McClatchy Reports Fourth Quarter 2016 Results

– Grew digital-only advertising revenues 11.0% in Q4 and a record 14.8% for the full year
– Reduced operating expenses 6.8% and adjusted operating expenses 5.9%
– Grew average monthly unique visitors 22.3%, local unique visitors up 13.2%
– Received dividend distribution of $6.0 million from CareerBuilder in December 2016
– Reduced debt by $32.8 million in the fourth quarter and by $63.6 million for the full year 2016
– Closed on the sale of the Sacramento Bee covered garage in December 2016
– Acquired The Herald-Sun in Durham, NC from Paxton Media Group

McClatchy (NYSE-MNI) today reported net income in the fourth quarter of 2016 of $3.1 million, or $0.40 per share, compared to net income of $8.8 million, or $1.04 per share in the fourth quarter of 2015. Per share amounts reflect the company’s 1 for 10 reverse stock split that became effective in June 2016. The fourth quarter and full year results were not impacted by the results from The Herald-Sun (Durham, NC), which was purchased on Dec. 25, 2016, the last day of McClatchy’s fiscal year.

The company reported adjusted net income, which excludes severance and certain other items, in the fourth quarter of 2016 of $12.9 million, compared to adjusted net income of $17.3 million in the fourth quarter of 2015.

As reported, on January 25, 2017, the board of directors appointed Craig Forman president and chief executive officer (CEO) of the company. He has been a McClatchy board member since 2013 and will remain on McClatchy’s board. Forman has a strong track record in both digital technology and journalism, and familiarity with the company’s digital-transformation strategy. He has served as the executive chairman of Inc. and Appia Inc. and previously held executive roles with Yahoo!, Time Warner, Infoseek, and Dow Jones. Forman served in senior leadership roles at Earthlink from 2006 to 2009, including as president of the company’s $1 billion consumer access and audience business.

Forman began his career as a reporter and bureau chief for The Wall Street Journal, where he was part of the reporting team whose coverage of the Persian Gulf War was a finalist for the 1991 Pulitzer Prize in International Reporting.

Forman said, “In the short fortnight since becoming chief executive, it has become clear to me that we have a highly skilled and dedicated team across McClatchy, committed to serving our customers and our neighbors from Sacramento to Miami and in dozens of communities in between. I’m thrilled to join them in the day-to-day work of running the company and using technology as a catalyst for growth. We’ve already transitioned in many respects to the foundations of a digital future. Our goal here is to accelerate that transformation—to focus on our pace.

“We remain vigilant on cost control and expense reduction as we align the cost structure with the decline in traditional print advertising. Our intent is to sharpen our connections to our local markets, both in terms of audience and advertising, by accelerating our digital product and sales efforts. In short, we are focused on the future while maintaining the integrity of our journalism and deep engagement with our communities.”

“We had an active fourth quarter as well as a busy start to 2017,” Forman continued. “During 2016 we reached a number of goals to move the company forward for our shareholders. We again achieved double-digit growth in digital-only advertising revenue, despite running against impressive growth from the fourth quarter 2015. This marks the fifth consecutive quarter of double-digit growth in the digital-only advertising category and a record growth rate of 14.8% for the full year in 2016.

“While we delivered on our digital advertising goal of double-digit growth, we experienced one of the toughest years recently in print advertising as the struggles of the retail industry had an impact on our results. But our strong digital revenue growth, coupled with better results for direct marketing revenues, helped to partially offset the print declines in the fourth quarter. As a result, for full-year 2016 we saw an improvement in total advertising revenues of two percentage points over full-year 2015.

“We also made progress in realigning our cost structure to reduce legacy expenses. For 2016 we reduced operating expenses by $347.4 million due primarily to the inclusion of goodwill impairment in 2015 expenses. When adjusted for non-cash impairments and other items to represent cash costs, we successfully reduced 2016 adjusted operating expenses1 by more than $58 million. Over the last two years, operating expenses have declined $109 million and adjusted operating expenses by $116 million.”
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