McClatchy execs soft pedal financial performance

During the company's 3rd quarter investor conference call, Heralds' parent company, McClatchy, executives tried to put a positive spin on the dismal state of their business.

McClatchy (MNI) has just ended its investor conference call for the third quarter results. In the discussion of paying down debt, there was talk of selling land in Miami and a tax refund on the sale of one of its papers. The company also forecast its debt level through the end of 2008.

According to the share price, the market was buying none of it. The stock fell almost 2% to $18.50, a new 52-week low. The company's 52-week high was $44.95. The stock has fallen almost 55% over the last year, while shares in Gannett (GCI) are off 22% for that period, and the New York Times (NYT) is down 18%

The sale of the land adjacent to the Herald Building if not the building itself is a foregone conclusion. Why would you want to use that expensive bayfront property to house a newspaper when you could do it much less expensively in some corporate park out west? Unfortunately for McClatchy the real estate market is softer than a waiting room full of octogenarians in a urologist's office.

When talking about future guidance, MNI commented "Accordingly, we expect the advertising revenue decline in the fourth quarter to be similar to that in the second and third quarters. We do not know when this downturn will end, and do not have visibility beyond the fourth quarter." So, the company sees debt dropping but without having a clear picture of how next year will go.

The third quarter was tough. Revenue fell from $595 million in the quarter a year ago to $540 million this year. Net income fell from $52 million to just over $23 million. Under the circumstances, there are clearly still concerns about debt service.

To add insult to injury the share price continued to tank through the end of the week, ending $17.54. That's about a 61% drop from the 52-week high of $44.62 in October of last year. The company is worth a little more than a third of what it was worth just about a year ago.

It's hard to see a happy ending for Heralds with such a financially crippled parent. Private local ownership would seem to be the only possible solution.