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Tuesday February 9, 2010
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Tuesday February 9, 2010
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Released: 10/21/2008
SACRAMENTO, Calif., Oct. 21 -- The McClatchy Company (NYSE: MNI) today reported net income from continuing operations in the third quarter of 2008 of $4.2 million, or five cents per share. Adjusted earnings from continuing operations(1) were $10.4 million, or 13 cents per share, in the third quarter of 2008 after excluding the unusual items discussed below. The company's total net income including discontinued operations was $4.2 million or five cents per share.Earnings in the third quarter of 2008 included the impact of several unusual items including: an adjustment to the second quarter gain on the sale of a one-third interest in SP Newsprint Company; a gain on the extinguishment of debt and a write off of deferred financing costs as a result of an amendment to the company's credit agreement; charges related to the implementation of previously announced restructuring plans; the write-down of certain internet investments; and adjustments for certain discrete tax items.
For the third quarter of 2007, the company reported an after-tax loss from continuing operations of $1.345 billion, or $16.40 per share, including the effect of non-cash, after-tax impairment charges. Adjusted earnings from continuing operations(1) were $25.7 million, or 31 cents per share, in the third quarter of 2007 after considering the non-cash impairment charges and adjustments for certain discrete tax items. Total loss in the third quarter of 2007 including discontinued operations was $1.347 billion or $16.42 per share.
Revenues in the third quarter of 2008 were $451.6 million, down 16.4% from revenues from continuing operations of $540.3 million in the third quarter of 2007. Advertising revenues were $370.1 million, down 19.0% from 2007, and circulation revenues were $64.7 million, down 4.9%. Online advertising revenues grew 9.0% in the third quarter of 2008 and were 12.2% of total advertising revenues compared to 8.6% of total advertising revenues for all of 2007.
On September 16, 2008, the company announced a restructuring plan which is expected to result in approximately $100 million in annual savings. This plan includes a reduction in workforce of about 10% and is expected to result in severance of approximately $20 million. Of that amount, $17.0 million was recognized in the third quarter of 2008.
As previously reported, near the end of the third quarter McClatchy successfully obtained an amendment to its credit agreement which provides greater flexibility for the life of the credit facility in the allowable leverage and interest coverage ratios, the two primary financial covenants contained in the agreement. The company reduced debt principal by nearly $404 million in the first nine months of 2008. Total debt was $2.07 billion as of September 28, 2008.
First Nine Months Results:
Income from continuing operations for the first nine months of 2008 was $23.2 million, or 28 cents per share, and was affected by the impact of the unusual items discussed above as well as amounts recorded in earlier quarters. Adjusted earnings from continuing operations(1) were $26.4 million, or
32 cents per share, in the first nine months of 2008. The company's total net income for the first nine months of 2008 including the results of discontinued operations was $23.1 million, or 28 cents per share.
The loss from continuing operations for the first nine months of 2007 was $1.296 billion or $15.81 per share including the effect of the non-cash impairment charges. Adjusted earnings from continuing operations(1) were $74.8 million, or 91 cents per share, in the first nine months of 2007 after considering the non-cash impairment charges and adjustments for certain discrete tax items. The company's total net loss, including the results of discontinued operations, for the first nine months of 2007 was $1.302 billion, or $15.89 per share.
Revenues from continuing operations in the first nine months of 2008 were down 15.3% to $1.4 billion compared to $1.7 billion in 2007. Advertising revenues in 2008 totaled $1.2 billion, down 17.0% and circulation revenues were $198.6 million, down 5.2%. Online advertising revenues grew 10.7% in the first nine months of 2008 and represented 11.8% of total advertising revenues.
Management's Comments:
Commenting on McClatchy's results, Gary Pruitt, chairman and chief executive officer, said, "Our advertising revenues in the third quarter of 2008 continued to be hurt by the weak economy and, to a lesser extent, the secular shift in advertising to the internet. Advertising revenues were down in the same 19% range that we saw at the end of the second quarter.
"Our online business continues to be a bright spot for the company; online audiences and revenues are growing strongly. In the third quarter, average monthly unique visitors to our websites were up 43.8% and were up 37.1% through the first nine months of 2008. Online advertising revenues grew 9.0% in the third quarter of 2008 and were up 49.3% excluding employment advertising, a category that has been impacted both online and in print by the nation-wide decline in jobs. More than half of our online advertising came from ads placed only online; they were not tied to a print up-sell.
