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Revenue shrinks and asset values decline for McClatchy.

McClatchy (NYSE: MNI, Bullboard) is the third largest publisher of newspapers in the US and it's in trouble. It borrowed money to buy rival chain Knight-Ridder and now has almost $2.5 billion on its balance sheet. As the value of the assets it bought has dropped it has posted two large write-offs.

Two or three years ago, it would not have been conceivable that a large newspaper chain could become insolvent, but this year that is what happened to MNI peer Journal Register which was pushed from a listing on the NYSE to the bulletin boards.

In the last quarter, MNI's revenue took a sharp drop from $477 million last year to $404 million in Q1, 2008. The company had interest expense of over $45 million. Operating income dropped from $87 million to $57 million and that drop is likely to continue.

The company's revenue is still shrinking at 10% or so year-over-previous year, so it is not hard to imagine that it could have problems with debt service over the next few quarters.

The stock is down to $9.50 from a 52-week high of over $30. But, it still may be one of the great shorts available.

ABOUT THE AUTHOR
From the news desk of 24/7 Wall St.

This report was prepared by 24/7 Wall St., LLC exclusively for Stockhouse. 

 
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Comments
Well its becoming harder and harder to fit the battle of electrics vs text.
This company must be facing some serious issues, as I find it hard to believe that solely market value conditions caused two large complete write-offs (you would think that dropping asset value would cause write-downs).
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