Tuesday, July 21, 2009

McClatchy buys time, but still hasn't figured out a strategy for long term success

Today's second quarter results were good news for McClatchy employees. It's a relief for them to know their employer won't be filing for bankruptcy protection in the near future. But some of the giddyness (this morning the Bee's Dale Kasler was taking about a "substantial turnaround") is too much.

Let's be honest -- McClatchy has merely delayed the inevitable.

When your gross revenues are falling at a 30% rate and your advertising rate is doing the same, all while your subscription rate rises at only 2.9% after 100% price increases across the board. The writing is on the wall and only the willfully blind can't see it.

In short order McClatchy's debt payments will overwhelm their net income. This is unavoidable with no way out. Going to online only will not be a solution as they can't close down or sell operations without bank permission. The banks are not going to go for it because they can't bring in enough online income to meet the debt.

It is a no win situation. All Pruitt can hope to do is delay the inevitable and pad his pockets while in the mean time, the only cost reductions that they really have left is more layoffs.



Anonymous said...

They can't even figure out short term sustainability when their debt starts coming due, how the hell are they going to figure out long term success? If I were the banks, I'd shut them down and liquidate while they still had some sort of physical worth. They're never going to see the principal, much less any profit off the loans.

Anonymous said...

Kasler writes in the same building that houses Pruitt's office. Can't blame the guy for looking at the lone bright spot in a sea of darkness. He's a good reporter being constantly placed in an uncomfortable position. Cut him some slack.

Anonymous said...

MW is just a shill to the idiots on here. All he does is regurgitate the idiocy spouted by the McClatchy haters.

You can say all you want that all they did is buy time...but you have no clue (like most of the others on here).

I want someone that says they have bought time to put in writing WHEN they will file chapter 11. Pick a date...then when that doesn't happen, we will let you beat around the bush and choose another date.

Predictions for Q3 just as profitable if not more so than Q2.

Anonymous said...

11:43 AM I am genuinely curious. How old are you?

Anonymous said...

11:48. Seriously? How old is 11:43? You must be the one still in puberty.

If 11:43 was 19 years old, you'd look stupid. If 11:43 was 55 years old, you'd still look stupid. What can you claim in his/her post that is incorrect?

Let's just get down to your intellectual level and an argument that you would understand.

Does the truth hurt?

Does not!

>Does too!

Does not!

>Does too!

Anonymous said...

11:43 a.m. you're correct. The conservatives and McClatchy haters on this blog are beside themselves because of today's earnings release. They had predicted much worse and now they don't know what to do or say except the same things they've been saying for six months or a year. A few have even made the point that the only reason for the earnings growth is because of the cost cuts. Well, why do you think they cut costs. It's an effor to get expenses in line with revenue.

Anonymous said...

12:07 PM

Thanks, that is what I thought. You're just a child.

Anonymous said...

"It's really remarkable," said newspaper analyst Edward Atorino of Benchmark Co. "They have done a Herculean job in a difficult economy. Unless things get a lot worse real fast, they should be OK for the rest of 2009."

Although McClatchy management expects revenue to keep crumbling in the months ahead, recent trends indicate the second half of the year might not be quite as painful as the first. The company's ad revenue fell 28 percent in June and is hovering around the same level this month, a slight improvement from declines of more than 30 percent in April and June.

Gannett Co., the largest U.S. newspaper publisher, reported similar trends in its second-quarter earnings report last week.

Under the requirements imposed by its bankers, McClatchy's debt can't be seven times higher than its cash flow for the past 12 months. The ratio stood at 5.8 at the end of June, an improvement from 5.9 in March.

Meanwhile, McClatchy's next big bond payment isn't due to be paid until 2011. Online sales accounted for 13 percent of McClatchy's total revenue in the second quarter, up from 11 percent a year ago.

Investors were heartened by McClatchy's progress as the company's shares surged 21 cents to 75 cents in Tuesday's afternoon trading.

Anonymous said...

With revenue and ad sales down significantly, expect layoffs to heat up significantly. You can't continue making a profit with sales and ad revenue drops unless you keep cutting. Eventually it will level off, but by then the staffs will be microscopic.

Anonymous said...

We are meeting our long term projections and as a result do not see any further major cuts in payroll for the remainder of the year.

There is a long term plan to keep this company afloat. We are currently meeting the expectations of this plan and will continue to make cost cutting measures throughout the company however not in the severity that MW and it's bloggers would have you believe.