"Nonetheless, the advertising environment continues to be weak and we expect print advertising revenues to continue to be down. Thus far in October, advertising revenues are tracking similarly to September.
"Given this economic climate we continue to reduce expenses and realign our cost structure, while retaining our focus on sales, news and online operations. Our print products are an important mainstay of our business, but we must produce them as efficiently as possible. We are finding numerous opportunities to streamline operations. For example, beginning in the fourth quarter our Modesto Bee is being printed by its sister newspaper, The Sacramento Bee, using faster presses with greater color capacity.
"Excluding severance and other benefit charges related to our restructuring plans, cash expenses were down 11.8% in the third quarter, and were down 10.6% in the first nine months of 2008. The expected annual savings from the two restructuring plans put in place this year is about $200 million; so clearly we expect to see additional cost savings from these initiatives in the coming quarters."
Pat Talamantes, McClatchy's chief financial officer, said, "We continue to generate significant cash, but given our limited visibility on advertising revenues resulting from slowing economic conditions, we and our banks agreed to amend our credit agreement. The amended agreement provides the company with greater flexibility for the life of the credit facility in the allowable leverage and interest coverage ratios, the two primary financial covenants contained in the agreement."
"We entered into this amendment because we realized that the credit crisis may result in a more drawn out economic downturn than we had initially thought," said Talamantes. "Based on our trailing twelve months of cash flow our leverage ratio is currently 4.7 times cash flow and our interest coverage ratio is just over 3.0 times cash flow as defined by our bank agreement -- well within the allowable covenant thresholds. The willingness of our bank group to agree to this amendment demonstrates the confidence they have in the company to work through this difficult environment, and we very much appreciate their support. We expect to make further progress in paying down debt through the remainder of 2008."
(1) Adjusted Earnings From Continuing Operations and EPS:
Earnings in the third quarter and nine months of 2008 included the impact of several unusual events including: the gain on the sale of a one-third interest in SP Newsprint Company, gains on the extinguishment of debt related to bond redemptions, write-offs of deferred financing costs related to amendments to our credit agreement, the impact of implementing restructuring plans, impairment related charges including the write-downs of certain internet investments, and charges for certain discrete tax items. The impacts of these items on 2008 results and comparable 2007 results are summarized below (dollars in thousands, except per share amounts):
Three Months Ended Nine Months Ended September 28, September 30, September 28, September 30, 2008 2007 2008 2007
(Dollars in thousands, except per share amounts) Income (loss) from continuing operations $4,167 $(1,345,187) $23,225 $(1,296,143) Unusual items, net of tax: Sale of SP Newsprint Company interest (1,809) - (21,785) - Gain on extinguishment of debt (80) - (12,455) - Restructuring related charges 7,551 - 18,960 - Impairment related charges 1,962 1,368,677 15,498 1,368,677 Write-off of financing costs 157 - 1,660 - Certain discrete tax items (1,538) 2,212 1,313 2,291 Adjusted income from continuing operations $10,410 $25,702 $26,416 $74,825 Earnings per share: Income (loss) from continuing operations $0.05 $(16.40) $ 0.28 $(15.81) Adjusted income from continuing operations $0.13 $0.31 $ 0.32 $0.91
Non-GAAP measures should not be considered a substitute for GAAP measures. However, adjusted income from continuing operations provides meaningful supplemental information about the company's underlying results of operations, and management believes it assists investors and financial analysts in analyzing and forecasting future periods.
The company's statistical report, which summarizes revenue performance for September, the third fiscal quarter and first nine months of 2008, follows.
At noon Eastern Time today, McClatchy will review its results in a conference call (877-278-1205 pass code 67578508) and webcast (http://www.mcclatchy.com). The webcast will be archived at McClatchy's website.
About McClatchy
The McClatchy Company is the third largest newspaper company in the United States, with 30 daily newspapers, approximately 50 non-dailies, and direct marketing and direct mail operations. McClatchy also operates leading local websites in each of its markets which extend its audience reach. The websites offer users comprehensive news and information, advertising, e-commerce and other services. Together with its newspapers and direct marketing products, these interactive operations make McClatchy the leading local media company in each of its premium high growth markets. McClatchy-owned newspapers include The Miami Herald, The Sacramento Bee, the Fort Worth Star-Telegram, The Kansas City Star, the Charlotte Observer, and The (Raleigh) News & Observer.
