- Monthly advertising revenue trends improved throughout the first quarter 2012
- Digital-only advertising revenues up 14.0% in the quarter
- Cash expenses declined by 4.1% from first quarter 2011, excluding restructuring-related charges
- Debt reduced by $35.5 million in first quarter 2012 to $1.599 billion
The McClatchy Company (NYSE-MNI) today reported a net loss in the first quarter of 2012 of $2.1 million or 2 cents per share. In the first quarter of 2011 the company reported a net loss of $2.0 million or 2 cents per share.
Revenues in the first quarter of 2012 were $288.3 million, down 5.1% from the first quarter of 2011. Advertising revenues were $209.8 million, down 6.8% from 2011, and circulation revenues were $66.4 million, up 0.4%. Digital advertising revenues grew 2.7% in the first quarter of 2012 and were 22.2% of total advertising revenues compared to 20.1% of total advertising revenues in the first quarter of 2011.
Results in the first quarter of 2012 included the following items:
-- Accelerated depreciation and certain cash charges totaling $2.9 million
($1.7 million after-tax) primarily related to relocating Miami newspaper
-- Severance charges totaling $1.2 million ($0.7 million after-tax) related
to continued restructuring of the company's operations.
-- A gain on the extinguishment of debt totaling $4.4 million ($2.8 million
after-tax) related to bonds repurchased in the open market.
The net loss in the first quarter of 2012, excluding the net impact of these items, was $2.5 million compared to a net loss in the first quarter of 2011 adjusted for similar items of $3.4 million. (Non-GAAP measurements are discussed below).
Operating cash expenses, excluding charges associated with restructuring plans, declined $9.7 million, or 4.1%, from the 2011 quarter. Operating cash flow, a non-GAAP measure, was $60.8 million in the first quarter of 2012, down 8.7%.
Also in the first quarter, McClatchy announced that Gary Pruitt, chairman, president and chief executive officer of McClatchy, will leave the company May 16, 2012, to become president and chief executive officer of The Associated Press.
McClatchy's Board of Directors has named Patrick Talamantes, McClatchy's current vice president, finance and chief financial officer (CFO), as Pruitt's successor. Talamantes will assume the title of president and chief executive officer (CEO) and join the company's Board of Directors. Kevin S. McClatchy, a director of McClatchy since 1998 and a fifth-generation member of the founding McClatchy family, will become chairman of the Board. Mr. Talamantes' replacement as CFO is expected to be named by the Board on May 16, 2012, the next board meeting date.
Management's Comments on First Quarter Results:
Commenting on McClatchy's first quarter results, Gary Pruitt said, "We were pleased to see the advertising revenue trend improving throughout the quarter. Advertising revenues were down 7.9% in January, 6.8% in February and 5.6% in March. For the full quarter advertising revenues were down 6.8%. Excluding one-time advertising related to the 2011 Super Bowl included in our Fort Worth newspaper's results, first quarter 2012 advertising revenues were down an estimated 6.3%.
"We continue to make progress on our digital initiatives and the strong revenue results in the quarter demonstrate that digital continues to be a high-growth opportunity for the company. Digital-only advertising revenue increased 14.0% in the quarter. Total digital advertising, which includes digital advertising both bundled with print and sold on a stand-alone basis, increased 2.7% compared to the 2011 quarter. Total digital advertising now represents 22.2% of McClatchy's total advertising revenue compared to 20.1% in 2011. Our digital traffic also continues to grow with daily average local unique visitors to our websites and mobile devices up 2.1% in 2012.
"Circulation revenue increased in the quarter, up 0.4%. Strategic price initiatives during the quarter offset the daily circulation volume declines of 5.5% and a Sunday decline of 1.1%.
"We continued to reduce costs in the quarter. Cash expenses, excluding restructuring costs, were down 4.1% and this continued focus on expense management enabled us to generate another quarter of healthy operating cash flow.
"Once again, our equity investments provided strong results. Our share of income from all equity interests was $6.0 million compared to $3.2 million in the first quarter of 2011. Many of these companies provide important products to our newspaper websites and are strategic partners in our digital success.
"As we look to the second quarter, we have limited revenue visibility, with April affected by holiday shifts. We will continue to focus on our strong and growing set of products and revenue initiatives, especially in digital and direct marketing advertising. We will also remain diligent in controlling costs and expanding our operational efficiencies and expect to continue to benefit from stability in newsprint pricing in the quarter. As a result, we expect cash expenses to be down in the range of three to four percent in the second quarter of 2012."
Pat Talamantes, McClatchy's CFO and in-coming president and CEO, said, "We were pleased with the debt reduction progress considering that we also made seasonally large bond interest payments and used $40 million of cash to fund near-term required pension contributions in the quarter. We reduced debt by $35.5 million in the first quarter to $1.599 billion and finished the quarter with a cash balance of $24.4 million. Our nearest term maturity in Nov. 2014 is only about $81 million - not an issue given our free cash flow. Our leverage ratio at the end of the first quarter as defined in our credit agreement was 4.56 times cash flow and our interest coverage was 2.26 times.
Non-GAAP Financial Measures:
In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included in this press release, the company has provided information regarding operating income, non-operating expenses and income, income taxes, and net income excluding certain items described in an attached schedule. In addition the company has presented operating cash flows (defined as operating income plus depreciation and amortization, restructuring related charges and other non-cash impairments) along with operating cash flow margins (operating cash flow divided by net revenues) that are reconciled to GAAP measures in the attached schedule. Management believes these non-GAAP measures, when read in conjunction with the company's GAAP financials, provide useful information to investors by offering:
-- the ability to make more meaningful period-to-period comparisons of the
company's on-going operating results;
-- the ability to better identify trends in the company's underlying
-- a better understanding of how management plans and measures the
company's underlying business; and
-- An easier way to compare the company's most recent operating results
against investor and analyst financial models.
Operating income, non-operating expenses and income, income taxes, and net income excluding certain items should not be considered a substitute or an alternative to these computations calculated in accordance with and required by GAAP. Nor are operating cash flow and operating cash flow margins to be considered replacements for cash provided by operating activities as shown in the company's statement of cash flows included in our financial statements.