A debit to the Associated Press for getting spun by McClatchy Company on the fourth-quarter earnings of the country’s No. 3 newspaper publisher.
The AP headlined its story “McClatchy Swings to a Quarterly Profit.” Problem is, McClatchy issued its release before calculating a big charge that will more than wipe out that profit.
McClatchy reported preliminary fourth-quarter earnings of $30.1 million, saying these results didn’t include a charge for impairment of goodwill and assets.
The newspaper downturn has slammed McClatchy, especially since its disastrous 2006 acquisition of Knight Ridder, and its market value has been plunging. It will have to write down the value of the goodwill from the acquisition, something Alan D. Mutter, a media executive and former city editor of the Chicago Sun-Times, does an excellent job of explaining:
McClatchy said it would take a still-to-be-determined accounting adjustment to reflect the $602.2 million drop in the price of its shares in the fourth quarter of last year. Since the end of 2007, its shares have plunged another $173.4 million to close today at $10.54 per share. Thus, the market capitalization of the company has fallen in five months by $775.6 million from $1.6 billion on Sept. 30—a plunge of 51%…
Accounting rules require a company (like MNI) to take a charge against its earnings in the event the shares it issues to fund an acquisition (like KRI) fall below a certain level. The exact amount of the charge against earnings, also known as a writedown, remains to be calculated. It is possible that auditors will conclude the writedown should be less than the full drop in the price of the shares. If so, then the writedown of the KRI deal would be less than I have projected.
Now, the AP story’s second sentence does say that McClatchy will take a yet-to-be-determined charge, but it isn’t quite clear whether that charge will apply to the fourth quarter’s supposed profit and it certainly doesn’t give the reader needed context to understand that this seemingly good quarter was, in fact, terrible.
McClatchy’s press release is much of the problem here, though that’s certainly no excuse for the AP. The company put out its earnings without really knowing what they were, probably because markets don’t look too kindly on firms that delay their earnings reports.
Elaine Lintecum, McClatchy’s treasurer, tells us the charge calculation is complicated because the typical way of analyzing cash flow yielded no impairment at all so the company is having to use a different method that’s taking longer.
But Wall Street has so far been able to untangle tens of billions of dollars in losses and put out its quarterly earnings on time, and Gannett took a goodwill charge last quarter, but was able to make its deadline for the report.
McClatchy would have been better off delaying its report if it couldn’t get the math done on time.
Much credit to the Financial Times for getting the first sit-down interview with Mikhail Khodorkovsky—the oil oligarch who was once Russia’s richest man—since his arrest in 2003 on fraud charges.
Leaning against the bars, he looked gaunt and drawn on the ninth day of a hunger strike in support of an imprisoned manager of Yukos, the oil company he created.
He answered questions during a 40-minute break in a hearing related to new fraud charges against him.
Asked if he thought Mr. Medvedev, Vladimir Putin’s chosen successor as Russian president, could deliver the rule of law, the 44-year-old former oligarch said: “It will be so difficult for him, I can’t even imagine… . Tradition, and the state of people’s minds, and the lack of forces able to [support] any movement towards the rule of law, everything’s against him. So … may God grant him the strength to do it. All we can do is hope.”
Readers get a nice package to put the story in context. There’s a small biographical sidebar and a box with information about Chita, the “city of exiles,” where he’s being held. Online there’s a link to a transcript of the interview highlights, and there’s also an editorial about Khodorkovsky’s situation.
Well handled, well reported, well played.