McClatchy Reports Third Quarter 2009 Earnings
Net income of $23.6 million on $347.4 million revenue for newspaper printing and pubishing firm
Company Supplied -- Graphic Arts Online, October 15, 2009
SACRAMENTO, Calif., Oct. 15 -- The McClatchy Company (NYSE: MNI) today reported net income from continuing operations in the third quarter of 2009 of $23.6 million, or 28 cents per share, compared to $4.2 million, or 5 cents per share, in the 2008 quarter. Adjusted earnings from continuing operations(1) were $11.0 million, or 13 cents per share, in the third quarter of 2009 after excluding the unusual items discussed below, compared to $10.4 million, or 13 cents per share, reported in the third quarter of 2008. The company noted that its adjusted earnings in the third quarter of 2009 were negatively impacted by a refinement to its projected annual tax rate. The Company's tax rate in the third quarter of 2009 was 61.8%. Unusual items affecting the third quarter results from continuing operations in each year are discussed below and are included in adjusted earnings from continuing operations.(1)
Revenues in the third quarter of 2009 were $347.4 million, down 23.1% from the third quarter of 2008. Advertising revenues were $266.1 million, down 28.1% from 2008, and circulation revenues were $69.0 million, up 6.7%. Online advertising revenues grew 3.1% in the third quarter of 2009 and were 17.6% of total advertising revenues compared to 12.2% of total advertising revenues in the third quarter of 2008. Cash expenses, excluding severance associated with restructuring plans, declined $105.5 million, or 29.4% from the 2008 quarter. Operating cash flow, a non-GAAP measure, was $94.4 million, up 1.3% (non-GAAP measurements are discussed below). First Nine Months Results: Income from continuing operations for the first nine months of 2009 was $27.9 million, or 33 cents per share, and was affected by the impact of the unusual items discussed below. Adjusted earnings from continuing operations(1) were $11.0 million, or 13 cents per share, in the first nine months of 2009. 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 below. Adjusted earnings from continuing operations (1) were $26.4 million, or 32 cents per share, in the first nine months of 2008. Revenues from continuing operations in the first nine months of 2009 were down 24.6% to $1.1 billion compared to $1.4 billion in 2008. Advertising revenues in 2009 totaled $834.5 million, down 29.3%, and circulation revenues were $206.9 million, up 4.2%. Management's Comments: Commenting on McClatchy's results, Gary Pruitt, chairman and chief executive officer, said, "Our advertising revenues in the third quarter showed some improvement from the second-quarter decline. Importantly, we reported growth in our online advertising revenues. Online advertising revenues were up 3.1% compared to the third quarter of 2008. Excluding employment advertising, a category that has been impacted both online and in print by the nationwide decline in jobs, online advertising revenues were up 28.4% in the quarter and up 27.2% year-to-date. "Our transition to a successful hybrid print and online company continues to advance. Our online audiences are growing strongly. Average monthly unique visitors to our websites were up 14.7% in the third quarter and were up 23.4% through the first nine months of 2009. We continue to be among the leaders in our industry in online advertising revenue performance and online advertising as a percentage of total advertising. In the third quarter, online advertising represented 17.6% of McClatchy's total advertising revenue. That was up from the 16.5% reported in the second quarter of 2009 and up from the 12.2% reported in the third quarter of 2008." "The declines in print advertising are undeniably challenging for our company, and the resulting restructuring of our business has been necessary to align expenses with these new revenue realities," said Pruitt. "While painful, this restructuring is clearly contributing to our ability to manage the company through this downturn by enabling us to grow cash flow in the third quarter and reduce debt. "The advertising declines we've experienced show some signs of slowing, but the ad environment remains weak overall. As a result, we expect print advertising revenues to continue to decline in the fourth quarter. So far in October, we're seeing advertising revenue trends similar to the third quarter. "We still have a lot of hard work ahead of us. As long as we are experiencing revenue declines, we must maintain a tight rein on expenses. We expect to hold costs down in the mid-twenty percent range in the fourth quarter. "We face these uncertain times with the resolve and confidence of a company that has successfully adapted to many economic downturns and media competitors over our 152-year history. We will continue to serve our communities with high quality journalism, and we will continue to aggregate audiences and serve the needs of our local and national advertisers, both online and in print." Pat Talamantes, McClatchy's chief financial officer, said, "We completed the quarter with debt principal outstanding of $1.99 billion, down $134.3 million from the end of 2008. Based on our trailing 12 months of cash flow, our leverage ratio, as defined under our credit agreement, improved for the second consecutive quarter to 5.7 times at the end of the third quarter, and our interest coverage ratio was 2.8 times. Both of these ratios are well within the covenant requirements under our credit agreement of a leverage ratio of less than 7.0 times and an interest coverage ratio of greater than 2.0 times. At the end of the quarter, we had approximately $172.0 million available under our bank credit line." (1) Adjusted Earnings From Continuing Operations and EPS: Earnings in the third quarter and nine months of 2009 and 2008 included the impact of several unusual events including: 2009 transactions and events: -- In March 2009, the company announced restructuring efforts which included, among other things, reducing its workforce by approximately 15%, freezing the company's pension plans and temporarily suspending the company's matching contribution to its 401(k) plan as of March 31, 2009. -- On May 21, 2009, the company launched a private debt exchange offer for all of its outstanding debt securities for a combination of cash and new debt securities. The offer closed on June 25, 2009, and the company exchanged $3.4 million in cash and $24.2 million of newly issued senior notes for $102.8 million of debt securities. The company recorded a gain on the transaction in the second quarter. -- In connection with the exchange offer described above, the company entered into an agreement with its lenders on May 20, 2009, to amend its credit agreement which, among other things, allows it to use up to $60 million of its revolving credit facility to repurchase its unsecured notes due in 2011 or unsecured notes due in 2014, subject to certain conditions. As a result the company wrote off a portion of its original financing costs related to its credit agreement in the second quarter. -- During the second quarter of 2009, the company recorded $10.6 million of accelerated depreciation on production equipment resulting from the outsourcing of printing at several of its newspapers. -- The company recorded additional closing adjustments which impacted the gain on the 2008 sale of SP Newsprint Company of which McClatchy was a one-third owner. The company received $60 million in proceeds from this sale ($5 million in 2009), which was used to repay debt. -- The company refined its estimate of its projected effective annual tax rate and applied the revised rate to the unusual items resulting in an adjustment in the third quarter of 2009. 2008 transactions and events: -- In May 2008, the company purchased $300 million aggregate principal amount of its outstanding publicly-traded debt securities for $282.4 million. The company recorded a gain on the transaction in the second quarter of 2008. -- On June 16, 2008 and again on September 16, 2008, the company announced restructuring plans to permanently reduce its workforce which reductions were implemented in the second and third quarters of 2008. -- On June 30, 2008, the company sold its 15.0% interest in ShopLocal, LLC for $7.875 million and used the proceeds to reduce debt and recorded a write-off in the second quarter of 2008 related to ShopLocal's carrying value. In addition, one of the internet companies in which McClatchy has an investment incurred an impairment charge on a product and as a result, the company recognized a charge related to this investment in the second quarter. -- In March and September 2008 the company obtained amendments to its credit agreement which provided 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. As a result the company wrote off a portion of its original financing costs related to its credit agreement in the first and third quarters of 2008. Both the 2009 and 2008 second quarters included charges for certain discrete tax items.
Cenveo Sales Down In Third Quarter
11/11/2009Q3 Loss for Quebecor World
11/09/2008
