Posted on 04/20/2006 3:19:42 PM PDT by abb
NEW YORK, April 20 (Reuters) - Moody's Investors Service on Thursday cut both Knight Ridder Inc. (KRI.N: Quote, Profile, Research) and McClatchy Co. (MNI.N: Quote, Profile, Research) to junk status, citing McClatchy's acquisition of its bigger rival newspaper publisher.
In mid-March, No. 9 U.S. newspaper publisher McClatchy said it would buy Knight-Ridder Inc. for $4.5 billion to become the second-largest U.S. newspaper chain.
Downgrades, particularly to junk, tend to raise a company's borrowing costs.
Moody's cut both Knight Ridder and McClatchy's bond ratings to the top junk level of "Ba1" from the bottom investment-grade rating of "Baa3."
The new combined company will have debt relative to free cash flow consistent with a speculative-grade credit, Moody's said.
"Moody's believes McClatchy's concentration in a single industry (substantially all revenues are derived from newspaper-related operations) creates vulnerability to the increasing level of competitive market share and pricing risk facing newspapers," the rating agency said in a statement.
The ratings outlook on both entities is stable, Moody's said
Congratulations! You've just joined GM and Ford.
Here ya go....
"Downgrades, particularly to junk, tend to raise a company's borrowing costs.
Moody's cut both Knight Ridder and McClatchy's bond ratings to the top junk level of "Ba1" from the bottom investment-grade rating of "Baa3."
The new combined company will have debt relative to free cash flow consistent with a speculative-grade credit, Moody's said.
"Moody's believes McClatchy's concentration in a single industry (substantially all revenues are derived from newspaper-related operations) creates vulnerability to the increasing level of competitive market share and pricing risk facing newspapers," the rating agency said in a statement."
Apparently one of the liberal controlled news organizations last week released a study showing that when Lee bought out Pulitzer last year, everyone thought that would be great for Lee. It hasn't been and now I can't find that study nor the comments citing it.
This pending bond rating cut to the bottom of the bottom feeders and the reality of the merger have been hammering the stock price of MCClatchy.
Here's some stuff on Lee
Belo and Lee Report Sharp Earnings Declines
By AP and E&P Staff
Published: April 20, 2006 9:55 AM ET
NEW YORK Newspaper publisher Lee Enterprises Inc. said its second-quarter profit slipped 20%, partly due to expenses related to its Pulitzer Inc. acquisition.
Meanwhile, Belo Corp., publisher of the Dallas Morning News and other papers, on Thursday reported a 27% decline in first-quarter earnings as higher expenses outweighed revenue growth. But it said it had a much stronger March.
At Lee, income for the quarter ending March 31 was $14.4 million, or 32 cents per share, down 20 percent from $18.1 million, or 40 cents per share, last year. Revenue for the quarter was $275.8 million, up 64 percent from $168.7 million last year.
Excluding expenses related to the Pulitzer acquisition, the company said it would have earned 33 cents per share.
Analysts polled by Thomson Financial expected the company to earn, on average, 33 cents per share on $278.1 million in revenue.
"Strong growth in online, employment and niche advertising revenue helped offset slower spending by automotive, national and department store customers. As a result of continued strong cash flow, we were able to reduce debt in the quarter by $54 million and continue delivering on our successful acquisition of Pulitzer," Mary Junck, chairman and chief executive, said in a prepared statement.
On a reported basis, which includes the addition of Pulitzer in the current year, advertising revenue for the quarter increased 68.6% from a year ago to $210.9 million. Retail grew 57.3%. Classified was up 72.1%. National increased 147.7%. Online advertising revenue increased 146.1%, and niche advertising rose 39.7%. Circulation revenue increased 60.7%. Total operating revenue increased 63.5% to $275.8 million.
On a same property basis, which excludes the impact of Pulitzer and other acquisitions and divestitures made in the current or prior year, total advertising revenue for the quarter increased 1.7% from a year ago. Retail was up 0.3%, classified was up 1.6%, and national was down 8.8%. Online advertising revenue grew 38.2%. Circulation revenue decreased 1.9%, and total operating revenue increased 0.8%.
Separately the company reported a 1.7 percent increase in March advertising revenue for properties owned over the last year, excluding those that were divested or acquired in the current or prior year.
