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$4.34 -0.01 (-0.23%)
10/6/2008 4:03 PM

The McClatchy Company (MNI)

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The Company is the newspaper company in the US, also has a robust network of internet assets, including local websites in each of its daily newspaper markets, offering users information, comprehensive news, advertising, e-commerce and other services.

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Avatar NetscribeMedia (22.48) Submitted: 2/26/07 8:00 AM : Underperform Start Price: $34.82 MNI Score: 59.34

The McClatchy Company was formed in 1998 and is primarily a publishing company. Their major newspapers include the Star Tribune, The California Newspapers and The Carolina Newspapers among others. The company has only one reportable business segment and is the third largest US based newspaper publisher.

In December 2006, the company announced its plans to sell The Star Tribune which it had bought for around $1.2 billion ten years ago, to Avista Capital Partners for around $530 million. The company is expected to get a future cash tax benefit of $160 million related to the sale and it will also help it pay down a small portion of its debt from the Knight Ridder acquisition. The debt at the end of March should be around $2.7 billion. The Star Tribune served the Minneapolis market and it had daily subscribers of around 360,000 so this divestiture might hurt the company a little bit in terms of revenues.

In June 2006, the company had acquired Knight Ridder which publishes 32 newspapers in 29 markets. On a pro forma basis, revenues for the fourth quarter revenues were down 3.4%. Even 2006 revenues were slightly down 0.4% compared to 2005 on a pro forma basis. The advertising environment in the fourth quarter was challenging with soft retail and declining employment and automotive classified advertising. The company expects advertising revenue on a pro forma basis to be down in the first half of 2007. The company will also have to focus on paying down its enormous debt which resulted in an interest expense of $93.6 million in 2006. The publishing industry in general has had an extremely hard year with torpid ad sales, low circulation and layoffs. In such a scenario, it is highly unlikely that McClathy will have a good year ahead of it.

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Avatar NetscribeMedia (22.48) Submitted: 4/23/07 2:43 AM

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The newspaper industry is in dire straits. Advertisers have ditched the newspaper like an antediluvian lover and jumped into bed with the Internet. Currently, the Internet appears to be gaining in this triangle of sorts. The newspaper industry meanwhile has started to build a strong online platform to attract advertisers and readers.

McClatchy, the third largest newspaper company in the USA has aligned itself with Yahoo in an Internet advertising deal. The company severed ties with previous partners Tribune and Gannett to join this rival group of companies. The group that McClatchy would join includes publishers Belo Corp, Hearst Corp, Journal Register, Lee Enterprises, Media News Group Inc. and EW Scripps. It spans papers such as the San Francisco Chronicle and the Dallas Morning News. The partnership uses Yahoo’s technology to sell help-wanted advertising and offer other local information services on related newspaper websites. The partnership will be profitable, but may take time to gather momentum.

McClatchy sold the Minneapolis Star Tribune newspaper for $530 million in March, 2007. McClatchy’s February advertising revenues decreased 5.2% to $150 million while total revenues were down 5.1% to $177.2 million compared to pro forma revenues. Pro forma revenues included the newspapers purchased in the Knight Ridder acquisition and excluded the Minneapolis Star Tribune newspaper. Year-to-date advertising revenues declined 5.5% and total revenues were down 5.2% on a pro forma basis. Earlier, the company’s 2006 pro forma revenues had been relatively flat year-over-year. Advertising revenues, on a pro forma basis are expected to be down in the first half of 2007. We, therefore, expect McClatchy to have a tough year ahead.

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