The McClatchy Co. reported a big jump in quarterly profits today, as major cost cutting overwhelmed the effect of a continued slump in revenue.
Sacramento-based McClatchy said its second-quarter profits soared to $42.2 million from $19.7 million a year earlier. Per-share earnings rose to 50 cents from 24 cents.
The improvement came in spite of a 25.4 percent decline in revenue, including a a 30.2 percent drop in advertising sales.
The results marked a substantial turnaround. In the first quarter, the company reported a $37.5 million loss -- the first time in its history as a public company that McClatchy lost money on a day-in, day-out basis.
But in the second quarter, a 29.3 percent drop in expenses returned The Bee's parent to profitability.
In March, the company announced the third major round of job cuts in less than a year. Since last summer, the company has trimmed payroll by about 35 percent, imposed pay cuts at the corporate level and several of its newspapers, and made other expense reductions.
The second-quarter results were a surprise: Wall Street analysts were expecting a loss of 8 cents a share, according to surveys by Thomson Reuters. McClatchy's stock quickly shot up 30 cents a share, to 84 cents, in early trading on the New York Stock Exchange.
"This is just a phenomenal performance," said investment analyst Edward Atorino of The Benchmark Co. in New York.
Numerous analysts predicted that McClatchy was headed toward defaulting on its debts, a move that could have forced the publisher into bankruptcy. With the second-quarter results, "they've given themselves a much better shot (at avoiding default) than anyone dreamed," Atorino said. "If they can get a break in revenue the next six to 12 months, they can pull through."
McClatchy officials have consistently dismissed suggestions of a default. But they have acknowledged that the company's $2 billion in debt, the legacy of the 2006 takeover of Knight Ridder Inc., has put McClatchy under a strain.
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