McClatchy ( MNI - Get Report) posted soft first-quarter numbers as newsprint costs and stock option expenses ate into the bottom line.

The Sacramento, Calif., newspaper chain said income for the first quarter of the year dropped to $27.7 million, or 59 cents per share, from the year-ago $32.3 million, or 69 cents per share. Revenue inched up to $282 million from $280.9 million last yaer.

Analysts polled by Thomson Financial were expecting a profit of 67 cents a share on $285.8 million in revenue.

"In the first quarter of 2006, we faced our toughest comparison in quarter-over-quarter advertising revenue growth," said CEO Gary Pruitt. "Real estate, employment and direct marketing advertising grew strongly in the quarter, but automotive and national advertising fell." Pruitt said the company recorded stock option expense coupled with increases in pension and medical costs and the higher cost of newsprint hit the company.

The company recently agreed to acquire Knight Ridder and its 32 newspapers properties for $4.5 billion. The company is in the process of selling 12 of those properties. The deal is expected to close sometime this summer.

Pruitt said that "we expect continued growth in real estate advertising and the other areas that sustained growth in the first quarter. At this time we do not see indications of a change in automotive advertising trends and national advertising remains unpredictable. We expect second quarter advertising results to be similar to the first quarter." Analysts will be looking for McClatchy to earn 95 cents a share on $310 million in revenue.

McClatchy shares slipped a dime early Thursday to $47.90.