McClatchy ( MNI), the publishing chain once viewed as a savior of newspapers, is now in a sorry state.

The publisher reported a 58% drop in third-quarter earnings Tuesday and signaled that it would record an impairment charge to reflect the steep deterioration in its financial results and stock price. Following the news, CEO Gary Pruitt apologized to investors for the company's dismal stock performance amid an extended malaise for the print media industry.

"We are disappointed in the share price -- no doubt about it," said Pruitt on a conference call with analysts after the earnings release. "I know the shareholders are very disappointed, and I'm sorry we haven't done better."

Pruitt has been humbled by the devastation in newspapers recently after he made a bold and optimistic bet on the industry by outbidding private-equity firms for Knight-Ridder when it went on sale last year. The acquisition made McClatchy the nation's second-largest newspaper chain behind Gannett ( GCI), the publisher of USA Today.

Shortly after the deal was announced, Pruitt published an op-ed in The Wall Street Journal headlined "Brave News World," extolling the acquisition and challenging conventional wisdom that newspapers are in permanent decline.

"The fact is, newspapers are still among the best media businesses -- and the most important," Pruitt declared.

Since then, shares of McClatchy have lost over three-fifths of their value. Though it acquired Knight-Ridder in a deal valued at $6.4 billion, McClatchy is now valued by the stock market at $1.5 billion.

Other major newspaper counterparts, such as Dow Jones ( DJ) and Tribune ( TRB), have been sold and conglomerates like E.W. Scripps ( SSP) and Belo ( BELO) are splitting off their newspaper businesses from other media properties that are more favored on Wall Street.

On the conference call, Pruitt hinted that a stock buyback may be in the works to reward shareholders who have suffered through the selloff, but he said paying down debt is still a priority.

"We do expect that we will participate in a share repurchase, but we don't have a specific time frame or balance in mind," Pruitt said. "Paying down the debt should also build equity value, and we'll be evaluating when is an appropriate time for us to enter the market and buy back shares as well."

McClatchy, whose properties include the Sacramento Bee and the Miami Herald, reported preliminary earnings for the third quarter of $23.5 million, or 29 cents a share, down from the $51.8 million, or 64 cents a share, it recorded for the same period last year.

The results included a charge of 3 cents a share for special tax provisions. Excluding such one-time items, analysts were expecting earnings of 31 cents a share, according to Thomson First Call.

McClatchy's revenue fell 9.2% in the quarter to $540.3 million from $595.1 million a year earlier. That missed Wall Street's expectations for revenue of $549 million.

Pruitt said cyclical factors in the industry, such as the weak housing market, represent "a significant portion of the current advertising downturn." That, along with the company's declining stock price, led it to move up its annual test of goodwill impairment, or the book value of a company's assets, from its scheduled time at the end of the year.

As a result, McClatchy said it will record a write-down of its assets in its third-quarter results. The amount of the charge will be disclosed in the company's quarterly report, which is expected to be filed in early November.

Shares of McClatchy recently were down 34 cents, or 1.8%, to $18.83.