National advertising revenue decreased 9.2 percent for the month, while online advertising revenue increased 39 percent. Total operating revenue for the month was $95.4 million, up from $60.4 million last year.
Shares of Lee fell 15 cents to $31.90 on the New York Stock Exchange.
At Belo, earnings fell to $17.3 million, or 16 cents per share, from $23.7 million, or 20 cents per share, a year earlier. The latest quarter included 3 cents per share in stock option expense.
Revenue increased 7 percent to $371.7 million from $349.2 million.
"The first quarter ended gaining momentum, with revenues and expenses slightly better than our recent guidance," Robert W. Decherd, chairman, president, and chief executive, said in a statement.
Analysts expected a profit of 15 cents per share on revenue of $371.5 million, according to Thomson Financial.
Belo said its revenue growth included an 8.4 percent increase at its television businesses and 4.8 percent increase at its newspapers.
Expenses grew 11 percent to $320.8 million from $289.2 million, with operating costs up 14 percent at its newspaper group, and up 4 percent at its television segment.
Total revenue for Belo's newspaper group rose 4.8%, including the estimated increase in circulation revenue of about $8.5 million in the first quarter. Advertising revenue at Belo's newspapers rose 2.7 percent in the quarter.
Ad revenue advanced 2.4% at The Dallas Morning News, 3.9% at The Providence Journal, and 2.5% at The Press-Enterprise in Riverside, Calif.
For the entire newspaper group, retail revenue dropped 6.1%. General revenue grew 3.1%. Classified revenue increased 4.5%. Within the classified category, real estate was up 10%; employment was up 8.9%; and automotive was down 11%.
In March alone, Belo's newspapers grew revenue by 6.2 percent, including a 3.4 percent increase in ad revenue. Television spot group revenue grew 4.9 percent in March.
Looking ahead to the second quarter, Belo said it expects television spot revenue is on pact to rise about 3 percent. It expects political ad revenue to be $3.5 million versus $1.9 million in the 2005 quarter.
The company expects revenue at its newspapers to fluctuate in the second quarter because of the number of Sundays in each month compared to 2005.
Overall company operating costs are expected to increase in the mid-single digits.
AP and E&P Staff (letters@editorandpublisher.com)
.44 Magnum pistol shots, especially to the head, tend to decrease a person's health status.
MNI had a little uptick in their stock value today.
It will be interesting to see what happens tomorrow with this reality.
Murdock ought to step in and buy it for $.10 on the dollar.
Fire all the blow hards.
More yet, Dave.... Guffaw, guffaw, guffaw....
Goldman Sachs: Newspaper Stocks Still 'Value Traps'
By Jennifer Saba
Published: April 20, 2006 12:15 PM ET
The phones are ringing off the hook at Goldman Sachs. Analyst Peter Appert explained in a research note released today that they are fielding an "increasing number of inquiries from investors on whether the newspaper stocks are values or value traps."
Goldman's advice: The group has a way to fall -- a correction of 16% is necessary -- before the stocks are considered a value. "In our view, valuation have not yet reached the level where investors are 'paid to wait' for a cyclical bounce in industry growth," according to the note. Given the "ever-increasing fragmentation in the local media marketplace, we believe we are experiencing a permanent downward shift in valuation levels."
As such, Goldman said the sector is still too expensive, there is no further industry consolidation in the near future to boost stocks, and operating fundamentals remain "sloppy."
Goldman thinks that the Knight Ridder sale process (Goldman Sachs is advising Knight Ridder but Appert is in a separate division) shows there is limited buyer interest in the newspaper sector given the lack of bids by financial players and, to a lesser extent, strategic buyers.
On the consolidation front, even if there were hungry buyers in the market for newspapers, only two public companies, Gannett and Tribune, are not tightly controlled by familes, said the note.
Goldman could get more bullish on newspaper stocks if there was a spurt in revenue growth or improved earnings. "Unfortunately, neither of these events seems likely on a near-term basis."
Jennifer Saba (jsaba@editorandpublisher.com) is associate editor for E&P
We have been saying this for years..." to junk status."
We could have saved them the time and expense, if they had just listened to us.../s
See what they miss by not reading FR !
LOL.
I must be a genius. I knew they were junk before Moody's figured it out.
Good people seeking truth are connecting rapidly. Propagandists are being exposed, and becoming irrelevant on their road to extinction.
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