Thursday, February 5, 2009

McClatchy reports fourth-quarter loss, says it will make $100 million to $110 million in cutbacks

Dale Kasler at the Sacramento Bee reports McClatchy will make $100 million to $110 million in cuts, but hasn't announced details of the cuts because the plans are still being worked out.

The McClatchy Co. reported a fourth-quarter loss because of declining revenue and a non-cash writedown Thursday. The Bee's publisher also announced it's developing plans to lop another $100 million to $110 million from its operating expenses, froze its pensions and temporarily halted matching contributions to its 401(k) plan.

Sacramento-based McClatchy also revealed that it's in danger of being de-listed from the New York Stock Exchange because its stock price has fallen below $1 in the past few weeks.

The results reflected the ongoing struggles in the newspaper industry, and the economy in general.

Sacramento-based McClatchy said fourth-quarter earnings from continuing operations fell to $21.8 million, or 26 cents a share. That compared with $36.1 million, or 44 cents a share, a year earlier. Revenue fell 17.9 percent from a year earlier, to $470.9 million, and advertising sales dropped 20.7 percent.

On a bottom line basis, the company reported a net loss for the fourth quarter of $21.7 million, or 26 cents a share, because of a $59.6 million non-cash writedown. The write-down, the third the company has taken since the downturn began, reflects an acknowledgment that its properties aren't worth as much as previously believed.

In a statement, Chairman and Chief Executive Gary Pruitt said "2008 was a difficult and disappointing year. We faced troubled economic times and structural changes in our business." He said 2009 is off to a rough start, with January "slower than the fourth quarter."

Pruitt called the latest cutbacks -- following significant layoffs and other cutbacks last year -- "especially painful in a horrible economy and we have had to make some very difficult decisions to keep the company safe."

The details of the $100 to $110 million in cost cutting weren't released. Previously the company has resorted to layoffs, buyouts and other measures.

The company said a freeze on executive salaries, which began in 2007, will run through 2009. Pruitt has declined any bonus for last year and this year, and no other senior executives received bonuses last year.

Rank-and-file employees have been under a one-year wage freeze since September.

McClatchy announced last week it was suspending shareholder dividend payments as of April 1. The move will save $60 million a year, cash that will be plowed into McClatchy's $2.04 billion debt.

For the full year, the company reported profits of $1.4 million, or 2 cents a share. Without one-time adjustments, including the latest write-down, the company made $55.4 million, or 67 cents a share, in 2008.

In 2007 the company lost $2.74 billion, or $33.37 a share, reflecting enormous non-cash writedowns. Without the writedowns, the company earned $110 million, or $1.35 a share.

With pensions frozen, employees will no longer accrue additional benefits, although the benefits they've earned will remain intact.

The company said it's suspending contributions to 401(k) plans effective March 31 but said it plans to offer a new 401(k) plan later this year.

The company also announced it will no longer report revenue every month, following a recent trend in the newspaper industry.

McClatchy's stock closed Wednesday at 66 cents a share. Under the stock exchange's de-listing procedures, McClatchy has six months to get its price back above $1. Otherwise, it would be relegated to a less visible, less prestigious exchange. Three other newspaper chains have been de-listed from the New York exchange in the past few months: Sun-Times Media Group, GateHouse Media and Journal Register.

Readers are saying cuts will include unpaid furloughs.


Anonymous said...

Can anybody (except nut jobs who get off on other people's misfortune) explain in layman's terms what the frozen pension plan means?

Anonymous said...

The freezing of our pension plans – which include The McClatchy Company Retirement Plan and the Knight Ridder Pension Plan – will be effective March 31, 2009. Your pension benefit grows each year based on years of service and your pay. As of the freeze date, employees will stop earning additional pension benefits. However, you will keep the entire pension benefit you may have earned prior to the freeze date. Although your pension benefit will be frozen, your continued employment after the freeze date will still count toward vesting and early retirement requirements. McClatchy is committed to honoring all of its existing pension obligations

Anonymous said...

8:16: Thanks

Anonymous said...

Clarification please:
'Impairment charge' - Information of importance or not?

"Management conducted its annual impairment testing of goodwill and other long-lived assets as of the end of its fiscal year, December 28, 2008. Upon completion of that testing, the company recorded a pre-tax non-cash impairment charge of $59.6 million to newspaper mastheads. The company did not record an impairment charge related to goodwill in 2008.

Anonymous said...

Archer05: It means they have concluded that the value of their properties have gone down, and are adjusting their net worth statements to reflect the decline. The impact is minimal on the daily lives of most MNI employees, but where it will hurt is when MNI tries to float or renegotiate a bond or debt, because the value of the assets backing it up have just declined.