McClatchy Shareholder Presses Pruitt on KR Sale

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By: Jennifer Saba

McClatchy Chief Executive Gary Pruitt reiterated that his company looks at growth markets — not those with low to flat growth — when pointeldly asked by an analyst about McClatchy?s acquisition strategy during a Q4 earnings call this afternoon.

Later in the call, shareholder Mario Gabelli of Gamco Investors (formerly Gabelli Asset Management) pressed Pruitt about a possible Knight Ridder acquisition: “Are there any [Knight Ridder] markets that would fit?”

Pruitt responded that he would not comment on Knight Ridder nor would he confirm if McClatchy signed a nondisclosure agreement (NDA) on the matter.

Gamco is McClatchy’s fourth largest institutional shareholder, with a 4.8% equity stake in the company. Private Capital Management, Ariel Capital Management, and Gardner Russo & Gardner are the other top shareholders holding 37.6%, 18.4%, and 6% respectively.

Gabelli further questioned Pruitt on how McClatchy plans to use its capital and if the company would consider selling any assets so that McClatchy could buy back significant shares. Pruitt said McClatchy is constantly evaluating the use of its capital.

One analyst also asked whether McClatchy has any plans to eliminate stock tables (a hot trend) or trim other sections, as many other newspapers are doing. “We do have big healthy news holes serving big healthy markets,” Pruitt said, adding that they have no plans to cut or eliminate stock listings.

Meanwhile, McClatchy reported today Q4 earnings per share were $.97 per share compared with $1.02 per share for the same period last year. Earnings for 2005 were $3.42 per share compared with $3.33 per share compared to the previous year.

Revenues for Q4 grew 0.5% to $309.8 million. Advertising revenues increased 1.1% to $263.4 million. Circulation revenues decreased 3.8% to $39.9 million.

December was a weak month for the company. Advertising revenues for the month dropped 1% due mostly to Christmas falling on Sunday, which impacted retail and classified advertising. Pruitt also cited soft auto advertising that hurt the company in Q4.

“Nonetheless,” Pruitt said in a statement, “2005 was a solid year for the company. We reported record revenues and earnings. Our online advertising grew 38.8% and direct marketing advertising was up 9.6%. We continued to outperform the industry in circulation and in advertising. In fact, 2005 was the fifth consecutive year we have outperformed the industry in advertising revenue growth.”

For Q4, including online revenues, retail advertising revenues dropped 2.2%. National was up 1.4%. Classified grew 3.9%. Within the classified category, auto slipped 17.9%, real estate was up 22.3%, and employment grew 11.2%.

Total advertising revenues for 2005 grew 2.8% to $1 billion. Including online revenues, retail advertising was flat. National decreased 1% and classified grew 5.9%. Within the classified category, auto was down 10.4%, real estate was up 18.3%, and employment grew 13.7%.

“We expect overall advertising revenue growth in the low-to-mid single digits in the first quarter, despite the toughest comparisons we will face in 2006,” Pruitt said in a statement.

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