McClatchy also owns a portfolio of premium digital assets, including 14.4% of CareerBuilder, the nation's largest online job site, and 25.6% of Classified Ventures, a newspaper industry partnership that offers two of the nation's premier classified websites: the auto website, cars.com, and the rental site, apartments.com. McClatchy is listed on the New York Stock Exchange under the symbol MNI.
Additional Information:
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 an economic recession in markets where McClatchy operates its newspapers may reduce its income and cash flow greater than expected; McClatchy may not consummate contemplated transactions which may 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; McClatchy's expense and income levels could be adversely affected by changes in the cost of newsprint and McClatchy's operations could be negatively affected by any deterioration in its labor relations, 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 December 30, 2007, 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.
THE McCLATCHY COMPANY CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September 28, September 30, September 28, September 30, 2008 2007 2008 2007 REVENUES - NET: Advertising $370,117 $457,017 $1,180,468 $1,422,317 Circulation 64,691 67,995 198,610 209,582 Other 16,812 15,332 50,508 55,030 451,620 540,344 1,429,586 1,686,929 OPERATING EXPENSES: Compensation 199,861 224,309 647,771 689,592 Newsprint and supplements 61,815 63,600 186,462 211,203 Depreciation and amortization 35,479 36,250 108,510 112,440 Other operating expenses 113,828 118,440 345,757 371,180 Goodwill and newspaper masthead impairment - 1,434,590 - 1,434,590 410,983 1,877,189 1,288,500 2,819,005
OPERATING INCOME (LOSS) 40,637 (1,336,845) 141,086 (1,132,076)
NON-OPERATING (EXPENSES) INCOME: Interest expense (34,195) (48,264) (116,140) (151,605) Interest income 761 23 1,332 129 Equity losses in unconsolidated companies, net (850) (7,652) (14,340) (28,599) Gain on sale of SP Newsprint 2,570 - 34,546 - Gain on extinguishment of debt 180 - 19,680 - Impairments related to investments and land held for sale (2,983) (84,568) (24,498) (84,568) Other - net 101 700 1,120 1,443 (34,416) (139,761) (98,300) (263,200)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION (BENEFIT) 6,221 (1,476,606) 42,786 (1,395,276)
INCOME TAX PROVISION (BENEFIT) 2,054 (131,419) 19,561 (99,133)
INCOME (LOSS) FROM CONTINUING OPERATIONS 4,167 (1,345,187) 23,225 (1,296,143)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS - NET OF INCOME TAXES 67 (1,546) (175) (6,324)
NET INCOME (LOSS) $4,234 $(1,346,733) $23,050 $(1,302,467)
NET INCOME (LOSS) PER COMMON SHARE: Basic: Income (loss) from continuing operations $0.05 $(16.40) $0.28 $(15.81) Loss from discontinued operations - (0.02) - (0.08) Net income (loss) per share $0.05 $(16.42) $0.28 $(15.89)
Diluted: Income (loss) from continuing operations $0.05 $(16.40) $0.28 $(15.81) Loss from discontinued operations - (0.02) - (0.08) Net income (loss) per share $0.05 $(16.42) $0.28 $(15.89)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES: Basic 82,382 82,040 82,274 81,967 Diluted 82,434 82,040 82,327 81,967
***The McClatchy Company*** Consolidated Statistical Report (In thousands, except for preprints)
September Combined Print Only
Revenues - Net: 2008 2007 % Change 2008 2007 % Change
Advertising Retail $56,493 $64,663 -12.6% $52,854 $62,698 -15.7% National 11,574 14,253 -18.8% 10,300 13,135 -21.6% Classified Total 36,996 53,771 -31.2% 27,754 43,579 -36.3% Automotive 10,285 12,985 -20.8% 7,522 10,766 -30.1% Real Estate 9,479 14,934 -36.5% 8,020 13,670 -41.3% Employment 10,254 17,930 -42.8% 5,964 11,782 -49.4% Other 6,978 7,922 -11.9% 6,251 7,361 -15.1% Direct Marketing 10,075 11,155 -9.7% 10,075 11,155 -9.7% Other Advertising 128 129 -0.8% 128 129 -0.8% Total Advertising $115,266 $143,971 -19.9% $101,111 $130,696 -22.6%
