Business News

McClatchy Reports First Quarter Results

Friday 24. April 2009 - The McClatchy Company (NYSE:MNI) today reported a net loss from continuing operations in the first quarter of 2009 of $37.7 million, or 45 cents per share. Adjusted for certain items, (1) the loss from continuing operations was $22.9 million, or 28 cents.

Net loss from continuing operations in the first quarter of 2008 was $993,000, or one cent per share. Adjusted for certain items, (1) earnings from continuing operations were $2.8 million, or three cents in the first quarter of 2008.

Revenues from continuing operations in the first quarter of 2009 were $365.6 million, down 25.1% from the first quarter of 2008. Advertising revenues were $284.7 million, down 29.5% from the first quarter of 2008, while circulation revenues were up 0.9% to $68.5 million.

Results in both the 2009 and 2008 quarters include certain unique items. Compensation in 2009 included $19.7 million in severance and related charges incurred in connection with the restructuring plan announced by the company on March 9, 2009, while the 2008 quarter included $2.1 million related to restructuring programs last year. Interest expense in the 2008 quarter included a write-down of $3.4 million of deferred financing costs related to an amendment of the company’s bank credit agreement. Both years also included adjustments related to discrete tax items.

The company noted that on April 15, 2009, it retired $31 million of unsecured notes which had matured. McClatchy has no other debt maturities until 2011, expects no required pension contributions until 2010, and has suspended cash dividends. Management expects to use cash primarily for debt repayment for the remainder of 2009.

Management’s Comments:

Commenting on McClatchy’s results, Gary Pruitt, chairman and chief executive officer, said, “As anticipated, our advertising revenues in the first quarter of 2009 were weaker than the fourth quarter of 2008 and reflect the widening economic recession.

“The impact of the downturn had largely been limited to print advertising in 2008, but in the first quarter of 2009 it began to have a greater effect on digital advertising as well. Still, all categories of digital advertising are outperforming print advertising. In total, digital advertising revenues decreased 4.7% in the first quarter of 2009. Digital advertising revenues were impacted by employment advertising, the category most negatively affected by the economic recession and which is down substantially in print and online. Excluding employment advertising, digital advertising revenues grew 28.7% in the first quarter of 2009. Also, digital advertising represented 15.3% of total advertising revenues, up from 11.6% of total advertising for all of 2008, and average monthly unique visitors to our websites grew 26.7% in the first quarter of 2009.

“To help offset the impact of declining advertising revenues, we implemented a number of circulation and cost-related initiatives. We have increased circulation prices at a number of our newspapers over the last several months which resulted in circulation revenue growth of 0.9%. We have also taken several actions in recent months to reduce our cost structure, largely on a permanent basis. Cash expenses, excluding the severance-related expenses, were down 18.0% as the result of the steps we have taken, and we note that newsprint prices fell sequentially in each month of the quarter. While we have recorded a good portion of the severance related to our most recent cost restructuring initiatives in the first quarter, most of the benefits of these initiatives will be realized over the next 12 months, starting in the second quarter of 2009. We expect lower expenses and improved circulation revenues to continue to mitigate the impact of advertising revenue declines throughout 2009.

“The economic environment is still weak and, like everyone else, our visibility on advertising trends is limited. So far April’s revenues are similar to the first quarter. We will remain focused on realigning our cost structure as we continue transitioning our business to a hybrid print and digital media company. We remain the leading local media company in some of the best growth markets in the nation and are working hard to position the company to benefit from a stronger economy once conditions improve.”

Pat Talamantes, McClatchy’s chief financial officer, said, “At the end of the first quarter debt net of cash on hand was $2.02 billion, compared to $2.03 billion at the end of 2008. Based on our trailing 12 months of cash flow, our leverage ratio, as defined under our credit agreement, was 5.9 times cash flow at the end of the quarter and our interest coverage ratio was 2.8 times cash flow, both of which are in compliance with the requirements of our credit agreement. We have approximately $145 million in availability under our bank credit lines, and have no debt maturities until June 2011. We expect to make further progress in paying down debt in 2009.”

The company’s unaudited interim statement of income and statistical report, which summarizes performance for the first fiscal quarter of 2009, follows.