McClatchy planning to use cash primarily for debt reduction in 2009

By Jennifer Lanning Drey

Portland, Ore., April 23 - McClatchy Co. expects to use cash primarily for debt repayment through the remainder of 2009, Gary Pruitt, chief executive officer of McClatchy, said Thursday during its first-quarter earnings conference call.

The company ended the first quarter with net debt of $2.02 billion, compared to net debt of $2.03 billion at the end of 2008. Following the close of the quarter, McClatchy repaid the remaining $31 million of its notes that matured on April 15.

McClatchy's next debt maturity is in 2011, and the company does not expect to have any required pension contributions until 2010, Pruitt said.

The company has also suspended cash dividends.

During the question-and-answer portion of the call, Pruitt declined to comment on the possibility of the company carrying out a debt exchange, aside from saying, "We look at everything and evaluate everything."

The company had a $36 million cash balance at March 31. Pruitt said McClatchy expects to be free cash flow positive for full-year 2009.

At quarter-end, McClatchy's leverage ratio was 5.9 times cash flow and interest coverage was 2.8 times cash flow, the company reported in its earnings release.

During the question-and-answer portion of the call, Pruitt said the company expects to be able to remain in compliance with the leverage covenant related to its credit facility going forward.

McClatchy has about $145 million available under its bank credit lines, according to the release.

Revenues fall 25%

McClatchy started the year with a 25% decline in first-quarter revenues, which were $365.6 million for the period. Advertising revenues were down 29.5%.

Pruitt said the effects of the downturn began to have a greater effect on digital advertising in the first quarter, whereas the effects were previously limited to print advertising.

Digital advertising revenues decreased 4.7% in the period.

The company has implemented circulation and cost-related initiatives to help offset the impact of declining revenues, which have not shown signs of improvement in April, he said.

McClatchy reported a net loss from continuing operations in the first quarter of $37.7 million, compared to a net loss from continuing operations of $993,000 in the comparable period of 2008.

McClatchy is a Sacramento, Calif.-based newspaper company.

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