McClatchy Provides Outlook at UBS Conference
The McClatchy Company (NYSE: MNI) today provided an update of business trends for 2011 and an outlook for 2012, including improving advertising revenues over the last three months, growing Sunday circulation and the expected receipt of nearly $30 million in dividends from the company's equity investments.
Management noted that it saw improving advertising revenue trends that began in September and continued in October and November 2011. Advertising revenues were down 8.7% in October and 2.4% in November (down 5.6% for the two months combined), compared to declines of 10.1% through the first nine months of 2011. Total revenues for October and November combined were down 4.9% compared to declines of 8.7% through the first nine months of 2011.
Gary Pruitt, McClatchy's chairman and chief executive officer, said, "The improving advertising trends in the first two months of the fourth quarter have been led by retail and national advertising. This is particularly encouraging given that October and November were our strongest months in 2010, and so are our toughest comparisons of the year."
Pruitt pointed to the growth of Sunday circulation as "one of the more positive developments" of 2011.
"While daily circulation has shown improvement over the year, Sunday circulation has improved dramatically and is now growing, up 1.9% in the last five months," Pruitt said. "There is no discounting the importance of the Sunday newspaper. On average, Sunday drives nearly 36% of advertising revenues. The Sunday paper is highly profitable for us in addition to being highly valued by our readers and advertisers."
Pruitt said the company also expects to receive nearly $30 million in dividends this month from the company's equity investments.
"Classified Ventures, a growing internet company in which we own a 25.6% interest, is expected to pay us a dividend of approximately $17 million later this month. Classified Ventures owns two of the nation's premier classified websites, the auto website Cars.com and the rental site Apartments.com.
"CareerBuilder, which operates the country's leading jobs sites and of which we own 15.0%, recently paid us a dividend of $7.5 million. Other equity investments will also contribute about $4 million this month," Pruitt said. "These valuable equity investments have also contributed more than $21 million in earnings through the first nine months of 2011. We are especially pleased with the performance of our internet investments these companies provide important products to our newspaper websites and are strategic partners in our digital success."
Pruitt noted that digital advertising revenue from the company's newspaper websites now makes up 20 percent of McClatchy's total advertising revenue among the highest in the industry. The company expects to generate digital advertising revenue in excess of $190 million in 2011.
Pruitt continued, "As we look to the fourth quarter, we are pleased to have seen the improvement in revenues in recent months. We expect cash expenses to be down in the mid- to high-single-digit percent range, excluding severance costs associated with our restructuring plans.
"As we look ahead to 2012, we have limited visibility but will work hard to maintain our ad revenue momentum. We're adding digital sales staff and expanding our sales training. We will continue to be vigilant in controlling expenses and, of course, we will continue to reduce debt. Finally, we will be opportunistic, as we always have been, in considering transactions that will strengthen our company and will be open to digital investments that give us a strategic advantage in our operations."
Pat Talamantes, McClatchy's chief financial officer, said the company reduced debt by $25 million in the fourth quarter and by $140 million in total in 2011.
"We expect our debt balance to be $1.635 billion by year-end," Talamantes said. "Our nearest term bond maturity is 2014 and that is only about $81 million obviously not an issue given our free cash flow. Finally, with the dividends arriving this month we expect to have a healthy cash balance at year-end. Given that cash and our revolver availability, we have ample liquidity as we enter 2012 and we have no covenant issues."
McClatchy management will review the company's business and strategies in a presentation at the UBS 39th Annual Global Media & Communications Conference at the Grand Hyatt New York today at 11:30 a.m., Eastern Time. The company's presentation will be webcast live on its website, www.mcclatchy.com. McClatchy's webcast presentation will continue to be archived at its website for future reference.
The McClatchy Company is a leading news and information provider, offering a wide array of print and digital products in each of the markets it serves. As the third largest newspaper company in the country, McClatchy's operations include 30 daily newspapers, community newspapers, websites, mobile news and advertising, niche publications, direct marketing and direct mail services. The company's largest newspapers include The Miami Herald, The Sacramento Bee, Fort Worth Star-Telegram, The Kansas City Star, The Charlotte Observer and The News & Observer in Raleigh, N.C. McClatchy is listed on the New York Stock Exchange under the symbol MNI.
Statements in this press release regarding future financial and operating results, including revenues, anticipated savings from cost reduction efforts, cash flows, debt levels, as well as future opportunities for the company and any other statements about management's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates" and similar expressions) should also be considered to be forward-looking statements. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the duration and depth of the economic recession; McClatchy may not generate cash from operations, or otherwise, necessary to reduce debt or meet debt covenants as expected; McClatchy may not consummate contemplated transactions to enable debt reduction on anticipated terms or at all; McClatchy may not achieve its expense reduction targets or may do harm to its operations in attempting to achieve such targets; McClatchy's operations have been, and will likely continue to be, adversely affected by competition, including competition from internet publishing and advertising platforms; increases in the cost of newsprint; bankruptcies or financial strain of its major advertising customers; litigation or any potential litigation; geo-political uncertainties including the risk of war; changes in printing and distribution costs from anticipated levels; changes in interest rates; changes in pension assets and liabilities; changes in factors that impact pension contribution requirements, including, without limitation, the value of the company-owned real property that McClatchy has contributed to its pension plan; increased consolidation among major retailers in our markets or other events depressing the level of advertising; our inability to negotiate and obtain favorable terms under collective bargaining agreements with unions; competitive action by other companies; decreased circulation and diminished revenues from retail, classified and national advertising; and other factors, many of which are beyond our control; as well as the other risks detailed from time to time in the company's publicly filed documents, including the company's Annual Report on Form 10-K for the year ended Dec. 26, 2010, filed with the U.S. Securities and Exchange Commission. McClatchy disclaims any intention and assumes no obligation to update the forward-looking information contained in this release.
SOURCE The McClatchy Company