would have earned 53 cents a share in the latest quarter.
Knight Ridder also saw interest expense soar about 74% to $32.8 million, due to increased borrowing and ongoing hikes in interest rates.
The year-earlier quarter includes 4 cents a share in earnings from the Detroit Free Press and the Tallahassee (Fla.) Democrat, both of which have since been sold, as well as 10 cents a share on a tax benefit.
Revenue rose to $739.9 million from $711.8 million.
Analysts polled by Thomson First Call were expecting a profit of 59 cents a share on revenue of $732.8 million.
On a pro forma basis, excluding the Detroit and Tallahassee papers and assuming Knight Ridder had otherwise owned the same assets in both quarters, operating revenue was up just 0.5%, with total advertising revenue up 1%.
Circulation was down 1.2%, also on a pro forma basis.
Advertising patterns for Knight Ridder were in line with the newspaper industry's lackluster performance over the past several quarters, and echoed much of what newspaper companies said last week when they reported first-quarter results.
National ad revenue fell 9% from the first quarter of 2005, with much of the damage coming from Knight Ridder's largest markets. Telecommunications, which accounts for about 28% of the national category, dipped 6.1%. National auto ad sales plunged 36% on a decline in spending by automaker General Motors . Entertainment was down 17%, while airlines plummeted 30%.
Retail was down 0.8%, as gains in home furnishings, grocery and office supply ads were offset by declines in department store, home electronics and general merchandise sales.
Classified was up 7.3%, as help-wanted revenue climbed 15% and real estate revenue was better by 22%. Classified automotive ad sales persisted in their weakness, dropping 11.4%.
Circulation copies fell 4.3% for daily editions, and 4.4% on Sundays.
Knight Ridder shares fell 73 cents, or 1.2%, to close at $61.12. This story was supplied by MarketWatch. For further information see
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