McClatchy Q3 Ad Revenues Fall 19%

By: E&P Staff The McClatchy Co. swung to a profit of $4.2 million, or 5 cents per share, in its third-quarter, but The Miami Herald parent also reported tumbling revenue.

The better-than-expected earnings compare to a 2007 third-quarter loss of $1.34 billion, or $16.40 a share, on a big write-down.

McClatchy said its Q3 revenue from continuing operations was $451.6 million, a drop of 16.4% from the same quarter in 2007.

Advertising revenue fell 19% to $370.1 million. McClatchy Chairman and CEO Gary Pruitt noted that the decline was about the same as in the second quarter of this year.

Print classified ad revenue plunged 35%, on big losses in automotive (down 30.2%); real estate (down 42.5%); and help-wanted (down 46.8%).

Newspaper retail ad revenue was off 14.1%, and national down 25.3%, McClatchy said.

Online advertising grew 9% in the quarter, and accounted for 12.2% of total ad revenue -- up from 8.6% of total advertising revenue for all of
2007.

McClatchy said its net income from continuing operations in the quarter was $4.2 million, or 5 cents per share, and its adjusted
earnings from continuing operations were $10.4 million, or 13 cents per share, after excluding unusual items.

The quarter's earnings included an adjustment to the second-quarter gain on the sale
of McClatchy's one-third stake 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.

Other items were charges related to implementing its reduction of 10% of the workforce. McClatchy said it paid out $17 million in severance during the third quarter out of what is expected to be about $20 million in payments. The quarter also included the write down of "certain Internet investments," McClatchy said.

McClatchy had previously reported it amended its credit agreement to loosen leverage and interest coverage ratios. It said it reduced debt principal by nearly $404 million in the first nine months of 2008, and that total debt was $2.07 billion as of September 28.

McClatchy CFO Pat Talamantes said based on trailing twelve months of cash flow, McClatchy's leverage ratio is currently 4.7 times cash flow and its interest coverage ratio is just over 3.0 times cash flow, which he said was "well within the allowable covenant thresholds."

CEO Pruitt said the Q3 results mostly reflect the continued weak economy. He said October's ad performance is looking much like September's.

He said the online business "continues to be a bright spot for the company," and noted that more than half of the online advertising came from ad placed only online, and not tied to a print up-sell.