Thursday, April 22, 2010

McClatchy offers up confusing report: declining revenue, severe cost cutting and debt restructuring continues

Update: I guess there are franchises in worse shape than a newspaper. The Pirates, for instance, who lost 20–0 this afternoon to the Brewers, no less.

Our round-up of newspaper company Q1 earnings reports continues with McClatchy's poorly received report today. The company reported a net loss of $2.2 million, which includes discontinued operations.

In fact, because of McClatchy's debt load, and high severance costs, it is hard to get a picture of the true health of one of the industry's most over leveraged firms. In February, according to McClatchy's report, the company issued $875 million of 11.50 percent senior secured notes due in 2017 and used the money to repay bank debt and repurchase a portion of its outstanding debt. There is something about that 11.5 percent number that gives me the chills.

The most important number to watch remains ad revenue which showed continued declines of 11.2 percent -- better than the previous year's 20.5 percent decline, but higher than what other newspaper firms are reporting. Possibly this is because of their exposure in California, but it could also be the result of digital advertising only growing 2.2 percent in the quarter -- again, below the performance seen elsewhere.

"Even though we expect advertising revenues to be down in the second quarter, we believe the ad trend will continue to improve. We will remain vigilant on costs, but the savings run rate going forward will be lower than we experienced in the first quarter because we have cycled over the major restructuring initiatives implemented in early 2009," Gary Pruitt, chairman and chief executive officer reported.

McClatchy shares were trading down about nine percent in active trading.

1 Comment:

Anonymous said...

I thought these guys were dead. No worries, I guess they will be soon!!!