Amid the secular and cyclical slowdown in print advertising, McClatchy Company (MNI), the third largest newspaper company in the U.S. and the publisher of 30 daily newspapers including the Miami Herald and Sacramento Bee, reported third-quarter 2009 results. McClatchy is facing the same dramatic decline in advertising revenue, as the rest of the newspaper industry. Total advertising revenue fell 28.1% year-on-year to $266.1 million. However, circulation revenue stabilized, up 6.7% to $69 million due to increase in circulation prices. As a result, total revenue slipped 23.1% to $347.4 million. To combat the downturn, management undertook cost-cutting initiatives, focused on building Internet operations and reduced debt load. McClatchy had lowered its headcounts, and cut executive pay. The company was able to lower its cash expenses by 29.4% and total operating expenses by 30.2%. McClatchy’s quarterly earnings remained flat at 13 cents a share compared to ...

Amid the secular and cyclical slowdown in print advertising, McClatchy Company (MNI), the third largest newspaper company in the U.S. and the publisher of 80 newspapers including the Miami Herald and Sacramento Bee, reported second quarter 2009 results.  The company is facing the same dramatic decline in advertising revenue, as the rest of the newspaper industry, reflecting the deepening economic recession. To combat the downturn, management undertook cost-cutting initiatives, focused on building internet operations and reduced debt load. McClatchy lowered its headcounts by 15%, or 1,600 employees, cut executive pay, suspended 401K matching contribution and dividend. The company was able to lower its cash expenses by 29.3% and operating expenses by 28.1%.  Consequently, EPS increased 42.9% year over year to $0.30. On a reported basis, EPS more than doubled to $0.50. Total revenue, however, plummeted 25.4% to $365.3 million, as the fall in total advertising revenue ...

Standard & Poor's Upgrades McClatchy's Corporate Rating

On Tuesday June 30, 2009, Standard & Poor's raised its corporate credit rating for newspaper publisher McClatchy (MNI) to "CC" (highly vulnerable) from "SD," (selective default). The rating agency still holds a negative view on the company on account of its possible restructuring.

Last Friday, June 26, both Standard & Poor's and Moody's Investor Services had lowered their corporate ratings on the company following the debt exchange offer announced by McClatchy. Moody's lowered its corporate rating to "Caa2" from "Caa1", whereas Standard & Poor's lowered its credit rating to "SD" from "CC." McClatchy offered to pay $60 million in cash and issue $175 million in new notes, with a 15.75% coupon rate due 2014, to replace $1.15 billion in debt owed to its bondholders.

The reason behind downgrading was the company's dubious ability to repay debt and high default risk. On the announcement of

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Miami Land Sale Delayed by Six More MonthsMiami land sale deal between McClatchy (MNI - the seller) and Citisquare Group (the buyer) was extended for the second time after the latter failed to exercise its option to buy the 10 acres of land adjacent to the Miami Herald.The deal was supposed to be completed on Tuesday, June 30, 2009. The date of closing the deal is now extended to December 31, 2009. Citisquare Group is required to increase the termination fee payable to McClatchy due to the extension of the agreement.Earlier, on December 30, 2008, McClatchy announced the extension of the closing date of the agreement (previously December 31, 2008) to sell the 10 acres in order to gain some time to arrange financing in this troubled credit environment, as falling real ...

On Friday June 26, 2009, McClatchy (MNI) announced the expiration of its private exchange offer, which commenced on May 21, 2009. The company offered to exchange the Old Securities for up to $60 million in cash and up to $175 million of newly issued 15.75% Senior Notes due 2014.

The coupon rate has substantially increased from the range of 4.625%-7.150%. With the increase in coupon rate, the company's interest coverage ratio which stood at 2.8x (EBITDA/Interest expense) will decline, and may fall below the covenanted minimum interest coverage ratio of 2.25x. The company's leverage ratio (Debt/TTM EBITDA) was 5.9x at the end of 1Q09 up from 5.1x at the end of 2008, approaching recently-amended bank covenants of 6.25x.

