Net pro forma earnings for newspaper groups were flat or showed marginal increases in the first half of 2002, which ended June 30, compared to figures from last year.

But a new accounting rule eliminating the amortization of goodwill and indefinite lived intangible assets may have had an affect on their operating expenses. The new accounting rule is Financial Accounting Standard 142 and addresses acquired goodwill and other intangible assets.

In an article written by Rick Wayman on investopedia.com, he explains that the new rule change could impact earnings in two ways.

Earnings per share growth will be exaggerated because the Financial Accounting Standards Board eliminated 40-year amortization and instituted a “market impairment” rule, which essentially means that companies must “mark to market” their goodwill assets. Depending on how the assets are currently valued and expensed to the income statement, the risk for potential one-time charge-offs may further depress already weak earnings, Wayman said.

“Investors will need to fully understand a stock’s long term earnings potential and not be fooled by an inefficient market and companies willing to do whatever it takes to generate spin for their shares,” he wrote.

Some company’s newspaper division amortization and depreciation expense decreased by as much as 50 percent.

The New York Times Co. reported that including special items, diluted earnings per share were $.51, down 70 percent from an adjusted $1.70 in the second quarter of 2001. Net income of $133.2 million for the first half was down from an adjusted $326.7 million last year. Special items included a gain of $412 million related to the sale of the company’s magazine group; work force reduction expenses of $79 million and income of $1.3 million related to a non-compete agreement.

Total revenues for the company increased 1.6 percent to $772.2 million from $760.3 last year. Circulation revenue increased 12.7 percent and advertising revenues declined 1.4 percent.

E.W. Scripps Co. reported net income of $66.8 million for the first six months of 2002, compared to $205.7 million the same period a year ago.

Scripps newspaper operating cash flow increased 18 percent to $70.6 million. Newspaper advertising revenue rose from $371 million to $373 million, while cash flows rose from $114 million to $134 million.

Operating income from the (Denver) Rocky Mountain News was $2.7 million, versus a loss of $11.7 million in the same six-month period last year. Because of the joint operating agreement between the Rocky Mountain News and The Denver Post, Scripps no longer includes the advertising and other revenue produced by the Rocky Mountain news, the costs to produce, distribute and market the newspaper, nor related depreciation.

The Tribune Co.’s publishing division reported first half revenues were $1.897 billion, down 3 percent with last year’s results. Publishing EBITDA, or cash flow, was $494 million, up 7 percent from $461 million in 2001, while cash operating expenses were down 6 percent.

Journal Register Co. reported a net income of $23 million for the first half, an increase of $36 million to last year’s similar period. Total revenues for the second quarter were $202 million as compared to $193 million for the first half 2001. Advertising revenue increased to 146 million. On the same basis, circulation revenue for the second quarter was 45.6 million, up from 43.1 million in 2001.

Gannett Co. Inc. reported newspaper operating cash flow was 860.5 million in the twenty-six weeks ended June 30, versus $898 million in the first half of 2001. Operating revenues were $2.7 billion. Pro forma advertising revenues declined 1.1 percent in the period, local and classified advertising were lower.

Knight Ridder reported it earned $1.50 per diluted share for the first half, up $.87 from the $.63 per diluted share earned in 2001, on a GAAP basis. Special items in the period 2001 included $47.1 million for buyouts and severance as a result of a work force reduction program. It also included a charge of $.16 for amortization of goodwill and certain other intangible assets that are no longer amortized under FAS rule number 142.

Total operating revenue for the first half was down 3.2 percent, while net income was $63.4 million, up $2.4 million. Operating costs were down $189 million in the second quarter 2002 compared to last year’s figures in the same period. Labor and employee benefits and newsprint accounted for $97 million in cuts from last year’s figures.