Mary Junck just learned last week that the internet exists at all. It is rumored that her great grandchild told her about, or that she needed to use it for the first time to get her social security benefits. The bigger point here is that old people who have worked their entire career in the internet business are incapable of understanding the challenge in their hands, and that like Mary and Gary, their companies will die a slow death as their septuagenarian readers gradually switch from reading the newspaper to either large-text books or, my gosh the internet!
I know Mary Junck personally and believe she is one of the smartest people in the newspaper industry. She forgot more yesterday than Gary Pruitt has learned in a lifetime.
This conversation is nearly identical to the dialogue we maintain discussing McClatchy's competitor Lee, whose stock seems to mirror McClatchy's. There is a pro-Lee stodge (who I suspect is on Lee's payroll or is the CEO in disguise) since she battles and never gives in, even with a 95% decrease in the stock price. The consensus on both companies, though, is that the execs made huge errors when they bought $1billion+ comps in the last 2 years, and dont seem to "get" the internet, and also seem to pray for its disappearance (Im convinced Lee CEO Mary "The Moron" Junck just learned that the internet exists in the last week when her grandkid showed it to her, since all her execs, including the VPs of New media are either children of the company's founder (like Greg "My-Mummy-Gave-Me-All-These-Stocks-What-Should-I-Do-With-My-Life" Schumer) or just plain stupid like Internet VP Jeff Herr. Ive actually communicated with execs at both companies extensively as a vendor, and my opinion of both are the same: these companies were once monopolies, and now have lost all competitive advantages. They dont know how to cooperate with tech upstarts, dont know how to evaluate companies for m&a to move to a different business, and are praying for the death of the internet. So, I say Lee and McClatchy are destined to be penny stocks like Journal Register, Sun Times, and Gatehouse, and will be followed soon by Media General and Gannett. Time to put a fork in 'em.
Deadcat, once again, let me iterate that the pay down in debt is from cash flow created as the result of asset sales and resultant tax benefits. Yes, its from cash flow, but not the type of cash flow that will lead to higher revenue and higher earnings going forward. So in GAAP my statement was incorrect, but in common sense I stand behind what I said.
This company is bleeding and only after they have sold off all their assets will the debt be paid off. There is no way they can continue to do it off of operating earnings, as the top line has dropped more quickly than they are able to cut expenses.
The banks reworked the loan to avoid having to throw the company into a default situation, thereby cutting off future borrowing opps and forcing a bankruptcy. If times were better for banks, they'd be all over this and be forcing higher rates, more capital or threatening to force a sale. Turning over the keys to bankers right now is not what the banks need, they have enough to deal with.
I'm glad you're still defending your position in this one, I just don't think it's worth more than 75 cents a share long term.
Fire Pruitt before the end of the day, please.
What is missing from your posts is honesty.
1. You posted, "What's missing is the company's ability to pay down debt." False. It fell by ~20% in the last year.
2. You posted, "The only reason debt level has gone down is asset sales." False. You have since verified the bulk of the pay down was from cash flow over the past year.
3 You posted, "he overpaid for newspapers (true)... written down to zero in 2 years." False. Even you probably don't believe the remaining KRI assets are carried at zero, right?
When I point out these inconsistencies, you "enlighten" me. Thanks. Depreciation and amortization expense...non cash... vastly exceed capital expenditures so MNI can keep paying down debt without making money... couple that with the structure of the long term debt and you can begin comprehend why the banks offerred MNI covenant relief. Even with the interest costs and the huge reduction in ad revenue the business remains markedly cash flow positive.
Deadcat, debt has gone down primarily from non-operating events that are unlikely to repeat, hence their one-time designation.
The comapny said earlier this year that debt would be at $2 billion by year end, now they say "nearly $2 billion." Operating results are so weak that future debt pay downs are unlikely without asset sales at even further reduced prices. This is all Pruitt's fault, they had very little debt, comparatively prior to the KRI reach.
Fire Pruitt today!!!
Deadcat, your post challenged me to dig up the facts on the debt buy down, which I did. I'm not sure what else I can do to help you understand that the KRI purchase has to be one of the biggest corporate blunders in the history of business.
But isn't the market telling us that? (down nearly 80% since the buyout announcement.)
hee's a scary thought, even George Bush is a better manager than gary Pruitt, which is unfathomable .
Sell MNI before it goes to zero, since they'll never fire Pruitt, who still thinks classified is going to come roaring back after this depression passes.
So debt has gone down due to cash flow?... more than from asset sales over the past year? Was that news to you since it didn't jive with your prior posts? And you feel you enlightened me? Thanks. "... written down to zero in two years ..." . Should I fact check that "allegation", or should it be your responsibility?
Mr. Pruitt did overpay for the former KRI newspapers and it was a very poor business decision.
Let's hope Mr. Obama proves to be a better leader than Mr. Bush.
Thanks for giving me the opportunity to enlighten you.
Debt through cash flow has been reduced by $335,000,000.
$55 million was from investment gains and highly unlikely to reoccur ( basically an asset sale or two).
$188,000,000 of the debt reduction is from other activities, non-operating results. (Basically the pass through of the tax savings due to the massive loss on the sale of the Strib.)
This leaves approx $90 million in debt that has been reduced due to OPERATING results. Based on current trends and assuming no further asset sales ( Who'd want to buy a newspaper now), it will take 20 years for the debt to be paid off.
The reason I think Pruitt should be fired is obvious. He overpapid for newspapers in markets that had huge real estate run ups, then saw the business evaporate in less than a year. 20 years to pay off something that has been written down to zero in 2 years? NOT a successful strategy.