After the expiration of the offer, according to Global Bondholder Services Corporation, the depositary for the Exchange Offer, $102.9 million in debt had been tendered. McClatchy received tenders from

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* HJ Heinz (NYSE:HNZ) reported inline fourth quarter earnings of 55 cents a share versus 61 cents a share a year ago, as revenues declined to $2.5 billion, versus $2.7 billion a year ago.  The firm raised its dividend 2 cents to $1.68 a share per year

* Big Lots (NYSE:BIG) beat Street estimates with first quarter earnings of 44 cents per share, four cents above projections, as revenues fell 0.9% year-over-year to $1.14 billion, a tad ahead of estimates of $1.13 billion.  The company provided inline guidance of 26 cents to 32 cents per share, ex-items, for the second quarter, and inline 2010 guidance of $1.85 to $1.95 ex-items

* Time Warner (NYSE:TWX) announced plans to spin-off its AOL internet operations

* Costco (NASDAQ:COST) reported its fiscal third quarter earnings of 48 cents per share, versus Street estimates of 53 cents a share, due to litigation settlement charges.  Revenues declined 4.8% year-over-year

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Highlights include The McClatchy Company (MNI), The New York Times Company (NYT), Washington Post Co. (WPO), Lee Enterprises (LEE), Gannett Co. (GCI) and Journal Communications (JRN).McClatchy: Expensive Debt Exchange Offer Extends MaturitiesIt's an offer bondholders can't refuse.The McClatchy Company (MNI) has announced an offer to exchange $1.15 billion in debt securities for cash and new notes in a move that extends its earliest maturities and lessons the threat of default -- but at a very steep price.The publisher of 80 newspapers, including the Miami Herald and Sacramento Bee, will issue new notes, due 2014, that raise its interest rate to 15.75%, from 4.63% to 7.15% on its current debt securities, but extends its nearest maturity from 2011 to 2014.There will be sufficient cash and new notes to repurchase all of the company's notes ...

Deteriorating Ad Market, Heavy Debtload Paint Gloomy OutlookThe outlook for shares of Radio One (ROIAK) has not improved, despite the 58% drop in their price since we downgraded it to a Sell on September 19, 2008. As expected, Radio One's 4Q08 financial results, reported on February 19th, reflected falling revenue and earnings, hurt by the advertising recession and secular migration away from radio.Excluding one-time items, EPS fell 28% to $0.18 for 4Q08 from $0.25 in 4Q07. Including charges for intangible asset impairment and other one-time items, EPS was negative $0.09 in 4Q08, compared with negative $3.91 in 4Q07. The outlook is getting worse as the decline in ad revenue accelerates -- ad revenue pacings are off 31% year-over-year for 1Q09 and are down 50% for 2Q09.Operating Costs, Capital Spending Cut to the Bone…As the deteriorating ad market shrinks revenues, the ...

Publishing – Circulation and Ad Revenue are Falling at an Accelerating Rate

The publishing industry is suffering accelerating declines in circulation and ad sales. Print advertising industry-wide has been decelerating for several years, eroded by the secular migration to the Internet.

Newspapers have fared far worse than magazines, as web-based news options have proliferated in recent years. Circulation of newspapers fell 2-3% on average each year from 2005 through 2007, and that has accelerated with to the mid-single digits in recent months as the economy slowed. Ad revenue is falling between 15-20% at many publications.

National newspapers, however, have out-performed the group significantly, particularly USA Today, a subsidiary of Gannett (

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Publishing – Circulation and Ad Revenue are Falling at an Accelerating RateThe publishing industry is suffering accelerating declines in circulation and ad sales. Print advertising industry-wide has been decelerating for several years, eroded by the secular migration to the Internet.Newspapers have fared far worse than magazines, as web-based news options have proliferated in recent years. Circulation of newspapers fell 2-3% on average each year from 2005 through 2007, and that has accelerated with to the mid-single digits in recent months as the economy slowed. Ad revenue is falling between 15-20% at many publications.National newspapers, however, have out-performed the group significantly, particularly USA Today, a subsidiary of Gannett (GCI) and The Wall Street Journal, owned by News Corp (NWS).Most publishing houses are rapidly cutting costs in line with their shrinking revenue stream, while attempting to build complementary Internet operations. But ...