Circulation 20,512 21,532 -4.7% Other 5,280 4,723 11.8% Total Revenues $141,058 $170,226 -17.1%
Advertising Revenues by Market: California $20,949 $26,113 -19.8% $18,565 $24,131 -23.1% Florida 15,778 21,189 -25.5% 13,844 19,572 -29.3% Texas 12,582 15,242 -17.5% 11,352 14,011 -19.0% Southeast 34,433 43,197 -20.3% 29,990 38,769 -22.6% Midwest 17,754 21,350 -16.8% 15,251 19,233 -20.7% Northwest 13,770 16,342 -15.7% 12,109 14,596 -17.0% Other 538 -100.0% 384 -100.0% Total Advertising $115,266 $143,971 -19.9% $101,111 $130,696 -22.6%
Advertising Statistics for Dailies: Full Run ROP Linage 2,037.1 2,481.4 -17.9% Millions of Preprints Distributed 465.7 486.3 -4.2%
Average Paid Circulation:* Daily 2,568.6 2,745.9 -6.5% Sunday 3,178.0 3,353.5 -5.2%
Online Only
Revenues - Net: 2008 2007 % Change
Advertising Retail $3,639 $1,965 85.2% National 1,274 1,118 14.0% Classified Total 9,242 10,192 -9.3% Automotive 2,763 2,219 24.5% Real Estate 1,459 1,264 15.4% Employment 4,290 6,148 -30.2% Other 730 561 30.1% Direct Marketing Other Advertising Total Advertising $14,155 $13,275 6.6%
Circulation Other Total Revenues
Advertising Revenues by Market: California $2,384 $1,982 20.3% Florida 1,934 1,617 19.6% Texas 1,230 1,231 -0.1% Southeast 4,443 4,428 0.3% Midwest 2,503 2,117 18.2% Northwest 1,661 1,746 -4.9% Other 154 -100.0% Total Advertising $14,155 $13,275 6.6%
Advertising Statistics for Dailies: Full Run ROP Linage Millions of Preprints Distributed
Average Paid Circulation:* Daily Sunday
* Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures.
***The McClatchy Company*** Consolidated Statistical Report (In thousands, except for preprints)
Quarter 3 Combined Print Only
Revenues - Net: 2008 2007 % Change 2008 2007 % Change
Advertising Retail $181,416 $204,349 -11.2% $170,208 $198,243 -14.1% National 33,485 41,719 -19.7% 29,495 39,511 -25.3% Classified Total 121,431 173,794 -30.1% 91,298 140,538 -35.0% Automotive 33,406 42,331 -21.1% 24,973 35,778 -30.2% Real Estate 30,099 48,322 -37.7% 25,560 44,485 -42.5% Employment 35,024 59,155 -40.8% 20,233 38,046 -46.8% Other 22,902 23,986 -4.5% 20,532 22,229 -7.6% Direct Marketing 33,389 36,639 -8.9% 33,389 36,639 -8.9% Other Advertising 396 516 -23.1% 397 516 -23.1% Total Advertising $370,117 $457,017 -19.0% $324,787 $415,447 -21.8%
Circulation 64,691 67,995 -4.9% Other 16,812 15,332 9.6% Total Revenues $451,620 $540,344 -16.4%
Advertising Revenues by Market: California $68,814 $86,405 -20.4% $61,188 $79,982 -23.5% Florida 50,321 66,530 -24.4% 44,242 61,649 -28.2% Texas 40,766 47,891 -14.9% 36,795 44,231 -16.8% Southeast 108,495 133,522 -18.7% 94,175 119,656 -21.3% Midwest 57,603 67,715 -14.9% 49,611 60,996 -18.7% Northwest 43,980 53,248 -17.4% 38,776 47,683 -18.7% Other 138 1,706 -91.9% 1,250 -100.0% Total Advertising $370,117 $457,017 -19.0% $324,787 $415,447 -21.8%
Advertising Statistics for Dailies: Full Run ROP Linage 6,677.3 8,034.7 -16.9% Millions of Preprints Distributed 1,643.1 1,609.0 2.1%
Average Paid Circulation:* Daily 2,490.8 2,646.0 -5.9% Sunday 3,140.5 3,311.6 -5.2%
Online Only
Revenues - Net: 2008 2007 % Change
Advertising Retail $11,208 $6,106 83.6% National 3,990 2,208 80.7% Classified Total 30,133 33,256 -9.4% Automotive 8,433 6,553 28.7% Real Estate 4,539 3,837 18.3% Employment 14,791 21,109 -29.9% Other 2,370 1,757 34.9% Direct Marketing Other Advertising Total Advertising $45,331 $41,570 9.0%
Circulation Other Total Revenues
Advertising Revenues by Market: California $7,626 $6,423 18.7% Florida 6,079 4,881 24.5% Texas 3,971 3,659 8.5% Southeast 14,320 13,866 3.3% Midwest 7,992 6,719 18.9% Northwest 5,205 5,565 -6.5% Other 138 457 -69.7% Total Advertising $45,331 $41,570 9.0%
Advertising Statistics for Dailies: Full Run ROP Linage
Millions of Preprints Distributed
Average Paid Circulation:* Daily Sunday
* Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures.
