The Associated Press said Tuesday that its revenue declined in 2011 for the third straight year, but the drop was significantly smaller than the previous two years.
Revenue dropped to $627.6 million last year from $630.5 million in 2010, the not-for-profit news cooperative said at its annual meeting on Tuesday. Before taxes, AP lost $23 million, compared with $22.5 million in 2010. After taxes, the AP said it lost $193.3 million, mostly because of a non-cash charge of $168 million that was taken as a reserve against future tax benefits.
AP Chief Financial Officer Ken Dale said he was encouraged that the revenue declines had slowed. Revenue dropped 10 percent in 2009 and 7 percent in 2010. The decline in 2011 amounted to 0.5 percent.
"We feel good about the year in 2011," Dale said.
The AP said revenue is likely to increase by as much as 2 percent in 2012, thanks partly to U.S. elections and the London Olympics. The AP sells separate, premium content related to both events. Broadcast revenue is also expected to increase because of the elections and Olympics. Separately, executives expect the AP's mobile news application for tablet computers and smartphones to generate new advertising revenue.
The AP's financial results come amid a change in leadership. CEO Tom Curley, chief executive for nine years, will be replaced by Gary Pruitt, CEO of The McClatchy Co., in July. Pruitt has been a member of the AP board for nine years.
"In selecting Gary, the AP board has sent a message of continuity as AP continues its digital transition," Curley said.
Pruitt said the AP will continue that transition and advocate for accountability from public officials and freedom of the press around the world. "But clearly, AP's challenge is to find new sources of revenue to continue this noble mission," he said.
William Dean Singleton, CEO of MediaNews Group Inc., also is stepping down after five years as the AP board's chairman. He is being replaced by Mary Junck, CEO of Lee Enterprises Inc.
Also at the meeting on Tuesday, the AP board added six members, re-elected three and saw three leave. It now has 19 board members, who serve in staggered three-year terms.
The new board members are Rich Boehne, CEO of The E.W. Scripps Company; Stacey Cowles, publisher of The Spokesman-Review; John Winn Miller, publisher of the Concord Monitor; Robin McKinney Martin, owner of the Santa Fe New Mexican; Jim Moroney, publisher of The Dallas Morning News; and Bill Nutting, vice president of Ogden Newspapers Inc.
The AP's finances have suffered in recent years largely because of the financial pressures many of its member newspapers are under. Newspapers have been hit hard by declines in advertising revenue. As a result, the AP has cut the fees it charges newspapers.
Under accounting guidelines established by the Financial Accounting Standards Board, a company that has a cumulative loss over a three-year period must establish a reserve against the future tax benefits of those losses that it carries on its balance sheet. Those tax benefits on the AP's books were $168 million. Although the AP is optimistic that it will be able to realize the tax benefits in the future, the accounting rules dictate that a charge had to be taken, Dale said.
This has become standard practice in corporate finance, as accounting firms force companies to take the most conservative view of the value of such assets.
Dale said the charge had no impact on operations, adding they held up well considering the U.S. newspaper business continued to face declines in print advertising revenue. Fees from newspapers account for about a fifth of the AP's revenue, roughly the same amount it gets from online media outlets.
AP was able to control costs in 2011, even as it poured resources into news coverage of the Arab Spring revolts in the Middle East, Japan's earthquake and tsunami, Hurricane Irene and the royal wedding in Britain.
Payroll expenses fell about 1 percent to $378.9 million, according to the AP's financial statement. The AP had 3,473 employees at the end of 2011, down 3.6 percent from 3,602 a year earlier, the AP said.
The AP said capital spending was $31 million in 2011. About half of that went toward updating its video department to handle high-definition video, Dale said. Capital spending is expected to be just under $30 million this year, as the high-definition update is completed and then fall in 2013, he said.
Nakashima reported from Los Angeles.