McClatchy Company (MNI) Reports Q2 Loss of $2.62

McClatchy Company (NYSE: MNI) reported Q2 EPS of ($2.62), versus ($1.36) reported last year. Revenue for the quarter came in at $204.3 million versus the consensus estimate of $203.59 million.

Craig Forman, McClatchy\'s president and CEO, said, "In the 2018 second quarter, newspaper-industry headwinds continued but nonetheless our digital transformation progressed despite these industry challenges. We saw many areas of sequential improvement: our total digital advertising revenues were up almost 8%, while our digital-only advertising revenues grew more than 20%. In the first quarter of 2018 we achieved a milestone in our digital transformation that was repeated in the second quarter: total digital advertising revenues exceeded our print newspaper advertising revenues and that trend accelerated in the quarter just ended. Indeed, in May and June we met another milestone: our digital-only advertising revenues exceeded our print newspaper advertising revenues. Finally, while print advertising was down double digits, even in this hard-hit category, we saw improvement in the trend of our print advertising business in almost all categories."

"We ended the quarter with 122,400 digital-only subscribers, up 34.5% from the same period in 2017, an accelerated pace of growth from the first quarter. We continue to be excited about our digital future and to invest in the growth engines of our business."

Forman continued, "We are gratified to have completed the refinancing of the vast majority of our debt earlier this month, which provides us more runway for our digital transformation. We reduced our first-lien debt by 10% to $310 million and extended the nearest-maturity debt to 2026, eight years from now, and we were able to complete a transaction on reasonable terms earlier than many anticipated. We appreciate the confidence and support shown by our investors.

"In our new debt structure, we will pay down the first lien notes from excess cash flows and certain asset sales and this ability to prepay debt is a positive term of the 2026 notes indenture that we sought from investors."

Outlook

Craig Forman, CEO said, "As we look to the rest of 2018 we are encouraged to see our investments in our digital transformation beginning to pay off. In the second quarter, we saw sequential improvement in advertising largely because of the investments we have made in sales tools and restructuring of our sales team and we expect that trend to continue in the second half of 2018. In addition, we continue to see growth in digital-only subscriptions and more of our bundled print/digital subscribers are adding our digital products to their daily routine. Finally, with the refinancing of our debt, we now have a longer runway to complete this transition to a digital-centric media company."

Elaine Lintecum, McClatchy's CFO, said, "We will continue to apply our cash flow and proceeds from asset sales to reduce debt. Under our new 2026 Notes, we now have a mechanism to prepay debt from these sources without incurring significant breakage costs. The effective cash interest rate on our debt remains largely unchanged at 7.9% compared to 8.0% prior to the refinancing. I believe this is the first significant refinancing for a newspaper company since 2014 and we are happy to complete it with such a positive outcome for the company and its shareholders."

Lintecum continued, "Given the increase in longer-term treasury rates since the beginning of 2018, we are happy to have locked in reasonable interest rates in our refinancing, and removed future potential market risk. And on the plus side we are seeing the benefits in the funding position of our qualified pension plan. Based on discount rates as of June 30, 2018, we estimate that the plan funding level improved more than $50 million, to an underfunded position of approximately $422 million from the $476 million we reported at the end of 2017."

For earnings history and earnings-related data on McClatchy Company (MNI) click here.

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