By: Mark Fitzgerald
The McClatchy Co. CEO Gary Pruitt said Wednesday there is “some evidence that classified advertising is recovering” as the nation’s third-largest newspaper publisher reported it swung to a profit in the fourth-quarter.
McClatchy’s Q4 revenue fell compared to a year ago, but not as deeply as in previous 2009 quarterly results. And operating cash flow jumped 19.8% in the quarter compared to 2008.
But as with its newspaper peers, McClatchy’s bottom line owed much to continued cost cutting. McClatchy said its cash expenses, excluding charges related to severance paid out in its restructuring, fell 28.5% in the quarter compared to 2008.
McClatchy reported net income from continuing operations in the quarter of $32.4 million, or 38 cents per share, compared to a loss of $20.4 million, or 25 cents per share, in the 2008 fourth quarter.
Revenue in the quarter was $393.2 million, down 16.5% from the fourth quarter of 2008.
Advertising revenue fell 20.5% to $308.7 million, down 20.5%, while circulation revenue grew 6.6% to $71.4 million.
Online ad revenue increased 14.9% in Q4 and now amount to 15.8% of total advertising revenue. That’s up from 10.9% of total ad revenue in the fourth quarter of 2008.
Revenue for all of 2009 fell 22.6% to $1.5 billion, McClatchy said. Ad revenue fell 27.1% during the year to $1.1 billion.
During the year, classified ad revenue fell 25% from 2008. Inside classified, automotive fell 20.4%, real estate 35.6% and employment 43.6%.
But CEO Pruitt said 2009 ended on a positive note.
“The advertising revenue trend improvement in October and November continued into December,” he said. Ad revenues, which were down 28.1% year-over-year in the third quarter, declined 25.9% in October, 19.6% in November and 14.9% in December. Importantly, we reported strong growth in our digital advertising revenues, up 14.9% in the fourth quarter compared to 2008.
“We’re seeing some evidence of a recovery in classified advertising. It’s typically the first area of our business to suffer in a downturn – and also the first to rebound when the economy improves. Importantly, the improvement in the rate of decline is consistent across all regions and categories of classified advertising, both in print and online advertising,” Pruitt said.
For the first few weeks of January, Pruitt added, ad revenue continues to decline but “in the low- to mid-teens percentage range and that is consistent with where we expect to see ad revenues in the first quarter of 2009.”
Still he warned that further cost cutting will continue: “But given that total ad revenues are still negative and secular challenges remain, we will continue to focus on costs.”
Separately, McClatchy announced a refinancing of its debt. It is issuing $875 million of senior secured refinancing debt to pay back $614 million in bank debt, plus $166 million in notes due next July and $24 million in notes coming due in 2014.
The refinancing extends the bank debt from June from June 27, 2011 to July 1, 2013.
McClatchy CFO Pat Talamantes said the company finished the quarter with debt principal outstanding of $1.95 billion, down more than $174 million from the end of 2008.
The company is well within its leverage and interest coverage ratio, Talamantes said.
More details on the Q4 results and refinancing are posted on E&P?s business-oriented Fitz & Jen blog