SACRAMENTO, Calif., April 25, 2013 --
The McClatchy Company (NYSE-MNI) today reported a net loss in the first
quarter of 2013 of $12.7 million or 15 cents per share, including an
$8.1 million after-tax loss related to debt refinancing and open-market
debt repurchases. In the first quarter of 2012 the company reported a
net loss of $2.1 million or 2 cents per share.
Total revenues in the first quarter of 2013 were $276.7 million, down
4.0% from the first quarter of 2012. Advertising revenues were $197.1
million, down 6.0% from 2012, and circulation revenues were $67.5
million, up 1.6%. Total digital advertising revenues grew 1.5% in the
first quarter of 2013, with digital-only advertising revenues up 8.9%
from the 2012 quarter. Total digital advertising represented 24.0% of
total advertising revenues in the first quarter of 2013 compared to
22.2% of total advertising revenues in the first quarter of 2012.
Results in the first quarter of 2013 included the following items:
-- A loss from the extinguishment of debt totaling $12.8 million ($8.1
million after-tax) related to the completion in early 2013 of the
refinancing of the company's 11.5% secured bonds due in 2017 and
open-market repurchases;
-- accelerated depreciation totaling $2.1 million ($1.3 million after-tax) related to relocating Miami newspaper operations;
-- severance and other restructuring-related charges totaling $2.3 million ($1.4 million after-tax);
-- the reversal of non-cash interest expense totaling $0.1 million ($.08 million after-tax) related to the release of tax reserves; and
-- additional tax expense totaling $1.1 million for an increase to liabilities related to tax positions taken in prior years.
The net loss in the first quarter of 2013, excluding the net impact of
these items, was $0.7 million compared to a net loss in the first
quarter of 2012 adjusted for similar items of $2.5 million. (Non-GAAP
measurements are discussed below.)
Operating cash expenses, excluding severance and other
restructuring-related charges, declined approximately $4.1 million, or
1.8%, from the 2012 quarter. Operating cash flow was $53.4 million in
the first quarter of 2013, down 12.2%.
Management's Comments:
Commenting on McClatchy's first quarter results, Pat Talamantes,
McClatchy's president and CEO, said, "We were pleased to see growth in
circulation revenues in the first quarter and sequential improvement in
total revenues compared to the last quarter of 2012. Total company
revenues were down 4.0% this quarter compared to down 5.3% in the fourth
quarter of 2012 on a comparable 13-week basis and down 5.1% in the
first quarter of 2012.
"For the quarter, total advertising revenues were down 6.0% compared to
the first quarter of 2012. Total digital advertising revenues grew
again, up 1.5%, compared to the same quarter last year while
digital-only revenues were up 8.9%. Digital advertising represented
24.0% of McClatchy's total advertising revenues in the first quarter
compared to 22.2% in the first quarter of 2012.
"Direct marketing advertising revenues were up 2.6% in the first
quarter. This category continues its growth with its 11th quarter of
revenue growth out of the past 12 quarters. Direct marketing accounted
for 14.5% of total advertising revenues in the quarter. Diversifying and
growing our revenue sources is one of the keys to our success. In the
quarter, advertising revenues from digital and direct marketing together
contributed more than 38.5% of our advertising revenues.
"The company-wide rollout of our new digital subscription packages,
known as our Plus Program, continues to exceed our expectations. We
finished the quarter with over 22,000 digital-only subscribers. In
total, the Plus Program provided $5.8 million in incremental revenues
contributing to the 1.6% growth in total circulation revenues for the
quarter compared to the same quarter last year. We now expect the Plus
Program to generate approximately $25 million in new revenues in 2013.
"Cash expenses, excluding severance and other restructuring-related
charges, were down 1.8% in the quarter compared to the first quarter of
2012. We were able to reduce cash expenses even though we invested
approximately $1.9 million in new revenue initiatives and
enterprise-wide operating systems and despite an increase in pension
expense of $2.8 million.
