McClatchy reports 4Q loss on newspapers' decline

Posted February 5, 2009 9:52 a.m. EST
Updated February 5, 2009 12:47 p.m. EST

— Newspaper publisher McClatchy Co. reported a $21.7 million loss for the fourth quarter on Thursday, reflecting the declining value of its newspapers, and said it plans deep cost cuts this year.

Sacramento, Calif.-based McClatchy, which owns The News & Observer in Raleigh and The Charlotte Observer, wouldn't say how much, if any, of the $100 million to $110 million in cuts would come from layoffs. The company said plans were still being completed.

The company, which already has imposed a company-wide wage freeze through September, said it also would freeze pension plans and suspend matches to its 401(k) retirement plans beginning March 31. A new retirement plan was being developed to tie contributions partly to cash flow performance.

Last year, the company laid off 70 people in Raleigh and bought out dozens more in several rounds of cost-cutting.

McClatchy took a $59.6 million pretax charge to account for the reduced value of its newspapers, whose revenue prospects have declined as the worsening recession compounds losses resulting from the migration of readers and advertisers to the Internet.

The loss amounted to 26 cents a share for the quarter, compared with a loss of $1.43 billion, or $17.46 per share, in a year-ago period that also included accounting charges for newspapers' valuation.

Excluding one-time charges, McClatchy earned 26 cents a share in the latest quarter, short of the 30 cents a share expected by analysts polled by Thomson Reuters.

Revenue fell 18 percent to $470.9 million from $573.4 million a year ago. The latest results were in line with the $470.5 million estimated by analysts.

"The economy remains mired in recession and our industry is still in a period of transition," Chief Executive Gary Pruitt said. "The advertising environment continues to be weak and we expect print advertising revenues to continue to be down."

Early indications show advertising sales in January to be slower than the fourth quarter, when McClatchy saw ad revenue dip 21 percent from the same period in 2007.

Online advertising revenue grew 10 percent during the October-December quarter, but it accounted for only 11 percent of total ad revenue, not enough to offset the losses in print.

Circulation revenue grew 1.4 percent.

McClatchy said it was looking to reduce costs by 7 percent over the next 12 months, beginning later in the first quarter.

McClatchy already went through two rounds of job cuts of about 10 percent each last year to produce an estimated $200 million in annual savings. It also plans to suspend dividend payments after April 1 to conserve cash.

Debt at McClatchy stood at $2.038 billion at year's end, down from $2.07 billion at the end of September, much of it coming from its 2006 purchase of the Knight-Ridder newspaper chain.

For the full year, McClatchy earned $1.4 million, or 2 cents a share, on sales of $1.9 billion. That compares with a 2007 loss of $2.74 billion, or $33.37 per share, on revenue of $2.26 billion.