McClatchy to cut workforce 10 percent; 12 layoffs at Modesto Bee

SACRAMENTO -- The McClatchy Co. announced another round of job cuts today and said it was reducing its shareholder dividend in half.

The Sacramento-based publisher of newspapers and Web sites said it was cutting its workforce by another 10 percent, or 1,150 full-time positions, as part of an effort to cut expenses by $100 million a year.

At The Modesto Bee, 12 people are being laid off, publisher and president Margaret Randazzo said in a memo to employees.

Across McClatchy, about half the cutbacks are to come through voluntary buyouts. McClatchy's announcement followed an earlier spell of layoffs in June that reduced staffing by about 10 percent.

The announcement reflects the company's inability to halt a slide in profits and revenue. Also today, the company said its August revenue fell 15.7 percent from a year earlier, to about $142.8 million. Advertising sales were down 17.8 percent.

McClatchy officials said the August figures marked something of an improvement over July, when revenue fell 16.4 percent. "August advertising activity turned out to be stronger than recent months," Chief Financial Officer Pat Talamantes said in a press release. He added that online advertising was "a bright spot," with a 7.4 percent gain in sales.

But with print revenue still dropping, the company said it had to keep cutting costs. Coupled with the June layoffs, a companywide wage freeze and other moves, McClatchy expects to save about $200 million a year in operating expenses, said Treasurer Elaine Lintecum.

Dropping the dividend in half, to 9 cents a share, will save the company an additional $7.4 million or so per quarter. That translates into annual savings of $29.6 million. The move wasn't a surprise; Chairman and Chief Executive Gary Pruitt signaled in July that the company was going to re-evaluate its dividend policies.

Still, McClatchy had never reduced its dividend in its 20 years as a public company.

Like other newspaper publishers, McClatchy has been struggling with a weak economy and the exodus of business to the Internet and other media. McClatchy's troubles are probably worse than most because of its heavy concentration of newspapers in hard-hit California and Florida, where revenues have fallen more than 20 percent this year, and the $2 billion in debt left from the 2006 takeover of Knight Ridder Inc.

Although the company has been able to make its debt payments - and has tried to assure analysts and investors that it is generating enough cash to keep current with its lenders - reducing the dividend will provide extra cushion at a time when McClatchy's profitability is slipping.

"It was clear to us that we needed to focus on debt repayment," Lintecum said. "It's a better use of our cash."

McClatchy's profits have dropped in half this year and total revenue is down 15 percent. The company's stock price has dropped 85 percent in the last 12 months and closed today at $3.40, up 2 cents, on the New York Stock Exchange. The dividend announcement came after the market closed.

"It is painful to announce these staff reductions, but the continued restructuring of our company is necessary given the relentless economic downturn and its impact on our business," Pruitt said in a press release.

The company expects severance costs from the latest round of job reductions to hit $20 million.

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