"Our equity investments started off the year impressively as our equity
income was up 52.2% to $9.2 million in the first quarter of 2013
compared to the same quarter last year. Importantly, Classified
Ventures and CareerBuilder continue to provide our customers with valued
products while at the same time providing us with strong financial
results.
"As we look to the second quarter, we expect that the trend in total
company revenues, aided by results from the Plus Program, will improve
compared to the same quarter last year. We will remain vigilant in
controlling costs and we expect cash expenses (excluding
restructuring-related charges) to be down in the low-single digits in
the second quarter versus the same quarter in 2012."
Elaine Lintecum, McClatchy's CFO said, "Total debt at the end of the
first quarter was $1.566 billion, a $145.9 million decrease compared to
the balance at the end of 2012. We completed the last stage of our
refinancing in the first quarter by retiring the remaining $83.6 million
of 11.50% Senior Secured Notes due 2017. The additional $62.3 million
reduction was accomplished through open market repurchases during the
quarter. The refinancing transaction, along with our continued focus on
debt reduction, has given us immediate benefits -- we have extended our
debt maturities significantly and lowers our cash interest expense by
about $15 million in the first year. For the quarter, cash interest
expense related to bonds was down approximately $4.4 million compared to
the same quarter last year.
"We contributed $7.5 million to our pension plan during the quarter and
expect that there will be no substantial additional cash contributions
made for the remainder of the year. Our leverage ratio at the end of the
first quarter as defined in our credit agreement was 4.41 times cash
flow and our interest coverage was 2.48 times.
"The relocation of The Miami Herald headquarters from downtown Miami to
Doral, Fla., is going well. We will begin moving office operations to
the new leased building in Doral at the end of the month. Construction
of the adjacent printing facility is complete and we expect to complete
the relocation by the end of May."
Management also noted that given the changes in its circulation delivery
contracts resulting from the rollout of the company's digital
subscription model and efforts to improve strategies and reduce costs
associated with delivery of its print newspapers, it has begun a review
of its delivery contracts to determine whether circulation revenues
should continue to be reported net of delivery costs or reported at
gross with delivery costs recorded as expenses. Neither method of
accounting has an impact on the company's operating income, operating
cash flows or earnings. The company expects to complete this review
before it files its Form 10-Q with the Securities and Exchange
Commission (SEC) on or before May 10, 2013.
The company's statistical report, which summarizes revenue performance for the first fiscal quarter of 2013, follows.
Non-GAAP Financial Measures:
In addition to the results reported in accordance with accounting
principles generally accepted in the United States ("GAAP") included in
this press release, the company has presented non-GAAP financial
measures such as adjusted net income, operating cash flows and operating
cash flow margins. Adjusted net income is defined as net income
excluding amounts (net of tax) for loss (gain) on extinguishment of
debt, restructuring-related compensation charges, accelerated
depreciation on equipment, other restructuring charges, reversal of
interest on tax items and certain other discrete tax items. Operating
cash flow is defined as operating income plus depreciation and
amortization, restructuring-related charges and other non-cash
impairments. Operating cash flow margin is defined as operating cash
flow divided by net revenues. These non-GAAP financial measures are
reconciled to GAAP measures in the attached schedule. Management
believes these non-GAAP measures, when read in conjunction with the
company's GAAP financials, provide useful information to investors by
offering:
-- The ability to make more meaningful period-to-period comparisons of the company's ongoing operating results.
-- The ability to better identify trends in the company's underlying business.
-- A better understanding of how management plans and measures the company's underlying business.
-- An easier way to compare the company's most recent operating results against investor and analyst financial models.
These non-GAAP financial measures should not be considered a substitute
or an alternative to these computations calculated in accordance with
and required by GAAP. McClatchy's non-GAAP financial measures may not
be comparable to similarly titled measures presented by other companies.
At noon Eastern time today, McClatchy will review its results in a conference call (877-278-1205, pass code 33652675) and webcast (www.mcclatchy.com). The webcast will be archived at McClatchy's website.