There is no plans for defaulting on our obligations to our lenders.


Anonymous said...

It's like the California budget today - buy time and pray you can outlast the wolves at the door. Ain't gonna happen Gary.

Anonymous said...


Who are you? "There is no plans..."

You need to check your grammar. I seriously doubt you are "Management."

The fact of the matter is, the only reason McClatchy saw a profit is because of all the cost cutting. Take that away and their losses would have been substantial. They will have to keep cutting costs to show any profit. Now whether or not that means more layoffs remains to be seen. I don't believe they will be able to give back the paycuts that were implemented earlier this year. As far as any raises going forward, I don't believe those will be handed out either.

Any comments?

Anonymous said...

As a MNI chapter 11 kind of guy, hat's off to all you lib, sheeple.

Enjoy your day in the "sun." There will be chapter 11 blood, just not today!

Anonymous said...

@ 1:20pm

I have one. So they cut all of these costs (salary primarily). It is not like they reap all of those benefits 1 time. They count the savings every time they have payday.

So assuming revenues stay the same (or get better) on a year over year comparison through 2009, the company will still be profitable until revenues hit the point that the savings no longer exist.

So if last December it was a 20% drop in revenue, they have prepared to lose another 30% this year (essentially seeing a 50% 2 year drop in revenue).

So anything less than a 30% drop in revenue is "gravy".

Anonymous said...

From the other thread:

Anonymous said...

beat analyst expectations, discuss debt exchange, possibly talk about year end guidance.

no mention of chapter 11, and no apology from MW claiming that mass layoffs were coming in June.

Stock up 40-50% today.

July 21, 2009 5:50 AM

Pretty accurate if you ask me.

Anonymous said...

The fact of the matter is, the only reason McClatchy saw a profit is because of all the cost cutting.

Of course its the reason, and it has been succesfull.

What is important is that we set a goal for a % in drop for YOY revenue and we have not only met it but exceeded it.

Things are not good with McClatchy however we as a company are following through with expectations and overall plan. Outside of furloughs and other reductions in operational expenses that have already been planned there is no more plans for additional layoffs. We are moving foward and will continue to be a profitable company that can meet the debt payments needed to avoid defaulting.

@1:42 you are correct that we projected a 30% reduction in revenue. As long as we maintain the revenue and maintain the already anounced cuts in expenses we will be fine going foward.

Anonymous said...

As long as we maintain the revenue and maintain the already anounced cuts in expenses we will be fine going foward.

You're either entirely dishonest or blindly foolish. Your revenue is in free fall and not recovering. You can't maintain it because you're losing advertising at the same rate.

The only way to keep your head above water is additional cutting in pace with declining revenue. You can't sustain that losses in revenue indefinitely.

You're not fine. You are failing at an incredible rate.

Anonymous said...

2:03 PM Isn't that almost exactly what Barney Frank tried to say before Fannie and Freddie bit him on the pecker?

"Going forward they'll be just fine!"


Anonymous said...

What will happen when there are no more costs to cut ?

I know... I know !!!!!!

Everyone will get there news from newspapers !!!! LOL !!!!!!

ch 11 here we come

come on ! where is my severance.

Anonymous said...

//What will happen when there are no more costs to cut ?//

What? Didn't you hear fanboy? They're planning on a 30% loss YOY. They'll be fine! It's all part of the plan. They can do it. ;-)

Anonymous said...

what will happen when McClatchy pulls through this with no CH11?

well you always have this blog to make you feel better about yourself. Feed your ignorant rantings

Anonymous said...

Anybody who feels smug about today's spinning of the numbers is perfect McClatchy employee fodder - ignorant and naive beyond belief. Reality is a cruel MFer.

Anonymous said...

this blog will still be around but mcclatchy will not be !


Anonymous said...

He he-- no doubt.

Anonymous said...

"I dont think this plan will work. We are headed into default."

"But we are making our goals and we are looking good heading into 3rd quarter to make those goals as well. Why do you believe we are heading into CH 11? Where are you getting your info?"

"Oh, The folks on MW said so and they know what they are talking about!"


Anonymous said...

All this talk about numbers going up and numbers going down.

How about the human factor? Those things called human beings are ground down to hopelessness.

An organization filled with anger, betrayal and toxicity will feed upon itself. Fraud, theft, and sabotage will run up and down the empty hallways.