McClatchy Co.'s (NYSE:MNI) stock has been showing signs of life, trading in the mid-$3 range and moving toward its 52-week high of $4.64, but that indicator is still no proof that the Sacramento, Calif.-based newspaper publisher has recovered from its financial woes.
The third-largest newspaper company in the U.S. with 30 daily newspapers will announce third-quarter earnings on Thursday at noon ET. Analysts expect McClatchy's earnings to come in at 21 cents per share, according to Yahoo!'s earnings calendar.
The company's problems with debt inherited from its buyout of newspaper chain Knight Ridder Co. in 2006 (subscribers to The Deal Pipeline may read more here) has lessened, thanks to a debt restructuring in July. McClatchy has been able to refinance $1.15 billion in debt, resulting in postponing debt payments in the immediate near term. The Associated Press says "the company's next big bond payment isn't due to be paid until 2011, giving it more breathing room to wait for a revival in ad sales."
But when that ad revival comes, nobody knows. The newspaper industry is in its worst advertising slump since the Great Depression. McClatchy has been shifting its emphasis from a solely print advertising business model to one that is looking for more online ad revenue. The transformation is still a work in progress, but nearly all media companies that own print products are chasing the same strategy, making the online advertising revenue sector very competitive.
McClatchy also has been focusing on reigning in costs with layoffs and selling off troubled assets to raise cash. The company has lowered its payroll by one-third since mid-2008, leaving it with just less than 9,000 workers at the end of June. Meanwhile, McClatchy is still trying to sell The Miami Herald, but inquiries have remained quiet.
For now, McClatchy seems to be out of the peril of bankruptcy that the market was warning about in the late spring, but the media company is not out of the woods yet. The next six months to a year are crucial for McClatchy. If it can find quality bids for some assets, keep expenses down and grow advertising revenue, perhaps its turnaround will continue. If not, its printing presses could bleed red ink. - Gerald Magpily
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