***The McClatchy Company*** Consolidated Statistical Report (In thousands, except for preprints)
September Year-to-Date Combined Print Only
Revenues - Net: 2008 2007 % Change 2008 2007 % Change
Advertising Retail $568,670 $623,878 -8.8% $535,683 $605,339 -11.5% National 108,391 132,934 -18.5% 96,466 127,547 -24.4% Classified Total 396,786 550,406 -27.9% 302,693 448,777 -32.6% Automotive 104,790 128,264 -18.3% 80,151 110,027 -27.2% Real Estate 99,934 158,233 -36.8% 86,868 146,912 -40.9% Employment 121,888 195,182 -37.6% 72,372 128,009 -43.5% Other 70,174 68,727 2.1% 63,302 63,829 -0.8% Direct Marketing 105,408 113,531 -7.2% 105,408 113,531 -7.2% Other Advertis- ing 1,213 1,568 -22.6% 1,213 1,568 -22.6% Total Advertising $1,180,468 $1,422,317 -17.0% $1,041,463 $1,296,762 -19.7%
Circulation 198,610 209,582 -5.2% Other 50,508 55,030 -8.2% Total Revenues $1,429,586 $1,686,929 -15.3%
Advertising Revenues by Market: California $212,328 $274,118 -22.5% $189,979 $254,514 -25.4% Florida 171,292 221,328 -22.6% 152,290 205,116 -25.8% Texas 129,857 147,076 -11.7% 117,736 136,534 -13.8% Southeast 345,776 404,638 -14.5% 301,157 362,967 -17.0% Midwest 182,837 206,679 -11.5% 159,033 186,896 -14.9% Northwest 137,494 163,720 -16.0% 121,268 146,985 -17.5% Other 884 4,758 -81.4% 0 3,750 -100.0% Total Advertising $1,180,468 $1,422,317 -17.0% $1,041,463 $1,296,762 -19.7%
Advertising Statistics for Dailies: Full Run ROP Linage 20,840.9 24,502.1 -14.9% Millions of Preprints Distributed 4,750.3 4,934.3 -3.7%
Average Paid Circulation:* Daily 2,610.6 2,732.2 -4.5% Sunday 3,233.6 3,384.3 -4.5%
Online Only
Revenues - Net: 2008 2007 % Change
Advertising Retail $32,987 $18,539 77.9% National 11,925 5,387 121.4% Classified Total 94,093 101,629 -7.4% Automotive 24,639 18,237 35.1% Real Estate 13,066 11,321 15.4% Employment 49,516 67,173 -26.3% Other 6,872 4,898 40.3% Direct Marketing Other Advertising Total Advertising $139,005 $125,555 10.7%
Circulation Other Total Revenues
Advertising Revenues by Market: California $22,349 $19,604 14.0% Florida 19,002 16,212 17.2% Texas 12,121 10,542 15.0% Southeast 44,619 41,671 7.1% Midwest 23,804 19,783 20.3% Northwest 16,226 16,735 -3.0% Other 884 1,008 -12.3% Total Advertising $139,005 $125,555 10.7%
Advertising Statistics for Dailies: Full Run ROP Linage Millions of Preprints Distributed
Average Paid Circulation:* Daily Sunday
* Reflects average paid circulation based upon number of days in period. Does not reflect ABC reported figures.
SOURCE The McClatchy Company
The McClatchy Company