McClatchy reports total ad revenues for October and November down 5.6% combined year-over-year versus declines of 10.1% for first nine months of 2011, led by retail and national segments, says Sunday circulation up 1.9% over last five months
December 7, 2011
– The McClatchy Company (NYSE: MNI) today provided an update of business trends for 2011 and an outlook for 2012, including improving advertising revenues over the last three months, growing Sunday circulation and the expected receipt of nearly $30 million in dividends from the company's equity investments.
Management noted that it saw improving advertising revenue trends that began in September and continued in October and November 2011. Advertising revenues were down 8.7% in October and 2.4% in November (down 5.6% for the two months combined), compared to declines of 10.1% through the first nine months of 2011. Total revenues for October and November combined were down 4.9% compared to declines of 8.7% through the first nine months of 2011.
Gary Pruitt, McClatchy's chairman and chief executive officer, said, "The improving advertising trends in the first two months of the fourth quarter have been led by retail and national advertising. This is particularly encouraging given that October and November were our strongest months in 2010, and so are our toughest comparisons of the year."
Pruitt pointed to the growth of Sunday circulation as "one of the more positive developments" of 2011.
"While daily circulation has shown improvement over the year, Sunday circulation has improved dramatically and is now growing, up 1.9% in the last five months," Pruitt said. "There is no discounting the importance of the Sunday newspaper. On average, Sunday drives nearly 36% of advertising revenues. The Sunday paper is highly profitable for us in addition to being highly valued by our readers and advertisers."
Pruitt said the company also expects to receive nearly $30 million in dividends this month from the company's equity investments.
"Classified Ventures, a growing internet company in which we own a 25.6% interest, is expected to pay us a dividend of approximately $17 million later this month. Classified Ventures owns two of the nation's premier classified websites, the auto website Cars.com and the rental site Apartments.com.
"CareerBuilder, which operates the country's leading jobs sites and of which we own 15.0%, recently paid us a dividend of $7.5 million. Other equity investments will also contribute about $4 million this month," Pruitt said. "These valuable equity investments have also contributed more than $21 million in earnings through the first nine months of 2011. We are especially pleased with the performance of our internet investments – these companies provide important products to our newspaper websites and are strategic partners in our digital success."
Pruitt noted that digital advertising revenue from the company's newspaper websites now makes up 20 percent of McClatchy's total advertising revenue – among the highest in the industry. The company expects to generate digital advertising revenue in excess of $190 million in 2011.
Pruitt continued, "As we look to the fourth quarter, we are pleased to have seen the improvement in revenues in recent months. We expect cash expenses to be down in the mid- to high-single-digit percent range, excluding severance costs associated with our restructuring plans.
"As we look ahead to 2012, we have limited visibility but will work hard to maintain our ad revenue momentum. We're adding digital sales staff and expanding our sales training. We will continue to be vigilant in controlling expenses and, of course, we will continue to reduce debt. Finally, we will be opportunistic, as we always have been, in considering transactions that will strengthen our company and will be open to digital investments that give us a strategic advantage in our operations."
Pat Talamantes, McClatchy's chief financial officer, said the company reduced debt by $25 million in the fourth quarter and by $140 million in total in 2011.
"We expect our debt balance to be $1.635 billion by year-end," Talamantes said. "Our nearest term bond maturity is 2014 and that is only about $81 million – obviously not an issue given our free cash flow. Finally, with the dividends arriving this month we expect to have a healthy cash balance at year-end. Given that cash and our revolver availability, we have ample liquidity as we enter 2012 and we have no covenant issues."
McClatchy management will review the company's business and strategies in a presentation at the UBS 39th Annual Global Media & Communications Conference at the Grand Hyatt New York today at 11:30 a.m., Eastern Time. The company's presentation will be webcast live on its website, www.mcclatchy.com. McClatchy's webcast presentation will continue to be archived at its website for future reference.
The McClatchy Company is a leading news and information provider, offering a wide array of print and digital products in each of the markets it serves. As the third largest newspaper company in the country, McClatchy's operations include 30 daily newspapers, community newspapers, websites, mobile news and advertising, niche publications, direct marketing and direct mail services. The company's largest newspapers include The Miami Herald, The Sacramento Bee, Fort Worth Star-Telegram, The Kansas City Star, The Charlotte Observer and The News & Observer in Raleigh, N.C. McClatchy is listed on the New York Stock Exchange under the symbol MNI.